Pennsylvania Law Assures Medical Expense Coverage for Injured Unlicensed Driver

By Andrew G. Simpson | December 29, 2023

An unlicensed driver exclusion in a Pennsylvania auto insurance policy does not apply to allow an insurer to deny statutorily mandated first party medical expense benefits, the Pennsylvania Superior Court has ruled.

The appeals court found that the exclusion does not apply to first party medical benefits because the Motor Vehicle Financial Responsibility Law (MVFRL) mandates that policyholders must purchase and insurers must offer those benefits, and because being an unlicensed driver is not one of the permissible grounds in the statute for denying first party benefits.

“By making medical expense coverage mandatory in the MVFRL, the General Assembly chose to treat medical expense coverage different from other first party benefit coverage,” the appeals court said.

The appeals court reversed a trial court that found the unlicensed driver exclusion relieved Nationwide Insurance of its obligation to pay for the medical expenses that policyholder Elvia Castaneda’s daughter Christina sustained while driving the mother’s Toyota Sienna when the car was hit from behind.

Christina did not have a Pennsylvania driver’s license and was driving the Sienna with permission of her mother, who was a passenger in the car. Christina was not the named insured on any policy providing first party benefits coverage; nor was she an insured on any policy other than the policy providing first party benefits coverage. Christina also did not regularly reside with her mother.

The Nationwide exclusion said there is no coverage if the operator’s license has been suspended, revoked or never issued. It also said the exclusion does not apply to the use of the auto by a relative, which is defined by the policy to be a “person who regularly resides in your household and who is related to you by blood, marriage or adoption.”

As Christina did not regularly reside with her mother, she was not a “relative” as defined by the policy. Accordingly, Nationwide found the exclusion applied to Christina’s claim, and denied her coverage for first party medical expenses on that basis.

Christina did not dispute that the unlicensed driver exclusion, as written, applied to her claim. Rather, she contended the exclusion itself is not valid under the MVFRL when an insurer uses that exclusion as a basis for denying first party medical expenses benefits, as Nationwide did.

The trial court agreed with Nationwide that the exclusion applied. It further agreed with the insurer that statutory list in the MVFRL is not exhaustive and does not bar insurers from incorporating other valid exclusions to the recovery of first party benefits in their policies.

The appeals court disagreed, finding that the unlicensed driver exclusion is not valid under the MVFRL, when that exclusion is applied in the context of statutorily mandated first party medical expense benefits.

The appeals court said it is clear that the legislature intended that only the exclusions identified in the statute itself can be used as a means of denying the otherwise-mandated coverage for first party medical benefits. The exclusions in the law include situations where someone is attempting to intentionally injure himself or another, committing a felony, or seeking to elude law enforcement. But being an unlicensed driver is not listed as one of the permissible grounds for denying first party benefits.

The appeals court noted that the underlying objective of the MVFRL is to provide broad coverage to assure the financial integrity of the insured, and therefore, the MVFRL is to be liberally construed to “afford the greatest possible coverage” to injured claimants.

“Indeed, if we were to permit insurers to add to the statutory list of selected exclusions and allow exclusion after exclusion to bar coverage for medical expenses, the General Assembly’s mandate requiring insurers to pay first party medical expenses for injuries arising out of the use of motor vehicles could simply be diluted to the point where it loses all effect,” the opinion says.

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