MidCentury Ins. v. Werley, 2024 Pa. Super. LEXIS 22554, (U.S. Ct. of App., 3d Cir., September 5, 2024) (Smith, J.)
OPINION OF THE COURT
RENDELL, Circuit Judge.
Levi Werley was seriously injured while riding an uninsured motorized dirt bike. When the insurance of the driver that struck him did not compensate him fully for his injuries, Levi’s parents, Chad and Jane Werley, sought to recover underinsured motorist (“UIM”) benefits under their own automobile insurance policies. The Werleys’ insurer, Mid- Century Insurance Company (“Mid-Century”), paid out $250,000 under one policy. But the Werleys maintain that they are entitled to an additional $250,000 under another household policy. In their view, that policy’s household vehicle exclusion, which bars payments for bodily injury sustained while occupying an uninsured vehicle, is invalid and unenforceable.
The District Court agreed with the Werleys that the coverage exclusion in the at-issue policy was invalid under Pennsylvania’s Motor Vehicle Financial Responsibility Law, 75 Pa. Cons. Stat. §§ 1701 et seq. (the “MVFRL”), and thus the Werleys were entitled to the additional UIM benefits sought. Because Pennsylvania Supreme Court precedents lead us to a different conclusion, we will vacate the District Court’s order and remand with instructions to enter judgment in favor of Mid-Century.
Levi Werley, then aged 15 and without a driver’s license, was riding his family’s uninsured Yamaha YZ85 dirt bike off road with several friends on private property in Kempton, Pennsylvania. Another 15-year-old struck Levi on his dirt bike while she was driving a Jeep CJ-7, resulting in severe injuries to Levi.
The driver of the Jeep had an insurance policy that paid out its bodily injury limit of $100,000 to Levi. Because the $100,000 paid by the driver’s insurance policy was insufficient to cover Levi’s damages, the Werleys sought UIM coverage under their own household automobile insurance policies.
The Werleys had two automobile policies in their household, both underwritten by Mid-Century. The first (the “Multi-Vehicle Policy”), listed Levi’s parents, Chad and Jane, as named insureds and insured four vehicles. The Multi Vehicle Policy provided UIM coverage equal to the bodily injury limits of $250,000 per person and $500,000 per accident, with intra-policy stacking validly rejected. However, the Werleys could not waive inter-policy stacking because the Multi-Vehicle Policy insured multiple vehicles. The Multi-Vehicle Policy contained a household vehicle exclusion of UIM coverage for “bodily injury sustained by you or any family member while occupying or when struck by any motor vehicle owned by you or any family member which is not insured for this coverage under any similar form.” Appendix (“App.”) 88 (bolded emphasis removed, italicized emphasis added). While the Multi-Vehicle Policy did not define the term “motor vehicle,” Pennsylvania’s Vehicle Code defines a “motor vehicle” as “[a] vehicle which is self-propelled except an electric personal assistive mobility device or a vehicle which is propelled solely by human power.” 75 Pa. Cons. Stat. § 102. Thus, Levi’s injuries would not normally be covered due to this exclusion.
The second Werley household automobile insurance policy (the “Jeep Policy”) at the time of the accident listed Chad Werley and Levi’s sister as named insureds. The Jeep Policy insured one vehicle, a Jeep, and provided $250,000 per person and $500,000 per accident in UIM coverage. Like the Multi-Vehicle Policy, the Jeep Policy contained a household vehicle exclusion for UIM coverage, but the language was not identical. The Jeep Policy’s household vehicle exclusion excluded UIM coverage for “bodily injury sustained by you or any family member while occupying or when struck by any car owned by you or any family member which is not insured for this coverage under this policy under any similar form.” The Jeep Policy defined “car” as
[a] four-wheeled private passenger car of the coupe, sedan, station wagon, pick-up truck, van or sport utility type, with gross vehicle weight of 14,000 pounds or less, and licensed for and used only upon public highways. It does not include a motorhome, a step van, parcel delivery van, cargo cutaway van, or other van with the cab separate from the cargo area.
Thus, Mid-Century determined that the Jeep Policy’s household vehicle exclusion did not exclude coverage for Levi’s injuries because the dirt bike was not a “car” as defined in the Jeep Policy.
Mid-Century determined that the Jeep Policy’s household vehicle exclusion did not exclude coverage for Levi’s injuries because the dirt bike was not a “car” as defined in the Jeep Policy.
The dirt bike Levi rode at the time of his accident was not a listed vehicle under any Werley family automobile insurance policy. The Werleys never paid any premiums to Mid-Century attributable to coverage for the dirt bike. The dirt bike lacked headlights, brake lights, parking lights, turn signals, and street tires, so it could not legally be operated on public roadways in Pennsylvania. Because insurance was not mandated for off-road vehicles, the Werleys were unaware that they had the option to insure the dirt bike. Chad and Jane did not inquire or research whether any insurance could be obtained for the dirt bike.
Mid-Century tendered the $250,000 limit under the Jeep Policy to Levi for the injuries he sustained in the dirt bike accident. But Mid-Century denied the UIM claim under the Multi-Vehicle Policy based on the household vehicle exclusion contained in that policy.
This case presents a particularly unusual fact pattern because Mid-Century presumably paid not because the dirt bike was covered by the Jeep Policy, but because Levi was a resident relative of the named insureds and the exclusion for accidents involving a “car” other than the Jeep did not apply to the dirt bike.
Mid-Century has no duty to provide UIM coverage to the Werleys under the Multi-Vehicle Policy. Pennsylvania Supreme Court would hold that the household vehicle exclusion at issue here is valid and that is does not function as an impermissible de facto waiver of stacking. We therefore must vacate the District Court’s order.
Absent a statutory prohibition, then, exclusions limiting the scope of UIM coverage, like the Multi-Vehicle Policy’s household vehicle exclusion, are generally enforceable. Mid-Century thus has no obligation to provide Levi UIM benefits in every circumstance, regardless of what vehicle he was operating, or how he was operating it, unless the exclusion functions as an impermissible de facto waiver of inter-policy stacking.
One crucial fact in this case makes it readily distinguishable from the facts in Gallagher and Donovan: the insureds there had elected and paid premiums on UIM coverage for the insured motorcycles (in Gallagher, the insured also paid for stacking). Gallagher, 201 A.3d at 132-33; Donovan, 256 A.3d at 1147-48. The Pennsylvania Supreme Court was focused on this fact. The Court reasoned that it would be unfair to allow the household vehicle exclusions to deprive the insureds of the stacking for which they had paid and for which no valid inter-policy stacking waiver existed (in fact, the insured in Gallagher had paid for stacking). In stark contrast, here, the Werleys never paid associated premiums for any coverage of the dirt bike, let alone UIM coverage on it. Inter-policy stacking aggregates coverage limits available under at least two separate policies. Craley, 895 A.2d at 533. The dirt bike was never insured, and application of the household vehicle exclusion here deprived the Werleys of nothing for which they had bargained. As we noted above, the Pennsylvania Supreme Court has cautioned that Gallagher “should be construed narrowly.” Mione, 289 A.3d at 530 (Pa. 2023). “It was only when confronted with th[e] unique facts [of that case] that [the Pennsylvania Supreme Court] concluded that enforcing the exclusion would be inconsistent with the unambiguous requirements [of] Section 1738 of the MVFRL” regarding the requirements for waiver of stacking. Id. (internal quotation marks omitted).
Mid-Century urges that two other Pennsylvania Supreme Court precedents, Eichelman v. Nationwide Insurance Co., 551 Pa. 558, 711 A.2d 1006 (Pa. 1998), and Erie Insurance Exchange v. Mione, 289 A.3d 524 (Pa. 2023), are more relevant to our analysis here. We agree.
Thus, we predict that the Pennsylvania Supreme Court would conclude that the collective logic of Gallagher, Donovan, Eichelman, and Mione is that a household vehicle exclusion is only invalid if (1) a policy insures the vehicle involved in the accident, (2) that policy provides UIM coverage on that vehicle, and (3) the household vehicle exclusion of a second policy sought to stack on top of the first policy would exclude UIM coverage for that vehicle.
Finally, our conclusion that the household vehicle exclusion is valid comports with principles underlying our interpretation of insurance contracts and the purposes of the MVFRL.
This is the underlying principle in Gallagher and Donovan as well as Eichelman and Mione: that the insureds are entitled to get what they paid for in terms of UIM coverage and stacking. The Donovan and Gallagher Courts held that the household exclusion was unfairly depriving the insureds of stacked coverage that they elected and paid for with higher premiums. In Eichelman and Mione, the insured did not pay for UIM benefits on the vehicles involved in the accident and could not therefore complain of a denial of the benefit of stacking by way of the household vehicle exclusion. So, too, here, the Werleys never paid any premiums for the off-roading dirt bike. Invalidating the household vehicle exclusion would provide the Werleys with benefits for which they never bargained. See Nationwide Mut. Ins. Co. v. Riley, 352 F.3d 804, 810 (3d Cir. 2003); see also Eichelman, 711 A.2d at 1010 (“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.”).
Our role here is to predict how the Pennsylvania Supreme Court would rule if presented with the same facts. Because we predict that Court would find the household vehicle exclusion at issue is valid under the MVFRL, we will vacate the District Court’s order granting the Werleys summary judgment and denying Mid-Century summary judgment and will remand this case to the District Court with instructions to enter judgment in favor of Mid-Century.
