Implications for Stacked Insurance in Pennsylvania following Gallagher v. GEICO (2019)
Open Access
- Author:
- Van Schaik, Juliette
- Area of Honors:
- Risk Management
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- David Arthur Cather, Thesis Supervisor
David Russell Hunter, Thesis Honors Advisor - Keywords:
- ARIMA
Bernoulli Trial
Beta-Binomial Distribution
Contract of Adhesion
Doctrine of Reasonable Expectations
Household Vehicle Exclusion
Indemnification
Insurance Fraud
Insured
Insurer
Moral Hazard
Motor Vehicle Financial Responsibility Law
Plurality Decision
Stacked Insurance
Tortfeasor
Underinsured Motorist
Uninsured Motorist - Abstract:
- A class action lawsuit has already begun to form following the decision of Gallagher v. GEICO (2019). In their decision, the Court deemed that the Household Vehicle Exclusion (versions of which are contained in largely all stacked insurance policies) violated the Motor Vehicle Financial Responsibility Law; that is, insureds were unfairly paying for a coverage which they could not receive. Gallagher did not happen in a bubble; it was the result of decades of previous stacked insurance cases in Pennsylvania and ultimately made possible by the plurality decision of GEICO v. Ayers (2008) eleven years earlier. Although courts have historically expressed a tendency to favor the disadvantaged party within a given contract of adhesion, Gallagher’s decision now precedentially states that insureds will be indemnified with stacked benefits when they have paid a premium and sustained damages in excess of the involved vehicle’s limit. It is crucial now more than ever that an insurer accurately prices stacked insurance. This begins by adopting ISO policy language to reduce risk of lawsuit arising from contract ambiguity. Then, the current pricing models must be changed to reflect the right of an individual to receive inter-policy stacking benefits. This is accomplished by first removing any relevant systems barriers, then by modeling the probability an insurer pays a stacked claim using a time series.