“If appellant’s position were accepted, it would allow an entire family living in a single household with numerous automobiles to obtain underinsured motorist coverage for each family member through a single insurance policy on one of the automobiles in the household.”
How later courts described this case
- “If appellant’s position were accepted, it would allow an entire family living in a single household with numerous automobiles to obtain underinsured motorist coverage for each family member through a single insurance policy on one of the automobiles in the household.”
Written by the judges who cited it.
The opinion
PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 23-1822
_____________
MID-CENTURY INSURANCE COMPANY
v.
CHAD WERLEY; JANE WERLEY, INDIVIDUALLY AND
AS PARENTS AND NATURAL GUARDIANS OF LEVI
WERLEY
CHAD WERLEY; JANE WERLEY, INDIVIDUALLY AND
AS PARENTS AND NATURAL GUARDIANS OF LEVI
WERLEY
v.
MID-CENTURY INSURANCE COMPANY
MID-CENTURY INSURANCE COMPANY,
Appellant
______________
On Appeal from the United States District Court for the
Eastern District of Pennsylvania
(District Court No. 5-21-cv-05592)
District Judge: Honorable Edward G. Smith
______________
Argued May 2, 2024
______________
Before: KRAUSE, CHUNG, and RENDELL, Circuit Judges.
(Filed: September 5, 2024)
Candace N. Edgar [ARGUED]
Marshall Dennehey Warner Coleman & Goggin
200 Corporate Center Drive
Suite 300
Camp Hill, PA 17011
Counsel for Appellant
Peter F. Schuchman, Jr. [ARGUED]
Kozloff Stoudt
2640 Westview Drive
Wyomissing, PA 19610
Counsel for Appellees
2
______________
OPINION OF THE COURT
______________
RENDELL, Circuit Judge.
Levi Werley was seriously injured while riding an
uninsured motorized dirt bike. When the insurance of the driver
that struck him did not compensate him fully for his injuries,
Levi’s parents, Chad and Jane Werley, sought to recover
underinsured motorist (“UIM”) benefits under their own
automobile insurance policies. The Werleys’ insurer, Mid-
Century Insurance Company (“Mid-Century”), paid out
$250,000 under one policy. But the Werleys maintain that they
are entitled to an additional $250,000 under another household
policy. In their view, that policy’s household vehicle exclusion,
which bars payments for bodily injury sustained while
occupying an uninsured vehicle, is invalid and unenforceable.
The District Court agreed with the Werleys that the
coverage exclusion in the at-issue policy was invalid under
Pennsylvania’s Motor Vehicle Financial Responsibility Law,
75 Pa. Cons. Stat. §§ 1701 et seq. (the “MVFRL”), and thus
the Werleys were entitled to the additional UIM benefits
sought. Because Pennsylvania Supreme Court precedents lead
us to a different conclusion, we will vacate the District Court’s
order and remand with instructions to enter judgment in favor
of Mid-Century.
3
I
A
We begin with an overview of the MVFRL and the
sections of that statute relevant to this appeal.
The MVFRL is comprehensive legislation that
“impose[s] mandatory obligations applicable to all automobile
insurance providers” in Pennsylvania. Sayles v. Allstate Ins.
Co., 219 A.3d 1110, 1124 (Pa. 2019). The MVFRL thus
governs the provision of UIM coverage. UIM coverage offers
benefits “when a third-party tortfeaser [sic] injures or damages
an insured and the tortfeasor lacks sufficient insurance
coverage to compensate the insured in full.” Gallagher v.
GEICO Indem. Co., 201 A.3d 131, 132 n.1 (Pa. 2019).
As relevant here, § 1731 of the MVFRL mandates that
insurers offer UIM coverage to their insureds when delivering
policies. 75 Pa. Cons. Stat. § 1731(a); Rush v. Erie Ins. Exch.,
308 A.3d 780, 790 (Pa. 2024). But, mindful of
cost-containment concerns underlying the MVFRL, the
General Assembly made the purchase of UIM coverage
optional if the insured rejects coverage by signing a statutorily
prescribed form. 75 Pa. Cons. Stat. § 1731(a), (c); Lewis v. Erie
Ins. Exch., 793 A.2d 143, 150–51 (Pa. 2002).
The MVFRL has a priority scheme for insurance payment
when multiple insurance policies apply to the same accident. 75
Pa. Cons. Stat. § 1733. The first-priority policy, or host-vehicle
policy, is a “policy covering a motor vehicle occupied by the
injured person at the time of the accident.” Id. § 1733(a)(1). If the
host-vehicle policy does not provide benefits sufficient to
4
compensate the injured insured, or if no host-vehicle policy
exists, a “policy covering a motor vehicle not involved in the
accident with respect to which the injured person is an insured”
will pay; this is a second-priority policy. Id. § 1733(a)(2).
The MVFRL also codifies a default rule of “stacking”
for UIM coverage. Id. § 1738. Stacking is “the practice of
combining the insurance coverage of individual vehicles to
increase the amount of total coverage available to an insured.”
Gallagher, 201 A.3d at 132 n.1. Stacking comes in two
varieties: Intra-policy stacking aggregates the coverage limits
on multiple vehicles covered under a single policy, even though
not all the vehicles are involved in the accident or occurrence.
Craley v. State Farm Fire & Cas. Co., 895 A.2d 530, 533 (Pa.
2006). Inter-policy stacking aggregates coverage limits for
vehicles insured under separate policies. Id.
An insured can, however, waive stacked UIM coverage.
75 Pa. Cons. Stat. § 1738(b); Rush, 308 A.3d at 798. Named
insureds may elect to waive stacked limits of coverage in
exchange for a reduced premium by signing a written waiver
form, the text of which is dictated by the MVFRL. 75 Pa. Cons.
Stat. § 1738(d). Section 1738 contemplates allowing insureds to
waive both inter-policy and intra-policy stacking. Craley, 895
A.2d at 540. But the Pennsylvania Supreme Court in Craley v.
State Farm Fire & Casualty Co. observed that the statutorily
prescribed waiver form is phrased only in terms of waiving
intra-policy stacking, involving multiple vehicles on a single
policy, rather than inter-policy stacking, involving stacking of
multiple policies. Id. at 541. Despite this issue of drafting in the
mandated waiver form, the General Assembly requires insurers
to use the form because “[a]ny rejection form that does not
comply with this section is void.” 75 Pa. Cons. Stat. § 1738(e).
5
Nevertheless, the Craley Court acknowledged that the stacking
waiver language was enforceable as a knowing waiver of inter-
policy stacking in the circumstance where a policy covers only
one vehicle. Craley, 895 A.2d at 542.1
With that statutory background established, we turn to
the facts presented by this appeal.
B
In 2019, Levi Werley, then aged 15 and without a
driver’s license, was riding his family’s uninsured Yamaha
YZ85 dirt bike off road with several friends on private property
in Kempton, Pennsylvania. Another 15-year-old struck Levi on
his dirt bike while she was driving a Jeep CJ-7, resulting in
severe injuries to Levi.
The driver of the Jeep had an insurance policy that paid
out its bodily injury limit of $100,000 to Levi. Because the
$100,000 paid by the driver’s insurance policy was insufficient
to cover Levi’s damages, the Werleys sought UIM coverage
under their own household automobile insurance policies.
The Werleys had two automobile policies in their
household, both underwritten by Mid-Century. The first (the
“Multi-Vehicle Policy”), listed Levi’s parents, Chad and Jane,
1
The Craley Court reasoned that an insured in the
single-vehicle policy scenario “could not have thought he was
receiving a reduced premium for waiving intra-policy stacking
because there could be no intra-policy stacking with only one
vehicle in the policy.” Craley, 895 A.2d at 542 (internal
quotation marks omitted).
6
as named insureds and insured four vehicles.2 The
Multi Vehicle Policy provided UIM coverage equal to the
bodily injury limits of $250,000 per person and $500,000 per
accident, with intra-policy stacking validly rejected. However,
the Werleys could not waive inter-policy stacking because the
Multi-Vehicle Policy insured multiple vehicles.3 The
Multi-Vehicle Policy contained a household vehicle exclusion
of UIM coverage for “bodily injury sustained by you or any
family member while occupying or when struck by any motor
vehicle owned by you or any family member which is not
insured for this coverage under any similar form.” Appendix
(“App.”) 88 (bolded emphasis removed, italicized emphasis
added). While the Multi-Vehicle Policy did not define the term
“motor vehicle,” Pennsylvania’s Vehicle Code defines a
“motor vehicle” as “[a] vehicle which is self-propelled except
an electric personal assistive mobility device or a vehicle
which is propelled solely by human power.”4 75 Pa. Cons. Stat.
§ 102. Thus, Levi’s injuries would not normally be covered due
to this exclusion.
2
The parties do not dispute that Levi qualified as a resident
relative under the Multi-Vehicle Policy. See Appellees’ Br. at 6.
3
See Donovan v. State Farm Mut. Auto. Ins. Co., 256 A.3d
1145, 1157 (Pa. 2021) (noting that the language of the
§ 1738(d) stacking waiver “does not provide the necessary
knowing waiver of inter-policy stacked coverage, absent the
single-vehicle situation in Craley”).
4
The parties do not dispute that the dirt bike meets this
definition.
7
The second Werley household automobile insurance
policy (the “Jeep Policy”) at the time of the accident listed
Chad Werley and Levi’s sister as named insureds. The Jeep
Policy insured one vehicle, a Jeep, and provided $250,000 per
person and $500,000 per accident in UIM coverage. Like the
Multi-Vehicle Policy, the Jeep Policy contained a household
vehicle exclusion for UIM coverage, but the language was not
identical. The Jeep Policy’s household vehicle exclusion
excluded UIM coverage for “bodily injury sustained by you or
any family member while occupying or when struck by any car
owned by you or any family member which is not insured for
this coverage under this policy under any similar form.” App.
20; 175 (bolded emphasis removed, italicized emphasis
added). The Jeep Policy defined “car” as
[a] four-wheeled private passenger
car of the coupe, sedan, station
wagon, pick-up truck, van or sport
utility type, with gross vehicle
weight of 14,000 pounds or less,
and licensed for and used only
upon public highways. It does not
include a motorhome, a step van,
parcel delivery van, cargo cutaway
van, or other van with the cab
separate from the cargo area.
App. 168. Thus, Mid-Century determined that the Jeep Policy’s
household vehicle exclusion did not exclude coverage for
Levi’s injuries because the dirt bike was not a “car” as defined
in the Jeep Policy.
8
The dirt bike Levi rode at the time of his accident was
not a listed vehicle under any Werley family automobile
insurance policy. The Werleys never paid any premiums to
Mid-Century attributable to coverage for the dirt bike. The dirt
bike lacked headlights, brake lights, parking lights, turn
signals, and street tires, so it could not legally be operated on
public roadways in Pennsylvania. Because insurance was not
mandated for off-road vehicles, the Werleys were unaware that
they had the option to insure the dirt bike. Chad and Jane did
not inquire or research whether any insurance could be
obtained for the dirt bike.
Mid-Century tendered the $250,000 limit under the Jeep
Policy to Levi for the injuries he sustained in the dirt bike
accident.5 But Mid-Century denied the UIM claim under the
Multi-Vehicle Policy based on the household vehicle exclusion
contained in that policy.
C
Mid-Century filed a complaint against Chad and Jane,
individually and as the parents of Levi, then a minor. The
complaint asserted a single claim under the Declaratory
Judgment Act, 28 U.S.C. §§ 2201–02, seeking a declaration that
5
This case presents a particularly unusual fact pattern because
Mid-Century presumably paid not because the dirt bike was
covered by the Jeep Policy, but because Levi was a resident
relative of the named insureds and the exclusion for accidents
involving a “car” other than the Jeep did not apply to the dirt
bike. We need not determine whether Mid-Century was correct
that it was obligated to pay under the Jeep Policy.
9
Mid-Century has no duty to provide UIM coverage to the Werleys
under the Multi-Vehicle Policy.
The Werleys filed a motion to dismiss for failure to state
a claim, which the District Court denied without prejudice. The
Werleys then filed an answer and counterclaim against
Mid-Century. In the counterclaim, the Werleys sought their
own declaratory judgment that UIM coverage is available to
them under the Multi-Vehicle Policy.
The Werleys and Mid-Century filed cross-motions for
summary judgment. The District Court granted the Werleys’
motion, denied Mid-Century’s motion, and entered a
declaration that Mid-Century had the duty to provide UIM
coverage under the Multi-Vehicle Policy. Mid-Century Ins. Co.
v. Werley, 666 F. Supp. 3d 463, 467 (E.D. Pa. 2023). The
District Court concluded that Levi was entitled to stacked
coverage, notwithstanding the uninsured status of the dirt bike
Levi occupied at the time of the accident. Id. at 492. Although
the District Court acknowledged the “seemingly abundant
support for Mid-Century’s position” in the applicable caselaw,
the District Court drew a distinction by noting that unlike other
insureds, the Werleys had not known they could insure their
dirt bike and therefore failed to insure it or subsequently
validly waive UIM coverage. Id. at 494–95. The opinion also
relied heavily on the fact that Mid-Century had already paid
UIM benefits to the Werleys under the Jeep Policy, thus
providing a base upon which the Multi-Vehicle Policy’s UIM
benefits could stack. Id. at 495. And the District Court noted
that § 1738 of the MVFRL—the section of the statute dictating
the default of stacking UIM coverage—was silent as to
whether an insured could only collect stacked coverage when
the vehicle involved in the accident was itself insured for UIM
10
coverage; thus, it reasoned that in the Werleys’ circumstances,
the UIM benefits “follow[ed] the insured and not the vehicle.”
Id. at 497–98. Putting these conclusions together, the District
Court determined that the Multi-Vehicle Policy’s household
vehicle exclusion, if enforced, would impermissibly operate as
a de facto waiver of stacking. Id. at 499–500.
Mid-Century timely appealed.
II6
“We exercise plenary review over an order resolving
cross-motions for summary judgment,” Tristani ex rel. Karnes
v. Richman, 652 F.3d 360, 366 (3d Cir. 2011) (citing Cantor v.
Perelman, 414 F.3d 430, 435 n.2 (3d Cir. 2005)), applying “the
same standards and presumptions as the District Court.” Sapa
Extrusions, Inc. v. Liberty Mut. Ins. Co., 939 F.3d 243, 249 (3d
Cir. 2019) (citing Gardner v. State Farm Fire & Cas. Co., 544
F.3d 553, 557 (3d Cir. 2008)).
III
When sitting in diversity, “we must apply the
substantive law as decided by the state’s highest court.”
Travelers Indem. Co. of Ill. v. DiBartolo, 131 F.3d 343, 348 (3d
Cir. 1997) (citing Orson, Inc. v. Miramax Film Corp., 79 F.3d
1358, 1373, 1373 n.15 (3d Cir. 1996)). Where the Pennsylvania
Supreme Court has not directly addressed the issue before us,
it is our role to predict how that Court would resolve the issue.
Id. We are persuaded that, if presented with the same facts, the
6
The District Court had jurisdiction under 28 U.S.C. § 1332.
We have jurisdiction under 28 U.S.C. § 1291.
11
Pennsylvania Supreme Court would hold that the household
vehicle exclusion at issue here is valid and that is does not
function as an impermissible de facto waiver of stacking. We
therefore must vacate the District Court’s order.
A
First, we must reject an argument that the District Court
found appealing, namely that the uninsured status of the dirt
bike is irrelevant because the Werley family seeks to collect
UIM benefits for Levi, who was undisputedly an insured under
the Multi-Vehicle Policy. The District Court agreed with the
Werleys on this point, concluding “the ability to stack follows
the son and not the dirt bike.” Werley, 666 F. Supp. 3d at 467.
Although it did not expressly say so, the District Court
presumably believed that somehow this rendered the household
vehicle exclusion an invalid waiver of the stacked coverage that
it concluded had attached to Levi. Id. at 492.
The same argument has been considered, and rejected,
by the Pennsylvania Supreme Court. Rush, 308 A.3d at 799.
That Court has not embraced “the notion that UIM coverage is
universally portable and not susceptible to exclusions from
coverage.” Id. As the Court reasons, UIM benefits, unlike first
party benefits, do not follow the insured person in all
circumstances, as suggested by the manner in which § 1733
lists priorities of recovery, specifically prioritizing recovery
under a host-vehicle policy. Id. at 800. And “[i]f the MVFRL
does not require that UIM coverage follow the insured in all
circumstances, then the MVFRL cannot be read to prohibit
exclusions from UIM coverage.” Id. at 801.
12
Absent a statutory prohibition, then, exclusions limiting
the scope of UIM coverage, like the Multi-Vehicle Policy’s
household vehicle exclusion, are generally enforceable.
Mid-Century thus has no obligation to provide Levi UIM
benefits in every circumstance, regardless of what vehicle he
was operating, or how he was operating it, unless the exclusion
functions as an impermissible de facto waiver of inter-policy
stacking. We address that issue below.
B
1
The Werleys next contend that the household vehicle
exclusion of the Multi-Vehicle Policy is invalid specifically as
applied to the facts of this case. They rely on two cases in which
the Pennsylvania Supreme Court held that applying household
vehicle exclusions would operate as impermissible waivers of
stacking. See Gallagher v. GEICO Indemnification Co., 201 A.3d
131 (Pa. 2019); Donovan v. State Farm Mut. Auto. Ins. Co., 256
A.3d 1145 (Pa. 2021). However, the Pennsylvania Supreme
Court has admonished “that the holding in Gallagher was based
upon the unique facts before [it] in that case, and that the decision
there should be construed narrowly.” Erie Ins. Exch. v. Mione,
289 A.3d 524, 530 (Pa. 2023).7 The only issue before us is
whether the principle adopted in those cases applies to the facts
7
Because the Donovan Court concluded that the “logic of the
case [was] indistinguishable from that in Gallagher,”
Donovan, 256 A.3d at 1160, we predict that the Pennsylvania
Supreme Court would determine that Donovan should also be
narrowly construed.
13
of this case—which are clearly distinguishable. We conclude that
it does not.
In both Gallagher and Donovan, the insureds elected and
paid premiums for UIM coverage on their motorcycle policies.
Gallagher, 201 A.3d at 132–33; Donovan, 256 A.3d at 1147.
Both insureds were injured while riding their motorcycles and
received UIM benefits under their motorcycle policies;
however, the insurers in both cases denied inter-policy stacked
coverage under the household automobile policies based on the
household vehicle exclusions contained therein. Gallagher, 201
A.3d at 132–33; Donovan, 256 A.3d at 1147–49.
The Gallagher and Donovan Courts held that those
exclusions acted as de facto stacking waivers, in violation of 75
Pa. Cons. Stat. § 1738, which, as discussed above, provides that
stacked UIM coverage is the default coverage available to all
insureds and prescribes the specific form of waiver required to be
signed by an insured who wishes to waive stacked coverage in
exchange for a lower premium. Gallagher, 201 A.3d at 137–38;
Donovan, 256 A.3d at 1160. The Gallagher Court underscored
that the insured “decided to purchase stacked . . . UIM coverage
under both of his policies [including the host-vehicle policy], and
he paid . . . premiums commensurate with that decision.”
Gallagher, 201 A.3d at 138.
One crucial fact in this case makes it readily
distinguishable from the facts in Gallagher and Donovan: the
insureds there had elected and paid premiums on UIM coverage
for the insured motorcycles (in Gallagher, the insured also paid
for stacking). Gallagher, 201 A.3d at 132–33; Donovan, 256
A.3d at 1147–48. The Pennsylvania Supreme Court was focused
on this fact. The Court reasoned that it would be unfair to allow
14
the household vehicle exclusions to deprive the insureds of the
stacking for which they had paid and for which no valid
inter-policy stacking waiver existed (in fact, the insured in
Gallagher had paid for stacking). In stark contrast, here, the
Werleys never paid associated premiums for any coverage of the
dirt bike, let alone UIM coverage on it. Inter-policy stacking
aggregates coverage limits available under at least two separate
policies. Craley, 895 A.2d at 533. The dirt bike was never
insured, and application of the household vehicle exclusion here
deprived the Werleys of nothing for which they had bargained.
As we noted above, the Pennsylvania Supreme Court has
cautioned that Gallagher “should be construed narrowly.”
Mione, 289 A.3d at 530 (Pa. 2023). “It was only when
confronted with th[e] unique facts [of that case] that [the
Pennsylvania Supreme Court] concluded that enforcing the
exclusion would be inconsistent with the unambiguous
requirements [of] Section 1738 of the MVFRL” regarding the
requirements for waiver of stacking. Id. (internal quotation
marks omitted).
2
Mid-Century urges that two other Pennsylvania Supreme
Court precedents, Eichelman v. Nationwide Insurance Co., 711
A.2d 1006 (Pa. 1998), and Erie Insurance Exchange v. Mione,
289 A.3d 524 (Pa. 2023), are more relevant to our analysis here.
We agree. Considering these cases, we are persuaded that the
Pennsylvania Supreme Court would find the Multi-Vehicle
Policy’s household vehicle exclusion valid and enforceable.
In Eichelman, the injured insured had waived UIM
coverage in his motorcycle policy. 711 A.2d at 1007. He was
struck by an underinsured driver while occupying his
15
motorcycle, so the injured insured sought UIM coverage under
his resident relatives’ policies covering household automobiles,
both issued by Nationwide. Id. Nationwide denied the injured
insured’s claim, citing the automobile policies’ household
vehicle exclusions. The exclusions provided that UIM coverage
would not apply to “[b]odily injury suffered while occupying a
motor vehicle owned by you or a relative not insured for [UIM]
coverage under this policy; nor to bodily injury from being hit
by any such motor vehicle.” Id.
The Eichelman Court unanimously held that the
household exclusions were enforceable notwithstanding the
insured’s election of stacking, concluding that
[a] person who has voluntarily
elected not to carry [UIM]
coverage on his own vehicle is not
entitled to recover [UIM] benefits
from separate insurance policies
issued to family members with
whom he resides where clear and
unambiguous “household
exclusion” language explicitly
precludes [UIM] coverage for
bodily injury suffered while
occupying a motor vehicle not
insured for [UIM] coverage.
Id. at 1010. The Eichelman Court also noted that the
cost-containment rationale underlying the MVFRL weighed in
favor of enforcing the household vehicle exclusions. Id.
16
Similarly, in Mione, the insured waived UIM coverage
on his motorcycle policy but paid for stacked UIM coverage
on at least one of two other automobile policies. 289 A.3d at
525–26. The insured was injured on his motorcycle and
attempted to recover UIM benefits under both the household
automobile policies. Id. at 526. The insurer refused to pay out,
citing the household exclusions contained in both automobile
policies; the coverage did not apply to “damages sustained by
anyone we protect while occupying or being struck by a motor
vehicle owned or leased by you or a relative, but not insured
for [UM/UIM] Coverage under this policy.” Id. at 526, 526 n.4.
The Mione Court distinguished the facts before it from
those in Gallagher, noting that the insured could not stack
coverage, as he had waived UIM benefits under the
host-vehicle policy and, instead, was seeking UIM benefits
under the other household automobile policies “in the first
instance.” Id. at 529. The household vehicle exclusions in those
automobile policies were held enforceable because they
excluded coverage for injuries sustained when the insured was
operating a motorcycle not insured for UIM coverage. Id. at
530. Citing practical concerns, the Mione Court feared that a
broad conclusion that all household vehicle exclusions were
unenforceable “would allow an entire family living in a single
household . . . to obtain underinsured motorist coverage for
each family member through a single insurance policy on one
of the automobiles in the household.” Id. at 527 (quoting
Eichelman, 711 A.2d at 1010).
Mione’s holding controls the outcome of this appeal.
There, the Supreme Court clearly stated that policies that
“explicitly exclude . . . UIM coverage for damages sustained
while operating an unlisted household vehicle . . . do not
17
conflict with Section 1738 of the MVFRL.” Id. at 530. The
Mione Court continued:
when an insured seeks . . . UIM
benefits under a household policy
but does not have . . . UIM
coverage on the vehicle that he or
she was occupying at the time of
the collision, it cannot be said that
a household vehicle exclusion in
the . . . UIM-containing policy is
operating as a sort of disguised
waiver of stacking that was
disapproved in Gallagher. Rather
in such circumstances, the
household vehicle exclusion
serves as an unambiguous
preclusion of all . . . UIM coverage
(even unstacked coverage) for
damages sustained while operating
an unlisted household vehicle.
Id. (emphasis added). Thus, when the host vehicle is uninsured,
UIM coverage that may have existed under a second-priority
policy can properly be excluded.
3
While these cases leave us with little doubt as to how
we predict the Pennsylvania Supreme Court would decide this
case, there are two factual distinctions that the Werleys seize
upon. First, the Jeep Policy—that covered one vehicle and not
the dirt bike—did pay out UIM coverage for Levi’s accident.
18
The Werleys contend that once any policy pays UIM coverage
for an accident, stacking is implicated for any other potentially
relevant policy. This position is supported, they urge, by
language in Mione that refers to policies that provide UIM
coverage “in the first instance.” Mione, 289 A.3d at 529. But
the reason for invalidating the household vehicle exclusion in
the stacked policy under Gallagher and Donovan is that it
excludes the very vehicle that was involved in the accident and
that had UIM coverage in the host-vehicle policy. Here, the
Jeep Policy did not insure the dirt bike, so there is no reason to
invalidate the exclusion in the Multi-Vehicle Policy. The “in
the first instance” language does not help the Werleys’ cause.
Second, the Werleys seek to distinguish their case from
Eichelman and Mione by noting that the insureds in those cases
had knowingly executed valid waivers under § 1731 for UIM
insurance coverage on the motorcycles they were operating at
the time of their injuries. Eichelman, 711 A.2d at 1007, 1007
n.2; Mione, 289 A.3d at 525, 525 n.1. By contrast, the Werleys
argue that they had never purchased any insurance for the dirt
bike, so they could never have validly waived UIM coverage
on the dirt bike.
This argument strains logic. Section 1731 mandates that
insurers issuing motor vehicle policies must offer UIM
coverage in such policies, 75 Pa. Cons. Stat. § 1731(a), which
insureds may reject using a statutorily prescribed form. Id.
§ 1731(c). The underlying condition precedent is that a vehicle
owner have an insurance policy on the vehicle involved in the
accident in the first place. Without that, there can be no duty
on the part of the insurer to offer UIM coverage for the vehicle,
and thus there can be no opportunity for the potential insured
to sign a statutorily compliant waiver. This argument, if
19
accepted, would effectively place a burden on all insurers to
affirmatively offer UIM coverage to motor vehicle operators
who never sought insurance at all.
If anything, the distinction the Werleys note between
themselves and the insureds in Eichelman and Mione
highlights the unreasonableness of their expectations of UIM
benefit recovery. In those cases, the Pennsylvania Supreme
Court noted that the insureds had chosen not to purchase UIM
coverage on their vehicles, had therefore received reduced
insurance premiums, and reasonably should have had
correlative reductions in expectations of coverage. Mione, 289
A.3d at 527 (quoting Eichelman, 711 A.2d at 1010). The
Werleys, who never even inquired as to whether the dirt bike
might be insured, let alone paid premiums on the dirt bike, had
no reasonable expectations of coverage at all.
***
Thus, we predict that the Pennsylvania Supreme Court
would conclude that the collective logic of Gallagher,
Donovan, Eichelman, and Mione is that a household vehicle
exclusion is only invalid if (1) a policy insures the vehicle
involved in the accident, (2) that policy provides UIM
coverage on that vehicle, and (3) the household vehicle
exclusion of a second policy sought to stack on top of the first
policy would exclude UIM coverage for that vehicle. As the
Court in Mione noted,
when an insured . . . does not
have . . . UIM coverage on the
vehicle that he or she was
occupying at the time of the
20
collision, it cannot be said that a
household vehicle exclusion in the
. . . UIM-containing policy is
operating as a sort of disguised
waiver of stacking that was
disapproved in Gallagher.
Mione, 289 A.3d at 530. Since the first condition is not satisfied
here, the household vehicle exclusion of the Multi-Vehicle
Policy is valid and enforceable.
C
Finally, our conclusion that the household vehicle
exclusion is valid comports with principles underlying our
interpretation of insurance contracts and the purposes of the
MVFRL.
When interpreting insurance contracts, “[t]he proper
focus regarding issues of coverage . . . is the reasonable
expectation of the insured.” Frain v. Keystone Ins. Co., 640 A.2d
1352, 1354 (Pa. 1994) (citing Dibble v. Sec. of Am. Life Ins. Co.,
590 A.2d 352, 354 (Pa. Super. 1991); Dorohovich v. W. Am. Ins.
Co., 589A.2d 252 (1991)). To determine those expectations, we
consider “the totality of the insurance transaction.” Id. “In most
cases, the language of the insurance policy will provide the best
indication of the content of the parties’ reasonable
expectations.” Liberty Mut. Ins. Co. v. Treesdale, Inc., 418 F.3d
330, 344 (3d Cir. 2005) (quoting Reliance Ins. Co. v. Moessner,
121 F.3d 895, 903 (3d Cir. 1997)).
The District Court concluded that the Multi-Vehicle
Policy’s household vehicle exclusion was unambiguous, Werley,
21
666 F. Supp. 3d at 491, and the parties do not dispute that point.
The exclusion clearly prohibited recovery of UIM benefits if the
insured was occupying a motor vehicle without insurance at the
time of the accident. The Werleys undisputedly failed to insure
the dirt bike. Indeed, they never made inquiries as to whether it
was possible to insure the dirt bike and affirmed that it was not
“intended for coverage” under the multi-vehicle policy. Thus, the
Werleys had no reasonable expectations of UIM coverage for the
dirt bike under the Multi-Vehicle Policy.
It is also a basic principle underlying the MVFRL that
“the insured is entitled to receive the maximum benefits for
which he or she has paid premiums, and the insurer is required
to provide coverage to the extent the insured contractually
agreed to and paid for such coverage under the terms of the
insurance policy.” Erie Ins. Exch. v. Backmeier, 287 A.3d 931,
946 (Pa. Super. 2022) (citations omitted), appeal denied, 303
A.3d 421 (Pa. 2023). The corollary to that is that the
Pennsylvania Supreme Court “has declined to invalidate policy
exclusions that would provide a disincentive to purchase
insurance by allowing an insured to expand coverage at the
expense of the insurer.” Heller v. Pa. League of Cities &
Municipalities, 32 A.3d 1213, 1222 (Pa. 2011).
This is the underlying principle in Gallagher and
Donovan as well as Eichelman and Mione: that the insureds are
entitled to get what they paid for in terms of UIM coverage and
stacking. The Donovan and Gallagher Courts held that the
household exclusion was unfairly depriving the insureds of
stacked coverage that they elected and paid for with higher
premiums. In Eichelman and Mione, the insured did not pay
for UIM benefits on the vehicles involved in the accident and
could not therefore complain of a denial of the benefit of
22
stacking by way of the household vehicle exclusion. So, too,
here, the Werleys never paid any premiums for the off-roading
dirt bike. Invalidating the household vehicle exclusion would
provide the Werleys with benefits for which they never
bargained. See Nationwide Mut. Ins. Co. v. Riley, 352 F.3d 804,
810 (3d Cir. 2003); see also Eichelman, 711 A.2d at 1010 (“If
appellant’s position were accepted, it would allow an entire
family living in a single household with numerous automobiles
to obtain underinsured motorist coverage for each family
member through a single insurance policy on one of the
automobiles in the household.”).
Further, Mid-Century never contractually agreed to
insure the Werleys for the risks associated with the family’s use
of the dirt bike. This case is distinguishable from Gallagher,
where GEICO insured both the host-vehicle motorcycle policy
and the second-priority automobile policy. Gallagher, 201 A.3d
at 132–33. GEICO was well-situated to understand the full
scope of the risks implicated by all the insured’s vehicles and
could adjust premiums accordingly. Id. at 138. Mid-Century, on
the other hand, had no knowledge at all of the Werleys’ dirt bike.
Because the Werleys failed to disclose information about that
vehicle, who was driving it, and in what contexts, Mid-Century
was poorly situated to understand the total risks posed by the
vehicles in the Werley household. In other words, the Werleys
urge us to compel Mid-Century to cover risks that Mid-Century
had no reason to know existed. But “[i]f this result were allowed,
it would most likely result in higher insurance premiums on all
insureds . . . since insurers would be required to factor expanded
coverage cost into rates charged for underinsured motorist
coverage,” Eichelman, 711 A.2d at 1010, and could, in time,
foster a state insurance system that is “prone to abuse.” Mione,
289 A.3d at 531 (“One could waive the (expensive) . . . UIM
23
coverage on one’s motorcycle policy with one insurer, knowing
full well that one has ample . . . UIM coverage on another (less
expensive) household automobile policy with another insurer.”).
And that would undermine one of the MVFRL’s recognized
goals: “to stop the spiralling costs of automobile insurance in the
Commonwealth.” Eichelman, 711 A.2d at 1010.
In short, our conclusion furthers the policies underlying
the MVFRL.
IV
Our role here is to predict how the Pennsylvania
Supreme Court would rule if presented with the same facts.
Because we predict that Court would find the household
vehicle exclusion at issue is valid under the MVFRL, we will
vacate the District Court’s order granting the Werleys summary
judgment and denying Mid-Century summary judgment and
will remand this case to the District Court with instructions to
enter judgment in favor of Mid-Century.
24
KRAUSE, Circuit Judge, concurring.
I agree with my colleagues that the District Court erred
in holding that the Werleys were entitled to inter-policy
stacking. But because I do not think the Werleys’ reading of
the Motor Vehicle Financial Responsibility Law (MVFRL) is
unreasonable, I write separately to urge the Pennsylvania
General Assembly to clarify when two policies can be stacked
and to include a waiver that applies to both inter- and intra-
policy stacking.
The MVFRL does not specify whether stacking can
occur only when the vehicle involved in the accident is itself
insured. See 75 Pa.C.S. § 1738(a) (stating that stacking applies
“[w]hen more than one vehicle is insured under one or more
policies providing uninsured or underinsured motorist
coverage”). In Erie Insurance Exchange v. Mione, 289 A.3d
524 (Pa. 2023), the Pennsylvania Supreme Court wrote that in
order to stack policies, “the insured must have received
UM/UIM coverage under some other policy first, or else
Section 1783 is not implicated.” Id. at 531. For the reasons
the majority explains, I agree that the best reading of Mione
and Pennsylvania case law is that the Werleys are not entitled
to UIM coverage in the absence of a host-vehicle policy. But
the District Court’s contrary reading of Mione is at least
plausible, given the MVFRL’s silence on whether a host-
vehicle policy is a prerequisite to stacking. Put differently,
without any statutory guidance, it is not unreasonable to read
“some other policy” the way Judge Smith did here: as referring
to both first- and second-priority policies. Through simple
amendment, the General Assembly could erase any lingering
doubt about the availability of stacking in the absence of a host-
vehicle policy.
1
At the same time, the General Assembly may wish to
clarify that the MVFRL’s prescribed stacking waiver applies to
both inter- and intra-policy stacking. In this case, the Werleys
had signed a stacking waiver on the Multi-Vehicle Policy, but
as the majority explains, the text of that waiver, as it is
currently set out in Pennsylvania law, serves to waive only
intra-policy stacking. See 75 Pa.C.S. § 1738(d). Had that text
clearly applied to inter-policy stacking as well as intra-policy
stacking, this would have been a much more straightforward
case. So here, too, the legislature could take the opportunity to
forestall needless case-by-case litigation over whether stacking
was appropriate. As the former Chief Justice of the
Pennsylvania Supreme Court observed, “the General
Assembly could cure the inconsistency between the [statutory
waiver] and the remainder of Section 1738” with a simple
revision. Craley v. State Farm Fire & Cas. Co., 895 A.2d 530,
543 (Pa. 2006) (Cappy, C.J., concurring). Almost two decades
later, the MVFRL still contains significant holes that could be
readily patched. I therefore echo former Chief Justice Cappy
in urging the General Assembly to bring much-needed
certainty to this persistently ambiguous corner of Pennsylvania
law.
2