The Pennsylvania Supreme Court's Rush Decision Upholds the Regular Use Exclusion
On January 29, 2024, the Pennsylvania Supreme issued a decision in Rush v. Erie Insurance Exchange finding that "regular use" exclusions in Pennsylvania auto insurance policies do not violate the express language of the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL"). The Court reversed a unanimous decision from a three-judge panel of the Superior Court holding that a regular use exclusion was unenforceable because it limited the scope of underinsured motorist ("UIM") coverage required by the MVFRL.
Regular use exclusions preclude coverage for injuries sustained by an insured while operating a vehicle they do not own but regularly use. The purpose of regular use exclusions, like most exclusions, is to protect insurers from forced underwriting of unknown risks.
The case arises from a 2015 motor vehicle accident in which Matthew Rush, a police detective for the City of Easton ("City"), sustained serious injuries when two other drivers crashed into his unmarked police car. At the time of the accident, Rush had two personal auto policies through Erie Insurance Exchange ("Erie"), both of which provided stacked UIM coverage and contained identical regular use exclusions. Rush submitted a claim for UIM benefits under the Erie policies asserting that his injuries and damages exceeded the liability limits of the tortfeasors' policies and the UIM coverage limits of the City's policy. Erie denied coverage citing the regular use exclusion, as it was undisputed that Rush did not own but regularly used the police car.
On appeal, Erie argued that the Superior Court, by finding that a regular use exclusion violates the MVFRL, disregarded decades of precedent. Specifically, Erie relied on the Court's prior decisions in Burstein v. Prudential Property and Casualty Insurance Co., 809 A.2d 204 (Pa. 2002) (holding that a regular use exclusion and its contractual restraint on UIM portability comport with the underlying policies of the MVFRL) and Williams v. GEICO Government Employees Insurance Co., 32 A.3d 1195 (Pa. 2011) (holding that a regular use exclusion, as applied to a state trooper, did not violate a public policy favoring protection of first responders). Rush argued that the Superior Court correctly concluded that neither Burstein nor Williams was controlling because they only addressed general public policy questions with respect to regular use exclusions and not whether such exclusions violate the MVFRL's express terms.
The Court upheld Erie's denial of UIM coverage. It stated, "There is no doubt that this Court held in both Burstein and Williams that the 'regular use' exclusion is permissible under the MVFRL." Citing Burstein, the Court noted that UIM coverage, unlike first party benefits, is not universally portable. It then reasoned that if the MVFRL does not require that UIM coverage follow the insured in all circumstances, then it cannot prohibit exclusions from UIM coverage. Finally, the Court concluded that the insurance contract controls the scope of UIM coverage and that the regular use exclusion is enforceable.
The Rush decision is a much-needed win for the Pennsylvania insurance industry and a course correction from the Court's 2019 decision in Gallagher v. GEICO, which invalidated the "household vehicle" exclusion.