An Apple Can Never Be An Orange – Regular Use Exclusion Effective

An Apple Can Never Be An Orange – Regular Use Exclusion Effective

Barry Zalma   By Barry Zalma, Attorney and Consultant

Erie Insurance Exchange ("Erie") appealed to the Superior Court of Pennsylvania from the grant of summary judgment in favor of Patrick and Daryl Rother ("Mother") in a declaratory judgment action involving the applicability of the regularly used, non-owned vehicle exclusion in Mother's personal vehicle policy. In Patrick Rother and Daryl Rother v. Erie Insurance Exchange, 2012 Pa.Super. 228 (Pa.Super. 10/18/2012), the appellate court resolved the issues raised by the appeal.

FACTS

Patrick Rother was severely injured in a motor vehicle accident on March 3, 2007, while he was driving his father's vehicle. At the time of the accident, Patrick was residing with his mother, Daryl Rother. He had recently acquired a job that was located ten miles from his mother's home and he did not own a car. His father permitted him to use one of his vehicles, a 1990 Nissan, to commute to work and for emergencies only. Patrick had been using the vehicle for those purposes for two weeks when he was involved in an accident with an intoxicated driver and was severely injured.

After recovering the liability benefits under the other driver's policy, Patrick and Mother commenced this action seeking a declaration that Erie was obligated to provide underinsured motorist coverage under Mother's policy. Erie maintained that the coverage was excluded by the regular use exclusion contained in the policy. The Rothers filed a motion for summary judgment, which the trial court granted finding the regular use exclusion inapplicable on the facts of the case.

Crash! Car Accident

It is undisputed that Patrick was driving his father's 1990 Nissan, a vehicle not owned by Mother and not insured for UM or UIM coverage under her Erie policy, and that Patrick was a resident of Mother's household at the time of the accident. His father permitted him to use his car to commute to work and for emergencies. On five of the days Patrick operated the Nissan he retrieved the car at his father's home in the morning and returned it after work. On two occasions he drove the Nissan to the home he shared with his mother. On one of the latter occasions, he received a call late in the evening from a friend who required a ride, and it was while Patrick was proceeding to retrieve his friend that the accident occurred. Patrick viewed this as an emergency.

QUESTION PRESENTED

Did the trial court err in determining that the regularly used, non-owned vehicle exclusion in a personal auto policy was not applicable to the claims of the plaintiff, Patrick Rother, for recovery of underinsured motorist benefits where his injuries arise out of the operation of a vehicle: (1) not owned by him or any resident relatives; and (2) used regularly by him to travel back and forth to work?

In evaluating the trial court's decision to enter summary judgment, the appellate court must focus its analysis on the legal standard articulated in the summary judgment rule. Whether a claim for insurance benefits is covered by a policy is a matter of law which may be decided on a summary judgment motion. The appellate court may only disturb the entry of summary judgment only where it is established that the court committed an error of law or abuse of discretion.

The policy provision at issue provides:

What We Do Not Cover - Exclusions this insurance does not apply to:

10. 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 or Underinsured Motorist Coverage under this policy.

The only issue is whether, on the undisputed facts presented to the court, Patrick regularly used the 1990 vehicle.

In Pennsylvania, the test for "regular use" is whether the use is "regular" or "habitual."  Erie contends that the trial court erred in refusing to apply the regular use exception on the facts herein. Patrick's use of his father's vehicle to go to and from work constituted regular use of the vehicle and the fact that his use was of short duration prior to the accident was irrelevant.

Patrick counters that the facts herein establish that his use of his father's 1990 Nissan was "incidental, infrequent and irregular" and "significantly restricted" by his father.  When presented with the Rothers' motion for summary judgment, as well as the parties' stipulation of facts and opposing and supporting submissions, the trial court granted the motion, and held as a matter of law that Patrick's use of the vehicle did not preclude coverage under the exclusion.

The Nissan was supplied by Patrick's father for the specific purpose of transportation to work and the appellate court found that such use was regular in the context of a personal vehicle. Furthermore, restrictions on Patrick's use of his vehicle and regular use of that vehicle are not mutually exclusive. Patrick routinely and habitually used the vehicle within the scope of his father's permission to go to and from work four days per week. The appellate court found this type of restriction on use to be comparable to the situation involving fleet or employer-owned vehicles where use is limited to work-related activities, and despite restrictions on use, it found the use to be regular within the meaning of the exclusion.

While Patrick had only used the vehicle for two weeks for this purpose, there was no indication that the use was temporary. The 1990 Nissan was the only vehicle Patrick used, it was used for a particular purpose, the pattern of use was consistent, and Patrick's use and possession of the vehicle was exclusive for a significant time each workday. Patrick's use could not be the type of isolated, casual, or incidental use of a non-owned vehicle that courts have held not to constitute regular use.

The regular use exclusion has been upheld on policy grounds because it generally promotes the cost containment policy underlying the state motor vehicle statutes. In an automobile insurance policy, it functions to prevent an insurance company from being subjected to an additional risk of coverage for a vehicle for which the insurance company did not receive a premium or intend to insure. As a matter of law the appellate court held that the regular use exclusion applies on the facts to preclude coverage. Therefore, the order granting summary judgment was reversed and the case remand to the trial court for entry of summary judgment in favor of Erie.

ZALMA OPINION

It is refreshing to find a court that reads a policy clearly as it is written rather than stretch the language of a policy to provide benefits to a person severely injured.

Reprinted with Permission from Zalma on Insurance, (c) 2012, Barry Zalma.

Barry Zalma, Esq., CFE, is a California attorney, insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He recently published the e-books, "Zalma on Insurance;" "Murder and Insurance Don't Mix;" "Heads I Win, Tails You Lose - 2011," "Zalma on Rescission in California," "Zalma on Diminution in Value Damages," "Arson for Profit" and "Zalma on California Claims Regulations," and others that are available at Zalma Books. Mr. Zalma can also be seen on World Risk and Insurance News' web based television program "Who Got Caught".

Mr. Zalma can be contacted at Barry Zalma or zalma@zalma.com, and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma's Insurance Fraud Letter.

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