Scott Cooper August 10th, 2010
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Leo Strupczewski
08-10-2010
Allocatur Watch
The state Supreme Court has granted allocatur to determine whether an insurance company can deny inter-policy stacking to an insured who has all his or her vehicles insured through the company and has not waived stacking.
According to a one-page per curiam order, the court will address in GEICO v. Ayers whether issuing such a denial through a household vehicle exclusion violates Section 1738 of the Motor Vehicle Financial Responsibility Law.
The decision to answer the question comes nearly 13 months after a plurality of the court ruled in Erie v. Baker that an insurance policy’s household exclusion clause could bar the recovery of UM/UIM benefits in a claim involving a vehicle owned by the insured but covered by a different policy issued by another company.
At the time of that decision, plaintiffs attorneys said Justice Thomas G. Saylor’s concurring opinion left open the door for the court to revisit the issue of household exclusion clauses.
Now, they’re hopeful the court will rule in favor of stacking.
Scott B. Cooper, who authored an amicus curiae for the Pennsylvania Association for Justice at the Superior Court level, said the Ayers petition for allowance of appeal was sitting at the state Supreme Court before the justices issued their ruling in Baker.
“My guess would be, well, if they were going to overturn and reverse, they would have just done it as part of Erie v. Baker,” said Cooper, who is a partner at Schmidt Kramer in Harrisburg. “It’s really unfair what happens in the situation where an insurance company can basically create the ability to use the exclusion.”
The plaintiff’s attorney in Ayers, Judd Crosby of Pittsburgh, said the fact that the policies in Baker were issued by two different insurance companies was a key distinction.
In Ayers, GEICO was fully aware of the plaintiff’s motorcycles and, therefore, was able to factor that into the premium.
“To allow them to avoid payment … they’re getting a windfall,” Crosby said. “It’s almost the inverse [of the MVFRL] to allow them to enforce the exclusion and thwarts the goal of the statute, which is to give what is paid for.”
In Ayers, a Superior Court panel ruled that an insured was barred from collecting stacked underinsured motorist benefits for injuries he sustained while riding his motorcycle because the policy’s household vehicle exclusion clause was unambiguous and did not violate public policy.
“The household vehicle exclusion prohibits the application of stacked coverage under narrow circumstances, which were triggered in the first accident,” Senior Judge Robert E. Colville wrote for the 2-1 majority. “Thus, the exclusion prohibits the application of stacked coverage under narrow circumstances, which were triggered in the first accident.”
Colville was joined in the majority by now Justice Joan Orie Melvin.
Orie Melvin did not participate in the decision to grant allocatur, according to the per curiam order.
In a dissent, Judge John L. Musmanno wrote that denying benefits to an insured under the circumstances presented in Ayers “deprives an insured of the benefits for which he or she paid.”
Further, he wrote, the majority was wrong in its ruling that the “stripping of inter-policy stacking” would only occur in “narrow circumstances.”
“Because insurance companies routinely require motorcycle owners to insure their motorcycles under a separate insurance policy from the owners’ other vehicle, those motorcycle owners who elected and paid for inter-policy stacking will be stripped of these benefits when they are injured while riding their motorcycles,” Musmanno wrote. “I do not characterize this as a ‘narrow circumstance’ and permit the insurance companies to receive a windfall, as they would be permitted to withhold benefits for which the insured has paid.”
According to Colville, Jesse Ayers was injured in back-to-back accidents when a pick-up truck struck him and his motorcyle. Ayers fell to the street and the truck then rolled backward over his body.
At the time of the accident, Ayers had two separate policies with GEICO — one for two motorcycles and one for two pick-up trucks, according to Colville. He had elected for stacking on both policies.
When Ayers filed for underinsured motorist benefits, however, GEICO denied his claim to stack the coverage as it related to the first accident, because he had been on his motorcycle at the time of the accident.
GEICO cited the household vehicle exclusion found in the policy covering the two trucks.
It read as follows:
“This coverage does 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 underinsured motorist coverage under this policy.”
After unsuccessfully seeking a declaratory judgment action, GEICO appealed to the Superior Court.
The majority of the panel accepted arguments that the exclusion was valid and did not violate the MVFRL.
In doing so, Colville wrote that Ayers’ stacked coverage, “not unlike most forms of coverage,” was subject to exceptions.
Those exceptions were noticeable in the policy’s amendment and that the language was “clear and unambiguous,” Colville wrote.
The exclusion also did not violate the MVFRL or run contrary to public policy, because it only applied in “narrow circumstances,” Colville wrote.
“Thus, the exclusion does not operate as a de facto waiver of inter-policy stacking;” Colville wrote. “[I]nstead, it merely excludes from coverage accidents which occur under limited circumstances.”
GEICO’s attorney, Joseph A. Hudock Jr. of Summers McDonnell Hudock Guthrie & Skeel in Pittsburgh, said he’s unsure of whether Saylor’s concurrence in Baker creates a hurdle for the insurance company to overcome.
“Every case is different,” he said. “Anything is possible.”
Hudock said he wrote in a brief in opposition to Ayers’ petition for allowance of appeal that a 2003 3rd U.S. Circuit Court of Appeals case, Nationwide v. Riley, ruled that it did not matter if policies are issued by the same insurer.
“The rationale for that is the risks involved in being on a motorcycle are different than the risks of being in a passenger car,” he said. “It’s the reasonable thing to do, to make you put it on another policy.”
A secondary argument, said Hudock, is that Ayers could have elected to take more UM/UIM coverage on his motorcycle policy.
“Nobody was stopping this guy from buying more coverage,” he said. •
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