Household Exclusion Again Challenged
/ 13.Apr, 2011
The household exclusion in auto policies continues to be challenged by the plaintiff’s Bar. Oral argument was conducted before the Supreme Court of Pennsylvania on April 12, 2011 in the case of GEICO v. Ayers. In that case, the claimant challenges the validity of the household exclusion, thereby seeking to recover underinsured motorist benefits under both his motorcycle and personal auto policies. At the time of the accident, the claimant had two separate policies with GEICO, namely: (1) a personal auto policy insuring two pick-up trucks; and (2) a motorcycle policy insuring two motorcycles. The claimant was operating one of the motorcycles at the time of the accident. The claim for recovery of underinsured motorist benefits under the personal auto policy was denied on the basis of the household exclusion.
In Erie v. Baker, the Supreme Court of Pennsylvania enforced a household exclusion in a similar situation. In that case, however, the personal auto policy had been issued by the Erie Insurance Exchange while the motorcycle policy had been issued by Universal Underwriters. The claimant in Ayers contends that household exclusion should not apply since GEICO issued both the personal auto and motorcycle policies. Thus, the claimant sought to invalidate the household exclusion in this particular factual circumstance. The Supreme Court has been presented the case for decision.
The rationale of the Supreme Court in Erie v. Baker should be applied. The household exclusion should be found to be valid and enforceable. The fact that the same insurer issued both the personal auto and motorcycle policies should be of no consequence. GEICO specifically chose to insure personal autos and motorcycles separately. In this way, GEICO sought to avoid the risks inherent with motorcycle use under the personal auto policy. If the Court invalidates the household exclusion, the Court will become, in actuality, dictating underwriting practices. The fact that GEICO issued both the personal auto and motorcycle policies should be of no legal significance in assessing the validity of the household exclusion. Nonetheless, the actions of the Supreme Court on this issue should be closely watched and monitored. The result of this case could have wide ranging impact in the motor vehicle insurance law area.