Three Recent Third Circuit Decisions Underline Validity of Regular Use Exclusion and Household Vehicle Exclusion—under the Appropriate Circumstances—in UM/UIM Policies.

In Eberly v. LM Gen. Ins. Co., the Third Circuit determined that the regular use exclusion in the UIM policy at issue did not act as a de facto waiver of stacked coverage and, therefore, did not violate Section 1738 of the Motor Vehicle Financial Responsibility Law (MVFRL). The Third Circuit noted that the Pennsylvania Supreme Court, in Rush v. Erie Ins. Exch., upholding regular use exclusions, had limited its decision to whether these exclusions violated Section 1731 of the MVFRL but did not directly address the Section 1738 argument. 

Finding that the insureds could access stacked coverage on their cars, and on any cars they drive, provided they do not fit within any applicable exclusions to coverage and the exclusion only applies where the insured was operating a vehicle which he did not own but was provided for his regular use, the Third Circuit determined that the regular use exclusion does not violate Section 1738 of the MVFRL and affirmed the trial court’s grant of summary judgment in favor of the insurer.

Similarly, in Burton v. Progressive Adv. Ins. Co., the Third Circuit upheld a regular use exclusion where the insured was operating her brother’s vehicle, which was not insured under the insured’s UIM policy, while her own listed vehicle was being repaired. The Third Circuit found immaterial the fact that the insured had planned to stop using her brother’s vehicle once her own vehicle was repaired and that her use of her brother’s vehicle qualified as “regular use.”

Finally, wading into the choppy waters left in the wake of the Supreme Court’s Gallagher decision—which determined that the household vehicle exclusion, under certain circumstances, acts a de facto stacking waiver and violated Section 1738 of the MVFRL—the Third Circuit, in its precedential decision in Mid-Century Ins. Co. v. Werley, No. 23-1822 (3d Cir. Sept. 5, 2024), determined that application of the household vehicle exclusion did not violate Section 1738 in that there was no reasonable expectation of UIM coverage where the insured was injured while operating an uninsured dirt bike.

Considering these three cases, and other recent appellate cases from Pennsylvania’s state and federal courts, there is a very real trend ongoing in the courts of upholding exclusions in UM/UIM policies alongside a continued narrowing of the Gallagher line of cases which were once thought to be expansive and all-inclusive.  

_{Case Law Alerts, 4th Quarter, October 2024 is prepared by Marshall Dennehey to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2024 Marshall Dennehey, all rights reserved. This article may not be reprinted without the express written permission of our firm.}