The Supreme Court of Pennsylvania recently affirmed the Superior Court’s order holding that the unlisted resident driver exclusion (“URDE”) in an automobile insurance policy is valid and enforceable. See Safe Auto Ins. Co. v. Oriental-Guillermo, et al, 2019 WL 3933568 (Pa. 2019).
In Oriental-Guillermo, the insured’s girlfriend was involved in a motor vehicle accident while driving a vehicle owned by the insured. The insured’s girlfriend lived with the insured, but she was not a listed driver on his policy. The policy included an URDE, which excluded coverage for any individuals who lived with, but were not related to, the policyholder, and whom the policyholder did not specifically list as additional drivers on the insurance policy.
After a personal injury lawsuit was filed against the insured and his girlfriend, the insurer sought declaratory judgment regarding the enforceability of the URDE. The trial court granted summary judgment in favor of the insurer, and concluded that the insurer had no duty under the policy to defend or indemnify the insured’s girlfriend in the underlying personal injury lawsuit. The Superior Court affirmed.
In affirming the Superior Court’s order, the Supreme Court rejected the argument that the policy exclusion was violative of the terms of the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”). The Court found that while Section 1786 of the MVFRL requires vehicle owners to ensure that operators of their vehicle are covered by insurance, Section 1786 does not impose any obligations on insurers. The Court stated that
requiring an insurer to provide coverage for an unlimited number of permissive users, including those who may be operating the vehicle on a regular basis, but whom the insured has neither disclosed nor paid to insure, contravenes the accepted principle that insureds are not entitled to receive gratis coverage. Further, such an interpretation would almost certainly result in an increase in the cost of insurance, as insurers would be forced to insure unknown risks….Under its plain language, Section 1786 [of the MVFRL] speaks to the obligations of the vehicle owner, not the insurer.
The Court also rejected Appellants’ argument that the policy exclusion is contrary to the underlying public policy of the MVFRL, in that it “undermines the Commonwealth’s ‘objective of limiting the number of uninsured motorists on Pennsylvania roadways, a principle intended to protect the safety and security of all individuals traveling on Commonwealth highways.’” In so doing, the Court noted that “a party seeking to void an unambiguous provision in an insurance contract on public policy grounds bears a heavy burden, and that a determination of public policy must be based on the law, not simply on general considerations of supposed public interest.”