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February 21st, 2024
In Rush v. Erie Insurance Exchange, 77 MAP 2022 (January 29, 2024), the Pennsylvania Supreme Court concluded that a “regular use” exclusion contained in a motor vehicle insurance policy does not violate the Motor Vehicle Financial Responsibility Law (“MVFRL”). 75 Pa.C.S. §§ 1701-1799.7
Matthew Rush, a City of Easton police detective, suffered serious injuries when two other drivers crashed into an unmarked Ford Fusion, the police car he regularly used, but was owned and insured by the City of Easton under a Travelers Insurance policy (“Easton Policy”). “The Easton Policy” provided for $35,000 in underinsured motorist (“UIM”) coverage.
At the time of the crash, Rush insured three personal automobiles on two insurance policies through Erie Insurance (“Erie Policies”). Rush paid for stacked UIM coverage on both policies. The first policy provided for $250,000 of UIM coverage on one vehicle and the second provided for $250,000 of UIM coverage stacked on two vehicles. Both Erie Policies include identical “regular use” exclusion clauses, which provided:
This insurance does not apply to:
Bodily injury to “you” or a “resident” using a non-owned “motor vehicle” or a “non-owned” miscellaneous vehicle which is regularly used by “you” or a “resident”, but not insured for uninsured or underinsured motorist coverage under this policy.
After the other drivers and the City of Easton tendered their policy limits to Rush, he filed a claim for UIM benefits under the Erie Policies as his injuries and damages exceeded the insurance coverage limits of the tortfeasors, and the UIM coverage limits of the Easton Policy. Erie Insurance denied coverage based on the “regular use” exclusion. Rush then filed the underlying declaratory judgment action seeking judicial determination of whether the MVFRL allows Erie Insurance to limit the scope of its UIM policies through the “regular use” exclusion. The trial court granted summary judgment in favor of Rush, holding that the “regular use” exclusion in the Erie Policies violated the MVFRL. Erie Insurance appealed the trial court’s decision, arguing that the “regular use” exclusion is an enforceable limitation on the scope of UIM coverage that it must provide to Insureds.
The Superior Court acknowledged the Supreme Court’s decision in Williams v. GEICO Govt. Emp. Ins. Co., 32 A.3d 1195, 1199 (Pa. 2011), wherein the Supreme Court’s stated that a “regular use” exclusion did not violate the express terms of the MVFRL; however, the Superior Court determined that the statement was dicta; and therefore was not bound by it. The Superior Court also noted that the Supreme Court in Williams relied upon Erie Ins. Exch. v. Baker, 972 A.2d 507 (Pa. 2008), which the Pennsylvania Supreme Court abrogated in Gallagher v. GEICO Indemn. Co., 201 A.3d 131, 135 (Pa. 2019). Ultimately, the Superior Court concluded that the “regular use” exclusion in the Erie Policies conflicted with the broad language of Section 1731(c), which requires UIM coverage in those situations where an insured is injured arising out of the “use of a motor vehicle.” Stated differently, the court found that the exclusion limited Section 1731(c)’s coverage mandate to situations where an insured is injured arising out of “use of an owned or occasionally used motor vehicle.” Therefore, the Superior Court held that since the “regular use” exclusion conflicts with the clear and unambiguous language of Section 1731 of the MVFRL, it is unenforceable.
Erie argued that the Supreme Court previously held in Burstein v. Prudential Property & Casualty Insurance Co., 809 A.2d 204 (Pa. 2002), that the “regularly used, non-owned car exclusion and its contractual restraint on UIM portability comport with the underlying policies of the MVFRL. Erie also argued that the Supreme Court reaffirmed Burstein in Williams, wherein the Supreme Court rejected a claimant’s challenge that a “regular use” exclusion violated Section 1731.
Here, the Supreme Court concluded that there was no doubt that the Court held in both Burstein and Williams that the “regular use” exclusion is permissible under the MVFRL, and that the interpretation has persisted for two decades without a legislative response. In so ruling, the Supreme Court reasoned that UIM coverage in Pennsylvania is not universally portable – it follows the motor vehicle, and not the person. The Court also noted that it had previously made clear that the holding in Gallagher was based upon the unique facts in that case, and that the decision there should be construed narrowly. Erie Ins. Exch. v. Mione, 289 A.3d 524, 528 & n.10 (Pa. 2023) (holding that the household vehicle exclusion remains valid and enforceable under certain circumstances).
The Pennsylvania Supreme Court’s Opinion in Rush v. Erie Insurance Exchange, 77 MAP 2022 (January 29, 2024) can be accessed here.
