Western District Declines to Extend Gallagher Analysis to Regular Use Exclusion

The United States District Court for the Western District of Pennsylvania recently held that the Pennsylvania Supreme Court’s decision in Gallagher v. GEICO does not invalidate the “regular use exclusion” in insurance policies.  See Barnhart v. The Travelers Home & Marine Ins. Co., 2019 WL 5557374 (W.D. Pa. Oct. 28, 2019).

In Barnhart, the insured was injured while a passenger on her husband’s motorcycle.  The insured sought underinsured motorist benefits under her automobile policy, which was purchased from a different insurer than the motorcycle policy.  The automobile insurer denied the UIM claim based upon the regular use exclusion in its insurance policy.  The insured filed suit, alleging that the regular use exclusion was unenforceable in reliance on the recent Gallagher decision.

In granting the insurer’s motion to dismiss, the Western District held that Williams v. GEICO, rather than Gallagher, controlled.  In Williams, decided in 2011, the Pennsylvania Supreme Court upheld the enforceability of the regular use exclusion, finding that it functions as a reasonable preclusion of coverage of the unknown risks associated from operating a regularly used, non-owned vehicle.  In finding that Williams remains good law, the court in Barnhart focused its analysis on two distinctions between Gallagher and Williams.  First, these cases were decided, in part, on the level of awareness of the insurance carriers on the risks that they insure. Whereas the insurer was aware of the risks in Gallagher because the motorcycle and automobile were insured by the same carrier, in Williams, the insurer did not know or have reason to know of any other vehicles the insured would drive or use.  Second, the cases address two different sections of the statute within Pennsylvania’s Motor Vehicle Financial Responsibility Law, as Gallagher addressed stacking coverage under 75 Pa. C.S. § 1738, and Williams addressed UM/UIM coverage under 75 Pa. C.S. § 1731.

The Barnhart court also noted that the Gallagher court made clear that its holding was narrow in scope as to the household vehicle exclusion and that “we offer no opinion or comment on the enforceability of any other exclusion to UM or UIM coverage.”  Accordingly, the Barnhart court found Williams controlling and held that valid “regular use exclusions” are enforceable to defeat an insured’s claim for underinsured benefits.