Stockdale v. Allstate Fire & Cas. Ins. Co.

441 F.Supp.3d 99

Kayla STOCKDALE, Plaintiff,

v.ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY, Defendant.

CIVIL ACTION NO. 19-845

United States District Court, E.D. Pennsylvania.

Signed February 27, 2020

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 LLP, Philadelphia, PA, for Defendant.

MEMORANDUM OPINION

WENDY BEETLESTONE, J.

This case addresses the scope of the Pennsylvania Supreme Court's decision in Gallagher v. GEICO Indemnity Co. , ––– Pa. ––––, 201 A.3d 131 (2019). Specifically, it addresses the extent to which Gallagher found the "household exclusion" inconsistent with the Pennsylvania Motor Vehicle Financial Responsibility Law's ("MVFRL"), 75 Pa. C.S.A. §§ 1701 et seq. , requirement that insureds knowingly waive stacked coverage. Defendant argues that Gallagher should be read narrowly; should not be understood as invalidating the exclusion entirely; and does not apply in this case. Plaintiff argues that Gallagher should be read broadly and does apply in this case.¹ Because the Pennsylvania Supreme Court invalidated the household vehicle exclusion in all personal auto insurance policies in which such an exclusion operates as a de facto waiver of stacked coverage, Defendant's Motion for Summary Judgment will be denied and Plaintiff's Partial Motion for Summary Judgment will be granted.

I. FACTS²

The following facts are not in dispute. Plaintiff, Kayla Stockdale, is a Pennsylvania resident who, at all times relevant here, resided with her parents, Mark and Jacqueline Sanders. Both Stockdale and her parents held car insurance policies with Defendant, Allstate Fire and Casualty Insurance Company.

Stockdale's policy (the "Stockdale Policy") provided $25,000 in uninsured and underinsured motorist coverage for her one vehicle,³ while her parents' policy (the "Sanders Policy") provided $100,000 in uninsured and underinsured motorist coverage for each of their three vehicles. 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; Stockdale did not.⁴

On June 10, 2017, while riding as a passenger in her vehicle, Stockdale was injured in a collision with another driver, Ronald Pagliei. Her injuries as a result of the accident were permanent and severe, and she sought recovery for those injuries. Stockdale first made a claim against Pagliei. With the approval of Allstate, she settled that claim for $100,000, the limit of liability coverage under Pagliei's policy. Stockdale also made a claim for underinsured motorist coverage under the Stockdale Policy. Allstate 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 Stockdale's medical needs. Accordingly, on February 7, 2018, Stockdale made a claim under the Sanders Policy for underinsured motorist coverage, on the basis that the Sanders Policy provided that Allstate "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 the policyholders, Mark and Jacqueline 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, Allstate 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.⁵

Because she was not riding in one of the three vehicles covered by the Sanders Policy, Allstate claimed that the household exclusion rendered Plaintiff ineligible to stack coverage across the Sanders and Stockdale Policies. Plaintiff subsequently filed her Complaint, bringing claims for individual and class relief and seeking $300,000 in underinsured benefits under the Sanders policy.

Allstate moved to dismiss Stockdale's claim on March 28, 2019. In that motion, Allstate argued that the Pennsylvania Supreme Court's Gallagher decision, which had found the household exclusion in the Gallagher plaintiff's auto insurance policy unlawful, did not apply to this case because the underlying events had occurred prior to Gallagher 's issuance on January 23, 2019. Allstate did not argue, however, that "this case [was] factually distinct from Gallagher in [sic] some material way." Stockdale , 390 F. Supp.3d at 607. On June 17, 2019, the Court denied Defendant's motion to dismiss in part.⁶ Id. at 613. The Court found that Gallagher had announced a new rule of law and thus applied retroactively to cases such as Plaintiff's which were brought post- Gallagher but concerned events which occurred pre- Gallagher. Id.

Defendant now moves for summary judgment, arguing that the facts of this case are materially distinguishable from those at issue in Gallagher and that Gallagher does not preclude the application of the Sanders Policy's household exclusion. Defendant also moves for summary judgment on Plaintiff's remaining class claims. Plaintiff cross-moves for partial summary judgment and requests that the Court enter judgment for $300,000⁷ against Defendant on the basis that Gallagher invalidated the household exclusion in the Sanders Policy.

II. STANDARD OF REVIEW

These motions are governed by Federal Rule of Civil Procedure 56(a), which provides that a "court shall grant summary judgment if the movant shows that there is no genuine dispute as to material facts and the movant is entitled to judgment as a matter of law." "Since the facts are not in dispute, there is presented solely an issue of law as to which of these parties is entitled to a judgment." Price v. Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am. , 1970 WL 791, at *1 (E.D. Pa. Sept. 22, 1970), aff'd , 457 F.2d 605 (3d Cir. 1972). Though this case involves motions for summary judgment from both parties, the standards governing summary judgment are "no different where there are cross-motions." Lawrence v. City of Philadelphia, Pa. , 527 F.3d 299, 310 (3d Cir. 2008) (internal citations omitted).

III. DISCUSSION⁸

Section 1738 of the MVFRL "governs the stacking of underinsured motorists benefits as well as the waiver of such stacking." State Farm Mut. Auto. Ins. Co. v. Powell , 879 F. Supp. 538, 540 (W.D. Pa. 1995).

Subsection 1738(a) unambiguously states that the limits of coverage for each vehicle owned by an insured "shall be the sum of the limits for each motor vehicle as to which the injured person is an insured." This provision specifically applies "when more than one vehicle is insured under one or more policies" providing for [uninsured and underinsured motorist] coverage. In other words, stacked [uninsured and underinsured motorist] coverage is the default coverage available to every insured and provides stacked coverage on all vehicles and all policies.

Gallagher , 201 A.3d at 137 (internal citations and alterations omitted) (emphasis added). However, "insureds can choose to waive stacked coverage. If an insured decides to waive stacked coverage, then the insured's premiums must be reduced to reflect the different cost of coverage." Id. To effectuate such a waiver, "an insurer must provide the insured with a statutorily-prescribed waiver form, which the named insured [i.e. , the policyholder] must sign if he wishes to reject the default provision of stacked coverage." Id. In determining whether a party is entitled to stacked coverage, "the relevant waiver is the one signed with respect to the policy under which the stacked benefits are being sought." Donovan v. State Farm Mut. Auto. Ins. Co. , 392 F. Supp.3d 545, 551 (E.D. Pa. 2019) (citing Craley v. State Farm Fire & Cas. Co. , 586 Pa. 484, 536, 895 A.2d 530 (2006) ).

In Gallagher , the Pennsylvania Supreme Court invalidated the household exclusion where such an exclusion operates as a de facto waiver of stacked coverage—for example, where the exclusion purports to waive coverage without requiring the insured to sign the statutorily prescribed waiver form. Id. at 138.

The facts in Gallagher , as here, are straightforward. Plaintiff Gallagher was struck by a truck while riding his motorcycle. Id. at 133. At the time of the accident, Gallagher had two insurance policies, both from GEICO—one on his motorcycle, and another on his two automobiles. The motorcycle policy provided for $50,000 of underinsured motorist coverage, and the automobile policy for $100,000 of such coverage. Id. Gallagher selected and paid for stacked coverage on both policies. Id. When the truck driver's insurance and Gallagher's motorcycle policy were insufficient to cover Gallagher's medical needs, Gallagher sought to recover his stacked benefits and made a claim under his automobile policy. Id. GEICO denied the claim pursuant to the household exclusion, however, because both the motorcycle and the automobiles were covered under different policies. Id. Gallagher sued GEICO for coverage, and the Pennsylvania Supreme Court ultimately found that the household exclusion,

buried in an amendment, is inconsistent with the unambiguous requirements Section 1738 of the MVFRL under the facts of this case insomuch as it acts as a de facto waiver

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