                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-16-2007

Haspel v. State Farm Mutl Auto
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-3716




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                                                               NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                ____________

                                     No. 06-3716
                                    ____________

                    KENNETH HASPEL; VICKI VINCENT,
            Co-Administrators of the Estate of Michael J. Haspel, Deceased

                                           Appellants

                                            v.

          STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
                             ____________

                   On Appeal from the United States District Court
                       for the Western District of Pennsylvania
                                (D.C. No. 05-cv-01503)
                   District Judge: Honorable Thomas M. Hardiman
                                    ____________

                      Submitted Under Third Circuit LAR 34.1(a)
                                   May 18, 2007

      Before: FISHER and ROTH, Circuit Judges, and RAMBO,* District Judge.

                                 (Filed: July 16, 2007)
                                     ____________

                             OPINION OF THE COURT
                                  ____________




      *
        The Honorable Sylvia H. Rambo, United States District Judge for the Middle
District of Pennsylvania, sitting by designation.
RAMBO, District Judge.

       Appellants, Kenneth Haspel and Vicki Vincent, co-administrators of the estate of

Michael J. Haspel, appeal the District Court’s dismissal of their complaint against

Appellee State Farm Mutual Automobile Insurance Company, for failure to state a claim

upon which relief can be granted. Appellants assert that the insured’s estate was entitled

to stack underinsured motorist (UIM) benefits of $200,000 from one insurance policy

onto $100,000 in UIM benefits that State Farm had already paid on another policy. State

Farm maintains that stacking of benefits is precluded because the insured waived stacking

on the controlling policy, which also contains a household exclusion provision that clearly

and unambiguously excludes the insured from coverage. The underlying facts present a

question regarding whether the stacking waiver was a knowing waiver of inter-policy

stacking. However, because we find that the household exclusion precludes coverage

here, we will affirm.

                                             I.

       In October 2001,1 Michael J. Haspel was killed while riding his motorcycle. At

the time of his death, Haspel had two insurance policies underwritten by State Farm. One

policy insured the motorcycle he had been riding when he died (motorcycle policy). The

other policy covered two other vehicles, a Ford Ranger and a Toyota MR2 (automobile


       1
        Appellants’ brief states that Haspel died on October 7, 2001, while Appellee’s
brief and the District Court’s October 2, 2006 memorandum state that Haspel died on
October 13, 2001.

                                             2
policy). Following legal action, Haspel’s estate recovered $100,000 from the tortfeasor,

as well as $100,000, the maximum UIM benefit available, under the motorcycle policy.

State Farm subsequently denied the estate’s claim for $200,000 in UIM benefits under the

automobile policy (the total of the $100,000 maximum UIM benefit available for each of

the two vehicles insured), asserting that Haspel had rejected stacking of UIM benefits

under that policy and that the policy contained a household exclusion provision.2

       Appellants filed suit in the Court of Common Pleas of Washington County,

Pennsylvania, on October 7, 2005. Appellee removed the case to the United States

District Court for the Western District of Pennsylvania and filed a Rule 12(b)(6) motion

to dismiss the complaint for failure to state a claim. The District Court stayed the case

pending the Pennsylvania Supreme Court’s decision in Craley v. State Farm Fire and

Casualty Co., 895 A.2d 530 (Pa. 2006), which was decided on April 21, 2006. The

District Court subsequently requested additional briefing, and oral argument, which took

place on July 19, 2006. On July 19, 2006, the District Court issued an order granting

State Farm’s motion to dismiss for the reasons stated on the record during oral argument.

Appellants’ timely appeal of the District Court’s final order dismissing the complaint

followed.


       2
        The District Court opinion contains the automobile policy household exclusion
language, which states: “THERE IS NO COVERAGE FOR BODILY INJURY TO AN
INSURED UNDER COVERAGE W3 [(uninsured / underinsured motorist coverage)]:
While occupying a motor vehicle owned by you, your spouse, or any relative if it is not
insured for coverage under this policy.”

                                             3
                                             II.

       The District Court had diversity jurisdiction over Appellants’ breach of contract

claim pursuant to 28 U.S.C. § 1332. We have jurisdiction over Appellants’ appeal from a

final order of dismissal under 28 U.S.C. § 1291.

       We exercise plenary review over a district court’s grant of a motion to dismiss for

failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Our standard of

review is the same as that applied by the District Court. We are required to accept as true

all factual allegations in the complaint and draw all inferences from the facts alleged in

the light most favorable to the plaintiff. Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651,

653 (3d Cir. 2003). In considering whether the complaint survives a motion to dismiss,

we review whether it “contain[s] either direct or inferential allegations respecting all the

material elements necessary to sustain recovery under some viable legal theory.” Bell Atl.

Corp. v. Twombly, – U.S. –, 127 S. Ct. 1955, 1969 (2007) (quoting Car Carriers, Inc. v.

Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984).3


       3
        We note that the District Court quoted the “no set of facts” language of Conley v.
Gibson, 355 U.S. 41, 45-46 (1957), when it set forth its legal standard for reviewing a
motion to dismiss. Similarly, our prior opinions have regularly cited Conley’s “no set of
facts” language. However, the Supreme Court, in its recent decision in Twombly,
expressly stated that Conley should not be interpreted as “the minimum standard of
adequate pleading to govern a complaint’s survival.” 127 S. Ct. at 1969. Even if the
District Court reached its conclusion based on what we now understand to be an
improperly narrow interpretation of Conley, we conclude that such error is harmless
because we find that the facts alleged here are not “suggestive of illegal conduct” even
viewed in light of Twombly’s clarification of the motion to dismiss standard. Id. at 1969
n.8.

                                              4
                                             III.

       The District Court relied primarily on Craley in concluding that both Haspel’s

waiver of stacking in the automobile policy and the household exclusion provision in the

automobile policy barred recovery of any benefits. Although we agree that Craley

provides that Pennsylvania law permits waivers of inter-policy stacking, we question

whether Craley supports the conclusion that Haspel’s automobile policy contains a

knowing waiver of inter-policy stacking. However, because we agree that the household

exclusion in the automobile policy dictates the result reached in the District Court, and

will affirm on that basis, we need not decide the inter-policy stacking waiver question.

       Stacking of UIM benefits and waiver of the same are provided for by Pennsylvania

statute. Section 1738 of the Pennsylvania Motor Vehicle Financial Responsibility Law

(MVFRL) states:

       (a) Limit for each vehicle.–When more than one vehicle is insured under
       one or more policies providing uninsured or underinsured motorist
       coverage, the stated limit for uninsured or underinsured coverage shall
       apply separately to each vehicle so insured. The limits of coverages
       available under this subchapter for an insured shall be the sum of the limits
       for each motor vehicle as to which the injured person is an insured.

       (b) Waiver.–Notwithstanding the provisions of subsection (a), a named
       insured may waive coverage providing stacking of uninsured or
       underinsured coverages in which case the limits of coverage under the
       policy for an insured shall be the stated limits for the motor vehicle as to
       which the injured person is an insured.

75 Pa. Cons. Stat. Ann. § 1738.




                                              5
       In Craley, which involved similar facts, Jayneann Craley’s estate collected UIM

benefits provided for in her policy, which was the policy that covered the vehicle

involved in the accident. Craley, 895 A.2d at 533. The estate then sought UIM benefits

under a separate policy held by Jayneann’s husband, Randall, which covered a different

vehicle. Id. The Pennsylvania Supreme Court stated that the terms of Randall’s policy,

the policy under which the benefits at issue were sought, determined whether and what

benefits were available. Id. Similarly, here, State Farm has paid the maximum amount of

UIM benefits available under the motorcycle policy and Appellants now seek to stack the

UIM benefits provided for in the automobile policy. Accordingly, as a threshold matter,

Craley dictates that the terms of the automobile policy determine whether and what

benefits may be available.

       With respect to the inter-policy stacking issue, in Craley, Randall’s policy included

a waiver that rejected UIM benefits in exchange for a reduced policy premium. Id. at

533-34. The Pennsylvania Supreme Court determined that the stacking waiver in Randall

Craley’s policy precluded UIM coverage, after expressly rejecting “the premise that

Section 1738 does not permit inter-policy stacking waiver.” Id. at 536. However, the

Craley court also concluded that § 1738 requires “some form of knowing waiver [to]

occur” as a pre-requisite to enforcement of an inter-policy stacking waiver. Id. at 541. It

reasoned that the waiver in Randall Craley’s policy was valid and enforceable because the

policy covered only one vehicle; thus, Randall “could not have thought he was receiving a



                                             6
reduced premium for waiving intra-policy stacking because there could be no intra-policy

stacking with only one vehicle on ‘the policy.’” Id. at 542. The Pennsylvania Supreme

Court explicitly noted that when a policy covers multiple vehicles, like the instant

automobile policy, it raises questions regarding whether a stacking waiver would be

knowing with respect to inter-policy stacking. Id. at 542 n. 18. Accordingly, although it

is clear that waivers of inter-policy stacking are permissible, it is not clear on the facts of

this case whether the automobile policy contains a valid and enforceable waiver of inter-

policy stacking.

       We need not answer this question, however, because the household exclusion

provides a sufficient legal basis for dismissing the complaint. The District Court also

looked to Craley to determine that the household exclusion precluded coverage. Randall

Craley’s policy contained a household exclusion, id. at 533-34, that was virtually identical

to the one contained in the instant automobile policy.4 However, the focus of the District

Court’s decision in this regard focused mainly on the decision of the Pennsylvania

Superior Court, State Farm Fire & Cas. Co. v. Craley, 844 A.2d 573 (Pa. Super. Ct.




       4
         The household exclusion in Craley stated that “[t]here is no coverage for bodily
injury to an insured under Coverage U3 [(uninsured motorist coverage)]: (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.” 895 A.2d at 534.

                                               7
2004),5 which had followed household exclusion principles set forth in Prudential

Property and Casualty Insurance Co. v. Colbert, 813 A.2d 747 (Pa. 2002).

       “Generally courts must give plain meaning to a clear and unambiguous contract

provision unless to do so would be contrary to a clearly expressed public policy.”

Colbert, 813 A.2d at 750 (citations omitted). In Colbert, the Pennsylvania Supreme Court

considered a household exclusion provision that was substantively identical to the

household exclusion in the instant automobile policy6 and determined that the exclusion

was clear and unambiguous and not contrary to public policy. 813 A.2d at 755 (holding,

in similar circumstances, that the household exclusion of UIM benefits was “consistent

with the underlying public policy of the MVFRL”).

       The household exclusion in Haspel’s automobile policy squarely rejects coverage

for an accident involving the motorcycle, which was covered under a different policy.

       5
         The Pennsylvania Supreme Court declined to address the enforceability of the
household exclusion clause in its decision, although it noted that it had previously found
such exclusions to be enforceable. See Craley, 895 A.2d at 531-32. The Superior Court
had agreed with the trial court’s finding that inter-policy stacking waiver was invalid, but
reversed the trial court’s decision that the household exclusion was void as contrary to
public policy. Craley, 844 A.2d at 573-74. The Pennsylvania Supreme Court reversed
the Superior Court’s stacking waiver ruling, but did not disturb the Superior Court’s
household exclusion ruling. Craley, 895 A.2d at 532. It affirmed the decision to remand
to the trial court for declaratory judgment in favor of the insurance company. Id.
       6
       The relevant policy language in Colbert stated
      We will not pay for bodily injury to anyone occupying or struck by a motor
      vehicle owned or leased by you or a household resident which is not
      covered under this policy, or if the liability coverage of that vehicle is used
      to pay any portion of an insured’s bodily injury liability claim.
813 A.2d at 751.

                                              8
Moreover, as we have stated previously, when the vehicle involved in an accident is

covered under a separate policy, a valid household exclusion clause “prohibits the

‘stacking’ of uninsured or underinsured coverage across multiple insurance policies. The

claimant may recover under the policy covering the occupied vehicle, but cannot add

coverage provided by the policy containing the exclusion.” Nationwide Mut. Ins. Co. v.

Hampton, 935 F.2d 578, 587 (3d Cir. 1991). Accordingly, under Pennsylvania law, the

Haspel’s automobile policy household exclusion precludes the stacking of UIM benefits

sought by Appellants. Therefore, we will affirm the order of the District Court.




                                            9
