Rush v. Erie Ins. Exch.

1

MATTHEW RUSH AND KATHLEEN MCGROGAN-RUSH, Appellees v. ERIE INSURANCE EXCHANGE, Appellant

No. 77 MAP 2022

No. J-28-2023

Supreme Court of Pennsylvania

January 29, 2024

ARGUED: May 23, 2023

Appeal from the Order of the Superior Court dated October 22, 2021 at No. 1443 EDA 2020 Affirming the Order of the Northampton County Court of Common Pleas, Civil Division, dated June 26 2020 at No. C-48-CV-2019-01979

TODD C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, JJ.

OPINION

DONOHUE, JUSTICE

This appeal requires the Court to determine whether a "regular use" exclusion contained in a motor vehicle insurance policy violates the express language of the Motor Vehicle Financial Responsibility Law ("MVFRL").^[1] We hold that as presented in this case, the "regular use" exclusion does not violate the MVFRL. Thus, we reverse the order of the Superior Court.

I. Background

Matthew Rush is a detective for the City of Easton ("City"). On November 28, 2015, Rush sustained serious injuries following a motor vehicle accident in which two drivers crashed into his unmarked 2010 Ford Fusion police car ("Ford"). The Ford was owned by the City's police department and was insured under the City's Business Auto Policy/Fleet Auto Policy issued by Travelers Insurance ("City's Policy"), providing for, inter alia, $35,000 in underinsured motorist coverage ("UIM").^[2]

Rush and his wife (collectively, the "Insureds") owned three personal vehicles on two insurance policies through Erie Insurance ("Erie"). The Insureds paid for stacked UIM coverage on both policies ("Erie Policies"). The first policy provided for $250,000 of UIM coverage on one vehicle and the second policy provided for $250,000 of UIM coverage stacked on the other two vehicles. The Erie Policies both included identical "regular use" exclusion clauses, which limited the scope of UIM coverage under the policies. Specifically, under the "regular use" exclusion, UIM coverage does not apply to

Bodily injury to "you" or a "resident" using a non-owned "motor vehicle" or a "non-owned" miscellaneous vehicle which is regularly used by "you" or a "resident," but not insured for uninsured [("UM")] or [UIM] Coverage under this policy.

Trial Court Opinion, 6/26/2020, at 3. The parties have agreed that the Insureds did not own or insure the Ford on their Erie Policies, and that Rush regularly used the car for work.

The insurance companies for the other drivers and the City provided Insureds with their policy limits. However, because Rush's injuries and damages exceeded the liability insurance limits of the tortfeasors and the UIM coverage limits of the City's Policy, the Insureds subsequently filed a claim for UIM benefits under the Erie Policies. Erie denied coverage based on the "regular use" exclusion.

On March 7, 2019, the Insureds commenced the underlying declaratory judgment action in the Northampton County Court of Common Pleas, seeking a determination of whether Erie can limit the scope of its UIM coverage through the "regular use" exclusion.

On December 9, 2019, the parties filed cross-motions for summary judgment. On June 26, 2020, the trial court entered partial summary judgment in favor of the Insureds, holding that the "regular use" exclusion in the Erie Policies violates the MVFRL. Trial Court Order, 6/26/2020, at 1. Erie appealed to the Superior Court, which unanimously affirmed the trial court's order in a published opinion. Rush v. Erie Ins. Exch., 265 A.3d 794 (Pa. Super. 2021).

In its opinion, the Superior Court observed that Section 1731 of the MVFRL governs the scope of UIM coverage in Pennsylvania. Id. at 796 (citing 75 Pa.C.S. § 1731).^[3] Specifically, it highlighted that Section 1731(c) provides that "absent a rejection of coverage, insurers shall provide UIM coverage that 'protect[s] persons who suffer injury arising out of the maintenance or use of a motor vehicle and are legally entitled to recover damages therefor from owners or operators of underinsured motor vehicles.'" Id. (citing 75 Pa.C.S. § 1731(c)). Based upon this language, the Superior Court concluded that Section 1731(c) "mandates" insurers to provide coverage when the insured: (1) suffers injuries arising out of the maintenance or use of a motor vehicle, (2) is legally entitled to recover damages from the at-fault underinsured driver; and (3) has not rejected UIM benefits by signing a valid rejection form. Id. at 796-97.

The Superior Court further emphasized that Section 1731 defines the scope of UIM coverage broadly, as such coverage is required whenever an insured suffers injuries "arising out of the … use of a motor vehicle." Id. at 797 (quoting 75 Pa.C.S. § 1731(c)) (emphasis in original) (internal quotations omitted). According to the court, Section 1731 considers neither the owner of the vehicle nor the frequency with which the insured uses it. Id. The Superior Court concluded that the "regular use" exclusion conflicts with the broad language of Section 1731(c)'s coverage mandate because it limits "the scope of UIM coverage required by Section 1731 by precluding coverage if an insured is injured while using a motor vehicle that the insured regularly uses but does not own." Id.

Additionally, the court rejected Erie's reliance on this Court's decision in Williams v. GEICO Government Employees Insurance Co., 32 A.3d 1195 (Pa. 2011), in which we addressed "whether the regular-use exclusion, as applied to a state trooper is void as against a public policy that favors protecting first responders." Id. at 1199. According to the intermediate appellate court, in Williams, this Court held that a state trooper did not meet his burden of establishing that the "regular use" exclusion violated the public policy supporting the MVFRL. Rush, 265 A.3d at 797 (citing Williams, 32 A.3d at 1206). Although the Superior Court observed that the Williams Court stated that the "regular use" exclusion clause in that case did not violate the express terms of the MVFRL, the Superior Court determined that this comment in Williams constituted non-binding dicta^[4] because it was not subsumed by the issue granted for review. Id. at 797-98. Moreover, the Superior Court observed that in reaching its conclusion, the Williams Court relied upon Erie Insurance Exchange v. Baker, 972 A.2d 507 (Pa. 2008) (plurality) (upholding the validity of the household vehicle exclusion to preclude UIM coverage), which this Court abrogated in Gallagher v. GEICO Indemnity Co., 201 A.3d 131 (Pa. 2019).

Erie filed a petition for allowance of appeal of the Superior Court's decision, which we granted to address the following issue, as phrased by Erie:

Whether the decision of the three-judge panel of the Superior Court is in direct conflict with the Pennsylvania Supreme Court decisions in Burstein v. Prudential Prop. & Cas. Ins. Co., 809 A.2d 204 (Pa. 2022) and Williams v. GEICO Gov't Emps. Ins. Co., 32 A.3d 1195 (Pa. 2011), and whether the Superior Court erred as a matter of law by finding that the "regular use exclusion" contained in Pennsylvania auto insurance policies violates the [MVFRL]?

Rush v. Erie Ins. Exch., 281 A.3d 298 (Pa. 2022) (per curiam).

II. Parties' Arguments

Erie's Arguments

In its brief to this Court, Erie argues that by finding that a "regular use" exclusion violates the MVFRL, the Superior Court has disregarded decades of precedent. Erie's Brief at 12-13. According to Erie, the first time this Court considered the validity of the "regular use" exception was in Burstein v. Prudential Property & Casualty Insurance Co., 809 A.2d 204 (Pa. 2002), wherein the Court held that the "regularly used non-owned car exclusion and its contractual restraint on UIM portability comport with the underlying policies of the MVFRL." Erie's Brief at 15 (quoting Burstein, 809 A.2d at 210). Nine years later, this Court reaffirmed Burstein in Williams, wherein this Court rejected a claimant's challenge that a "regular use" exclusion violated 75 Pa.C.S. § 1731. Erie insists that Burstein and Williams remain controlling law. Erie's Brief at 15-17.

Erie proceeds to argue that the Superior Court misunderstood and misapplied the controlling precedent, highlighting that the court ignored Burstein and its progeny. Id. at 18. This, it emphasizes, is demonstrated by the intermediate appellate court's suggestion that the issue before it was one of "first impression," wholly ignoring Burstein and "inexplicably label[ing]" this Court's finding regarding "regular use" exclusions in Williams as dicta. Id. at 18-19. Erie insists that the language in Williams does not constitute dicta because the claimant in that matter "expressly argued that the 'regular use exclusion' violates 75 Pa.C.S. § 1731." Id. at 20 (citing Williams, 32 A.3d at 1199). The Superior Court's labeling William's finding as dicta, according to Erie, was erroneous and disregarded the principles of stare decisis. Id. at 23.

Building on this premise, Erie argues that the Superior Court incorrectly questioned whether Williams was overruled by Gallagher, as Gallagher dealt with a "household exclusion," not a "regular use" exclusion, and involved different facts. Id. at 24-25. As Erie argues, Gallagher said nothing about Section 1731, as it dealt specifically with Section 1738 of the MVFRL, i.e., the stacking provision. Id. at 25. To Erie, the only explanation for the Superior Court's reasoning is that Gallagher essentially overruled Baker, and the Williams Court relied on Baker in finding that a "regular use" exclusion did not violate the MVFRL. Id. at 25-26. Erie argues that the Superior Court's conclusion that Gallagher overruled Williams sub silentio "necessitates multiple logical leaps that ignore the verbiage of both Williams and Gallagher entirely." Id. at 25. Further,...