Insurance Services – Coverage & Bad Faith Litigation

While in the course and scope of his employment and while operating a vehicle owned by his employer, Russo was injured in a motor vehicle accident. He submitted a claim for and obtained underinsured motorist (UIM) benefits from the insurer of his employer’s vehicle.

Russo next submitted a claim for UIM benefits under his personal auto insurance policy, issued by Erie. Erie denied the claim based upon the regular use exclusion.

Litigation ensued, with the trial court ultimately finding in Erie’s favor as a result of the Pennsylvania Supreme Court’s decision in Rush v. Erie Ins. Exch., where the court found that the regular use exclusion remained valid and enforceable.

Russo appealed to the Superior Court, which upheld the trial court’s ultimate conclusion that Russo was owed no UIM coverage under his personal auto policy issued by Erie, albeit on different grounds.

The court first reiterated that Section 1738 of Pennsylvania’s Motor Vehicle Financial Responsibility Law (regarding the stacking of uninsured and UIM benefits) states: “[w]hen more than one vehicle is insured under one or more policies providing uninsured or underinsured motorist coverage, the stated limit for uninsured or underinsured coverage shall apply separately to each vehicle so insured. The limits of coverages available under this subchapter for an insured shall be the sum of the limits for each motor vehicle as to which the injured person is an insured.

Russo argued that he was an “insured” of the auto policy issued to his employer, which provided coverage for the vehicle he was operating at the time of the accident. Erie argued that “insured” is a term of art and is limited to only “class one insureds,” who are the named insureds, resident relatives of the named insured and, if the named insured is a corporation, officers of the corporation.

The court reiterated that a claimant must be an insured under both policies implicated in a stacking situation in order to effectuate inter-policy stacking of UM/UIM insurance.

The Superior Court ultimately held that Russo was not an insured under the policy issued to his employer and, therefore, was unable to stack his personal auto policy and no benefits were owed by Erie. In its conclusion, the court stated: “[s]imply receiving UIM coverage for injuries sustained as an occupant in a first priority vehicle does not make one an ‘insured’ under the vehicle’s policy who is then entitled to stack one’s personal auto policy UIM coverage.”

UIM stacking cases often involve claimants operating or occupying their employers’ vehicles. This case is a reminder to confirm that the claimant qualifies as an insured under the employer’s policy and as statutory defined by Section 1738 before stacking of their personal policies can apply. This reminder should also extend to claimants operating or occupying any non-owned motor vehicle.