The same day the Pennsylvania Supreme Court ruled that the household vehicle exclusion cannot be used to bar stacked coverage, five class action lawsuits were filed in Philadelphia aimed at compensating those who have had their stacking benefits denied under the exclusion.
According to the lawyers who filed the suits, the class actions were necessary to identify anyone who has had their claim rejected under the clause, because, depending on how the Supreme Court’s sweeping opinion will be interpreted, the claims may stretch back to 1990.
“These people are entitled to benefits for which they paid a premium,” James Haggerty of Haggerty, Goldberg, Schleifer & Kupersmith, who filed the lawsuits, said.
Just how far back the Supreme Court’s Jan. 23 opinion in Gallagher v. Geico reaches is one of many new issues attorneys are now set to begin litigating in the wake of the ruling.
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Although attorneys from the plaintiffs and defense bars offered different opinions about exactly how Gallagher should be interpreted, nearly all attorneys who spoke with The Legal agreed that the 13-page opinion, written by Justice Max Baer, was sweeping.
According to Baer, a household exclusion in a policy issued by GEICO violated the Motor Vehicle Financial Responsibility Law because it acted as a “de facto waiver” of stacked coverage. The ruling reversed a Superior Court decision, which had relied on two prior Supreme Court decisions that had both failed to achieve a majority, and, according to several attorneys, it marked a significant departure from precedent.
A footnote in the opinion demonstrated how broadly the ruling should be interpreted.
“As in every case, we are deciding the discrete issue before the court and holding that the household vehicle exclusion is unenforceable because it violates the MVFRL,” Baer said.
Although Gallagher involved a man who sought benefits after being injured in a motorcycle accident, attorneys agreed the ruling is not limited to cases involving motorcycle policies, but invalidated the exclusion in any situation where a driver seeks to recover stacked benefits.
“It certainly is a big change,” Post & Schell attorney Bryan Shay, a principal in the firm’s insurance department, said. “If nothing else, the court is expressly overruling a few prior decisions that have been around for a little while.”
However, Shay said it is still unclear whether the ruling applies only to scenarios where the claimant is seeking to recover stacked benefits from a policy that the same insurer provided, or if it also extends to situations where the claimant is seeking to stack benefits with a policy provided by another carrier.
Gallagher involved policies that were issued only by Geico. According to court records, Gallagher bought stacked coverage on two Geico insurance policies—one for his motorcycle and the other for his two automobiles. With stacking, Gallagher was entitled to $250,000.
After Gallagher was involved in a motorcycle accident, Geico paid $50,000 in underinsured motorist coverage, but the company denied Gallagher’s claim for additional coverage under the automobile policy, citing the household vehicle exclusion, which said the coverage did “not apply to bodily injury while occupying or from being struck by a vehicle owned or leased by you or a relative that is not insured for [UIM] coverage under the policy.”
Shay said there was clear logic behind the notion that an insurer could not bar stacking when it provided both policies and the plaintiff never waived the benefits. But the issue was less clear with two separate carriers, he said.
“That logic of, ‘Well, they knew about the other household vehicles,’ will not be quite as clear,” Shay said. “That’s where the litigation is going to be going forward.”
Foley Comerford & Cummins attorney Daniel Cummins said he agreed with Justice David Wecht’s dissenting opinion, which said the majority’s ruling went beyond the case before it, and should have, instead, limited itself to scenarios where the same carrier provided all the policies. For that reason, Cummins said carriers might try to make the argument that the more expansive portions of the ruling are dicta, although he added that the defendants would have a difficult argument to make.
“It’s dicta in a clearly worded majority opinion in the Pennsylvania Supreme Court, so I’m not confident an argument in that regard would get very far if raised by the carriers,” he said.
Cummins said the Gallagher decision was a “seismic shift” in insurance law, and was also part of a recent pattern from the court of departing with long-standing precedent. He specifically noted the cases Cagey v. PennDOT and Balentine v. Chester Water Authority.
“It seems like there’s no restraint on the part of this court in taking a fresh look at long-standing precedent,” Cummins said. “And for these reasons I think civil litigation defense attorneys may want to think twice before taking an issue up to the Supreme Court, for fear of making law that favors plaintiffs.”
Cummins is one of many attorneys who said the Gallagher ruling will create numerous new hurdles for insurance carriers, and could cause statewide increases in insurance premiums.
“It may be that we have to wait for the pendulum to shift the other way, which could be a while,” he said.
At the same time the defense bar is set to push back on the ruling, many in the plaintiffs bar are looking to expand on Gallagher.
Schmidt Kramer attorney Scott Cooper, who was plaintiff’s co-counsel in Gallagher and is co-counsel in the recent class actions, said that since the ruling hinged on the court’s interpretation of the MVFRL, the same logic would apply to exclusions for unlisted resident drivers, and the regular use exclusion.
“If you’re paying for interpolicy stacking, you should be getting benefits,” he said. “Any time you have an exclusion now, you can argue the Gallagher case and say, read the statute.”
Cooper and Haggerty were both dismissive of the argument that Gallagher only applies to situations where the same carrier issued all the policies, saying the ruling clearly struck down the household vehicle exclusion broadly.
According to Haggerty, arguments can be made that carriers now have a good-faith duty to reach out to anyone who had a claim denied on the basis of the household vehicle exclusion going back at least four years, but possibly as far back as 1990, when amendments regarding stacking were added to the MVFRL.
Cooper agreed and, pointing to a footnote in Baer’s opinion, said that if the carriers want to change the law, they would need to ask the Legislature.