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January’s Insurance Stacking Supreme Court Decision is Retroactive, Federal Judge Rules

judge making a rulingEarlier this month, a federal judge ruled in Butta v. Geico that the Pennsylvania Supreme Court’s decision in Gallagher v. Geico back in January should be applied retroactively.

U.S. District Judge Mark Kearney said since the court was not announcing a new rule of state law – the court said, under the Motor Vehicle Financial Responsibility Law (MVFRL), household vehicle exclusions cannot prevent policyholders from using stacked insurance coverage – the decision should be applied to past cases.

The Gallagher decision “does not change binding Pennsylvania law,” Kearney said. The Gallagher decision applies to the “MVFRL since its inception and applies to Mr. Butta’s policy.”

This ruling could impact several pending class action lawsuits in Pennsylvania, including class actions filed against Geico, Allstate, Pennsylvania National Mutual Casualty Insurance Co., Donegal Mutual Insurance and USAA. These insurance companies have argued that benefit denials that occurred before the Gallagher decision were allowed based on established court precedent. The class actions are aimed at compensating policyholders who were denied stacking benefits under the household vehicle exclusion.

Schmidt Kramer Partner Scott Cooper is one of the attorneys who filed the proposed class action lawsuits and he says Judge Kearney’s ruling could expand the size of the potential class. The ruling may allow them to pursue claims that date back to 1990, when Pennsylvania’s MVFRL was passed.

Cooper says the insurance companies will likely use the statute of limitations to try to limit the size of the class. There will likely be disputes about tolling in cases involving minors who were denied benefits and whether clients needed to actually file a claim rather than simply being denied stacking coverage.

The Supreme Court’s 5-2 decision in January said the household exclusion was a direct violation of the MVFRL. After that decision, five class action lawsuits were filed with the goal of compensating people who had their stacking benefits denied due to the household exclusion, this includes Butta.

Three of the class actions, the ones involving Geico, Allstate and USAA, were moved from state to federal court in March, and brought before Judge Kearney.

What to do if Your Insurance Claim was Denied

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