Motor Vehicle Financial Responsibility Law; Regular Use Exclusion
Rush v. Erie Ins. Exchange, 265 A.3d 794 (Pa. Super. 2021), allocatur granted June 27, 2022, appeal docket 77 MAP 2022
Erie Insurance Exchange (Erie) appeals from an order of the Northampton County Court of Common Pleas (trial court) granting summary judgment in favor of Matthew Rush and Kathleen McGrogan-Rush (Insureds) and holding that the “regular use” exclusion clause in Insured’s policy with Erie as it relates to uninsured and underinsured motorist (UIM) coverage is unenforceable because it violates the Motor Vehicle Financial Responsibility Law (MCFRL).
The relevant factual background is as follows:
Matthew Rush, a City of Easton police detective, suffered serious injuries when two other drivers crashed into his police car on November 28, 2015. The parties agreed that Insureds did not own or insure he police car on their Erie Policies and that Mr. Rush regularly used the car for work.
The City of Easton insured the police car through a policy of insurance (“The Easton Policy”) that provided for, inter alia, $35,000 in underinsured motorist (“UIM”) coverage.
Additionally, Insureds insured three personal automobiles on two insurance policies through Erie Insurance. Insureds paid for stacked UIM coverage on both policies (“Erie Policies”). The first policy provided for $250,00 of UIM coverage on one vehicle and the second provided for $250,000 of UIM coverage stacked on two vehicles.
Both Erie Policies include identical “regular use” exclusion clauses, limiting the scope of UIM coverage under the policies. In particular, the “regular use” exclusion precludes Erie Insurance from providing UIM coverage when an insured suffers injuries arising from the use of a motor vehicle that he (1) regularly uses, (2) does not own, and (3) does not insure on the Erie Policies. The relevant provision of the Erie Policies provides:
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 or underinsured motorist coverage under this policy.
The insurance companies for the other drivers and the City of Easton provided Insureds with their policy limits. Insureds then filed a claim for UIM benefits under the Erie Policies. Erie Insurance denied coverage based on the “regular use” exclusion.
On March 7, 2019, Insureds filed the underlying declaratory judgment action seeking judicial determination of whether the MVFRL allows Erie Insurance to limit the scope of its UIM policies through the “regular use” exclusion. On December 9, 2019, the parties filed cross Motions for Summary Judgment.
By Order dated June 26, 2020, the trial court granted summary judgment in favor of Insureds, holding that the “regular use” exclusion in the Erie Policies violates the requirements of the MVFRL.
Slip op. at 1-3 (emphasis in original) (internal citations and footnotes omitted).
Erie filed a timely notice of appeal raising the following issues:
(1) Whether the trial court erred in invalidating the “regular use” exclusion?
(2) Whether the trial court erred in granting Appellees’ [M]otion for [P]atrial [S]ummary [J]udgment, and declaring that the “regular use” exclusion in an auto insurance policy issued to Appellees by Appellant is repugnant to and violates various provisions of the [MVFRL]?
Slip op. at 3. Erie challenges the trial court’s holding that the “regular use” exclusion violates the MVFRL arguing that the “regular use” exclusion is an enforceable limitation on the scope of UIM coverage that it must provide to insureds.
To begin its analysis, Superior Court provided an overview of the MVFRL. The MVFRL is legislation that governs the rights and obligations of insurance companies and insureds under liability insurance policies covering motor vehicles.The “provisions of the MVFRL pertaining to the required scope of coverage and content of automobile insurance policies, and benefits payable thereunder, impose mandatory obligations applicable to all automobile insurance providers in this Commonwealth[.]” Slip op. at 4 (internal quotations omitted). Where an insurance contract contravenes a provision of the MVFRL, the provision in the insurance contract will be unenforceable, because “[i]nsurers do not have a license to rewrite statutes.” Slip op. at 5 (internal quotations omitted).
Section 1731, which governs the scope of UIM coverage, provides that “absent a rejection of coverage, insurers shall provide UIM coverage that protects ‘persons who suffer injury arising out of the maintenance or use of a motor vehicle and are legally entitled to recover damages therefor from the owners or operators of underinsured motor vehicles.’” Slip op. at 5 (quoting 75 Pa.C.S. § 1731(c)). Only when an insured executes a statutorily prescribed rejection form are insurers relieved of their obligation to provide UIM coverage. “In the absence of a signed and valid rejection form, ‘uninsured or underinsured coverage, or both, as the case may be, under that policy shall be equal to the bodily injury liability limits.’” Slip op. at 5 (quoting 75 Pa.C.S. § 1731(c.1). Thus, Superior Court concluded that Section 1731 mandates insurers provide insureds coverage when the following are satisfied by an insured: “the insured must (1) have suffered injuries arising out of the maintenance or use of a motor vehicle; (2) be legally entitled to recover damages from the at-fault underinsured driver; and (3) have not rejected UIM coverage by signing a valid rejection form.” Slip op. at 5. Superior Court further noted that the scope of UIM coverage under Section 1731 is broad and does not consider who owns the vehicle.
Superior Court next addressed the enforceability of the “regular use” exclusion to UIM coverage. In support of its argument that the “regular use” exclusion is permissible, Erie relied on the Pennsylvania Supreme Court’s decision in Williams v. GEICO Gov’t. Emp. Ins. Co., 32 A.3d 1195 (Pa. 2011). There, the Supreme Court addressed “whether the regular-use exclusion, as applied to a state trooper, is void as against public policy that favors protecting first responders.” Slip op. at 7 (internal quotations omitted). Upon conducting a public policy analysis, the Supreme Court concluded that “the insured failed to meet the high burden of establishing that the regular use exclusion violated the public policy supporting the MVFRL.” Superior Court noted that the Supreme Court, in dicta, stated that a “regular use” exclusion “did not violate the express terms of the MVFRL.” Slip op. at 7. Accordingly, because this issue was not before the Supreme Court, Superior Court concluded it was dicta and was, therefore, not bound by it.
Having dispensed with Erie’s argument, Superior Court concluded that Mr. Rush satisfied all the requirements under Section 1731. In so concluding, the court explained that Mr. Rush “suffered injuries arising out of use of a motor vehicle, was legally entitled to recover damages from the at-fault underinsured drivers, and never signed a rejection form waiving his right to UIM coverage,” Slip op. at 6 (footnote omitted).
The Supreme Court granted allocatur to consider the following issue:
Whether the decision of the three-judge panel of the Superior Court is in direct conflict with the Pennsylvania Supreme Court decisions in Burstein v. Prudential Prop. & Cas. Ins. Co., 809 A.2d 204 (Pa. 2002) 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 Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa.C.S.[ ] [§] 1701, et. seq.