'Wild West of insurance': Attorneys battle over 'regular use' exclusion in UM/UIM policies
The Pennsylvania Supreme Court heard arguments over whether state law prohibits UM/UIM policies from excluding coverage for vehicles a policyholder regularly uses but does not own or insure.
Attorneys battling before the Pennsylvania Supreme Court over the validity of “regular use” exclusions in uninsured and underinsured coverage policies agreed on one thing—a lot is riding on the justices’ ruling.
The high court heard oral arguments Tuesday over whether Pennsylvania’s Motor Vehicle Financial Responsibility Law prohibits UM/UIM policies from excluding coverage for vehicles a policyholder regularly uses but does not own or insure.
Defendant Erie Insurance Exchange warned that a ruling in the plaintiff’s favor would create “the Wild, Wild West of insurance.”
Erie, represented by McCormick & Priore shareholder Glen Shikunov, argued that the Superior Court had ignored precedent and misinterpreted statutory provisions to conclude that the MVFRL invalidated the regular use exclusion.
In that ruling, a three-judge panel determined that the exclusion conflicts with the MVFRL’s requirement that UIM coverage applies to an insured’s injury arising from the “use of a motor vehicle.”
The panel’s conclusion, Shikunov contended, would entirely bar insurance providers from placing limitations on the scope of their UM/UIM coverage. “If the Superior Court was correct, each and every exclusion would fall,” he said.
Upholding the panel’s ruling, Shikunov said, would rescind all precedent upholding various other exclusions in UM/UIM policies.
But James Haggerty, a shareholder at Haggerty, Goldberg, Schleifer & Kupersmith representing plaintiff Matthew Rush, accused Shikunov of making an “end-of-civilization argument.”
Haggerty pushed back against Erie’s claim that the Superior Court’s ruling invalidated all exclusions, saying carriers may still include such provisions, and that other exclusions would each be decided on their own merit.
Haggerty said insurers only began utilizing regular-use exclusions in the early 2000s after a Supreme Court ruling said they were permissible. “What we have to understand is that the carriers have accepted premiums for these in the past,” he said.
Haggerty’s co-counsel, Schmidt Kramer partner Scott Cooper, made his projection of dire consequences that would accompany a win for his opponents.
“This only punishes people for working,” Cooper said of the regular use exclusion. He said the provision deprives persons of coverage if they work jobs that require them to drive vehicles they don’t own, as was the case for Rush.
‘What is the increased exposure?’
Rush, a police detective, had sought payment from Erie to cover injuries he sustained when two cars struck his police cruiser.
“This is the worst exclusion that could ever have been enforced,” Cooper said.
According to Shikunov, the exclusion is a reasonable safeguard against unknown risks. However, Cooper said, “The unknown risk is total bull.”
He and Haggerty argued that, unlike liability insurance, UM/UIM coverage ensures the negligence of others rather than the insured. Because the insurance covers the person rather than the vehicle, they argued that the car the insured drives during the accident does not matter.
Justice Christine Donohue, at least, appeared to find the plaintiff’s argument compelling.
“What I try to grapple with with this whole thing is what is the increased exposure?” she asked Haggerty.
“I don’t think there is an increased risk, your honor,” Haggerty responded.
Donohue asked both sides about the portability of UM/UIM insurance, and voiced skepticism at Shikunov’s argument that the level of portability is not absolute.
“That sort of begs the question, doesn’t it?” Donohue said. “If it’s intended to be portable, then you can’t have exclusions that make it not portable.”