Photo credit: Rawpixel.com/Shutterstock.com

Allstate Fire & Casualty Insurance will have to wait to appeal a federal judge's ruling interpreting the Pennsylvania Supreme Court's 2019 decision in Gallagher v. Geico as invalidating the "household vehicle exclusion," commonly used in motor vehicle policies.

In Stockdale v. Allstate Fire & Casualty Insurance, one of several putative class actions alleging insurers have improperly used household exclusions to bar stacked uninsured and underinsured motorist coverage since as far back as 1990, U.S. District Judge Wendy Beetlestone of the Eastern District of Pennsylvania denied Allstate's request to certify her Feb. 27 ruling as a final judgment so that it could immediately appeal it. The February ruling granted plaintiff Kayla Stockdale's motion for summary judgment and denied summary judgment to Allstate.

In an April 8 decision, Beetlestone said the case must proceed to the class certification phase before an appeal can be taken.

"While Allstate argues that the adjudicated and unadjudicated claims involve 'unrelated legal issues,' all of the claims in fact involve the issue of Gallagher's scope," Beetlestone said. "Whether Allstate appeals the court's denial of summary judgment now, or, if a class is certified, after the certification of such class, the crux of Allstate's argument will essentially be the same: that this court misconstrued the scope of Gallagher's holding. Because the individual and class claims stand or fall on how broadly or narrowly Gallagher applies, this is not a case in which there is an 'an injustice of delaying judgment on a distinctly separate claim pending adjudication of the entire case' to be avoided."

Stockdale had sought to stack UIM coverage under her parents' Allstate policy (referred to in the opinion as the "Sanders policy") with the UIM coverage provided under her own policy (referred to as the "Stockdale policy"). Allstate, however, denied the claim, citing the household exclusion provision in her parents' policy, which informed the insured that no UIM coverage would be available "to you or a resident relative" injured in a vehicle that wasn't specifically covered by that policy.

In seeking summary judgment in Stockdale's suit, Allstate argued that the Gallagher decision had limited reach beyond the specific facts in that case.

In her Feb. 27 decision, Beetlestone rejected that notion, however.

"Allstate's assertion that the Pennsylvania Supreme Court intended Gallagher to be a 'narrow' decision is misleading," the judge said. "Allstate makes much of a footnote stating that '[o]ur focus here is narrow.' That phrase, however, was written in the context of explaining 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."

Instead, Beetlestone continued, "The Pennsylvania Supreme Court must be presumed to have meant what it said when it wrote that 'household vehicle exclusions should not and cannot operate as a pretext to avoid stacking' and that 'these exclusions are unenforceable as a matter of law,' and this court declines to read any limiting language into that clear pronouncement."

Allstate also sought to factually distinguish Stockdale's case from Gallagher, which involved an insured who had attempted to stack UIM benefits across two Geico policies—one for his motorcycle and one for his automobiles. Allstate argued that, unlike the plaintiff in Gallagher, Stockdale had not purchased stacking on her own policy and the two policies she sought to stack coverage across had been purchased by two different insureds.

But Beetlestone said both of those factual distinctions between the two cases were "irrelevant," noting that while Stockdale had not purchased stacking on her own policy, her parents had paid for coverage for all "'resident relative[s]'" in their household.

"Here, it is undisputed that Stockdale is making a claim under the Sanders policy and that she was an insured under that policy," Beetlestone said. "Because it is also undisputed that the Sanders did not waive stacked coverage, and because a household exclusion 'cannot operate as a pretext to avoid stacking' or a 'de facto waiver' of stacked coverage, the household exclusion in the Sanders policy is 'unenforceable as a matter of law.'"

In seeking to certify the Feb. 27 ruling, Allstate argued that if class certification proceeds and the U.S. Court of Appeals for the Third Circuit subsequently rules that Gallagher is not applicable to Stockdale's case, the parties and the court will have needlessly incurred the 'substantial time and expense of class discovery and class certification proceedings,'" according to Beetlestone.

But Beetlestone said that, even if the Third Circuit did reverse her summary judgment ruling, "it is unlikely that it will provide the certainty Allstate argues justifies certification; the issue at the heart of this litigation is an issue of state law, and, as such, can only be definitively resolved by the Pennsylvania Supreme Court."

"Furthermore, allowing this litigation to proceed as a consolidated whole rather than piecemeal would affirmatively promote efficiency in that it would allow the Court of Appeals to decide, when and if they are presented, all issues, whether related to Gallagher, or the class certification process, at once," Beetlestone continued.

Stockdale is represented by James Haggerty of Haggerty, Goldberg, Schleifer & Kupersmith, Scott Cooper of Schmidt Kramer and Jonathan Shub of Kohn Swift & Graf.

Cooper said in an email, "This case shows exactly what the Pennsylvania Supreme Court meant when it wrote in Gallagher that it is writing for all cases and judges cannot limit Gallagher to its facts. Insurance companies received a windfall for years by charging a premium for an illusory benefit and now they will need to give people the coverage they paid for."

"Like all of Judge Beetlestone's opinions, it was fair and well-reasoned," Haggerty added in a separate email.

Counsel for Allstate, Mark Levin of Ballard Spahr in Philadelphia, could not be reached for comment on the decision.