Craley v. State Farm Fire and Cas. Co.

• Citation: 895 A.2d 530
• Parties: Randall P. CRALEY, Administrator of the Estate of Jayneann M. Craley, Randall P. Craley, Parent and Natural Guardian of Keith P. Craley, a Minor, and Randall P. Craley, In His Own Right, and Gloria M. Craley and Lawrence W. Craley, Husband and Wife, Appellants v. STATE FARM FIRE AND CASUALTY COMPANY, Appellee.
• Decision Date: 21 April 2006
• Court: Pennsylvania Supreme Court

895 A.2d 530

Randall P. CRALEY, Administrator of the Estate of Jayneann M. Craley, Randall P. Craley, Parent and Natural Guardian of Keith P. Craley, a Minor, and Randall P. Craley, In His Own Right, and Gloria M. Craley and Lawrence W. Craley, Husband and Wife, Appellants v. STATE FARM FIRE AND CASUALTY COMPANY, Appellee.

Supreme Court of Pennsylvania.

Argued May 16, 2005.

Decided April 21, 2006.

Lee S. Cohen, Robert G. Kelly, King of Prussia, for Pennsylvania Defense Institute and the Ins. Federation of PA, amici curiae.

Daniel E.P. Bausher, Samuel Woodcock, Reading, for Craley et al., appellants.

Scott B. Cooper, James Richard Ronca, Harrisburg, for PA Trial Lawyers Ass'n, appellee amicus curiae.

Teresa Ficken Sachs, Philadelphia, for State Farm Fire and Cas. Co., appellee.

Before: CAPPY, C.J., CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and BAER, JJ.

OPINION

Justice BAER.

We granted allowance of appeal in this matter to address the interplay between coverage exclusions in motor vehicle insurance policies, including the household vehicle exclusion previously found enforceable by this Court,¹ and the statutory provision of the Motor Vehicle Financial Responsibility Law (MVFRL) providing "named insureds"² the ability to waive "stacked" uninsured motorist coverage, 75 Pa.C.S. § 1738, which the Superior Court has found inapplicable to inter-policy stacking, the stacking of benefits provided by two or more policies.³ After review of the relevant statutory provisions, the insurance policies at issue, and our precedent, we hold the named insured's waiver of inter policy stacking enforceable under the facts of this case, without addressing the enforceability of the household vehicle exclusion, upon which the Superior Court relied. Nevertheless, we affirm the Superior Court's holding reversing the trial court's grant of relief to the insureds and remanding for entry of declaratory judgment in favor of the insurance company. See Donnelly v. Bauer, 553 Pa. 596, 720 A.2d 447 454 (1998) (holding that this Court may affirm on any basis).

The facts of this case, although tragic, are straightforward and uncontested. While driving her own car insured by Appellee State Farm Insurance Company (State Farm), Jayneann M. Craley was killed in an accident attributed to the negligence of an uninsured drunk driver on July 12, 1993. Her infant son, Keith Craley, and her mother-in-law, Gloria Craley, who resided with Keith and Jayneann, were passengers in the car and were injured in the accident. Following the accident, Jayneann's husband, Randall Craley, as administrator of Jayneann's estate and on Keith's behalf, and Gloria Craley on her own behalf sought and collected uninsured motorist benefits from State Farm pursuant to a policy for which Jayneann was the named insured and which provided coverage of $15,000 per person and $30,000 per occurrence.⁴

The Craleys' claims, however, exceeded the limits of the benefits provided under Jayneann's policy. Accordingly, the Craleys sought uninsured motorist benefits under Randall Craley's motor vehicle insurance policy.⁵ Randall's policy had the same limits as Jayneann's and also was underwritten by State Farm. It is Randall's policy and its exclusions that are relevant to the legal issues presented in this case. State Farm does not contest that Jayneann, Keith, and Gloria all fit within the definition of "insureds" under the language of Randall's policy because they were all resident relatives of Randall, the named insured. See 75 Pa.C.S. § 1702 ("Insureds").

State Farm filed a declaratory judgment action in the Berks County Court of Common Pleas, seeking a determination that it had no obligation to pay the Craleys' claims under Randall's policy. The company believed that the claims were excluded pursuant to Randall's waiver of stacking and the household vehicle exclusion included in the policy endorsement related to non-stacked uninsured motorist coverage.⁶

State Farm maintained that the stacking waiver form Randall signed was valid and applied to "inter-policy stacking," the stacking of limits available on two or more separate policies, such as Jayneann's and Randall's policies. "Inter-policy stacking" is in contrast to "intra-policy stacking," which would entail the stacking of limits applicable to more than one vehicle insured under a single policy. The waiver signed by Randall, entitled "Rejection of stacked uninsured motorist benefits," conforms to Section 1738(d) of the MVFRL, and thus provides:

By signing this waiver, I am rejecting stacked limits of uninsured motorist coverage under the policy for myself and members of my household under which the limits of coverage available would be the sum of limits for each motor vehicle insured under the policy. Instead, the limits of coverage that I am purchasing shall be reduced to the limits stated in the policy. I knowingly and voluntarily reject the stacked limits of coverage. I understand that my premiums will be reduced if I reject this coverage.⁷

The parties stipulated that Randall received a reduced premium as a result of signing the stacking waiver.

Due to Randall's signing of the stacking waiver, Randall's policy included Endorsement 6997AG Uninsured Motor Vehicle — Coverage U3 and Underinsured Motor Vehicle — Coverage W3 (Non-Stacking Options). The household vehicle exclusion set forth at Endorsement 6997AG provides as follows:

There is no coverage for bodily injury to an insured under Coverage U3:⁸

(1) While occupying a motor vehicle owned by you, your spouse, or any relative if it is not insured for this coverage under this policy. . . .

In addition to asserting the enforceability of the waiver of stacking, State Farm maintained that it was not obligated to pay the Craleys' claims pursuant to the household vehicle exclusion because the insureds were injured while occupying Jayneann's vehicle, which was not insured under Randall's policy. Randall's policy listed only his pick-up truck, which was not involved in the accident.

The trial court viewed this case as presenting an issue of first impression because prior caselaw relating to stacking waivers had not addressed a situation involving individual vehicles insured under separate policies, implicating inter-policy stacking. Invoking the rules of statutory construction, the court concluded that waiver provisions in Section 1738 did not apply to inter-policy stacking, and Randall's waiver of stacking, therefore, did not obviate State Farm's duty to pay the Craleys' claims.

The trial court next turned to the applicability of the household vehicle exclusion in Randall's policy. The court concluded that the case was controlled by this Court's decisions in Eichelman v. Nationwide Insurance Co., 551 Pa. 558, 711 A.2d 1006 (1998), and Paylor v. Hartford Insurance Co., 536 Pa. 583, 640 A.2d 1234 (1994), characterizing those decisions as setting forth a general rule that exclusionary clauses are against public policy, but excepting and finding enforceable clauses that "deter an insured from attempting to recover benefits which the insured voluntarily chooses not to pay for." State Farm Fire & Cas. Co. v. Craley, 39 Pa. D. & C. 4th 277, 291 (1998) (Craley I).

Notwithstanding its acknowledgment that in Eichelman we held that a household vehicle exclusion similar to the one in Randall's policy did not violate public policy, the trial court limited the holding in Eichelman, suggesting that it applied only to insureds who voluntarily waived uninsured motorist coverage under the policy covering the vehicle involved in the accident and then attempted to claim uninsured motorist coverage under a separate policy. Similarly, the court noted that in Paylor we held that a "family car exclusion"⁹ could be enforced where a claimant attempted to convert inexpensive underinsured motorist coverage on one policy covering automobiles into more expensive liability coverage for a motor home involved in an accident and insured under a separate policy without underinsured motorist coverage.

The court found that the Craleys' situation did not fit the Paylor or Eichelman exceptions because the Craleys were not trying to convert their coverage into something for which they had not paid, but rather were trying to collect uninsured motorist benefits for which the court concluded they had paid under both Jayneann's and Randall's insurance policies.¹⁰ Noting that the primary purpose of the MVFRL was to control the rising costs of insurance caused by the large numbers of uninsured, the court found that the denial of coverage in this case would not serve that purpose because the Craleys had paid the premiums for the coverage they sought. The court therefore found the household vehicle exclusion void as against public policy under the circumstances of this case and awarded the Craleys benefits under Randall's State Farm policy on December 22, 1998.

In making the award, the trial court erroneously believed that the available coverage limit of Randall's policy was $90,000. Accordingly, in April 2000, following the filing of post-trial motions by the Craleys and State Farm, the trial court amended the verdict to award the Craleys $30,000, pursuant to the parties' stipulation that the policy provided for a maximum benefit of $30,000 per accident, but denied State Farm's post-trial motion asserting, inter alia, trial court error in refusing to enforce the stacking waiver and the household vehicle exclusion. The verdict was reduced to judgment in May 2000, after which State Farm appealed to the Superior Court.

An en banc panel of the Superior Court initially dismissed State Farm's appeal as untimely, based on the majority's conclusion that the appeal had not been filed within the requisite thirty days following the December 1998 decision, pursuant to Pa.R.A.P. 903, even though State Farm filed its appeal within thirty days of the April 2000 order deciding post-trial motions. State Farm Fire & Cas....