Erie Insurance Exchange v. Petrie, J. ( 2020 )

J-A23037-20
2020 Pa. Super. 268
ERIE INSURANCE EXCHANGE : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
JANICE PETRIE, INDIVIDUALLY AND :
IN HER CAPACITY AS THE :
EXECUTRIX OF THE ESTATE OF : No. 261 EDA 2020
SCOTT PETRIE, DECEASED AND :
ESTATE OF SCOTT PETRIE, :
DECEASED BY AND THROUGH ITS :
EXECUTRIX, JANICE PETRIE AND :
BRANDON PETRIE, INDIVIDUALLY :
AND MEGAN PETRIE RAMIREX, :
INDIVIDUALLY AND KIRA BETH :
PETRIE, INDIVIDUALLY :
:
Appellants
Appeal from the Order Entered January 2, 2020
In the Court of Common Pleas of Bucks County Civil Division at No(s):
2019-04245
BEFORE: KUNSELMAN, J., NICHOLS, J., and PELLEGRINI, J.*
OPINION BY PELLEGRINI, J.: FILED NOVEMBER 18, 2020
Janice Petrie (Petrie), individually and in her capacity as the Executrix
of the Estate of Scott Petrie, Deceased, et.al, appeals from the order entered
in the Court of Common Pleas of Bucks County (trial court) granting the
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* Retired Senior Judge assigned to the Superior Court.
J-A23037-20
motion for judgment on the pleadings filed by Erie Insurance Exchange (Erie)1
holding that there was no right to aggregate or “stack” the limits of coverage
for underinsured motorists (UIM) of two separate policies, i.e. “inter-policy
stacking” under the terms of the automobile insurance policy in effect with
Erie.2 We reverse the trial court and remand.
I.
A.
On October 16, 2016, Decedent, while operating a Yamaha motorcycle,
was struck and killed by a truck operated by an underinsured driver. Decedent
was survived by Petrie and their three children, all of whom are parties in this
case.
At the time of the accident, Decedent and Petrie had purchased and
were named insureds on two motor vehicle insurance policies through Erie and
Foremost Insurance (Foremost). The Foremost policy provided $25,000.00 in
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1 The Pennsylvania Association for Justice has filed an amicus curiae brief in
support of Petrie’s appeal. Various insurance lawyers’ associations filed an
amicus curiae brief in support of Erie.
2 “The basic concept of stacking is the ability to add the coverages available
from different vehicles and/or different policies to provide a greater amount
of coverage available under any one vehicle or policy.” McGovern v. Erie
Ins. Grp., 796 A.2d 343, 344 (Pa. Super. 2002). There are two types of
stacking, intra-policy and inter-policy. Intra-policy stacking is when more
than one vehicle is insured under a single policy of insurance. Inter-policy
stacking, which is at issue in the instant case, is the addition of coverages for
vehicles insured under different policies of insurance. See id.
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UIM coverage and Decedent’s motorcycle was insured by that company.
Petrie made a successful claim for UIM benefits from Foremost.
Petrie then submitted a claim for UIM benefits under the Erie policy. The
Erie policy covered four vehicles and UIM coverage limits for bodily injury of
“$100,000 per person/$300,000 per accident-Unstacked.” (Erie Automobile
Policy, at 2).
B.
The stacking waiver included in the Erie policy pursuant to Section 1738
of the Motor Vehicle Financial Responsibility Law (MVFRL), which governs
stacking of UM/UIM benefits in automobile insurance policies, states in
conformity with that section:3
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3 Section 1738 provides:
(a) Limit for each vehicle.─When more than one vehicle is
insured under one or more policies providing uninsured or
underinsured motorist coverage, the stated limit for uninsured or
underinsured coverage shall apply separately to each vehicle so
insured. The limits of coverages available under this subchapter
for an insured shall be the sum of the limits for each motor vehicle
as to which the injured person is an insured.
(b) Waiver.─Notwithstanding the provisions of subsection (a), a
named insured may waive coverage providing stacking of
uninsured or underinsured coverages in which case the limits of
coverage available under the policy for an insured shall be the
stated limits for the motor vehicle as to which the injured person
is an insured.
(c) More than one vehicle.─Each named insured purchasing
uninsured or underinsured motorist coverage for more than one
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UNDERINSURED COVERAGE LIMITS
By signing this waiver, I am rejecting stacked limits of
underinsured motorist coverage under the policy for myself and
members of my household under which the limits of coverage
available would be the sum of limits for each motor vehicle insured
under the policy. Instead, the limits of coverage that I am
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vehicle under a policy shall be provided the opportunity to waive
the stacked limits of coverage and instead purchase coverage as
described in subsection (b). The premiums for an insured who
exercises such waiver shall be reduced to reflect the different cost
of such coverage.
(d) Forms.—
* * *
(2) The named insured shall be informed that he may
exercise the waiver of the stacked limits of underinsured motorist
coverage by signing the following written rejection form:
UNDERINSURED COVERAGE LIMITS
By signing this waiver, I am rejecting stacked limits of
underinsured motorist coverage under the policy for myself and
members of my household under which the limits of coverage
available would be the sum of limits for each motor vehicle insured
under the policy. Instead, the limits of coverage that I am
purchasing shall be reduced to the limits stated in the policy. I
knowingly and voluntarily reject the stacked limits of coverage. I
understand that my premiums will be reduced if I reject this
coverage.
[Signature of First Named Insured and Date]
(e) Signature and date.─The forms described in subsection (d)
must be signed by the first named insured and dated to be valid.
Any rejection form that does not comply with this section is void.
75 Pa.C.S. § 1738(a)-(e).
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purchasing shall be reduced to the limits stated in the policy. I
knowingly and voluntarily reject the stacked limits of coverage. I
understand my premiums will be reduced if I reject this coverage.
(Erie Underinsured Coverage Limits Waiver, signed by Decedent on 9/29/16)
(emphases added).
Furthermore, the Erie policy contains a household exclusion as part of
the Uninsured/Underinsured Motorists Coverage Endorsement that reads:4
If Underinsured Motorists Coverage is indicated on the
“Declarations”, “we” will pay damages for bodily injury that the
law entitles “anyone we protect” or the legal representative of
“anyone we protect” to recover from the owner or operator of an
“underinsured motor vehicle.” . . .
* * *
EXCLUSIONS-What We Do Not Cover
This insurance does not apply to:
* * *
5. damages sustained by “anyone we protect” while
“occupying” or being struck by a “miscellaneous vehicle” owned
or leased by “you” or a “relative,” but not insured for Uninsured
or Underinsured Motorists Coverage under this policy.
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4 “The household vehicle exclusion is one of several types of exclusionary
clauses included in motor vehicle insurance policies providing uninsured
motorist coverage.” Craley v. State Farm Fire & Cas. Co., 895 A.2d 530,
533 n.1 (Pa. 2006) (citation omitted). “Specifically, the household vehicle
exclusion exempts from uninsured motorist coverage any coverage for bodily
injury sustained while occupying a vehicle owned by the named insured, the
named insured’s spouse, or a resident relative of the named insured, but not
insured under the policy in question.” Id. (citation omitted).
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(Erie Automobile Policy, Uninsured/Underinsured Motorists Coverage
Endorsement, at 2-3).
C.
In April 2017, Erie issued a letter denying the claim because the above
stacking waiver prevents Petrie from recovering benefits from both Foremost
and Erie, i.e., that provision bars inter-policy stacking. In addition, Erie also
maintained that the household exclusion bars Petrie’s request for UIM benefits
because, at the time of the accident, Decedent was operating a motorcycle he
had insured with a different carrier and not under the Erie policy.
In June 2019, Erie filed the underlying action seeking a declaratory
judgment providing that there was no UIM coverage available to Petrie in
connection with the October 16, 2016 motor vehicle accident under the Erie
policy. After the pleadings were closed, Erie filed a Motion for Judgment on
the Pleadings. In opposing the motion, Petrie contended that judgment on
the pleadings should not be granted because the stacking waiver relates only
to intra-policy stacking within the Erie policy itself and not to other policies of
insurance and, therefore, does not prevent recovery from both Erie and
Foremost. In addition, Petrie contends that the household vehicle exclusion
was found to be unconstitutional and that although it prevents recovery for a
survival claim, it does not bar a wrongful death claim.
The trial court granted Erie’s motion for judgment on the pleadings.
After reviewing the applicable case law, the trial court found that the stacking
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waiver that Decedent signed was sufficient to waive inter-policy stacking. It
did so primarily based on the rubric that insureds should get the coverage for
which they pay and, since Erie had no notice of the second insurance policy
with a different carrier covering, it was unable to quote and collect a higher
premium to account for that coverage commensurate with the risk and, as a
result, Decedent received a lower premium. It did not address the applicability
and viability of the household exclusion provision. This timely appeal
followed.5 Petrie and the trial court complied with Rule 1925. See Pa.R.A.P.
1925(a)-(b).
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5 The standard to be applied upon review of a motion for judgment
on the pleadings accepts all well-pleaded allegations of the
complaint as true. The question presented by the demurrer is
whether, on the facts averred, the law says with certainty that no
recovery is possible. Where a doubt exists as to whether a
demurrer should be sustained, this doubt should be resolved in
favor of overruling it.
Entry of judgment on the pleadings is permitted under
Pa.R.C.P. 1034 which provides for such judgment after the
pleadings are closed, but within such time as not to delay trial. A
motion for judgment on the pleadings is similar to a demurrer. It
may be entered when there are no disputed issues of fact and the
moving party is entitled to judgment as a matter of law. In
determining if there is a dispute as to facts, the court must confine
its consideration to the pleadings and relevant documents. The
scope of review on an appeal from the grant of judgment on the
pleadings is plenary. We must determine if the action of the court
below was based on clear error of law or whether there were facts
disclosed by the pleadings which should properly go to the jury.
Forbes v. King Shooters Supply, 230 A.3d 1181, 1187 (Pa. Super. 2020)
(case citations omitted).
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II.
On appeal, Petrie contends that the trial court erred in granting Erie’s
motion for judgment on the pleadings because the stacking waiver provision
in the policy is ambiguous as to inter-policy stacking of UIM coverage because
the waiver provision uses the singular word “policy” instead of the plural term
“policies.” Because she and the Decedent were not given full information
regarding the availability of both intra-policy and inter-policy stacking, neither
could have made a knowing and conscious waiver of coverage. Petrie also
contends that the household exclusion provision is unenforceable because of
our Supreme Court’s decision in Gallagher v. GEICO Indem. Co., 201 A.3d
131 (Pa. 2019).
A.
Whether the stacking waiver provisions in an insurance policy were
sufficient to waive inter-policy stacking was addressed by our Supreme Court
in Craley v. State Farm Fire & Cas. Co., 895 A.2d 530 (Pa. 2006). Craley
dealt with a single-vehicle insurance policy where the insured had signed a
stacking waiver in conformity with Section 1738(d) of the MVFRL. While
holding that inter-policy stacking may be waived, it addressed the
requirements for such waiver to be valid:
The conclusion that inter-policy stacking may be waived
does not end our analysis. We must determine how it may be
waived. Subsection (d), which provides the necessary waiver
form for multiple-vehicle policyholders, indicates that the
legislature felt it necessary to require insurers to provide insureds
with specific language in written form to ensure ample notice of
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the benefits to be waived. Moreover, the legislature imposed a
significant sanction on an insurance company that deviates from
the form, voiding any “rejection form that does not comply with
this section.” 75 Pa.C.S. § 1738(e). Given the form required by
subsection (d), the sanction provided in subsection (e), and the
imperative language granting stacking to all insureds in
subsection (a), it is readily apparent that some form of
knowing waiver must occur before we allow enforcement
of an inter-policy stacking waiver. As Chief Justice Cappy
previously has commented, “It is evident that the General
Assembly sought to ensure that policyholders would be given full
information regarding availability of stacked coverage before
deciding whether or not to reject it.” Rupert v. Liberty Mut.
Ins. Co., 566 Pa. 387, 781 A.2d 132, 135 (2001).
Id. at 540-41 (emphases added).
It then went on to determine whether that stacking waiver form put the
insured on clear notice that he was waiving inter-policy stacking. Focusing on
the fact that the insured’s policy only covered one vehicle, it held that the
insured had clear notice that he was waiving inter-policy stacking because
when the insured signed the waiver form stating, “I understand that my
premiums will be reduced if I reject this coverage,” he “could not have thought
he was receiving a reduced premium for intra-policy stacking because there
could be no intra-policy stacking with only one vehicle on the policy.” Id. The
court further stressed, “[a]bsent the applicability of intra-policy waiver, the
only interpretation fairly available to insured was that his premium-reducing
waiver applied to inter-policy stacking.” Id.
However, Craley also highlighted that this same waiver form may not
be valid in the context of multi-vehicle policies covering different automobiles,
which is the case here. The pertinent footnote states:
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Although we conclude that the waiver in this case was knowing,
our consideration nonetheless raises questions as to whether the
waiver would be knowing if [Plaintiff’s] policy had covered more
than one vehicle. If a named insured insures some cars under
one policy (“the policy”) and others under a separate policy (“the
second policy”) and signs the form provided in subsection (d)
which refers to the waiver of stacking “for each motor vehicle
insured under the policy,” that named insured reasonably could
assume that he received a reduced premium for waiver of the
stacking of the limits regarding the vehicles insured by “the policy”
with no knowledge that he was waiving stacking of the applicable
limits of “the policy” to “the second policy,” despite paying
premiums on both policies. We urge the legislature or the
Commissioner to clarify whether and how insurers may secure a
valid waiver in such a case.
Id. at 542 n.18 (emphasis original).
Erie contends that this footnote represents little more than an
afterthought, i.e. dicta, because it was not essential to the opinion because
facts hypothesized within the footnote were not extant in Craley, and our
Supreme Court was merely exhorting the General Assembly to consider
amending the current requirements of the MVFRL. While the footnote may be
dicta, that does not mean that its reasoning is no less cogent. We agree with
the reasoning in Craley that under the standard Section 1738 stacking waiver
provision, an insured may have “no knowledge that he was waiving stacking
of the applicable limits of ‘the policy’ to ‘the second policy,’” i.e., the insured
would not have “clear notice” that he was waiving inter-policy stacking.
In this case, under the Erie policy, Petrie and Decedent paid a premium
for $100,000 in UIM coverage in the event an insured under the policy was
injured or killed. While the Petries received a premium reduction by executing
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the waiver, it was possible for them to reasonably attribute this reduction to
their waiver of intra-policy stacking only, as it relates to the four vehicles
covered by the Erie policy. Further, Erie should have been aware of the
potential defect in the waiver provision in the context of multi-vehicle policies
and, it was free to supplement it or otherwise fulfill its obligation to secure a
knowing waiver of inter-policy stacking. Because the stacking waiver did not
explicitly provide for inter-policy stacking, Decedent could not have made a
knowing decision to do so when he signed the policy.
B.
Just because the stacking waiver provision was made ineffective by
Craley does not automatically mean that Petrie is entitled to stacking because
the household exclusion provision, if valid, would preclude the inter-policy
stacking sought here. The validity of the household exclusion provision was
addressed recently in Gallagher v. GEICO Indem. Co., 201 A.3d 131 (Pa.
2019). Petrie contends that Gallagher makes the household exclusion also
inoperative to waive stacked inter-policy coverage.
In Gallagher, the insured had two insurance policies with the same
company — one for his motorcycle and one for his cars. The insured opted
for and paid for stacked UM and UIM coverage when purchasing both policies.
While riding his motorcycle, the insured was involved in an accident and was
injured. The insured recovered the full policy limits of UIM coverage available
under the motorcycle policy. However, when the insured filed a claim for UIM
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coverage under the automobile policy, the insurance company denied the
claim because the insured was injured while riding the motorcycle and the
household exclusion provision precluded him from receiving stacked UIM
coverage under that policy.
In holding that the household exclusion provision did not bar inter-policy
stacking, our Supreme Court first stated that under Subsection 1738(a) of the
MVFRL, stacked UM/UIM coverage is the default coverage available to every
insured and provides stacked coverage on all vehicles and all policies. See
id. It went on to note that:
Importantly, the MVFRL makes clear that to effectuate a
waiver of UM/UIM coverage, an insurer must provide the insured
with a statutorily-prescribed waiver form, which the named
insured must sign if he wishes to reject the default provision of
stacked coverage. Id. at § 1738(d). This waiver provision has
the salutary effect of providing insureds with detailed notice and
knowledge of their rights to UM/UIM coverage absent such
formal waiver.
Id. at 137 (emphasis added). It then found that the household exclusion
provision could not act as a stacking waiver because:
This [household exclusion] policy provision, buried in an
amendment, is inconsistent with the unambiguous
requirements of Section 1738 of the MVFRL under the facts
of this case insomuch as it acts as a de facto waiver of stacked
UIM coverage provided for in the MVFRL, despite the indisputable
reality that [insured] did not sign the statutorily-prescribed UIM
coverage waiver form. Instead, [insured] decided to purchase
stacked UM/UIM coverage under both of his policies, and he paid
[insurers] premiums commensurate with that decision. He simply
never chose to waive formally stacking as is plainly required by
the MVFRL.
Id. at 138-39 (emphasis added).
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Erie argues that Gallagher does not apply because it was a “narrow”6
decision limited to its facts of that case that are not present here. They
contend that, unlike in Gallagher, the policies here were from two different
companies and the Decedent did not purchase stacking in either policy.
However, if it wanted the holding in Gallagher to be that narrow, our
Supreme Court would have simply held that where you had two different
stacked policies from the same insurance company, absent an express waiver
conforming to Section 1738, the household exclusion provision did not prevent
stacking because the insured paid for stacking in both policies.
Instead of that narrow holding, our Supreme Court issued a broad
holding that the household exclusion provision cannot be used to skirt the
express requirement under Section 1738 that an insurer must receive an
insured’s written acknowledgement that he knowingly decided to waive
stacked UM/UIM coverage. See id. at 138. That holding is not limited to the
facts set forth in Gallagher, but one that finds that the exclusion is
inconsistent with the requirements of Section 1738 of knowing waiver – a
holding that is applicable to all policies for automobile insurance. Moreover,
just because Decedent did not purchase stacking or the polices are from two
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6 The contention that the decision is narrow comes from footnote 8 in the
opinion where it states, “[o]ur focus here is narrow.” Gallagher, supra at
138 n.8. However, that phrase was written to explain that the majority’s
opinion did not endanger other, non-household coverage exclusions such as
“exclusions related to racing and other inherently dangerous activities” and
does not narrow the scope of its holding as to the household exclusion. Id.
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different companies is irrelevant because Section 1738 requires a knowing
waiver of stacking from whom the insurance is being obtained- in this case,
Erie.
Accordingly, because Gallagher found the household exclusion
provision inconsistent with Section 1738 of the MVFRL requirement that
insureds knowingly waive stacked coverage, and Craley found the present
stacking waiver provision was not sufficient for an insured to make a knowing
decision to waive stacked coverage, the trial court’s grant of judgment on the
pleadings is reversed and the matter is remanded to the trial court.7
Order reversed. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/18/2020
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7 We recognize that our Supreme Court recently granted the Petition for
Certification of Question of Law filed by the United States Court of Appeals for
the Third Circuit in Donovan v. State Farm, 2020 WL 4580633 (Pa. filed July
24, 2020), and will address the issue that controls this decision. Specifically,
the Court will consider: “Is a named insured’s signing of the waiver form set
out at 75 Pa.C.S. § 1738(d) sufficient to waive inter-policy stacking of
underinsured motorist benefits under Pennsylvania’s Motor Vehicle Financial
Responsibility Law, where the policy insures more than one vehicle at the time
the form is signed?” However, we are bound to apply the law as it currently
exists.
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