Pennsylvania Court Upholds ‘Regular Use’ Exclusion for Underinsured Motorist Coverage *Centurion Insurance AFS*

The Pennsylvania Supreme Court has upheld a “regular use” exclusion in an auto insurance policy that prohibits underinsured motorist coverage for injuries involving a non-owned vehicle that an insured used regularly.

In so doing, the state’s high court reversed a 2020 Superior Court ruling against Erie Insurance that held that the “regular use” exclusion violated the state’s Motor Vehicle Financial Responsibility Law (MVFRL).

Erie appealed the Superior Court ruling, arguing that by finding that a “regular use” exclusion violates the MVFRL, the Superior Court has disregarded decades of precedent upholding the validity of the “regular use” exception. Erie argued that the Superior Court’s decision would lead to higher premiums to cover for uninsured/underinsured motorist coverage (UM/UIM).

The state Supreme Court has now sided with Erie in its appeal and upheld its own precedents that a “regular use” exclusion is valid under Pennsylvania law.

In November 2015, Matthew Rush, a detective for the city of Easton, sustained serious injuries following a motor vehicle accident in which two drivers crashed into his unmarked 2010 Ford Fusion police car. The Ford was owned by the city’s police department and was insured under the city’s business auto policy/fleet auto policy issued by Travelers Insurance that provided $35,000 in underinsured motorist coverage (UIM).

Rushes’ Claim

Rush and his wife owned three personal vehicles on two insurance policies through Erie Insurance. The Erie policies both included identical “regular use” exclusion clauses limiting the scope of UIM coverage under the policies. Under the “regular use” exclusion, UIM coverage 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 (UM)] or [UIM] coverage under this policy.

The parties agreed that the insureds did not own or insure the city’s Ford on their Erie policies, and that Rush regularly used the car for work.

The insurance companies for the other drivers and the city provided Rush with their policy limits. However, because Rush’s injuries and damages exceeded the liability insurance limits of the tortfeasors and the UIM coverage limits of the city’s policy, the Rushes subsequently filed a claim for UIM benefits under the Erie policies. Erie denied coverage based on the “regular use” exclusion.

UIM coverage is designed “to protect the insured (and his additional insureds) from the risk that a negligent driver of another vehicle will cause injury to the insured (or his additional insureds) and will have inadequate coverage to compensate for the injuries caused by his negligence.”

The Rushes sought a determination of whether Erie can limit the scope of its UIM coverage through the “regular use” exclusion.

Superior Court

In June 2020, the Superior Court entered partial summary judgment in favor of the Rushes, holding that the “regular use” exclusion in the Erie policies violates the state’s MVFRL.

In its opinion, the Superior Court observed that Section 1731 of the MVFRL mandates” that insurers provide UIM coverage and defines the scope of UIM coverage broadly. Coverage is required whenever an insured suffers injuries “arising out of the … use of a motor vehicle” and the law does not consider either the owner of the vehicle or the frequency with which the insured uses it, according to this court.

The Superior Court rejected Erie’s reliance on the Supreme Court’s 2011 decision in Williams v. GEICO Government Employees Insurance Co., in which the high court found that a regular-use exclusion as applied to a state trooper did not violate public policy. The Superior Court determined that the comment in Williams was non-binding.

Thus the question before the Supreme Court was whether the Superior Court’s decision was in direct conflict with the Pennsylvania Supreme Court decisions and whether the Superior Court erred as a matter of law by finding that the “regular use exclusion” contained in Pennsylvania auto insurance policies violates the MVFRL

According to Erie, the first time the high court considered the validity of the “regular use” exception was in 2002 in Burstein wherein the court held that the “regularly used, non-owned car exclusion and its contractual restraint on UIM portability comport with the underlying policies of the MVFRL.” Nine years later, the Supreme Court reaffirmed Burstein in Williams, wherein it rejected a claimant’s challenge that a “regular use” exclusion violated Section 1731.

In its appeal, Erie insisted that Burstein and Williams remain controlling law.

Erie further argued that the legislature passed the MVFRL in part to cut the cost of automobile insurance. Erie argued that the Superior Court’s decision will incentivize insurers to raise premiums to cover the possibility that people can regularly drive non-owned cars with gratis UM/UIM coverage.

The Rushes argued that the “regular use” exclusion limits the scope of the UIM coverage that Erie is required to provide, and thus it is unenforceable. They highlighted that since the Superior Court decided its case, two federal courts have determined that its reasoning was sound,

The Insureds further maintained that the General Assembly placed no limit on the scope of coverage because lawmakers recognized that “everyday citizens regularly use vehicles they do not own and do not insure under their personal auto policies.”

The Insurance Federation of Pennsylvania, the Pennsylvania Association of Mutual Insurance Companies, and the Pennsylvania Defense Institute filed a joint amici brief in support of Erie. Their argument is almost exclusively that this Court is bound by its prior decisions and continue to hold that the “regular use” exclusion does not violate the MVFRL.

In support of the Insureds, the Pennsylvania Association for Justice submitted an amicus brief in opposition to the exclusion.

The Supreme Court noted, and the parties recognized, that it previously upheld the validity of “regular use” exclusions in Burstein and then in Williams. The court said the Rushes were effectively asking the court to overrule these decisions.

Burstein involved a challenge to the “regular use” exclusion in a household policy on the basis that it violated public policy in relation to first offenders. But the high court found that to void the “regular use” exclusion would frustrate the public policy concern of cost containment, reasoning that insurers “would be compelled to underwrite unknown risks that it has not been compensated to insure” and that insureds would be encouraged to obtain UIM coverage on one car and then “drive an infinite number of non-owned vehicles, and receive gratis UIM coverage on all those vehicles.” To invalidate the “regular use” exclusion, according to the Burstein opinion, would force insurers “to increase the cost of insurance, which is precisely what the public policy behind the MVFRL strives to prevent.”

Thus in the present case, the high court ruled in favor of its own precedents and Erie. The court said that while the precedents do not foreclose all novel plain language arguments, they do lead it to reject the precise argument directly before it. The Rushes’ argument is “not novel, but merely a recitation of one of the same arguments previously rejected,” the court concluded in overriding the Superior Court.

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Pennsylvania