Pennsylvania Superior Court Strikes Down the Regular Use Exclusion
Rush v. Erie Insurance Exchange, No. 1443 EDA 2020 (Pa. Super. Oct. 22, 2021)
In an October 22, 2021, precedential panel decision, the Pennsylvania Superior Court in Rush v. Erie Insurance Exchange extended the reasoning of Gallagher v. Geico Indemn. Co., 201 A.3d 131 (Pa. 2019), to the regular use exclusion for UM/UIM coverage. In Gallagher, the Pennsylvania Supreme Court held that stacking applies to UM/UIM claims unless a waiver of stacked coverage was executed under §1738 of the Pennsylvania Motor Vehicle Responsibility Law (MVFRL). The household exclusion that traditionally applied to preclude stacking of a resident relative’s policy was eroded. The Superior Court has now similarly held in Rush that underinsured motorist coverage may only be precluded by the waiver process under §1731 of the MVFRL, and not by a policy exclusion.
In Rush, a City of Easton police detective was injured in an automobile accident caused by two negligent tortfeasors while he was driving his police vehicle that he regularly used for work. The Easton automobile policy provided for $35,000 in underinsured motorist coverage. Having received the limits of the tortfeasors’ policies and the $35,000 limits of the Easton policy, the detective sought underinsured motorist coverage from Erie pursuant to two insurance policies that covered three personal vehicles and provided for $750,000 in total stacked underinsured motorist coverage.
Erie denied the underinsured motorist claim, citing the regular use exclusion applicable to bodily injury resulting from the use of a non-owned vehicle that was not identified on the Erie policies. The detective then filed a declaratory judgment action in the Court of Common Pleas of Northampton County against Erie contending that the regular use exclusion violated the MVFRL. The exclusion 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 use by ‘you’ or a ‘resident’, but not insured for uninsured or underinsured motorist coverage under this policy.
Rush, Slip op. at p. 2-3.
The trial court held the regular use exclusion unenforceable under the MVFRL and entered summary judgment in favor of the detective. Erie appealed to the Superior Court, which affirmed.
The Superior Court held that absent an express waiver of coverage under 75 Pa.C.S. §1731, uninsured and underinsured motorist coverage must be provided in an amount equal to the bodily injury liability limits. The court reasoned that the regular use exclusion “conflicts 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.’” Rush, at p. 7. It rejected Erie’s reliance upon Williams v. GEICO Gov’t Emp. Ins. Co., 32 A.2d 1195, 1199 (Pa. 2011), despite the identical facts presented therein.
In Williams, a state trooper injured while occupying a police vehicle not identified on his personal GEICO policy was precluded from recovering underinsured motorist benefits due to the regular use exclusion in his policy. The Pennsylvania Supreme Court concluded therein that the insured had failed to meet his high burden of establishing that the regular use exclusion violated the public policy supporting the MVFRL. The Superior Court in Rush read the public policy holding of Williams as not controlling. Interestingly, the Rush panel also rejected Williams’s express statement that the regular use exclusion did not violate the express terms of the MVFRL, holding that it was mere dicta. Rush further rejected Erie’s reliance upon Erie Ins. Exch. v. Baker, 972 A.2d 507 (Pa. 2008), where the Pennsylvania Supreme Court had enforced the regular use exclusion, finding that Gallagher had abrogated that decision.
Since Gallagher, and prior to Rush, numerous federal judges had rejected the argument that the regular use exclusion contravened the MVFRL. The Honorable Edward G. Smith identified several such decisions recently in Eberly v. LM General Ins. Co., 2021 WL 4284521 (E.D. Pa. Sept. 21, 2021). In that case, the regular use exclusion precluded the plaintiff’s claim for underinsured motorist benefits arising out of an accident that occurred while he was operating his employer’s vehicle. Judge Smith held that Gallagher was not controlling as it applied to stacking and not to regular use exclusions. He also recognized the Pennsylvania Supreme Court’s decision in Burstein v. Prudential Property and Cas Ins. Co., 809 A.2d 204 (Pa. 2002), which held that the regular use exclusion comported with the policies underlying the MVFRL. Burstein was also reaffirmed in Williams.
The Rush decision has immediate and wide-sweeping ramifications for the insurance industry. Unless there is a stay, all claims for uninsured or underinsured motorists benefits that have been denied based upon the regular use exclusion, and which are within the applicable statute of limitations, may become payable. The panel decision in Rush may be appealed to the Pennsylvania Supreme Court, where review is discretionary. If an appeal is not successful, it is likely that only a legislative change will be able to reduce an insurer’s risk of exposure to uninsured and underinsured motorist claims arising from the use of motor vehicles, including motorcycles, of which the insurer is unaware and has no control.
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