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Trial Court Holds That Household Exclusion Remains Valid When Insured Has Rejected Stacking

A Pennsylvania trial court has held that the Pennsylvania Supreme Court’s decision in Gallagher v. GEICO does not preclude application of the household exclusion in cases in which the insured has elected non-stacked insurance coverage. See Nationwide Prop. & Cas. Ins. Co. v. Ryman, No. 673-cv-2019 (Ct. Com. Pl. Nov. 27, 2019) (Columbia Cty.)

In Ryman, Nationwide’s named insured elected to waive stacked uninsured (“UM”) and underinsured (“UIM”) motorist coverage. The insured’s resident relative was subsequently involved in a motor vehicle accident and made a claim for UIM benefits under the insured’s policy. The insurer denied coverage, citing the household exclusion. However, the insured argued that the household exclusion was not enforceable based upon the Pennsylvania Supreme Court’s decision in Gallagher v.  GEICO Indem. Co. — PA — 201 A.3d 131 (2019). In Gallagher, the Pennsylvania Supreme Court held that where an insured has paid for stacked coverage, the household exclusion is void against public policy because application of the household exclusion would constitute a de facto waiver of stacking.

The trial court in Ryman declined to read Gallagher to bar enforcement of the household exclusion. The trial court found that “the undisputed fact that the plaintiff in Gallagher selected and paid for stacking rights was pivotal in the Gallagher decision by the Supreme Court.” The trial court found that “the most fair interpretation of Gallagher is to read it in the context of its facts and in view of all of the language used by the Supreme Court, especially in citing the importance of the fact that the plaintiff selected and paid for the right to stack benefits under both policies.” The trial court concluded that “where there has been a valid waiver of stacking UIM benefits as to both policies, inter-policy stacking may be legitimately prohibited in the motor vehicle insurance policy.”