Insurance Services – Coverage & Bad Faith Litigation

Following the Pennsylvania Superior Court determination that “regular use exclusions” in UM/UIM policies violated the Motor Vehicle Financial Responsibility Law (MVFRL) in 2021, and in light of the post-Gallagher decisions, most were expecting the “regular use exclusion” to suffer the same fate as other policy exclusions. Now, however, in Rush v. Erie Ins. Exch., --- A.3d ---, 2024 WL 316407 (Pa. Jan. 29, 2024), the Pennsylvania Supreme Court, in a lengthy majority opinion, has proven that the regular use exclusion remains very much alive.

The Supreme Court first considered whether its prior decisions in Burstein and Williams—two cases which found “regular use exclusions” valid—were controlling precedent. The court recognized that, if it were to hold for the Rushes and find “regular use exclusions” invalid, it would necessarily have to overrule those prior decisions. 

The court noted that, in Burstein, it had determined that voiding “regular use exclusions” would frustrate the public policy considerations that led to the enactment of the MVFRL, specifically cost containment. Further, in Burstein, the court rejected the insureds’ argument that UM/UIM coverage was “universally portable” and found, after a textual analysis of the MVFRL, that coverage does not “follow the person” as first party benefits do.

The court was again presented with the validity of “regular use exclusions” in the Williams case, nine years after the Burstein decision. In Williams, the insured’s argument was two-fold: first, the insured argued that the Pennsylvania legislature had evidenced a public policy that placed first responders in a more favored class that demanded higher protections and, thus, the “regular use exclusion” violated that public policy. Second, the insured argued that “regular use exclusions” violated Section 1731 of the MVFRL, since Williams had not expressly rejected UIM coverage, yet the exclusion acted as an implicit waiver of that coverage.  The Supreme Court rejected both arguments, finding that first responders are not more favored than other insureds under the MVFRL and that “regular use exclusions” did not violate Section 1731 of the MVFRL but, instead, furthered the cost containment policy considerations behind the statute. 

Turning to the case before it, the Supreme Court noted that the Superior Court’s decision implicitly holds that UIM coverage is mandatory in “virtually” all instances, absent a voluntary waiver and, thus, the Superior Court had revived the “universal portability” argument that the Supreme Court had previously rejected in Burstein. The court also rejected the Superior Court’s assertion that the holding in Williams, that “regular use exclusions” do not violate the express terms of MVFRL, was mere dicta. Instead, the court recognized that the question before it was identical to the question that had been decided in Williams.

The court also rejected the argument that Gallagher—where the court determined that “household vehicle exclusions” were invalid when they operated as de facto waivers of stacked coverage—was analogous and applicable to “regular use exclusions.” Rather, the court emphasized that Gallagher was a limited holding and pointed to its subsequent decision in Mione, which upheld a “household vehicle exclusion” where the insured had rejected UM/UIM coverage on the vehicle they were operating at the time of the accident. 

Ultimately, the Supreme Court determined that Burstein and Williams remained valid and were controlling precedent by which it was bound. As such, the “regular use exclusion” was upheld and the Superior Court was reversed. As the Supreme Court stated: “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.”

Justice Wecht filed a concurring opinion agreeing with the majority’s opinion as to whether “regular use exclusions” violate Section 1731 of the MVFRL. He would, however, have remanded the case back to the Superior Court to consider whether such exclusions violate Section 1738 of the MVFRL, as the trial court had held.

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^{Legal Update for Insurance Services, January 30, 2024, has been prepared for our readers by Marshall Dennehey. It is solely intended to provide information on recent legal developments and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note to tamontemuro@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved.}