Opinion
C.A. NO. 03-3796
February 4, 2004
MEMORANDUM OPINION AND ORDER
The plaintiff brought this action seeking a declaratory judgment that it does not have to pay defendant underinsured motorist (UIM) benefits in the amount of $300,000.00 under her father's insurance policy. Presently before the court are the parties' cross-motions for summary judgment. For the reasons which follow, the motion of the plaintiff will be granted and the motion of the defendant will be denied.
There is no dispute as to the material facts. Defendant does not own a motor vehicle nor is the regular user of any particular motor vehicle. She does not maintain an automobile insurance policy. On August 6, 2000, the defendant was a passenger in a vehicle owned and operated by her daughter, Amanda Krish ("Krish"), which was involved in an accident with another vehicle. The Krish vehicle was insured with Allstate Insurance Company. At the time of the accident, defendant and Krish lived at the same residence as defendant's father, Frederick J. McCurry ("McCurry"). McCurry insured three vehicles under a single policy with the plaintiff. This policy provides UIM benefits in the amount of $300,000.00. Krish is listed on the declaration page of the plaintiff's policy as a licensed operator in the household. Although defendant is not a named insured under her father's policy, she is nevertheless entitled to UIM benefits under the father's policy since she is a relative residing in his household. Defendant alleged injuries due to the August 6, 2000 accident and recovered the $100,000.00 liability limits provided under the Allstate policy which covered the other vehicle as well as under the policy Krish maintained with Allstate. As a resident relative of the McCurry household, defendant now seeks UIM benefits in the amount of $300,000.00 under her father's policy.
The plaintiff has denied defendant's UIM claim, citing the household exclusion clause listed in McCurry's policy with plaintiff. Specifically, that provision provides:
"LOSSES WE WILL NOT PAY FOR (PART 5) OTHER HOUSEHOLD VEHICLES:
We will not pay for bodily injury to anyone occupying or struck by a motor vehicle owned or leased by you or a household resident which is not covered under this policy. . . ."
Policy at p. 8 (emphasis in original).
Plaintiff contends that since defendant was a passenger in a regularly used vehicle owned by another occupant of her household but which was not insured under McCurry's policy with plaintiff, defendant is not entitled to UIM benefits from plaintiff for this accident. Defendant responds that the household exclusion should not be enforced under the unique facts of this case because defendant was only a passenger in the daughter's vehicle and was not the owner of the vehicle and did not purchase any automobile insurance.
There is no question that defendant is precluded under the plain language of the household exclusion from recovering UIM benefits from plaintiff. The question is whether the household exclusion should be enforced under the facts of this case.
Although the Pennsylvania Supreme Court has held that the enforceability of the exclusion is dependent upon the factual circumstances presented in each case, the Court has upheld the exclusion in nearly all of the cases in which it has been considered. See e.g., Paylor v. Hartford Insurance Co., 640 A.2d 1234 (Pa. 1994); Windrim v. Nationwide Insurance Co., 641 A.2d 1154 (Pa. 1994): Eichelman v. Nationwide Insurance Co., 711 A.2d 1006 ( Pa. 1998); Burstein v. Prudential Prop. Cas.Ins.Co., 809 A.2d 204 (Pa. 2002).
Recently, in Prudential Prop. Cas.Ins.Co. v. Colbert, 813 A.2d 747 (Pa. 2002), the Supreme Court of Pennsylvania held that a "other household vehicle" exclusion similar to the one in the case sub judice, was not void against the public policy of Pennsylvania's Motor Vehicle Financial Responsibility Law (MVFRL), 75 Pa.C.S. sections 1701- 1799.7 as to Adam Colbert.
In Colbert, Adam Colbert was involved in an automobile accident while driving his car, which he had insured with both UM and UIM coverage with State Farm Insurance Company. At the time of the accident, Adam resided with his parents who owned three vehicles all of which were insured under a single policy with Prudential Property and Casualty Insurance Company. Adam settled his claim against the tortfeasor and also recovered the maximum amount of UM coverage under his policy with State Farm. Adam's subsequent claim for additional UIM benefits under his parent's policy with Prudential was rejected by Prudential on, inter alia, the ground that the "other household vehicle" exclusion expressly excluded coverage of a named insured or household resident for accidents occurring while the insured or household resident was using another owned vehicle not insured under the Prudential policy.
The Colbert court noted that Adam had received the UIM coverage for which he paid under his policy with State Farm and that neither Adam nor his parents paid Prudential to insure Adam's car. The court noted that in fact there is nothing in the record to suggest that either Adam or his parents ever disclosed Adam's vehicle to Prudential. The Court found that under these facts, voiding the household exclusion would be tantamount to compelling Prudential "to underwrite unknown risks that the insureds neither disclosed nor paid to insure. In addition, Adam would stand to receive gratis coverage or, more accurately, double coverage." 813 A.2d at 754 (emphasis in original) The Colbert Court went on to state:
Moreover, voiding the "other household vehicle" exclusion would empower insureds to collect UIM benefits multiplied by the number of insurance policies on which they could qualify as an insured, even thought they only paid for UIM coverage on one policy. As a result, insureds would receive benefits far in excess of the amount of coverage for which they paid, as would be the case here were we to void the exclusion. The same would be true even if the insureds never disclosed any of the other household vehicles to the insureds. Consequently, insurers would be forced to increase the cost of insurance, which is precisely what the public policy behind the MVFRL strives to prevent.813 A.2d at 754-55. (emphasis in original).
The Superior Court of Pennsylvania has also recently weighed in with a decision on this issue. Rudloff v. Nationwide Mutual Ins.Co., 806 A.2d 1270 (Pa.Super. 2002). In Rudloff, Elizabeth Rudloff was injured while operating a vehicle that she owned. Rudloff sought UIM benefits through an automobile policy that her father maintained with Nationwide. Rudloff was not a named insured on her father's policy although, as a relative residing in his household, she would be entitled to UIM benefits under the father's policy. Nationwide denied Rudloff's claim for UIM benefits on the basis of a household exclusion similar to the one in this case. In siding with Nationwide, theRudloff, court reasoned as follows:
The scope of the household exclusion in this case is narrow. As stated above, while appellee is not the named insured in the Nationwide policy, she is nonetheless entitled to UIM benefits as a relative residing in her father's household. Thus, were appellee to suffer her injuries while occupying or operating a vehicle owned by a friend, then she would have been entitled to UIM benefits under the Nationwide policy. By virtue of her status as an insured, the UIM benefits followed [Rudloff] to almost any vehicle that she could have occupied or operated. Nationwide contracted for this risk when it insured her father's vehicle. The exclusion only shields Nationwide from the risks associated with [Rudloff's] operation of a vehicle that she or a relative within the household owns and that is not insured for UIM coverage with Nationwide.806 A.2d at 1274.
The Superior Court went on to observe:
The Nationwide policy covered [Rudloff's] father's vehicle and provided him with UM coverage, as well as any relative residing in his household who operated or occupied the vehicle. Furthermore, the policy also provided father and his relatives with UIM coverage if they suffered injuries while occupying or operating another person's vehicle. The household exclusion, however, limits this coverage in cases where the father or relative owned the vehicle yet have not insured it for UIM coverage with Nationwide. While UIM coverage underwrote the risks associated with father or his relatives occupying or operating another vehicle which he or a relative within his household did not own, this risk is negligible when compared to the risk associated with [Rudloff] operating or occupying the vehicle that she owned. The difference in these risks derives from the fact that it is generally assumed that the occasions on which a person occupies or operates a vehicle that he or she does not own are slight when compared to the occasions on which a person occupies or operates a vehicle that he or she owns, because the vehicle that a person owns is normally that person's primary source of transportation.Id. (emphasis in original).
Finally, in Nationwide Mutual Insurance Co. v. Riley, 352 F.2d 284 (3d Cir. 2003), our Court of Appeals also upheld a similar household exclusion. Pamela Riley was injured when she was involved in an accident with another vehicle. The vehicle Riley was driving was owned by her and insured by her with Nationwide. She recovered the limits of the liability from the other tortfeasor and also recovered the limits of the UIM coverage on her own vehicle. At the time of the accident, Riley lived with her father who maintained his own policy with Nationwide and on which Riley qualified as a relative. Nationwide denied Riley's claim for additional UIM benefits under her father's policy.
In upholding the validity of the household exclusion, our Court of Appeals noted the similarity between the facts of the case before it and those in Colbert, The Court reasoned:
In exchange for a reduction in insurance premiums, Arthur Riley chose to exclude the other cars in his household from his underinsured motorist policy. Now that his daughter Pamela has already recovered to the limit of her own underinsured motorist policy, she seeks benefits for which she has not paid. She has presented no evidence, however, that Nationwide factored in the risk of her having an accident with an uninsured motorist when it calculated Arthur's premium. Indeed, we may presume that it did not, as Pamela's insurance policy was issued months after Arthur's policy. Voiding the exclusion clause would therefore allow Pamela added underinsured policy recoveries, and force nationwide to pay for items not factored into its risk calculations.352 F.2d at 288.
Thus, based on the above authority, there is no question that had defendant, instead of her daughter, owned and maintained insurance with State Farm on the Krish vehicle involved in the accident, we would enforce the household exclusion. However, in the case sub judice, defendant was a passenger in the Krish vehicle and did not own or insure any vehicle of her own.
Nevertheless, we find that the same policy considerations which were present in the aforementioned cases are also present here. Under the above authority, the relevant inquiry in deciding the enforceability of the household exclusion, is not whether the person seeking UM benefits owned or maintained insurance on the vehicle involved in the accident, but rather whether the insurer was compelled to underwrite unknown risks that it has not been compensated to insure. Colbert, 813 A.2d at 752;Burstein, 809 A.2d at 210. Here, the Krish vehicle was not insured by plaintiff but by another carrier. McCurry did not pay any premiums to Prudential to insure Krish's car. Nor is there is any evidence that McCurry ever disclosed the existence of Krish's vehicle to plaintiff. Plaintiff would be exposed to an increased risk if it is required to provide UM and UIM coverage for vehicles owned by other family members and insured by another carrier in which a family member was injured. To absorb such a risk, plaintiff would be forced to increase its insurance rates, an outcome which is against the public policy of the MVFRL.
The household exclusion discourages family members such as Krish from scrimping on the amount of insurance they purchase for their own vehicle in the hopes that any shortfall can be made up by their status as a household resident on another family member's policy. Defendant was injured while a passenger in Krish's car. As such, she properly recovered under the terms of Krish's own policy with Allstate. Had defendant been injured while in one of the three vehicles insured by McCurry with plaintiff she would be entitled as a household resident to the UIM benefits from plaintiff. That is because McCurry specifically paid for UIM coverage for each of the three vehicles. By not including Krish's vehicle under his policy, McCurry paid a lesser premium to plaintiff than he would have had he included the Krish vehicle.
Indeed, had defendant been injured in almost any other vehicle than her daughter's vehicle, she would have been entitled to UIM benefits by virtue of her status as an insured under the McCurry policy. However, plaintiff was willing to underwrite the risk of defendant being injured in a vehicle which her father or she did not own because the risk of being injured in such a vehicle is negligible when compared to the risk of being injured in vehicle which another family member owned. This is because, defendant would be more likely to occupy a vehicle owned by another family member than a vehicle owned by a non-family member. Plaintiff was understandably unwilling to underwrite the more likely risk of defendant being injured while occupying a vehicle owned by another family member.
For the foregoing reasons, we find that the household exclusion as applied to defendant is consistent with the underlying policy of the MVFRL and will enter judgment in favor of the plaintiff and against the defendant.
The motion of the defendant for reconsideration (Doc. # 10) is DENIED.
The motion of the defendant for summary judgment (Doc. # 13) is DENIED.
The motion of the plaintiff for summary judgment (Doc. #12) is GRANTED.
The Court declares that:
1) the household exclusion contained in the applicable Prudential insurance policy that Prudential will not pay for bodily injury for anyone occupying or struck by a motor vehicle owned or leased by you or a household resident which is not covered under this policy, is valid and enforceable as to Debra J. Dormer;
2) defendant is not entitled to recover underinsured motorist benefits from plaintiff under the applicable insurance policy.
Judgment is ENTERED in favor of the plaintiff and against the defendant.
IT IS SO ORDERED.