The Court of Common Pleas of Northampton County recently granted an insured’s motion for partial summary judgment after holding that the regular use exclusions contained in the insurer’s automobile policies were “repugnant to and violate” Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL). The Court found that the regular use exclusion went against the Supreme Court’s rationale in Gallagher, which restricted insurance companies from using the household exclusion to decline stacking coverage. See Rush v. Erie Insurance Exchange, No. C-48-CV-2019-01979 (C.P. Northampt. Co. Jun. 29, 2020 Baratta, J.).
In Rush, the insured was employed as a police officer by the City of Easton and was operating a police car when he was involved in a three vehicle accident, allegedly caused by the negligence of the drivers of the other two vehicles. The insured settled his tort claims against both tortfeasors and recovered the limits of the city’s underinsured motorist (UIM) benefits. The insured subsequently sought UIM coverage provided by his own insurance policies with the insurer. The insured and his wife had a personal auto policy with the insurer, which provided UIM coverage of $250,000 for one vehicle. The insured also had a commercial non-fleet auto policy, which provided $250,000 per person stacked UIM coverage for two vehicles. Neither the insured nor his wife signed any waivers of UIM coverage under the policies. The insurer denied UIM coverage to the insured under the “regular use exclusion” set forth in both policies, which barred coverage for injuries that occurred in vehicles the insured regularly used but did not own. The insured sought a declaration that the regular use exclusion violates the MVFRL and is therefore void and unenforceable. The insurer sought a declaration that the regular use exclusion is consistent with the MVFRL and therefore the insured’s claims for UIM coverage under his policies were barred as a matter of law.
Citing the “sweeping and expansive” language adopted by the Gallagher court in finding that the household vehicle exclusion was invalid because it acted as a disguised waiver of UIM coverage in violation of the MVFRL, the Court held that the regular use exclusion was inconsistent with the MVFRL and therefore invalid. The Court was not persuaded by the fact that Gallagher involved “factual distinctions,” namely that it involved a motorcycle, two policies issued by the same insurer, and the insured selected and paid for stacking on both policies. Rather, the Court focused on the “[stunning] similarity” between the cases: in both, the insured was injured operating a vehicle not covered under the policy that the insured sought to access for UIM coverage they had paid for, and the insurer used an exclusion to deny coverage. The insureds in both cases also did not execute a waiver of UM/UIM coverage as required by Section 1738 of the MVFRL. Given these broad similarities, the Court concluded that “logic dictates” that if the household exclusion violates the language of the MVFRL, then so does the regular use exclusion. The Court further stated that “[i]f the exclusion, as written, is unenforceable as a matter of law, then it does not matter how one tries to distinguish or explain away the facts.”
In support of its conclusion, the Court referenced post-Gallagher Third Circuit and Pennsylvania Supreme Court opinions (Slupski and Sayles, respectively) in which the courts held that insurance policy language could not sidestep certain requirements of the MVFRL. The Court observed that “the landscape is now shifting with regard to strictly enforcing the plain language of the MVFRL.”