In its most recent interpretation of a “household exclusion” provision in a UIM policy the Pennsylvania Superior Court, in a 2-1 decision, struck down the exclusion and awarded the claimant UIM benefits based upon the unique, and conflicting, exclusion language between the UIM and UM provisions of the policy. The case of Clarke v. MMG Ins. Co., No. 2937 EDA 2003 (Pa. Super. September 4, 2014) (Panella, Lazarus, and Jenkins, JJ) (OP. by Jenkins, J.) (Panella, dissenting), provides a valuable lesson concerning the exact wording of exclusion provisions.
The “household exclusion” has become a common provision within UM/UIM policies. The provision is designed to preclude the payment of UM/UIM benefits to a claimant injured while occupying a motor vehicle owned by someone in the claimant’s household, but not insured for UM/UIM coverage under the policy from which he seeks benefits. The exclusion is most often found enforceable by the Pennsylvania Appellate Courts on the basis that it is plainly worded and not in violation of public policy. However, in Clarke, the Superior Court struck down an attempt at exclusion by focusing on the specific language used in the UIM section of the policy and contrasting it with exclusion language used in the UM portion of the policy.
Plaintiff, Timothy Clarke, was driving his motorcycle when he collided with a car which turned in front of him causing him serious injury. At the time of the accident, Clarke had two motor vehicle insurance policies in effect. The first, issued by American Modern Select Insurance Company (AMS), was issued on his motorcycle. The second, underwritten by MMG Insurance Company, (MMG) was issued on two of Clarke’s other automobiles. The AMS policy provided for UIM coverage and Clarke ultimately received a payment of $25,000 from AMS; in addition to a $100,000 payment from other driver’s carrier. However, those payments proved insufficient to cover Clarke’s losses from the accident. As a result, he attempted to turn to the $300,000 in UIM coverage afforded to him under the MMG policy on his other vehicles.
MMG denied UIM coverage to Clarke based on the “household exclusion” clause of the policy. Under the UIM section of the policy coverage was excluded for injuries sustained in vehicles “not insured for this coverage.” It was MMR’s assertion that this provision precluded coverage because the motorcycle involved in the accident was not a “covered vehicle” under the policy – – which only covered the two other automobiles owned by Clarke. The trial court agreed with MMG and denied coverage on a discreet interpretation of the UIM language and the fact that the motorcycle was not insured for UIM coverage under the policy. The trial court further mentioned that its ruling denying coverage was “consistent with Pennsylvania public policy regarding Household Exclusion clauses.”
On appeal, Clarke argued that the interpretation of the UIM exclusion language should also take into consideration the exclusion language contained in the UM portion of the policy; which, through the use of three keys words, was arguably more unambiguous. While the UIM coverage section excluded coverage for injuries sustained in vehicles “not insured for this coverage”, the UM coverage section excluded coverage for injuries sustained in vehicles “not insured for this coverage under this policy.”
Viewing the language of both the UIM exclusion and UM exclusion, the Court reasoned that a plain and unambiguous reading of the UIM exclusion dictated coverage for Clarke since the vehicle that he was operating at the time of the incident was in fact, “insured for this coverage” because Clarke had UIM coverage for the motorcycle, albeit through a separate insurance policy issued by another carrier. The Court reasoned that the lack of the three words “under this policy”, contained in the UM provisions, but not in the UIM provisions was dispositive. The court chose to interpret the language of the UIM exclusion by viewing the policy language as a whole and reading the language in conjunction with the different exclusion language contained in the UM section. The Court reasoned that the words “under this policy” employed in the UM, but absent from the UIM section, were not mere surplusage. They opined that if MMG had intended for the UIM and UM exclusions to have the same meaning, they would have contained the same language. Thus, the absence of the three words in the UIM section must have been intentional and therefore UIM coverage was extended to the insured so long as he had that type of coverage under any policy; not just the MMG policy. The Court found that the MMG policy excluded UIM coverage only for vehicles which did not maintain any UIM coverage under any policy.
The Court further determined that the trial court had erred in examining the role of public policy in denying Clarke’s relief. The Court found that it was only proper to consider public policy arguments in the event that the terms of a contract were not found to be clear and unambiguous. Since the terms of the UIM exclusion were found to be clear, no public policy analysis was warranted and the trial court in doing so.