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The Superior Court ruled for the third time in recent weeks to deny certain UIM benefits to a policyholder. In Alderson v. Nationwide Mutual Insurance Co., a three-judge panel unanimously overturned an arbitration ruling that awarded a policy-holder UIM benefits for vehicles insured under a different household policy than the motorcycle involved in the accident. The court based its ruling on a string of decisions upholding household exclusions. For example, in two recent cases, Generette v. Donegal Mutual Insurance Co. and O’Connor-Kohler v. United Services Automobile Association, the same court had refused to grant UIM benefits for policy-holders. “In this case, the arbitrator and the trial court decided that Nationwide’s household exclusion violates public policy, and refused to apply it,” Senior Judge Phyllis W. Beck wrote in her opinion. “Instead, the court affirmed the arbitrator’s decision to declare the exclusion void, and make available to Alderson the stacked limits of the additional policies, or $175,000.” Nationwide asked the court to reverse the arbitrator’s decision that invalidated its household exclusion clause, according to the opinion. A court is permitted to reverse or alter an arbitration award “where the award is contrary to law and is such that had it been a verdict of a jury the court would have entered a different judgment or a judgment notwithstanding a verdict,” the opinion said. “We hold that the trial court did err, as the arbitrator’s decision was contrary to law, and we therefore reverse and remand,” Beck said. In Alderson, plaintiff William Alderson was injured in an accident while driving his 1974 Harley Davidson, Beck said. The motorcycle was insured under its own policy with Nationwide. After Alderson collected $15,000 from the third-party tortfeasor’s insurance policy, he received $25,000 in UIM coverage from Nationwide, according to the opinion. Alderson then attempted to collect additional UIM benefits by making a claim to Nationwide under the policies that covered four other vehicles in his household. Each of those policies contained a household exclusionary rule that stated, “This coverage does not apply to: . . . Bodily injury suffered while occupying a motor vehicle owned by you or a relative but not insured for Underinsured Motorists coverage under this policy.” The court cited Prudential Property & Cas. Ins. Co. v. Colbert (Pa. Supreme 2002), a case dealing with a similar household exclusion clause, as reason to reverse the arbitrator’s decision. In that case the court said invalidating such an exclusion “would empower insureds to collect UIM benefits multiplied by the number of insurance policies on which they could qualify as an insured, even if they only paid for UIM coverage on one policy,” according to the opinion. Prudential was not the only case dealing with this issue, according to Beck. “The household exclusion has been upheld in several recent cases notwithstanding express arguments that it violates public policy,” Beck said. Contrary to Alderson’s argument, public policy would be adversely affected if the household exclusion was nullified, she said. “Indeed, the court [in Prudential] emphasized that the public policy goals of the Motor Vehicle Financial Responsibility Law would be undermined by forcing insurers to underwrite risks for which insureds have not paid a premium,” Beck said. “Therefore, providing additional UIM coverage to Alderson under the Nationwide policies that expressly do not apply to the 1974 Harley Davidson motorcycle would hold Nationwide responsible for a risk it did not get paid to insure under those policies.” According to the opinion, Alderson also argued that Nationwide knew about the 1974 Harley because the company insured it under another policy, and that knowledge in some way changed the validity of the household exclusion. The court disagreed, saying “the risks appurtenant to the operation of the motorcycle were rated separately, and a separate premium for specific coverages was paid; no extra coverage under other household policies was purchased.” Unlike Generette and O’Connor-Kohler, the court in Alderson avoided a discussion of stacking UIM benefits. According to the opinion, because it was found that Alderson was not entitled to the additional coverage, the court had no reason to continue onto the stacking issue. Beck was joined by Judges Joan Orie Melvin and John T. Bender. Neither side’s attorneys were available for comment. (Copies of the five-page opinion in Alderson v. Nationwide Mutual Insurance Co ., PICS No. 05-1519, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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