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The Pennsylvania Supreme Court Strikes Down The Household Vehicle Exclusion

January 24th, 2019

In Gallagher v. GEICO, (January 23, 2019), the Pennsylvania Supreme Court struck down the “household vehicle exclusion” contained in GEICO’s motor vehicle insurance policies.

In this case, Brian Gallagher suffered serious injuries when a pickup truck ran a stop sign and hit the motorcycle he was riding.   Mr. Gallagher insured his motorcycle and 2 cars with GEICO.  Mr. Gallagher selected, and paid for stacked Underinsured Motorists coverage for all of his vehicles.  Underinsured Motorists coverage pays benefits when the person who causes an accident does not have enough insurance.  In Pennsylvania, the law only requires a person to carry $15,000.00 per person in liability coverage.  Thus, it is very important to carry as much Underinsured Motorists coverage as possible.  In addition, the law allows an insured to “stack” their Underinsured Motorists coverage.  Stacking means that the Underinsured Motorists limits for each vehicle are added together.

Therefore, Mr. Gallagher’s limit of Underinsured Motorists coverage should have been the amount of his limits for each of his vehicles added together.  In this case, Mr. Gallagher’s limit of Underinsured Motorists coverage for his motorcycle was $50,000.00, and his limit for his cars was $100,000 apiece.  Thus, Mr. Gallagher requested and paid a premium for a maximum of $250,000 .00 in Underinsured Motorists coverage.

However, GEICO unilaterally put Mr. Gallagher’s motorcycle on a separate insurance policy and inserted an EXCLUSION in the policy called the Household Vehicle Exclusion.  This exclusion said that Mr. Gallagher was only entitled to the limit of Underinsured Motorists coverage for the vehicle covered under that policy.  By doing this, GEICO nullified Mr. Gallagher’s right to get the stacking that he requested and paid for, and limited him to maximum of only the $50,000 in Underinsured Motorists benefits under his separate motorcycle policy.

However, under Pennsylvania law, a policyholder must sign a waiver form in order to waive stacking of their Underinsured Motorists coverage.  GEICO never asked Mr. Gallagher to sign a waiver form.  Instead, it attempted to nullify Mr. Gallagher’s right to stack his Underinsured Motorist coverage by putting his motorcycle on a separate policy and then inserting the Household Vehicle Exclusion.

The Pennsylvania Supreme Court held that GEICO violated the law by doing this, and that Mr. Gallagher was entitled to the stacking of his Underinsured Motorists coverages that he had requested and paid for.

This is a very important case because almost every insurance carrier inserts the Household Vehicle exclusion in their policies, which will no longer be permitted.

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