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December 21st, 2023
In Nationwide Prop. and Cas. Ins. Co. v. Castaneda, No. 1030 MDA 2022 (Pa. Super Dec. 5, 2023), the Superior Court concluded that a non-licensed driver exclusion under the Policy was not a valid exclusion under Pennsylvania’s Motor Vehicle Financial Responsibility Law.
Elvia Castaneda purchased an automobile insurance policy (“Policy”) for her Toyota Sienna through Nationwide Property and Casualty Insurance Company (“Nationwide”), which provided first-party medical expense benefits up to $10,000 for a person driving with the permission of a policyholder. However, the Policy excluded coverage for any insured who uses the motor vehicle without a valid driver’s license. Yet, the exclusion did not apply to the use of the automobile by a “relative,” which the Policy defined as a “person who regularly resides in your household and who is related to you by blood, marriage or adoption.”
Elvia gave her daughter, Christina, permission to drive the Sienna. Christina did not have a valid driver’s license, and she did not regularly reside with her mother. She was neither a named insured on any policy providing first-party benefits coverage; nor was she an insured on any policy other than the Policy providing first-party benefits coverage.
Christina sustained serious injuries as a result of being rear-ended while she was operating her mother’s vehicle. Christina submitted a claim for first-party medical expense benefits, but Nationwide denied the claim, stating that it had no duty to cover medical expenses under the “unlicensed driver exclusion” contained in the Policy. Nationwide also determined that because Christina did not regularly reside with her mother, she was not a “relative” as defined by the Policy, and therefore, the exclusion applied. Christina asked Nationwide to reconsider the denial of her claim because the unlicensed driver exclusion was not one of the exclusions listed in Section 1718 of the Motor Vehicle Financial Responsibility Law (“MVFRL”), 75 Pa. C.S.A. §§ 1701-1799.7, and therefore, it was invalid.
Nationwide denied Christina’s request for reconsideration and initiated a declaratory action seeking an order from the Court that it was not obligated to pay first-party medical benefits to Christina under the exclusion. Nationwide argued that although Section 1718 provided a list of exclusions for first-party benefits’ coverage which did not include an unlicensed driver exclusion, the statutory list was not exhaustive and did not bar insurers from incorporating other valid exclusions to the recovery of first-party benefits in their policies. Nationwide maintained that the unlicensed driver exclusion was valid, and it had properly denied benefits to Christina under this exclusion as she was undisputedly driving without a license at the time of the accident.
Christina filed an answer with a new matter. Interestingly, she also filed a class-action counterclaim, requesting, individually and on behalf of a putative class, a judgment declaring that the unlicensed driver exclusion violated the MVFRL and public policy when applied to claims for first-party medical expenses and, therefore, that any coverage denial for those expenses under the exclusion was improper.
Nationwide filed a motion for judgment on the pleadings, alleging that it was entitled to judgment as a matter of law. The trial court agreed with Nationwide, relying on several cases, including Nationwide Mut. Ins. Co. v. Cummings, 652 A.2d 1338, 1342 (Pa. Super. 1994) (citing Marino v. General Acc. Ins. Co., 610 A.2d 477 (Pa. Super. 1992)) in determining that the MVFRL did not contain an exhaustive list of permissible coverage exclusions. The trial court also agreed that Section 1718 did not violate public policy in precluding an insurer from excluding [first party] benefits for being an unlicensed driver.
On appeal, the Superior Court noted that the underlying objective of the MVFRL is to provide broad coverage to assure the financial integrity of the insured, and therefore, the MVFRL is to be liberally construed to “afford the greatest possible coverage to injured claimants.” Danko v. Erie Ins. Exchange, 630 A.2d 1219, 1222 (Pa. Super. 1993). Moreover, the Court acknowledged that Section 1711 of MVFRL mandates that policyholders purchase and insurers provide coverage for first-party medical expenses for injuries arising from the use of a motor vehicle. See also id. at § 1713 (clarifying that first-party benefits are recoverable for injuries “arising out of the maintenance or use of a motor vehicle”). Finally, the Superior Court noted that none of the cases the trial court relied on to exclude coverage involved first-party benefits, “much less the non-waivable medical expense benefits insurers are mandated to cover by the MVFRL.” See Burstein v. Prudential Property and Cas. Ins. Co., 809 A.2d 204, 209 (Pa. 2002) (discussing the MVRFL’s differing treatment of first-party coverage from uninsured/underinsured coverage). These cases, therefore, also did not involve the list of exclusions to first-party benefits set forth by Section 1718.
Ultimately, the Superior Court emphasized that the Pennsylvania legislature constructed a mandatory motor vehicle liability no-fault system for first-party medical expense benefits. Therefore, the Court concluded Christina was entitled to coverage for her first-party medical expense claim because Section 1718 did not include an unlicensed driver exclusion, and therefore it was not a valid exclusion upon which Nationwide could rely on to refuse coverage for Christina’s first-party claim for medical expenses arising from the accident.
The Superior Court of Pennsylvania’s opinion in Nationwide Prop. and Cas. Ins. Co. v. Castaneda, No. 1030 MDA 2022 (Pa. Super Dec. 5, 2023) can be accessed here.
