JUSTICE WECHT

Louis C. Long, Esq., Thomas, Peter James Speaker, Esq., Thomas & Hafer, LLP, Pittsburgh, PA, for Amicus Curiae The Insurance Federation of Pennsylvania Inc., et al.

George Gerasimos Rassias, Esq., Schmidt, Kirifides & Rassias, PC, Media, PA, for Amicus Curiae Pennsylvania Association For Justice

Scott B. Cooper, Esq., Schmidt Kramer, P.C., Harrisburg, PA, James C. Haggerty, Esq., Haggerty, Goldberg, Schleifer & Kupersmith, P.C., Philadelphia, PA, Michael Anthony Snover, Esq., Easton, PA, for Appellant.

Glen Shikunov, Esq., McCormick & Priore, P.C., Philadelphia, PA, Scott J. Tredwell, Esq., Philadelphia, PA, for Appellee.

BAER, C.J., TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, JJ.

OPINION

JUSTICE WECHT

This case concerns the enforceability of two household vehicle exclusions in a pair of automobile insurance policies. The courts below held that the exclusions were valid and enforceable, citing this Court's 1998 decision in Eichelman v. Nationwide Insurance Co. , 551 Pa. 558, 711 A.2d 1006 (1998). Appellants here, husband and wife Albert and Lisa Mione, contend that the lower courts erred in applying Eichelman , arguing that this Court sub silentio overruled that decision in Gallagher v. GEICO Indemnity Co. , 650 Pa. 600, 201 A.3d 131 (2019). We reject the Miones’ argument, and we affirm.

In 2018, Albert Mione ("Mione") was in a collision while operating his motorcycle. Mione's motorcycle was insured by Progressive Insurance, under a policy that did not include UM/UIM coverage ("the motorcycle policy"). Albert and his wife Lisa ("the Miones") jointly owned a car, which was insured by Erie Insurance on a single-vehicle policy that included UM/UIM coverage with stacking ("the automobile policy"). Mione's adult daughter Angela also lived in the couple's home, and she too owned a car, which Erie insured on a single-vehicle policy ("Angela's policy"). Both of the Erie policies contained household vehicle exclusions barring UM/UIM coverage for injuries sustained while operating a household vehicle not listed on the policy under which benefits are sought.

After Mione's motorcycle collision, the Miones sought benefits from the at-fault driver's insurance company, which paid out the policy's maximum benefit. The Miones then tried to recover UIM benefits from Erie under both the automobile policy and Angela's policy. Erie denied coverage for both claims, citing the household vehicle exclusions in the policies. The company then filed suit in the Lehigh County Court of Common Pleas seeking a declaratory judgment that it was not required to pay the Miones UIM benefits under either of the policies.

Erie eventually filed a motion for judgment on the pleadings, which the trial court granted. The court noted that "the facts in this case are nearly identical to the facts in" Eichelman , where this Court rejected the argument that household vehicle exclusions are per se unenforceable on public policy grounds.

The appellant in Eichelman was struck by an underinsured motorist while operating his motorcycle. The motorcycle was covered on its own policy, issued by Aegis Security Insurance Company ("Aegis"). Though the Aegis policy lacked UM/UIM coverage altogether, Eichelman lived with his mother and her husband. The couple owned two cars, each of which was covered on a Nationwide Insurance policy that included UIM coverage.

When Eichelman tried to collect UIM benefits under his family's Nationwide policies as a resident relative of the named insured, Nationwide denied the claims, citing an exclusion in each policy stating that coverage does not apply to "[b]odily injury suffered while occupying a motor vehicle owned by you or a relative not insured for [UIM] coverage under this policy ; nor to bodily injury from being hit by any such motor vehicle." Because Eichelman was injured while occupying his motorcycle—a vehicle "not insured for [UIM] coverage under this policy"—it was Nationwide's position that the exclusion unambiguously barred the claim.

On appeal, our Court unanimously upheld the denial of coverage and rejected Eichelman's argument that the household vehicle exclusion violated public policy. We explained that the exclusion, by its terms, was unambiguous, and we discerned no clear public policy that would require judicial invalidation of the exclusion. We also stated that the cost-containment rationale underlying the MVFRL weighed in favor of enforcing the household vehicle exclusion.

[U]nderinsured motorist coverage serves the purpose of protecting innocent victims from underinsured motorists who cannot adequately compensate the victims for their injuries. That purpose, however, does not rise to the level of public policy overriding every other consideration of contract construction. As this Court has stated, "there is a correlation between premiums paid by the insured and the coverage the claimant should reasonably expect to receive." Hall v. Amica Mut. Ins. Co ., 538 Pa. 337, 648 A.2d 755, 761 (1994). Here, appellant voluntarily chose not to purchase underinsured motorist coverage. In return for this choice, appellant received reduced insurance premiums.

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Allowing the "household exclusion" language to stand in this case is further bolstered by the intent behind the MVFRL, to stop the spiraling costs of automobile insurance in the Commonwealth. If appellant's position were accepted, it would allow an entire family living in a single household with numerous automobiles to obtain underinsured motorist coverage for each family member through a single insurance policy on one of the automobiles in the household. If this result were allowed, it would most likely result in higher insurance premiums on all insureds (even those without family members living at their residence) since insurers would be required to factor expanded coverage cost into rates charged for underinsured motorist coverage. Thus, allowing the "household exclusion" language of the two insurance policies at issue to bar recovery by appellant of underinsured motorist benefits is consistent with the intent behind the enactment of the MVFRL.

Returning to the case before us, the trial court below reasoned that the household vehicle exclusion in the Miones’ automobile policy was unambiguous and enforceable. Like the Eichelman court, the trial court emphasized that Mione had waived UIM coverage for his motorcycle, meaning that the public policy of cost containment would be furthered by enforcing the household vehicle exclusion.

The trial court also rejected the Miones’ argument that this Court's 2019 decision in Gallagher compelled a different result. Gallagher involved a motorcyclist who was hit by an underinsured driver. At the time of the collision, GEICO insured the motorcycle under a policy that included $50,000 of UM/UIM coverage. Gallagher also owned two automobiles, which GEICO insured under a separate policy that included UM/UIM coverage of $100,000 per vehicle. Both of these GEICO policies included stacking.

After Gallagher's collision, he filed claims under both policies. GEICO paid the $50,000 motorcycle-policy claim, but then rejected Gallagher's claim for stacked benefits under the automobile policy, citing a household vehicle exclusion that barred coverage for injuries sustained while operating a household vehicle "that is not insured for [UIM] Coverage under this policy. " The lower courts enforced this exclusion and sided with GEICO, citing this Court's 2008 decision in Erie Insurance Exchange v. Baker , where we held that household vehicle exclusions are not "disguised waiver[s]" of stacking that skirt the MVFRL's express waiver requirements.

On appeal, this Court held (in a departure from Baker ) that GEICO's household vehicle exclusion "is inconsistent with the unambiguous requirements [of] Section 1738 of the MVFRL" because "it acts as a de facto waiver of stacked UIM coverage provided for in the MVFRL." Thus, the Court stated, insurers must "comply with the Legislature's explicit directive to offer stacked UM/UIM coverage on multiple insurance policies absent a knowing Section 1738 waiver."

The trial court below distinguished Gallagher , noting that Mione lacked UM/UIM coverage on his motorcycle, whereas the insured in Gallagher had purchased UM/UIM coverage for his motorcycle. In the trial court's view, because there was no UM/UIM coverage on Mione's motorcycle policy, the Miones’ claim under the automobile policy does not implicate stacking (or Gallagher ) at all, since there is no underlying coverage upon which to "stack" the automobile policy.

Mione appealed to the Superior Court, arguing that Gallagher invalidated all household exclusions in Pennsylvania, and that the decision's rationale applies equally in this case. The Superior Court affirmed the trial court, concluding that "stacking and Section 1738 are not implicated in this case" because Mione did not have UM/UIM coverage under his "host-vehicle" policy and therefore "did not have the requisite UM/UIM coverage on which to stack other household policies with UM/UIM benefits." Thus, like the insured in Eichelman , the Superior Court concluded that the Miones were "using the Erie Auto Policies to procure UIM coverage in the first place. Therefore, this is not a stacking case, and the rationale of Gallagher does not apply." The Superior Court also rejected the argument that Gallagher implicitly overruled Eichelman , explaining that " Gallagher only invalidated household exclusions in cases where they are used to circumvent Section 1738's specific requirements for waiving stacking."

The Miones then petitioned for allowance of appeal, which we granted in order to consider whether the lower courts erred in distinguishing Gallagher and applying Eichelman . The gist of the Miones’ argument before this Court is that Gallagher overruled Eichelman sub silentio . The Miones also take issue with the Superior Court's basis for distinguishing Gallagher . In the Miones’ view, it is irrelevant that, unlike in Gallagher , the motorcycle policy here did not include UM/UIM coverage in the first instance. According to the Miones, the decisive fact in Gallagher was that "the policy under which [the] claim [was] made provided stacked underinsured motorist benefits," which is also true in this case. Thus, the Miones argue that Gallagher ’s "de facto waiver" rationale applies equally here, and that Eichelman is no longer good law in a post- Gallagher world.

The Miones also claim that the lower courts erred in even considering the terms of the motorcycle policy at all. The couple cites our decision in Craley v. State Farm Fire &Casualty Co. , 586 Pa. 484, 895 A.2d 530 (2006), which they contend stands for the proposition that the only relevant coverage elections are those of the policy under which coverage is being sought . Thus, in the Miones’ view, the Superior Court disregarded Craley when it relied upon the fact that Mione's "host-vehicle policy" (i.e. , the motorcycle policy) lacked UM/UIM coverage.

Erie, on the other hand, agrees with the lower courts that Eichelman is binding precedent, and that Gallagher is factually distinguishable because Mione waived UM/UIM coverage on his motorcycle policy, whereas the insured in Gallagher did not. Erie therefore phrases the issue before us as "whether a claimant that failed to insure a household vehicle for UM/UIM benefits should nevertheless be allowed to recover UM/UIM benefits from household policies despite the presence [of] an unambiguous ‘household exclusion’ contained therein."

Our analysis here turns upon Section 1738 of the MVFRL, which states that, when multiple vehicles are insured under one or more policies, any UM/UIM coverage is stacked by default. This means that the amount of coverage "shall be the sum of the limits for each motor vehicle as to which the injured person is an insured." While stacked coverage is the default, an insured nevertheless may waived stacked coverage limits by signing a written waiver form, the text of which is dictated by Subsection 1738(d). In Gallagher , this Court concluded that enforcing a household vehicle exclusion under the circumstances of that case would conflict with Section 1738 ’s explicit waiver regime, where stacking is assumed to be included in a policy unless the named insured explicitly waives it in accordance with the statute. In so ruling, the Court underscored that "Gallagher decided to purchase stacked UM/UIM coverage under both of his policies , and he paid GEICO premiums commensurate with that decision." Thus, the holding turned on the fact that "Gallagher did not sign the statutorily-prescribed UIM stacking waiver form for either of his GEICO policies" and the fact that "he would have received the UIM coverage that he bought and paid for under both of his GEICO policies pursuant to Subsection 1738(a) of the MVFRL, save for the ‘household vehicle exclusion[.]’ "

Here, unlike in Gallagher , the Miones are not attempting to stack anything at all. They have not yet received any UIM benefits, but their theory is that one or both of the household policies can provide UIM coverage in the first instance . The problem with that argument is that the policies explicitly exclude UM/UIM coverage for damages sustained while operating an unlisted household vehicle. Those exclusions do not conflict with Section 1738 of the MVFRL. Unlike in Gallagher , the exclusions here do not act as de facto waivers of stacking . In other words, because the Miones are not attempting to stack UIM benefits from the household policies on top of UIM benefits from the motorcycle policy, Section 1738 ’s rules for waiving stacking—which were the basis for this Court's decision in Gallagher —are simply not implicated.

We reiterate today that the holding in Gallagher was based upon the unique facts before us in that case, and that the decision there should be construed narrowly. The insured in Gallagher was attempting to stack (inter-policy) the coverage limits from his automobile policy on top of the coverage limits for his motorcycle policy. He was also attempting to stack (intra-policy) the coverage limits for each of the two vehicles on his household automobile policy. It was only when confronted with those unique facts that this Court concluded that enforcing the exclusion would be "inconsistent with the unambiguous requirements [of] Section 1738 of the MVFRL[.]"

In contrast, when an insured seeks UM/UIM benefits under a household policy but does not have UM/UIM coverage on the vehicle that he or she was occupying at the time of the collision, it cannot be said that a household vehicle exclusion in the UM/UIM-containing policy is operating as the sort of disguised waiver of stacking that was disapproved in Gallagher . Rather, in such circumstances, the household vehicle exclusion serves as an unambiguous preclusion of all UM/UIM coverage (even unstacked coverage) for damages sustained while operating an unlisted household vehicle. We disagree with the Miones that this approach conflicts with the general contract-law principle that the only relevant coverage selections in a UM/UIM case are those of the policy under which benefits are being sought. It is of course true that the terms of the Miones’ automobile policy govern whether benefits are payable under that policy, just as the terms of Angela's policy dictate the scope of coverage for that policy. But those policies contain household vehicle exclusions. And to know whether or not the exclusions can be enforced per Gallagher , we must first determine whether they are impermissibly acting as de facto waivers of stacking. It is only for this limited purpose—to determine whether the insured is actually attempting to stack coverage at all—that we look to what the Superior Court called the "host-vehicle policy." This methodology in no way conflicts with Craley . Our approach merely recognizes that, for a household vehicle exclusion to be acting as an impermissible de facto waiver of stacking, the insured must have received UM/UIM coverage under some other policy first, or else Section 1738 is not implicated at all.

As interpreted in Gallagher , the MVFRL precludes any clause that acts as a disguised waiver of stacking by skirting Section 1738 ’s express waiver requirements. Because that holding was based on the unambiguous text of the MVFRL, we need not weigh other interpretive factors, like the law's remedial purpose or its underlying cost-containment rationale. Nevertheless, we highlight that the Miones’ argument, if we accepted it, would create a system prone to abuse. One could waive the (expensive) UM/UIM coverage on one's motorcycle policy with one insurer, knowing full well that one has ample UM/UIM coverage on another (less expensive) household automobile policy with another insurer. As we have said in the past, interpretations of the MVFRL that open the door to such abuses are strongly disfavored, unless the plain language of the statute clearly states otherwise.

In sum, we continue to reject the view that household vehicle exclusions are ipso facto unenforceable. Gallagher did not undermine Eichelman ’s central holding in that regard; it simply held that a household vehicle exclusion cannot conflict with Section 1738 by purporting to take away coverage that the law says is mandatory unless waived using a specific form. In cases where the exclusion does not interfere with the insured's ability to stack UM/UIM coverage, Gallagher ’s de facto waiver rationale is not applicable. Thus, we conclude that the lower courts correctly distinguished Gallagher and correctly enforced the exclusions in the Miones’ household policies.

We affirm.

Chief Justice Todd and Justices Donohue, Dougherty, Mundy and Brobson join the opinion.

The Late Chief Justice Baer did not participate in the decision of this matter.