Household vehicle exclusions cannot be used to bar injured claimants from recovering stacked coverage, the Pennsylvania Supreme Court has ruled in a decision that breaks with decades of precedent.

The Supreme Court ruled 5-2 on Wednesday that a household exclusion in a policy issued by Geico violated the Motor Vehicle Financial Responsibility Law because it acted as a “de facto waiver” of stacked coverage. The ruling in Gallagher v. Geico reversed a Superior Court decision, which had relied on two prior Supreme Court decisions that had both failed to achieve a majority.

According to Justice Max Baer, who wrote the majority opinion, the MVFRL clearly says that, unless insurance purchasers specifically agreed to waive stacking, the coverage should be available to claimants.

“This provision has the salutary effect of providing insured with detailed notice and knowledge of their rights to [uninsured/underinsured] coverage absent such formal waiver,” Baer said. “[Brian] Gallagher decided to purchase stacked UM/UIM coverage under both of his policies, and he paid GEICO premiums commensurate with that decision. He simply never chose to waive formally stacking as is plainly required by the MVFRL.”

In footnotes, Baer said the decision breaks with the Supreme Court's 2011 holding in Government Employees Insurance v. Ayers, and the 2009 decision in Erie Insurance Exchange v. Baker. However, Baer said the court's holding from Wednesday did not go against principals of stare decisis because the court split evenly in Ayers and the holding in Baker was a plurality decision.

In other footnotes, Baer said the state General Assembly was free to alter the law to allow for the exclusion, and cautioned the ruling ”may disrupt the insurance industry's current practices.”

“However, we are confident that the industry can and will employ its considerable resources to minimize the impact,” he said.

Baer's 13-page opinion garnered dissent from Chief Justice Thomas Saylor and Justice David Wecht.

Although Saylor simply noted his dissent from the majority ruling, Wecht issued an eight-page dissent, saying the majority confused the rejection of stacking, which requires a form, with the ability of carriers to specifically exclude coverage for certain occurrences. The ruling, he said, will require insurers to provide coverage for vehicles they are unaware of. Carriers, Wecht warned, will react with “a hike in premiums for all Pennsylvania policyholders without regard to excluded risks.”

According to court records, Gallagher bought stacked coverage on two Geico insurance policies—one for his motorcycle and the other for his two automobiles. According to Baer, with stacking, Gallagher was entitled to $250,000.

In 2012, Gallagher was involved in a motorcycle accident, and, after paying $50,000 in underinsured motorist coverage, Geico denied Gallagher's claim for additional coverage under the automobile policy.

Geico cited the household vehicle exclusion in that policy, which said the coverage did “not apply to bodily injury while occupying or from being struck by a vehicle owned or leased by you or a relative that is not insured for [UIM] coverage under the policy.”

Schmidt Kramer attorney Scott Cooper, who, along with Joyce Novotny-Prettiman of Quatrini Rafferty, represented Gallagher, said the ruling revered about 30 years of case law, but it also sided with arguments he and other plaintiff-side attorneys have been making for the past few decades. According to Cooper, the case law was built around incidents that allowed courts to avoid addressing the statutory arguments head-on, such as one case where a plaintiff involved in a motorcycle crash sought coverage on one policy but had not paid for motorcycle insurance.

“Once people actually read the statute, you can see the statute says the insured can purchase, or reject it, and there's nothing that allows the insurance companies to do what they're doing,” he said. “It was a backdoor way to take away what you purchased.”

The ruling was applauded by the plaintiffs bar.

Haggerty, Goldberg, Schleifer & Kupersmith attorney James C. Haggerty, who wrote an amicus brief on behalf of the Pennsylvania Association for Justice, said the decision is a “resounding victory for motor vehicle accident victims in Pennsylvania.”

Joseph Hudock Jr. of Summers, McDonnell, Hudock, Guthrie & Skeel, who represented Geico, declined to comment for the story.