Introduction
On January 29, 2024, the Pennsylvania Supreme Court issued its much-anticipated decision in the Rush v. Erie Insurance Exchange matter. This case involved the important question of whether Regular Use Exclusion contained in motor vehicle policies of insurance violated the language of Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”).
This decision by the Supreme Court was so important to the defense and plaintiff’s bar alike in that it would provide a clearer judicial landscape in cases involving Regular Use Exclusion language in insurance policies after the waters were muddied in cases involving this issue following the Gallagher v. Geico decision.
I am pleased to share that the Supreme Court’s decision came down in favor of insurance carriers, and the impact of this ruling will be discussed more fully below.
Background of Rush v. Erie, No. 77 MAP 2022 (Pa. Jan. 29, 2024)
The Plaintiff in this matter was Matthew Rush, a detective for the City of Easton, Pennsylvania. On November 28, 2015, Mr. Rush suffered significant injuries after a motor vehicle accident where two (2) drivers crashed into his unmarked police vehicle. The vehicle was owned by Easton’s police department and insured under their Business Auto Policy/Fleet Auto Policy issued by Travelers Insurance. This policy provided $35,000 in underinsured motorist coverage at the time of the accident.
In addition to the City of Easton’s insurance policy, Mr. Rush and his wife owned three (3) personal vehicles covered by two (2) insurance policies provided by Erie Insurance. Mr. and Mrs. Rush’s policies both provided stacked underinsured motorist coverage. The first policy provided $250,000 of underinsured motorist coverage on one (1) vehicle, and the second policy provided $250,000 of underinsured motorist coverage on two (2) vehicles for a total of $500,000 in coverage. Between the two (2) policies, the Rush family had a total of $750,000 in underinsured motorist (“UIM”) coverage.
Both Erie Insurance policies contained identical “regular use” exclusion clauses which function to limit the scope of underinsured motorist coverage under the policies. The “regular use” exclusion states that 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.” It was not disputed by the parties to the litigation that Mr. and Mrs. Rush did not own or insured the vehicle occupied by Mr. Rush at the time of the accident. Likewise, it was not disputed by the parties that Mr. Rush regularly used the car for work.
The insurance companies who insured the two tortfeasor drivers tendered their policy limits to Mr. Rush. Also, the City of Easton tendered their $35,000 UIM policy to Mr. Rush as compensation for his injuries. Mr. Rush’s injuries and damages exceeded the amount paid by the tortfeasor’s and the City of Easton’s UIM coverage. As such, Mr. Rush filed a claim for UIM benefits under his two (2) Erie policies discussed above. Erie ultimately denied coverage based on the “regular use” exclusion contained in each policy.
Mr. Rush filed a declaratory judgment action in the Northampton County Court of Common Pleas on March 7, 2019 seeking a determination by the court as to whether Erie could limit the scope of its UIM coverage through the “regular use” exclusion. Then, on December 9, 2019, the parties filed cross-motions for summary judgment.
Decisions of the Lower Courts
On June 26, 2020, the trial court entered partial summary judgment in favor of Mr. Rush. The court held that the “regular use” exclusion contained in the Erie policies violated the Pennsylvania MVFRL because it modified the clear and unambiguous requirements of the MVFRL and functions to preclude Mr. Rush from accessing UIM benefits to which he would otherwise be entitled.
Erie appealed the trial court’s ruling to the Superior Court, and the Superior Court unanimously affirmed the trial court’s order. In so doing, the Superior Court relied heavily on the language of Section 1731 of the Pennsylvania MVFRL, as it governs the scope of UIM coverage in Pennsylvania. Specifically, the Court highlighted the following portions of Section 1731:
[A]bsent a rejection of coverage, insurers shall provide UIM coverage that ‘protect[s] persons who suffer injury arising out of the maintenance or use of a motor vehicle and are legally entitled to recover damages therefor from owners or operators of underinsured motor vehicles.
75 Pa.C.S. § 1731(c).
The Superior Court reasoned that based upon the language of Section 1731, the MVRFL “mandates” insurers to provide coverage when the insured: (1) suffers injuries arising out of the maintenance or use of a motor vehicle, (2) is legally entitled to recover damages from the at-fault underinsured driver; and (3) has not rejected UIM benefits by signing a valid rejection form. Rush v. Erie Ins. Exch., 265 A.3d 794, 796-97 (Pa. Super. 2021). The Superior Court also emphasized that the language of Section 1731 is broad and considers neither the owner of the vehicle nor the frequency with which the insured uses it. Based upon this, the Superior Court concluded that the “regular use” exclusion conflicts with the broad language of the MVFRL’s coverage mandate because it limits the scope of UIM coverage required by Section 1731 if an insured is injured while using a motor vehicle they regularly use but do not own.
The Pennsylvania Supreme Court’s Decision
Erie filed a petition for allowance of appeal of the Superior Court’s decision. Erie’s petition was granted to address the issue of “whether the decision of the three-judge panel of the Superior Court is in direct conflict with the Pennsylvania Supreme Court decisions of Burstein v. Prudential Prop. & Cas. Ins. Co., 809 A.2d 204 (Pa. 2022) and Williams v. GEICO Gov’t Emps. Ins. Co., 32 A.3d 1195 (Pa. 2011), 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]?” Rush v. Erie Ins. Exch., 281 A.3d 298 (Pa. 2022) (per curiam).
Mr. Rush argued that UIM coverage must be provided in all circumstances without regard for which vehicle the injured party occupied at the time of the accident. The Supreme Court rejected this argument on the grounds that if they were to accept such an argument, all exclusions contained in auto insurance policies would effectively be invalid. Mr. Rush also relied upon the Supreme Court’s previous decision in Gallagher v. GEICO to support the proposition that the “regular use” exclusion should be eradicated in Pennsylvania just as the “household” exclusion was eradicated by the Gallagher decision. The Supreme Court rejected this argument as well by confirming that that the Court had clarified and narrowly limited its Gallagher decision in its Erie Insurance Exchange v. Mione decision.
The Supreme Court noted in its decision that it previously addressed arguments similar to Mr. Rush that UIM coverage must be provided in all circumstances without regard for which vehicle the injured party occupied at the time of the accident in the Burstein and Williams. In both of those cases, the Supreme Court upheld the “regular use” exclusion as a permissible limitation of UIM coverage. These cases determined that the Plaintiffs’ interpretations of Section 1731 of the MVFRL, which likened UIM coverage to a person and portable first party benefit, were flawed.
Incorporating the reasoning of the Burstein and Williams cases, the Supreme Court reasoned as follows:
Once it is decided that UIM coverage is not universally portable—given the express non-priority of an insured’s UIM policy coverage in Section 1733 and the contrary priority of coverage for first party benefits—any argument that Section 1731 prohibits exclusions from coverage in the insurance contract must fail. If the MVFRL does not require that UIM coverage follow the insured in all circumstances, then the MVFRL cannot be read to prohibit exclusions from UIM coverage. Consequently, the insurance contract controls the scope of UIM coverage and the “regular use” exclusion is enforceable.
Based upon this reasoning, the Supreme Court concluded that they are bound by their prior decisions in Burstein and Williams and upheld the “regular use” exclusion as a permissible limitation of UIM coverage. Accordingly, the Supreme Court found the Superior Court’s conclusion that the “regular use” exclusion violates the MVFRL was erroneous. The Supreme Court reversed the order of the Superior Court and held that the “regular use” exclusion in Mr. Rush’s policies was valid and enforceable.
Implications and Analysis
This decision by the Pennsylvania Supreme Court is a meaningful one. This decision allows insurers to continue to reasonably limit UIM coverage for its insurers. The reasonable use exclusion will continue to be valid in Pennsylvania for the foreseeable future. This observation is based specifically on language used in the Majority’s Opinion.
The Court stated: the Regular Use Exclusion remained a permissible limitation of UIM coverage within the language of the MVFRL and that, “[w]ith decades of reliance by insureds and insurers, and no justification to allow this Court to depart from decades of established law,” the Court would maintain its continued course on this issue “unless and until the General Assembly or the Insurance Department acts in a way that would suggest we do otherwise.”
Based on this above statement by the Court, it would seem that any additional challenges to the “regular use” exclusion will go the way of Williams, Burstein and Rush and be rejected by the Court. This does not seem likely to change until the General Assembly substantively changes the language of the MVFRL.
Conclusion
To recap, one, the Pennsylvania Supreme Court upheld the “regular use” exclusion contained in motor vehicle insurance policies because it does not violate the express language of Pennsylvania’s Motor Vehicle Financial Responsibility Law. Two, the Supreme Court so ruled with reliance on its prior decisions of Burnstein and Williams. Finally, any similar challenges to the “regular use” exclusion are likely futile until the General Assembly makes changes to the statutory language of the MVFRL.
We here at Hardin Thompson would like to encourage anyone reading this article to stay informed about continuing developments in insurance law, as it is a very technical field of the law. Hardin Thompson prides themselves on their attorneys’ knowledge and understanding of this niche field, and we encourage you to reach out to us with any insurance coverage issues that may arise for you.