Pennsylvania auto insurance’s “regular use” exclusion faces state Supreme Court review

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The Pennsylvania Supreme Court has agreed to hear a case that could limit the application of the “regular use exclusion” in auto insurance policies.

The state Supreme Court has agreed to review a Supreme Court ruling that the regular use exemption violates the state’s motor vehicle financial responsibility law. A regular use exclusion excludes coverage for injuries to insureds when they use vehicles they do not own but use regularly.

Last October, a three-judge Supreme Court panel ruled that a regular use exception is unenforceable because it limits the scope of uninsured motorist (UIM) coverage that the Motor Vehicle Financial Responsibility Law (MVFRL) requires insurers offer. The Supreme Court found that an insurer has a duty to offer UIM coverage unless the insured has signed a valid opt-out form. This ruling upheld a 2020 ruling by a trial court.

Erie Insurance Exchange is challenging the Supreme Court’s position. It argues that the regular use exclusion is a legitimate and enforceable limitation on the scope of UIM coverage it is required to provide to Insureds.

The state Supreme Court will now decide whether the lower court erred in striking down the regular use exception.

The case involves Matthew Rush, a police detective in the city of Easton, who suffered serious injuries when two other drivers crashed into his police car on November 28, 2015. The city of Easton owned the police car and secured it through a police insurance that provided for UIM coverage.

Erie Insurance Exchange denied Rushes’ UIM claim because he did not own but regularly used the police car.

The Rushes insured three personal automobiles on two insurance policies through Erie Insurance. They paid for the accumulated UIM coverage on both policies. Both Erie policies include identical “regular use” exclusion clauses that exclude Erie Insurance from providing UIM coverage when an insured sustains injuries resulting from the use of a vehicle that the insured regularly uses, does not own, and does not insure in Erie policies. UIM coverage is triggered when the at-fault party’s liability coverage is not sufficient to cover the damages caused in an accident.

According to the Supreme Court, it must decide whether the Supreme Court’s decision is in direct conflict with previous Pennsylvania Supreme Court decisions and whether the Supreme Court erred as a matter of law in finding that the regular use exception violates the financial responsibility.

The Supreme Court said insurers are released from the obligation to provide uninsured or underinsured coverage, or both, only when an insured waives such coverage by signing a “statutory opt-out form.”

The court said the financial responsibility act mandates that insurers provide coverage to insureds when the insured meets three requirements. The insured must have suffered damages caused by the maintenance or use of a motor vehicle; have a legal right to recover damages from the at-fault underinsured motorist; and have not declined UIM coverage by signing a valid opt-out form.

“[T]The provisions of the MVFRL relating to the required scope of coverage and content of automobile insurance policies, and the benefits payable thereunder, impose mandatory obligations applicable to all automobile insurance providers in this Commonwealth. Importantly, where a provision of an insurance contract conflicts with the MVFRL, we will find that provision unenforceable,” the Supreme Court concluded.

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