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Supreme Court of Pennsylvania Rules on Erie v. Baker

Erie Insurance Exchange v. Baker, No. 26 WAP 2008 (Pa. 2009)

Craig Murphey, Chair of MacDonald Illig's Insurance practice group, successfully argued this case for Erie Insurance before the Supreme Court of Pennsylvania. This litigation was followed closely by the auto insurance industry and the plaintiff's bar because of its significant ramifications for the recovery of uninsured and underinsured motorist benefits.

In a decision dated June 22, 2009, Erie prevailed.

Mr. Baker was the owner of three vehicles insured by Erie, and a motorcycle insured by another company. He had selected the stacking option on both policies. He was injured while operating the motorcycle and recovered compensation for his damages from both the other vehicle's liability carrier and the UIM insurer for his motorcycle. He then sought UIM coverage from Erie.

Erie denied the claim because of the "household exclusion" provision of Baker's policy, which precludes UIM coverage for any injury occurring while the insured is occupying a vehicle owned by the insured or a member of his household but not insured for UM/UIM on the Erie policy.

Baker challenged the denial because he had elected the stacking option on both of his policies. He argued that the household exclusion cannot be enforced when it serves to prevent him from stacking the coverages of his motorcycle and auto policies.

The Superior Court found in favor of Erie on the grounds that the household vehicle exclusion has been held to be enforceable by the Supreme Court time and again.

The Supreme Court granted Baker's request for appeal, but affirmed the Superior Court in a 4-3 decision. In the opinion announcing the court's decision, Justice Greenspan pointed out that the Supreme Court has repeatedly held that the household vehicle exclusion is enforceable and entirely consistent with public policy as it prevents insurers from exposure to risks for which it did not collect a premium. She then explained that the stacking election made by Baker is irrelevant to the outcome. The household vehicle exclusion operated to eliminate UIM coverage for the accident from the Erie policy so there was simply no UIM coverage to stack.

In sum, a majority of the court agreed with Erie's interpretation of the statute and policy language and therefore found in Erie's favor.