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Eberly v. LM General Insurance Company, 5:20-cv-06308 (E.D. Pa. September 21, 2021)

Insureds have set their sights on the regular use exclusion in the wake of the monumental Pennsylvania Supreme Court decision in Gallagher v. GEICO, 201 A.3d 131 (Pa. 2019). The Court in Gallagher determined that the household vehicle exclusion contained in most, if not all, underinsured motorist (UIM) benefits policies, acted as a de facto waiver of stacking, in certain factual situations, and therefore violated Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL). While courts have struggled to make sense of Gallagher and apply it to various permutations of facts (including the Supreme Court itself), courts have consistently upheld the regular use exclusion.

The United States District Court for the Eastern District of Pennsylvania is the most recent court to have determined that the regular use exclusion remains valid and enforceable in Pennsylvania. The insured, Eberly, was tragically killed in a car accident while operating a vehicle in the course and scope of his employment. The vehicle he was operating was owned and provided for his regular use by his employer. LM General Insurance Company (LM General) insured Eberly and his wife which provided stacked UIM coverage. The couple's son also resided in their home and he was a named insured under a separate policy also issued by LM General which provided non-stacked UIM coverage. Neither LM General Policy insured the vehicle which Eberly was operating on the date of the accident. After Eberly’s spouse submitted claims for UIM benefits under both policies, LM General denied both claims based upon the regular use exclusion in both policies. Eberly’s spouse then commenced suit.

The Eastern District was faced with cross-motions for summary judgment. The Eberlys relied upon Gallagher and argued that the regular use exclusion violated the MVFRL in that it was a de facto waiving of stacking of UIM benefits; that regular use exclusions violated Section 1731 of the MVFRL requiring insurers to offer UM/UIM coverage for auto policies; and that regular use exclusions violated public policy. LM General argued that Gallagher has no bearing on regular use exclusions and that such exclusion has been routinely upheld. 

The court noted that the Supreme Court itself described Gallagher as a “narrow” decision, limited to the facts of the case. As a result, the Eastern District followed other courts in Pennsylvania that have determined that the Supreme Court case of Williams v. GEICO, 32 A.3d 1195 (Pa. 2011)—which upheld regular use exclusions and specifically held that such exclusions did not violate the MVFRL and public policy did not command the abrogation of those exclusions—remains controlling law with regard to regular use exclusions.

Further, the court pointed to other courts in the Third Circuit that have upheld the regular use exclusion even after the issuance of Gallagher. In addition to the federal courts, the Eastern District discussed the Commonwealth trial court case of Nationwide Prop. And Cas. Ins. Co. v. Stuber, C-48-CV-2019-4957 (Northampton Cnty. Ct. Com. Pl. May 21, 2020) which also upheld the regular use exclusion in the face of arguments by the insureds in that case regarding Gallagher’s expansive effect.

The court determined that regular use exclusions did not violate Section 1731 as it only mandates that UM/UIM coverage only be offered to insureds; such coverage may be waived. Here, the court determined that LM General had properly offered UM/UIM coverage, satisfying Section 1731.

Finally, the court determined that, indeed, regular use exclusions further the public policy of the MVFRL in addressing the increasing costs of automobile insurance by precluding UIM coverage for unknown risks such as, in this case, a vehicle provided for the regular use of an insured by their employer.

Despite the long line of cases, both pre- and post-Gallagher, upholding the regular use exclusion—absent an opinion from the Pennsylvania Supreme Court reifying its previous opinion in Williams—insureds will likely continue their barrage of attacks on the exclusion. Insurers, however, have a lot of ammunition with which to fight back.
 

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