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.
Let’s consider a teen driver who lives with her parents. The excited teen gets her first car, but her parents, unexcitedly, decide not to put her car on their policy. She purchases a bare minimum policy and rejects UM/UIM. After getting rear-ended by an uninsured motorist in her new car, she submits a UM claim to her parents’ insurer. The insurer denies the claim, citing both a household and a regular use exclusion.
Assuming Mom and Dad have stacked UM/UIM coverage, one should start with the Gallagher de facto waiver argument. Simply argue that the household exclusion acts as an impermissible de factor waiver of the stacked UM/UIM limits. You are, in essence, seeking to extend Gallagher from the case where the host vehicle had UIM coverage to where it did not.
Consider the unfairness of allowing recovery of UIM under Gallagher where the host vehicle has minimum UIM (stacking possible) and disallowing it because the host vehicle rejected UIM (stacking not possible). If your client purchased UIM coverage, why should it matter that the vehicle he happened to be riding in at the time of the injury did not have UIM coverage? This is an especially compelling argument if the host vehicle is owned by someone your client neither lives with nor is related to. Your client presumably had no input as to the insurance purchased and should not suffer from the choice made. Indeed, as shown below, the focus in these cases is on the policy from which coverage is sought, not the host vehicle
The challenge is that Gallagher focuses on stacking. In a case where the host vehicle did not have UIM coverage, there is no inter-policy stacking. There is Common Pleas level support for extending Gallagher to this scenario in Erie Insurance Exchange v. Sutherland, 10437 of 2019 (C.P. Lawrence County). Sutherland was injured while riding his motorcycle which was insured by Progressive. He had signed a UIM rejection waiver for the cycle. He also had stacked UIM on his household vehicles, which were insured with Erie. Erie declined to pay UIM, citing a household exclusion. The Court concluded that Gallagher “clearly held household exclusions violate the MVFRL and are unenforceable.” The exclusion resulted in an impermissible de facto waiver of stacked coverage. The Court focused on the policy from which coverage was sought (Erie) and not on the Progressive policy, citing Stockdale v. Allstate Fire and Casualty Ins. Co., 2020 WL 953284 (E.D. Pa. 2020). The fact that Sutherland did not purchase stacking from Progressive was irrelevant. Simply put, the Court held that a household exclusion did not apply where the household policy had stacking on multiple vehicles. The insurer cannot use a policy exclusion to get around the MVFRL’s requirement of a stacking waiver.
