A federal district court in Pennsylvania has ruled that the Pennsylvania Supreme Court's January 23, 2019 holding in Gallagher v. GEICO Indemnity Co. – that the “household exclusion” in an automobile insurance policy violated Pennsylvania law, at least when the same insurer agreed to stacking on different vehicles operated by family members in the same household – applied retroactively.
The Case
Francis J. Butta suffered severe injuries while riding his motorcycle after an underinsured driver, June E. Rosengrant, allegedly struck Mr. Butta with her car. Ms. Rosengrant's liability coverage provided $300,000 in compensation to Mr. Butta, insufficient to compensate him for his injuries.
After Mr. Butta collected $15,000 from his own UIM coverage under a policy he had obtained from GEICO Indemnity Company, he made a claim under the UIM policy that his parents (with whom he lived) had obtained from GEICO Casualty Company.
GEICO denied Mr. Butta's claim for UIM coverage under his parents' policy on August 18, 2017, basing its denial on the policy's “household exclusion,” which provided: “When This Coverage Does Not Apply[:] This coverage does not apply to bodily injury while occupying or from being struck by a vehicle owned or leased by you or a relative that is not insured for Underinsured Motorist Coverage under this policy.”
GEICO explained that Mr. Butta's parents' UIM coverage did not apply to Mr. Butta because he was related to the policyholders and their GEICO policy did not insure his motorcycle.
Mr. Butta sued GEICO on January 23, 2019 seeking stacked underinsured motorist coverage under his parents' policy and compensatory damages for breach of contract. He alleged that the “household exclusion” was not enforceable under the Pennsylvania Supreme Court's January 23, 2019 holding in Gallagher v. GEICO Indemnity Co., which held the same household exclusion relied on by GEICO to deny Mr. Butta's claim violated Pennsylvania's Motor Vehicle Financial Responsibility Law (“MVFRL”).
Mr. Butta argued that the Pennsylvania Supreme Court's Gallagher decision applied retroactively to his policy in effect before the Pennsylvania Supreme Court's January 2019 decision and that it barred the application of the household exclusion to his claim.
GEICO moved to dismiss, asserting that Gallagher was not retroactive.
The District Court's Decision
The court denied GEICO's motion.
In its decision, the court explained that the Pennsylvania Supreme Court did not decide whether Gallagher applied to the same language in pre-policies issued to other persons, so it had to predict how Pennsylvania's highest court would decide this case.
After reviewing the Pennsylvania Supreme Court's Gallagher decision, the district court found that it did “not announce a new rule of Pennsylvania law” because it did not express a “fundamental break from precedent” or modify a “previous opinion” of the Pennsylvania Supreme Court.
Accordingly, the district court concluded the Pennsylvania Supreme Court's definition of Pennsylvania law in Gallagher applied to this case involving stacking under insurance policies issued by the same insurer to family members in the same household.
The case is Butta v. GEICO Casualty Co., No. 19-675 (E.D. Pa. April 19, 2019). Attorneys involved include: For FRANCIS J. BUTTA, INDIVIDUALLY AND ON BEHALF OF A CLASS OF SIMILARLY SITUATED PERSONS, Plaintiff: JAMES C. HAGGERTY, LEAD ATTORNEY, HAGGERTY GOLDBERG SCHLEIFER & KUPERSMITH PC, PHILADELPHIA, PA; JONATHAN SHUB, KOHN SWIFT & GRAF PC, PHILADELPHIA, PA; SCOTT B. COOPER, SCHMIDT, RONCA & KRAMER P.C., HARRISBURG, PA. For GEICO CASUALTY COMPANY, Defendant: KYMBERLY KOCHIS, MICHAEL R. NELSON, LEAD ATTORNEYS, EVERSHEDS SUTHERLAND (US) LLP, NEW YORK, NY.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].