Disputes over the extent of consumers' ability to stack underinsured and uninsured motorist insurance coverage keep popping up in Pennsylvania—and courts keep siding with the insureds.

In a Sept. 16 decision in Rutt v. Donegal Mutual Insurance, a Lancaster County Court of Common Pleas judge ruled that the Pennsylvania Supreme Court's landmark January ruling in Gallagher v. Geico, which held that the household vehicle exclusion in insurance policies violates the Pennsylvania Motor Vehicle Financial Responsibility Law and cannot be used to bar stacked coverage, applied to all household vehicle exclusions and should be applied retroactively. The court rejected the defendant insurer's argument that Gallagher was only applicable to situations where both policies were issued by the same insurance provider and that it should only apply prospectively because it introduced a new rule of law.

Then, in a Sept. 28 opinion in Barnard v. Travelers Home and Marine Insurance, the state Supreme Court, answering a certified question from the U.S. Court of Appeals for the Third Circuit, ruled 6-1 that an insured's decision to increase underinsured motorist policy limits constitutes a "purchase" requiring the insurer to offer a new stacking waiver.

And most recently, on Oct. 1, a Northampton County Court of Common Pleas judge in Rush v. Erie issued what may be the first ruling in Pennsylvania opening the door to extending the Gallagher ruling to the regular-use exclusion commonly found in insurance policies.

In Rush, Northampton County Judge Stephen Baratta denied a motion for summary judgment by defendant Erie Insurance Exchange, which had sought to rely on its policy's regular-use exclusion to bar plaintiffs Matthew Rush and Kathleen McGrogen-Rush from recovering stacked UIM benefits.

Baratta agreed with the plaintiffs that, in light of the Supreme Court's recent rulings in Gallagher and Safe Auto Insurance v. Oriental-Guillermo, there is a substantial question of law as to whether regular-use exceptions are against public policy and the MVFRL.

"Defendant narrowly construes the issue in this case as whether plaintiffs' claims are barred by the regular use exception where plaintiff admits the accident occurred in a vehicle provided by his employer for his regular use," Baratta said. "Defendant purposefully ignores the broader question of whether the regular use exception, as applied, violates the MVFRL and public policy."

Scott Cooper, a personal injury attorney at Schmidt Kramer in Harrisburg, represents the plaintiffs in Rush, represented the plaintiffs in Gallagher and penned an amicus brief in Barnard. He said the "tide appears to be turning" with regard to Pennsylvania courts' attitude toward insureds' entitlement to stacked coverage.

"The courts are realizing that the person has a right to stack and the companies can't write exclusions and try to get away with technicalities," Cooper said.

Counsel for the plaintiff in Barnard, Erik Snyder of Snyder Law Group in King of Prussia, agreed, saying the courts are starting to recognize that the legislature used particular language in the MVFRL and "they're enforcing it the way it was intended, in favor of consumers—which is bad news for insurance companies."

Jim Haggerty of Haggerty, Goldberg, Schleifer & Kupersmith in Philadelphia—who also represents the plaintiffs in Rush and Rutt, was co-plaintiffs counsel in Gallagher and co-authored the Barnard amicus brief with Cooper—agreed that courts are increasingly viewing insurance policies and exclusions through the lens of the statutory goals of the MVFRL.

"They've recognized that remediation to accident victims is as equally an important goal as cost containment," Haggerty said.

The Barnard case in particular, the attorneys said, was significant.

In Barnard, plaintiff Michelle Barnard originally signed a written waiver of stacked benefits when she purchased her two-vehicle policy, leaving her underinsured motorist policy limit at $50,000 per person. She later increased her policy limit to $100,000 per person but was not offered a waiver, according to court documents.

Barnard was subsequently injured in a car accident and filed a claim for UIM coverage, after which Travelers paid out $100,000. Barnard did not accept the payout and argued that stacked limits were available.

In February 2018, U.S. District Judge Gerald McHugh of the Eastern District of Pennsylvania denied a motion for summary judgment by defendant Travelers Home and Marine Insurance Co., finding that Section 1738(c) of the MVFRL employed the plain meaning of the word "purchase."

"In common usage, to purchase means to buy—to acquire something by paying for it," McHugh said. "Travelers contends that the transaction should be characterized as an 'alteration' of limits, but that ignores the fact that plaintiff here paid for a level of UIM insurance that was different from what she had previously purchased, and for which she paid a different and higher premium. As an insurance 'product,' the May 2009 policy was distinct from the May 2007 version that preceded it."

Travelers appealed the matter to the Third Circuit, which then asked the state Supreme Court to weigh in.

Writing for the majority, Justice David Wecht agreed with McHugh's interpretation of Section 1738(c).

"Based upon the unambiguous language of this subsection, we conclude that an insurance company must offer an insured the opportunity to waive stacking any time she acquires UIM coverage for more than one vehicle, regardless of whether this acquisition occurs when she initially applies for an insurance policy or when she subsequently increases her UIM coverage limits for multiple vehicles," Wecht said. "Here, Barnard paid to obtain additional UIM coverage for her two vehicles in 2009. Therefore, Travelers was required to offer her the opportunity to waive stacking of the new, aggregate amount of UIM coverage at that time."

Wecht, joined by Justices Max Baer, Debra Todd, Christine Donohue, Kevin Dougherty and Sallie Updyke Mundy, rejected Travelers' argument that Subsection 1738(c) limits the term "purchase" to an insured's initial purchase of an insurance policy.

"Rather, the subsection requires the execution of a new stacking waiver any time an insured pays to obtain UIM coverage for multiple vehicles, regardless of whether this acquisition occurs when an individual initially applies for insurance, or when she subsequently pays to obtain additional UIM coverage," Wecht said.

But Chief Justice Thomas Saylor issued a dissenting opinion, arguing that the majority's holding is "unsupported by the MVFRL and inconsistent with this court's analysis in Sackett v. Nationwide Mutual Insurance Co."

In that case, known as Sackett II, the Supreme Court ruled that when an insurer extends coverage to a new vehicle on a preexisting policy under an after-acquired vehicle clause, new stacking waivers are not required.

"In that matter, this court explained that a 'purchase,' for Section 1738(c) purposes, has acquired specialized meaning in the insurance industry and, as such, is a term of art, making it ill-suited to a plain-meaning analysis based on dictionary definitions, as portrayed by the majority," Saylor said. "Further, the court ultimately concluded that the addition of coverage for a newly-acquired vehicle, under a policy's after-acquired-vehicle clause, did not constitute a 'purchase' of insurance so as to trigger the need for a new stacking  waiver. This was true even where the insured was required to pay an extra premium for coverage of the new vehicle."

But Wecht said Sackett II refers to the Supreme Court's ruling on reargument that modified its original ruling in Sackett I. In Sackett I, the justices ruled that a new stacking waiver is required whenever additional UIM coverage is added for multiple vehicles. Sackett II modified that ruling only to the extent that it held that new waivers aren't required where vehicles are added to a policy via a continuous after-acquired vehicle provision.

Since Barnard did not involve an after-acquired vehicle provision, Sackett I applies, Wecht said.

"We opined that 'Section 1738(c), read as a whole, makes it clear that an insurer must provide a stacking waiver each time a new vehicle is added to the policy because the amount of coverage that may be stacked increases,'" Wecht said, quoting Sackett I. "Thus, under the rationale of Sackett I, an insurance company must offer an insured the opportunity to waive stacking whenever she obtains additional UIM coverage for multiple vehicles because the amount of UIM coverage that may be stacked increases."

Cooper called the majority opinion in Barnard "the most thorough opinion written explaining Sackett I and Sackett II and the limitations of Sackett II—that it's really the exception to the rule."

Snyder said this clarity is important because "some lower courts have been interpreting Sackett II in a manner beyond its intended ruling," which dealt narrowly with the after-acquired vehicle provision.

Haggerty added that insurers have been attempting to push the boundaries of Sackett II as well.

"Several insurers are still taking the position that Sackett II applies in all situations where vehicles are added to policies and Barnard recognizes that Sackett II is a very limited exception to Sackett I," he said.

Defense counsel in Rutt, Joseph Mayers of The Mayers Firm in Plymouth Meeting, could not be reached for comment; nor could defense counsel in Rush, Scott Tredwell of McCormick & Priore in Philadelphia.

Defense counsel in Barnard, Brooks Foland of Marshall Dennehey Warner Coleman & Goggin in Camp Hill, also could not be reached.