Stockdale v. Allstate Fire & Cas. Ins. Co., CIVIL ACTION NO. 19-845

390 F.Supp.3d 603

Kayla STOCKDALE, Plaintiff,

v.ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY, Defendant.

CIVIL ACTION NO. 19-845

United States District Court, E.D. Pennsylvania.

Signed June 17, 2019

James C. Haggerty, Haggerty Goldberg Schleifer & Kupersmith PC, Jonathan Shub, Kohn Swift & Graf PC, Philadelphia, PA, Scott B. Cooper, Schmidt, Ronca & Kramer P.C., Harrisburg, PA, for Plaintiff.

Mark J. Levin, Elanor A. Mulhern, Ballard Spahr Andrews & Ingersoll, Philadelphia, PA, for Defendant.

OPINION

Wendy Beetlestone, J.

This case presents an unresolved question of Pennsylvania law: What effect should be given to Gallagher v. GEICO Indemnity Co. , 201 A.3d 131 (Pa. 2019), a Pennsylvania Supreme Court decision that held a particular insurance exclusion—called the "household exclusion"— violated the Pennsylvania Motor Vehicular Financial Responsibility Law, 75 Pa. C.S.A. §§ 1701 et seq. ("MVFRL")? Plaintiff argues that, as is generally the case, the holding should be applied to cases brought after Gallagher was decided, but concerning events that predate the decision. Defendant, however, argues that an exception to that general rule is in order here and that Gallagher should be applied only to cases arising out of events that postdate the decision. As explained below, no exception is warranted here and Defendant's motion to dismiss the Complaint will be denied accordingly.

I. LEGAL STANDARDS

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). When analyzing a motion to dismiss, the Court must "construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Fowler v. UPMC Shadyside , 578 F.3d 203, 210 (3d Cir. 2009). "[U]nder Rule 12(b)(6), the defendant has the burden of showing no claim has been stated." Kehr Packages, Inc. v. Fidelcor, Inc. , 926 F.2d 1406, 1409 (3d Cir. 1991).

Where, as here, a federal court has authority to hear a suit by virtue of diversity jurisdiction, the court must apply state substantive law. Erie R.R. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). "When interpreting state law, [federal courts] follow a state's highest court; if that state's highest court has not provided guidance, [federal courts] are charged with predicting how that court would resolve the issue.... tak[ing] into consideration: (1) what that court has said in related areas; (2) the decisional law of the state intermediate courts; (3) federal cases interpreting state law; and (4) decisions from other jurisdictions that have discussed the issue." In re Energy Future Holdings Corp. , 842 F.3d 247, 253-54 (3d Cir. 2016) (quoting Illinois Nat. Ins. Co. v. Wyndham Worldwide Operations, Inc. , 653 F.3d 225, 231 (3d Cir. 2011) ).

II. FACTUAL BACKGROUND

Plaintiff, Kayla Stockdale, is a Pennsylvania resident who, at all times relevant here, resided with her parents, Mark and Jacqueline Sanders. Both Plaintiff and her parents held car insurance policies with Defendant, Allstate Fire and Casualty Insurance Company. Plaintiff's policy (the "Stockdale Policy") provided $ 25,000 in uninsured and underinsured motorist coverage for the one vehicle covered by the policy;¹ her parent's policy (the "Sanders Policy") provided $ 100,000 in uninsured and underinsured motorist coverage for each of the three vehicles covered by that policy—none of which were the vehicle covered by the Stockdale Policy. The Sanders also paid to "stack" their underinsured motorist coverage, meaning the Sanders elected to combine the insurance coverage of individual vehicles within their policy ("intra-policy stacking") and across policies ("inter-policy stacking") to increase the amount of total coverage available.²

On June 10, 2017, while riding as a passenger in the vehicle covered by the Stockdale Policy, another driver, Ronald Pagliei, collided with Plaintiff's vehicle. She suffered severe and permanent injuries as a result of the accident, and sought recovery for those injuries. Plaintiff first made a claim against Pagliei. With the approval of Defendant, she settled that claim for $ 100,000, the limit of liability coverage under Pagliei's policy. Plaintiff also made a claim for underinsured motorist coverage under the Stockdale Policy. Defendant approved the claim and provided her with $ 25,000, the limit of underinsured motorist coverage under the Stockdale Policy.

The combined recovery, however, was insufficient to meet Plaintiff's medical needs. Accordingly, on February 7, 2018, Plaintiff made a claim under the Sanders Policy for underinsured motorist coverage, on the ground that the Sanders Policy provided that Defendant "will pay damages to an insured person for bodily injury which an insured person is legally entitled to recover," and defined "insured person" to include "any resident relative" of Mark Sanders. Because she lived with her parents at the time of the accident, Plaintiff claimed she was eligible to stack the underinsured coverage provided in the Sanders Policy with the underinsured coverage provided in the Stockdale Policy.

On February 14, 2018, Defendant denied the claim. It premised the denial on a provision of the Sanders Policy called the "household exclusion," which provided that:

Allstate will not pay any damages an insured person is legally entitled to recover because of ... bodily injury to you or a resident relative while in, on, getting into or out of or when struck by a motor vehicle owned or leased by you or a resident relative which is not insured for Underinsured Motorist Coverage under this policy.

Because she was not riding in one of the three vehicles covered by the Sanders Policy, Defendant claimed that the household exclusion rendered Plaintiff ineligible to stack coverage across the Sanders and Stockdale Policies.

On January 23, 2019, the Pennsylvania Supreme Court issued its decision in Gallagher , holding that "the household vehicle exclusion violates the MVFRL; therefore, these exclusions are unenforceable as a matter of law." 201 A.3d at 138. The Gallagher Court explained that while the MVFRL allows insureds "to waive stacked coverage," the statute nevertheless "makes clear that [to do so], an insurer must provide the insured with a statutorily-prescribed waiver form." Id. at 137. The household exclusion, however, "acts as a de facto waiver of stacked UIM coverage" because "in reality, the household exclusion ensures that ... UIM coverage could never be stacked with the coverage under" other policies. Id. at 137-38. The exclusion thus "violates the clear mandates of the waiver provisions of Section 1738 [of the MVFRL]," because it "deprive[s insureds] of the stacked UIM coverage that [they] purchased," "render[ing] the household vehicle exclusion invalid and unenforceable." Id. at 138.

Plaintiff filed her Complaint the day the Gallagher Court announced its opinion, bringing claims for individual and class relief. As to the former, Plaintiff seeks $ 300,000 in underinsured benefits from the Sanders Policy. As to the latter, Plaintiff seeks to:

[R]epresent a class of persons injured in motor vehicle accidents from 1990 to the present as a result of the negligence of an uninsured or an underinsured motorist who were insureds under Automobile Policies providing uninsured and/or an underinsured motorist coverage in accordance with the MVFRL and where: (a) the named insured elected stacked uninsured and underinsured motorist coverage; (b) the named insured paid an additional premium for stacked uninsured and/or underinsured motorist coverage; (c) a claim was made for recovery of uninsured and/or underinsured motorist coverage under the policy; (d) the claim for recovery of uninsured or underinsured motorist coverage was denied by reason of the household exclusion; and (e) inter-policy stacking of underinsured motorist benefits was denied to an otherwise eligible claimant by reason of the household exclusion where, nonetheless, the named insured had elected and paid for stacked uninsured and/or underinsured motorist coverage under the policy.

Defendant now moves to dismiss Plaintiff's Complaint for failure to state a claim, or else dismiss the putative class action claims to the extent they are time-barred by Pennsylvania's four-year statute of limitations for contract claims.

III. DISCUSSION

A. Effect of Gallagher

Defendant denied Plaintiff's claim for underinsured motorist benefits based on the household exclusion in the Sanders Policy, an exclusion the Gallagher Court found "unenforceable." Id. at 138. Defendant does not argue that this case is factually distinct from Gallagher is some material way. The only issue, then, is whether Gallagher's holding should be applied here—a case brought after the Pennsylvania Supreme Court issued Gallagher , concerning events that predate that decision.

Generally, under Pennsylvania law, a rule announced by a judicial decision is applied both retroactively—that is, to pending cases—and prospectively—to cases commenced thereafter. See In re L.J. , 622 Pa. 126, 79 A.3d 1073, 1087 (2013) ; Cleveland v. Johns-Manville Corp. , 547 Pa. 402, 690 A.2d 1146, 1150 n.8 (1997). Indeed, "[j]udicial decisions have had retrospective operation for near a thousand years." Gibson v. Com. , 490 Pa. 156, 415 A.2d 80, 84 (1980) (quoting Kuhn v. Fairmont Coal Co. , 215 U.S. 349, 372, 30 S.Ct. 140, 54 L.Ed. 228 (1910) (Holmes, J., dissenting)).

Recently, however, rare exceptions to this general rule have been permitted. See Gibson , 415 A.2d at 84 ("Only recently have courts limited the full effect of their decisions."); see, e.g. , In re L.J. , 79 A.3d at 1087 (noting that courts may apply a...