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In upholding the dismissal of a lawsuit over underinsured motorist coverage filed by a man and a woman hit by a car while riding their motorcycle, the U.S. Court of Appeals for the Third Circuit drew a clear line between two major Pennsylvania insurance law decisions.
The court affirmed a lower judge's ruling that plaintiffs William Dunleavy and Erin Francis did not have an underinsured motorist policy with their insurer, defendant Mid-Century Insurance Co., thus putting an end to their breach of contract suit.
Both the auto policy, through Progressive Insurance, and the motorcycle policy, through Mid-Century, excluded underinsured motorist coverage. The plaintiffs were paid the $100,000 policy limit by the other driver's insurer, according to Third Circuit Judge Patty Shwartz's nonprecedential March 18 opinion.
As part of the analysis, the Third Circuit picked apart the plaintiffs' use of the Pennsylvania Supreme Court's 2009 decision in Gallagher v. Geico Indemnity, which the plaintiffs argued supported their claim that the district court employed faulty methodology in considering their existing motorcycle policy with Progressive Insurance—which they deemed "irrelevant" to their suit against their auto insurer, Mid-Century.
Shwartz wrote in a footnote that the plaintiffs' reliance on Gallagher was misplaced. "Gallagher addressed the concept of stacking underinsured motorist coverage. Section 1738 of the Motor Vehicle Financial Responsibility Law ('MVFRL') establishes a default of stacked underinsured coverage '[w]hen more than one vehicle is insured under one or more policies providing uninsured or underinsured motorist coverage' and permits insureds to waive that coverage only by signing the statutorily prescribed form."
In Gallagher, the plaintiff bought underinsured motorist coverage for his motorcycle and car under separate policies issued by Geico and never signed the UIM waiver, disallowing Geico to exclude UIM coverage in the case.
"Gallagher prevents insurance companies from circumventing the statutorily prescribed method for an insured to waive stacked coverage through household vehicle exclusions that act as de facto waivers of stacked coverage," Shwartz said. "Here, there is no stacked coverage because Dunleavy rejected underinsured motorist coverage on his motorcycle policy."
The more apt precedent was from the Pennsylvania Supreme Court's 1998 decision in Eichelman v. Nationwide Insurance, Shwartz said.
"In that case, the plaintiff—like plaintiffs here—had motorcycle insurance but did not have underinsured motorist coverage under his motorcycle policy when his motorcycle was struck by a pick-up truck," Shwartz said. "After that accident, the plaintiff sought coverage under the underinsured provision in his mother's and her husband's automobile policies. Those automobile policies, however, contained a clause excluding underinsured coverage for 'a motor vehicle owned by you or a relative not insured for Underinsured Motorists coverage under this policy.'"
"Here, as in Eichelman," Shwartz continued, "Dunleavy waived underinsured motorist coverage in his motorcycle policy and plaintiffs tried to secure underinsured coverage through a separate policy. In both cases, the policy under which coverage was sought clearly stated that the coverage was unavailable if the vehicle in which the accident occurred did not itself have underinsured motorist coverage. Based on such language, the parties here and in Eichelman had no reasonable basis to expect coverage."
John Bryan of Friday & Cox in Pittsburgh represents the plaintiffs and did not respond to a request for comment. Audrey Copeland of Marshall Dennehey Warner Coleman & Goggin represents the defendant and did not respond to a request for comment.
P.J. D'Annunzio
Reporter at the Legal Intelligencer covering public corruption, federal courts, and breaking news.