Although it is anticipated, by accident attorneys thought to be specialists in motorcycle accident law, that the inter policy stacking issues facing motorcycle accident victims will be resolved when the Pennsylvania Supreme Court decides, Government Employees Ins. Co. v. Ayers, 2 A.3d 468 (Pa. Jul 27, 2010) (No. 442 WAL 2008), these lawyers may be disappointed. In this article, Attorney Ben Mayerson discusses the coverage issue that arises when an insurance carrier sells its insured two single vehicle policies that portend to provide stacked underinsured motorist coverage (UIM), but where the insurer then refuses to stack that coverage, after a loss occurs, pursuant to Geico v. Ayers, 955 A.2d 1025 (Pa. Super. Ct. 2008).
In Hunt v. Progressive Northern Ins. Co., Court of Common Pleas of Chester County, Docket No. 09-08265, Attorney Ben Mayerson challenges his client’s insurer on this issue by filing a lawsuit against the insurer, alleging fraud and deceit under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law. The Hunt insurance claim dispute originates out of a disagreement over whether Randall Hunt was entitled to stack his underinsured motorist benefits (UIM), for his truck and his motorcycle, as provided for in his insurance policies. As is typical in this type of coverage dispute, the insurer sold its insured two single vehicle insurance policies to insure a truck and a motorcycle. Both policies provide stacked underinsured benefits (in this case $100,000 each), but after the accident the insurer (Progressive Insurance) refused to stack the coverage, citing a “family exclusion” buried within the truck policy. In support of the claim denial, Progressive relied upon the Superior Court’s decision in Geico v. Ayers, which found that such exclusions were valid and enforceable even if the insured was unaware of the exclusionary language, and even though the insured explicitly requested stacked UIM coverage.
Notwithstanding the Superior Court’s reasoning, Pennsylvania law clearly requires all insurers to offer consumers stacked UIM coverage, whether the coverage is requested by the insured or not. 75 Pa.C.S.A. §1738(d). Indeed, Pennsylvania deems stacked UIM coverage to be so important, that it requires all insurers to secure the insured’s signature on a statutorily mandated waiver of stacking form before the insurer is permitted to avoid providing the insured stacked UIM coverage. 75 Pa.C.S.A. §1738(e). Thus, no insurer should be able to circumvent the intent of the law by requiring consumers to insure their motorcycles on separate insurance policies in order to prevent the insured from stacking their UIM benefits.
In an effort to stop this practice, Attorney Ben Mayerson filed suit on behalf of his injured client because, as the suit alleges, the exclusionary language inserted into the truck policy violates the Motor Vehicle Financial Responsibility Law (MVFRL), in that it precludes stacking of policies without the requisite waiver of stacking required by §1738(d) and (e), and that the reasoning in Geico v. Ayers was not controlling because it was the same insurer that wrote both single vehicle policies. Mayerson’s suit further alleges that the truck policy is ambiguous, self-contradictory, deceptive, and thus fraudulent, in that it purportedly and facially provides stacking, yet it denies stacking in the event the insured is injured while operating either of his two vehicles.
Attorney Ben Mayerson argues that his client’s case, raising the issue of whether a family exclusion is enforceable when a single insurer issues stacked UIM coverage on two single vehicle policies, is not controlled by either the Supreme Court’s decision, Erie Ins. Exch. v. Baker, 927 A.2d 507 (Pa. 2009), or the Superior Court’s decision, Geico v. Ayers, 955 A.2d 1025 (Pa. Super. Ct. 2008). Mayerson argues that the facts of his client’s case are materially different, and thus distinguishable from both appellate decisions. Rather, Mayerson argues, his client’s case falls under an earlier Pennsylvania Supreme Court decision, Tonkovic v. State Farm Mutual Auto. Ins. Co., 521 A.2d 920 (1987).1. Erie Ins. Exch. v. Baker
Erie Ins. Exch. v. Baker, 927 A.2d 507 (Pa. 2009), is a plurality opinion (4-3 split decision) of the Supreme Court of Pennsylvania. The four member majority opinion is written by Justice Greenspan, and joined by Chief Justice Castille and Justice Eakin. Justice Saylor filed a concurring opinion making up the four member majority. The dissent, or 3 member minority opinion, was written by Justice Baer, and joined by Justice Todd and Justice McCaffery. Thus, three of the seven members of the Supreme Court agreed that the family exclusion should be unenforceable because it voided stacking without the statutorily mandated waiver and/or notice to the insured.
Baker involved a serious motorcycle accident. Baker insured his motorcycle with Universal Underwriters Insurance Company, which included $15,000 of stacked UIM coverage, but his three automobiles were insured with a different insurance company, Erie Insurance Exchange (Erie). The Erie policy provided $100,000 of stacked UIM coverage, or $300,000.
After settling his claim with the striking vehicle, and his first level of UIM coverage with Universal Underwriters Ins. Co., Baker sought to collect the three stacked UIM policies he purchased from Erie. Erie refused to honor the claim, filed an action for declaratory relief, and thereafter secured judgement on the pleadings from the trial judge, which was later affirmed by the Superior Court. The Supreme Court granted review, and the four member majority concluded that the household exclusion contained in the Erie policy was valid even though the insured never signed a waiver of stacking.
The four member majority reasoned that the family exclusion made sense because the insurer would otherwise “be paying on a risk it did not knowingly insure, or collect a premium to underwrite: in this case, the substantially higher risk associated with motorcycles.” Id. at 511. The decision left open the issue of whether the exclusion would be upheld when the same insurer wrote both insurance policies, and thus knew of the increased risk associated with motorcycle(s). This issue was raised in Geico v. Ayers; still, the Superior Court determined that the waiver was valid even though the same insurer wrote both policies, and was thus aware of the increased risk associated with the motorcycle(s).2. Government Employees Ins. Co. v. Ayers
Government Employees Ins. Co. v. Ayers, 955 A.2d 1025 (Pa. Super. Ct. 2008) is a divided decision of the Superior Court, written by Judge Colville, and joined by Judge Orie Melvin. Judge Musmanno filed the dissenting opinion, and on July 27, 2010, the Supreme Court of Pennsylvania granted an appeal.
It is anticipated, by most motorcycle accident attorneys, that the Supreme Court will reverse the Superior Court’s decision, and find that the family exclusion may not be applied to void a valid selection of stacked UIM coverage when the same insurer issued both insurance policies. Reversal is anticipated, in part, because Justice Greenspan, who found the Baker exclusion valid, is no longer a sitting Justice. She was replaced by former Superior Court Judge, Orie Melvin. Likewise, Justice Orie Melvin was one of the Superior Court judges that decided Geico v. Ayers while on the Superior Court. Thus, she properly recused herself from participating in the Supreme Court’s review of her Superior Court decision.
Thus, it appears promising that the Supreme Court will find the exclusion not enforceable when the same insurer writes both insurance policies. More specifically, it is anticipated that the dissenting opinion of Justice Baer in Baker, which was joined by Justices Todd and McCaffery, will control the outcome in Geico v. Ayers. However, the Supreme Court has been known to throw some curve balls, and this case presents an interesting fact which, when combined with some of the language in Baker, suggests the Court may affirm, rather than reverse.
Specifically, Baker contains language suggesting that as long as the insured is able to stack some coverage, then the exclusion should be upheld. And the insured in Geico v. Ayers insured more than one vehicle on each policy, and would thereby still receive the benefit of stacking, even if the exclusion is upheld. In short, the Court may find that standard principals of contract interpretation dictate that the exclusion be upheld to give meaning to all policy provisions whenever possible.
In the lawsuit filed by Attorney Ben Mayerson, Hunt v. Progressive Northern Ins. Co., the insured was sold two single vehicle policies with stacked coverage where, if the exclusion is imposed, there is nothing to stack. More specifically, if the exclusion is upheld, it will eviscerate any right to stack UIM coverage whenever the insured is injured while operating either of his two vehicles.
Given the above, all family exclusions should be stricken when a single insurer writes two single vehicle policies that portend to provide stacked UIM benefits. This would be accurate even if the Supreme Court affirms Geico v. Ayers. This result is consistent with, and supported by Tonkovic v. State Farm, 521 A.2d 920 (Pa. 1987), which was cited by Justice Baer within his dissenting opinion in Baker as follows:
We find a crucial distinction between cases where one applies for a specific type of coverage and the insurer unilaterally limits that coverage, resulting in a policy quite different from what the insured requested, and cases where the insured received precisely the coverage that he requested but failed to read the policy to discover clauses that are the usual incident of the coverage applied for. When the insurer elects to issue a policy differing from what the insured requested and paid for, there is clearly a duty to advise the insured of the changes so made. The burden is not on the insured to read the policy to discover such changes, or not read it as his peril.
Baker at 517 (Baer, J. dissenting), citing Tonkovic v. State Farm Mutual Auto. Ins. Co., 513 Pa. 445, 521 A.2d 920, 925 (1987).
This point was also expressly recognized by the Superior Court majority in Geico v. Ayers, as follows:
There is an important distinction between paying for something you cannot receive (e.g., paying for stacking in a policy which contains an exclusion of all stacking) and paying for something that all parties know is limited by the terms of the policy (e.g., the situation here where the house-hold exclusion clause limits stacking only in certain situations and does not otherwise affect the insured’s right to stack.) The latter is contractually valid and not inconsistent with public policy.
Geico v. Ayers at 1030, emphasis in original, internal citations omitted. This is the issue raised by Attorney Ben Mayerson in Hunt v. Progressive Northern Ins. Co., Court of Common Pleas of Chester County, Docket No. 09-08265 . If the issue is not addressed by the Supreme Court in Geico v. Ayers, Attorney Mayerson is confident it will be addressed in a subsequent appellate decision, Hunt v. Progressive Northern Ins. Co., perhaps.
