ARTICLE: Can The Regular-Use Exclusion Withstand an Attack from the Plaintiffs Bar?

This article of mine was published in the Pennsylvania Law Weekly  on September 10, 2020 and is republished here with permission.

Can the Regular-Use Exclusion Withstand an Attack From the Plaintiffs Bar?

By Daniel E. Cummins | Pennsylvania Law Weekly, September 10, 2020

Daniel E. Cummins of Cummins Law.



Until recently the regular use exclusion, typically found in most automobile insurance policies, had been routinely upheld, for decades, in every state and federal court decision as a valid exclusion under Pennsylvania’s Motor Vehicle Financial Responsibility Law [MVFRL].

But the plaintiffs bar has been relentless in its pursuit to have automobile insurance policy exclusions overturned as invalid under an argument that the exclusions act as de facto waivers of coverage when the MVFRL requires carriers to obtain express, written waivers of coverage from its insureds. After supporting several candidates in their quests to secure seats on the Pennsylvania Supreme Court, the plaintiffs bar was finally successful with this argument in securing the supposed eradication of the household exclusion by that new court in the case of Gallagher v. Geico, 201 A.3d 131 (Pa. 2019) after decades of previous decisions upholding that exclusion as valid. Once they secured that stunning success, the plaintiffs bar quickly set their sights on attempting to invalidate the regular use exclusion under essentially the same analysis.

As noted below, following a series of recent Pennsylvania federal court decisions rejecting the plaintiffs’ efforts to overturn the regular use exclusion under an application of the Gallagher v. Geico decision, the plaintiffs bar found a state trial court judge willing to rule in their favor. 

 
The Regular Use Exclusion

Under the regular use exclusion, a carrier need not provide coverage to its insured where the insured was involved in an accident while using a vehicle that was regularly available for his or her use but not insured under that carrier’s policy. The common sense and cost containment rationale behind the exclusion is that the carrier did not know of that risk when it assessed its premium to its insured on the policy sold to the insured and, therefore, should not have to provide coverage.

Stated otherwise, an insured cannot secure coverage for his or her use of a vehicle regularly available to be driven by that insured if the insured never told the carrier about his or her use of that vehicle and never paid a premium for such coverage. Simply put, the regular use exclusion upholds the all-American adage that you can’t get something (coverage) for nothing (not paying a premium).

The Exclusion Has Been Regularly Upheld

The regular use exclusion has been upheld time and time again for decades dating back to at least the 1990s in both the state and federal courts of Pennsylvania. See State Farm Mutual Automobile Insurance v. Brnardic, 657 A.2d 1311 (Pa. Super. 1995); see Nationwide Mutual Insurance v. Shoemaker, 965 F. Supp. 700 (E.D. Pa. 1997), aff’d sub nom. Nationwide Insurance v. Shoemaker, 149 F.3d 1165 (3d Cir. 1998).

The courts continued to find the exclusion to be clear and unambiguous in repeated decisions handed down in the 2000s and the 2010s.

One lone decision in which a court was hesitant as to the validity of the exclusion was issued by Judge Carmen D. Minora of the Lackawanna County Common Pleas Court in 2007 in the case of Decker v. Nationwide Mutual Insurance, No. 05 CV 1863 (C.P. Lacka. Co. 2007). Minora questioned whether a regular use exclusion should be allowed to prevent a first responder or police officer from securing UIM coverage under his own personal automobile policy when that person was involved in an accident while driving a regularly used work vehicle such as a police car or an ambulance, particularly where that insured had not executed any written waiver of that coverage. Yet, Minora’s solo was drowned out by the choir of other state and federal trial and appellate court decisions repeatedly upholding the validity of the regular use exclusion as a valid part of the insurance contract entered into by the carriers and their insureds.

Recent Federal Court Decisions Uphold Exclusion

As noted above, the plaintiffs bar has recently become energized by the new Pennsylvania Supreme Court, particularly in light of that court’s agenda decision in the case of Gallagher v. Geico. With Gallagher v. Geico, the Pennsylvania Supreme Court accepted the plaintiff’s argument that the household exclusion improperly acted as a de facto waiver of coverage when the MVFRL required carriers to purposefully secure waivers of UM/UIM coverage from its insureds. With that success, the plaintiffs bar turned its focus upon the regular use exclusion with a goal of striking that exclusion down under a similar analysis.

One such recent effort by the plaintiffs to rely upon the Gallagher v. Geico rationale to defeat a regular use exclusion was rebuffed by the U.S. District Court for the Western District of Pennsylvania in the case of Barnhart v. Travelers, 417 F. Supp. 3d 653 (W.D. Pa. Oct. 28, 2019 Horan, J.), appeal dismissed sub nom. Barnhart v. Travelers Home & Marine Insurance, No. 19-3646 (3d Cir. Mar. 30, 2020).

In that case, the plaintiff was injured as a result of an accident that occurred while she was a passenger on a motorcycle that was insured by Progressive Insurance. After the plaintiff recovered from the tortfeasor, she pursued a UIM claim under a Travelers policy that covered two cars the Plaintiff and her husband owned.

Travelers relied upon the regular use exclusion given that the motorcycle on which the plaintiff was involved in the accident was regularly available for the plaintiff’s use and was not covered under the Traveler’s policy. The plaintiff argued that the regular use eExclusion was unenforceable under the Gallagher v. Geico analysis.

The court in Barnhart specifically held that the Pennsylvania Supreme Court’s holding in Gallagher “does not extend to invalidate the ‘regular use exclusion’” or to overturn the long line of cases that supported the continued validity of the regular use exclusion."

As such, the defendant carrier’s motion to dismiss the plaintiff’s complaint was granted in Barnhart because the regular use exclusion was found to defeat the plaintiff’s claims.

In the case of Nationwide Affinity Insurance Company of America v. Fong, No. 2:19-cv-02119-CFK (E.D. Pa. April 28, 2020 Kenney, J.), the court granted a carrier’s motion for summary judgment and denied the insured’s motion for summary judgment in a declaratory judgment action seeking a determination of rights and obligations under an automobile insurance policy in part based upon the upholding and application of a regular use exclusion.

According to the opinion, the Nationwide Insurance policy was issued to the injured party’s parents. At the time of the accident, the injured party resided with the named insureds with her husband and was included under the Nationwide policy as a “listed driver.” The policy also contained a regular use exclusion and a household exclusion.

At the time of the accident, the injured daughter was operating a vehicle that she owned and that she and her husband had separately insured through an Allstate insurance company policy. It was undisputed that the injured daughter owned the vehicle she was operating at the time of the accident and that that vehicle was available for her regular use.

Allstate denied the injured daughter’s claim for UIM benefits because the daughter and her husband had rejected UIM coverage under the Allstate policy. The injured daughter then turned to her parent’s Nationwide Insurance policy for UIM coverage. Nationwide filed this declaratory judgment complaint seeking a determination of its rights and obligations under the policy.

In his opinion in Nationwide v. Fong, Judge Chad F. Kenney of the U.S. District Court for the Eastern District of Pennsylvania upheld Nationwide’s reliance upon the regular use exclusion.

The court noted that the record before it confirmed that the injured daughter’s claim under the Nationwide policy was for injuries that she suffered while occupying a motor vehicle that she owned and which was available for her regular use, and which was not insured under the Nationwide policy.

The court noted that the clear language of the regular use exclusion was not ambiguous and that the plain language of that exclusion clearly applied to bar coverage under the Nationwide policy for any UIM coverage to the injured daughter.

The court in Nationwide v. Fong also noted that the claimants did not present any argument that the regular use exclusion was unenforceable on policy grounds. Regardless, the court noted that the regular use exclusion had been previously upheld by the Pennsylvania Supreme Court’s holding in the case of Williams v. Geico, 32 A.3d 1195, 1209 (Pa. 2011), in which it was held by the then Pennsylvania Supreme Court nine years ago that the regular use exclusion was not void as against public policy.

Notably, the court in this case also made a point to emphasize that the current Pennsylvania Supreme Court’s separate decision with respect to the household exclusion in the case of Gallagher v. Geico “does not affect Williams’s precedent, as the facts of Gallagher are wholly distinguishable to the facts in the [Nationwide v. Fong] matter, as conceded by the defendants.”

As such, up until recently, not only has the regular use exclusion been summarily upheld as valid for the past 25 years by numerous state and federal courts, but it has also been more repeatedly upheld as valid by several courts even in the wake of the Gallagher v. Geico decision.

A Split of Authority or an Anomaly

And then, in June, came the Northampton County Common Pleas Court case of Rush v. Erie Insurance Exchange, No. C-48-CV–2919-01979 (C.P. Northampt. Co. June 29, 2019 Baratta, J.). In Rush, Judge Stephen G. Baratta of the Northampton County Common Pleas Court granted partial summary judgment to the injured party plaintiffs after holding, as a matter of first impression by any court in Pennsylvania, that Erie’s regular use exclusion was invalid under the MVFRL.

According to the opinion, the plaintiff in Rush was a police officer who was injured while driving a police vehicle that was regularly available for his use at work. After recovering otherwise, the plaintiff was seeking a further recovery under his own UIM coverage under his personal automobile insurance policy.

The carrier that issued that policy denied coverage in reliance upon the regular use exclusion contained in the personal policy. A declaratory judgment action was filed and the parties eventually filed cross-motions for summary judgment.

Buying into the plaintiffs’ de facto waiver of coverage argument, the court in Rush emphasized in its opinion that the plaintiff had not executed any UIM coverage or stacking waivers.

The court found that the regular use exclusion at issue violated the MVFRL in two respects. First, the court in Rush referred to the Pennsylvania Supreme Court’s household exclusion decision in Gallagher v. Geico and found that the regular use exclusion was analogous to a household exclusion and was invalid as a “disguised waiver” of UIM coverage when the MVFRL required the carrier to secure written waivers of such coverage from the insured during the application process or otherwise.

Secondly, under a rationale previously set forth in Slupski v. Nationwide Mutual Insurance, 801 Fed. Appx. 850 (3d Cir. 2002), the court in Rush found that, because the plaintiff was entitled to liability/medical coverage of $250,000 for his injuries from the accident, the regular use exclusion was also found to violate 75 Pa.C.S.A. Section 1734, which mandated the carrier to provide UIM coverage equal to the bodily injury coverage available absent a written waiver secured from the insured.

The Rush v. Erie Insurance decision is on its way up the appellate ladder. It remains to be seen whether this decision will be the start of an atomic split of authority on the validity of the regular use exclusion under the MVFRL or an anomaly that will fade under the heavy weight of 25 years of solid precedent supporting the exclusion and the fact that you can't get something for nothing.

Daniel E. Cummins is the managing partner of the Clarks Summit law firm of Cummins Law, a civil litigation practice. He also conducts mediations of civil litigation matters through Cummins Mediation Services. Cummins is also the sole creator and writer of the Tort Talk Blog (www.TortTalk.com), which is designed to provide continuing updates on important cases and trends in Pennsylvania civil litigation law. He can be reached at dancummins@CumminsLaw.net.