Regular use exclusion in auto policies is unenforceable, Pa. Appeals Court says

For the second time in the last year, the state Superior Court determined an auto insurance policy’s “regular use” exclusion violates Pennsylvania’s Motor Vehicle Financial Responsibility Law.

The court’s Wednesday decision in Jones v. Erie Insurance Exchange allowed the plaintiffs’ underinsured motorist insurance claim to proceed despite a provision in their insurance policy barring coverage for vehicles the policyholder regularly uses but does not own.

The ruling mirrors — and heavily cites — the Superior Court’s October 2021 decision in Rush v. Erie Insurance Exchange, which also challenged the regular use exclusion in a personal automobile insurance policy issued by Erie.

Rush’s outcome paved the way for the Jones plaintiffs to succeed in their appeal, but whether or not policyholders will see an end to regular use exclusions on a broader scale will depend on a pending appeal of the former case, according to Purchase, George & Murphey’s Craig Murphey.

In the Superior Court’s Rush opinion, Judge Alice Dubow said the exclusion “conflicts with the broad language of [MVFRL] Section 1731(c), which requires UIM coverage in those situations where an insured is injured arising out of the ‘use of a motor vehicle,’” and is therefore unenforceable.

Murphey, who represented plaintiffs John and Tanya Jones, said if the high court upholds the Rush conclusion, “the implications would be very favorable for policyholders.” Murphey said he has seen regular use exclusions in almost every UM/UIM policy he’s seen and that their validity has been heavily litigated over the years.

The Supreme Court granted the defendant’s petition for appeal in Rush in June, and oral arguments in the case have yet to be scheduled.

“My speculation is that we won’t know ultimately … how long it will be until this exclusion is deemed unenforceable for good,” Murphey said.

In Jones, the court agreed with the plaintiffs’ argument that the exclusion was unenforceable in the wake of Rush.

Erie Insurance Exchange, however, argued Rush contradicts state Supreme Court precedent—the same argument it raises on its appeal of the case. In both matters, Glen Shikunov of McCormick & Priore is representing Erie. Shikunov did not respond to requests for comment.

The Superior Court’s Jones decision, authored by Judge Mary Murray, reverses a trial court judgment saying the Jones’ insurance policy did not cover the vehicle involved in their claim. Judge Maria McLaughlin joined the opinion and Judge Victor Stabile concurred in its result.

According to Murray’s opinion, John Jones sought UIM coverage for injuries he sustained in an accident that occurred while he drove his employer’s vehicle. Jones filed a complaint alleging Erie breached its contract by denying the claim. At the time of the trial court’s opinion, the Superior Court had not issued its Rush decision.

The Jones plaintiffs appealed the trial court’s decision in October 2020, but the matter was stayed in anticipation of the Rush determination.

The Superior Court remanded the Jones case for further proceedings and said the trial court should not have granted Erie’s motion for judgment “as its right to succeed was not certain.”

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