We all know the sinking feeling of receiving a letter from an insurer disclaiming coverage based on a policy exclusion. This article addresses how to fight back against two of the biggest culprits, the household exclusion and the regular use exclusion. We focus on the client who is riding in a vehicle (the “host vehicle”) and seeks UM/UIM coverage from a household policy. It’s mind-twisting material, but certain hopeful trends are emerging that will help you know what to look for and how to shape your arguments.
Before we get into the depths of these exclusions, the best starting place is understanding the situations in which they apply. Under 75 Pa.C.S.A. §1733, the priority of recovery for UM/UIM is first with the host vehicle and then with any policy a person is an “insured” under. The household and regular use exclusions attempt to cut people off from this second level of coverage.
The enforceability of an unambiguous household exclusion was first established in Eichelman v. Nationwide Ins. Co., 711 A.2d 1006 (Pa. 1998). Eichelman involved a motorcyclist who sought UIM benefits from a household relative’s policy. The cycle did not have UIM coverage. The household policy had an exclusion for household vehicles not covered for UIM benefits, like the motorcycle.
There are several legal arguments to use when attacking these exclusions. Understand first that there are various moving parts that the cases address. There is inter-policy stacking (one policy) v. intra-policy stacking (more than one policy). There are cases where one policy has UM/UIM coverage and the other does not, and others where both policies have this coverage. Sometimes the case involves the named insured and other times you are dealing with a guest passenger or a resident relative who is not named on the policy. Finally, the household may insure multiple vehicles by one company or two. You need to first assess which type of case you have and then you can formulate your arguments based on the relevant case law. Let’s start with the case that has shaken up this area of law like no other.
In Gallagher v. Geico, 201 A.3d 131 (Pa. 2019), the Court held that a household vehicle exclusion violated §1738 of the Motor Vehicle Financial Responsibility Law. Gallagher was injured while riding his motorcycle. GEICO insured this vehicle, and in a second policy, insured Gallagher’s two autos. Both policies had stacked UIM coverage and so, of course, Gallagher had not signed a UIM stacking waiver. GEICO claimed that its household exclusion precluded UIM coverage under the auto policy. The Court concluded that the policy’s household exclusion impermissibly acted as a de facto waiver of stacked UM/UIM coverages. It held further that a household exclusion cannot be used to avoid §1738’s express requirement that an insured received a written acknowledgment that he knowingly chose to waive stacked UM/UIM coverage.
Gallagher has opened a new line of attack against both household and regular use exclusions. Our goal as trial lawyers is to extend Gallagher to new sets of facts.
