Haley Rodd was injured in a motor vehicle collision while driving an uninsured vehicle. She sought underinsured motorist (UIM) benefits from her parents' Progressive insurance policy. The policy contained a household vehicle exclusion, which bars UIM coverage for injuries sustained while using a vehicle owned by or available for the regular use of a family member. Initially, Progressive denied Rodd's claim based on this exclusion. However, relying on a 2019 Pennsylvania Supreme Court decision, Gallagher, which limited the use of such exclusions in cases involving stacked coverage, Progressive reversed course and agreed to provide benefits. The parties could not agree on the amount, so Rodd sued for breach of contract and bad faith in October 2021. In November 2021, Progressive filed its answer with twenty-two affirmative defenses, but notably omitted the household vehicle exclusion. Later, after the Pennsylvania Supreme Court issued a 2023 decision in Mione, Progressive moved to amend its defenses and file a second summary judgment motion, arguing that Mione upheld the exclusion. The District Court denied these motions, finding Progressive unduly delayed. A bench trial followed, resulting in a judgment for Rodd, which Progressive appealed.
The Third Circuit reviewed the District Court's denial of Progressive's motions for leave to amend and for summary judgment. The court emphasized that in insurance litigation, a defense based on a policy exclusion is affirmative, placing the burden on the defendant to establish it. While leave to amend pleadings is generally granted freely, a court may deny it based on undue delay, bad faith, or prejudice. The court focused on whether Progressive's delay was undue. Progressive argued it waited to assert the defense until the Mione decision, which it claimed made the defense viable. The court rejected this, noting that the Pennsylvania Supreme Court had upheld the household vehicle exclusion in Eichelman v. Nationwide Insurance Company in 1998, nearly thirty years before the suit. The court explained that Gallagher only invalidated the exclusion in specific circumstances where it acted as a de facto waiver of stacked coverage. Mione clarified that Gallagher did not invalidate the exclusion generally, but merely confirmed its continued validity where it does not interfere with stacking waivers. Because the law regarding the exclusion was settled at the time Progressive filed its answer, the court found Progressive's explanation for the delay failed. Consequently, Progressive waived the defense by failing to raise it timely, and the District Court properly denied its motions.
The decision affirms the judgment for the plaintiff, Haley Rodd, and prevents Progressive from relying on the household vehicle exclusion in this case due to procedural default. It reinforces the strict requirement that insurers must assert policy exclusions as affirmative defenses in their initial answers or face waiver. The ruling clarifies that insurers cannot use subsequent case law, like Mione, to justify a late assertion of a defense that was legally available and settled at the time of the original pleading. The case remains open for any remaining issues not resolved by the summary judgment denial, but the specific defense regarding the household vehicle exclusion is now foreclosed for Progressive.
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