In Ginther v. Farmers New Century Insurance Company, No. 04-3478 (3d Cir. Apr. 21, 2009), the United States Court of Appeals for the Third Circuit recently upheld “the other household vehicle exclusion” contained in an automobile insurance policy.
The insured purchased separate single-vehicle automobile liability insurance policies from the insurer; one for each of his two family vehicles. Each policy contained $100,000 underinsured motorist limits. The insured was given a reduced premium because he signed a form waiving stacked limits for underinsured motorist coverage. When the insured was involved in an automobile accident with an underinsured motorist, he submitted a claim to the insurer for $200,000 under both auto policies, which the insurer rejected.
The insured subsequently commenced an action against the insurer alleging breach of contract and bad faith, and seeking a declaration that he was entitled to underinsured motorist benefits under each of his single-car insurance policies. The insurer tendered the full policy limits for underinsured motorist coverage under the policy covering the vehicle the insured was occupying at the time of the collision, whereupon the insured withdrew his claims for breach of contract and bad faith, maintaining only his count seeking declaratory relief.
The insured maintained that he was entitled to stack the underinsured motorist limits of the two auto policies because: (1) he did not knowingly waive inter-policy stacking; and (2) the other household vehicle exclusion at issue was void because it violated Pennsylvania’s Motor Vehicle Financial Responsibility Law.
The Court held that household exclusions are consistent with Pennsylvania’s public policy of controlling insurance costs for insureds. Because the other household vehicle exclusion clearly and unambiguously prohibited inter-policy stacking to recover additional underinsured motorist benefits, the Court declined to reach the first question with respect to whether the insured’s waiver was valid.