Purpose of financial responsiblity rules for interstate motor carriers
49 C.F.R. ? ? 387.1 states: "The purpose of these regulations is to create additional incentives to motor carriers to maintain and operate their vehicles in a safe manner and to assure that motor carriers maintain an appropriate level of financial responsibility for motor vehicles operated on public highways."
Minimum insurance coverage required of interstate motor carriers
The minimum levels of coverage are set by Federal Motor Carrier Regulations as follows:
Minimum levels of financial responsibility-property, 49 C.F.R. ? 387.9
(1) Property/Dry Freight ................... $750,000
(2) Oil/Petroleum ........................... $1,000,000
(3) Hazardous Materials ................... $5,000,000
Minimum levels of financial responsibility-passenger, 49 C.F.R. ? 387.33
(1) Seating for 15 or less .................. $1,500,000
(2) Seating for 16 or more ................ $5,000,000
How motor carrier insurance requirements have failed to keep up with inflation
Adjusted to inflation according to the Consumer Price Index:
o $750,000 in 1980 equals $1,921,811in 2009, and is worth only $292,693 today.
o $1 million in 1980 equals $2,562,415 in 2009, and is worth only $390,257 today.
o $5 million in 1980 equals $12,812,075 in 2009, and is worth only $2,491,933 today.
Insurance policy forms used in the trucking industry
The policy forms most often encountered in trucking cases are the Business Auto (ISO Form CA 00 01), Truckers Coverage (ISO Form CA 00 12), Motor Carrier (ISO Form CA 00 20) forms, and the Nontrucking Use Endorsement a/k/a "Bobtail Coverage." Occasionally, one may still encounter a Commercial General Liability policy amended with an endorsement to provide coverage for trucks or trailers, even though in 2004, the Insurance Services Office (ISO) withdrew the motor vehicle law endorsement CG 99 01 for use with its CGL coverage in most jurisdictions.
A federally mandated endorsement known as the MCS-90 is provided under the Motor Carrier Act of 1980, which provides that commercial motor carriers engaged in interstate commerce must register with the United States Secretary of Transportation and comply with minimum financial responsibility requirements established by the Secretary of Transportation.
The "primary purpose" of the MCS-90 endorsement "is to assure that injured members of the public are able to obtain judgment from negligent authorized interstate carriers." The MCS-90 endorsement is "in effect, suretyship by the insurance carrier to protect the public - a safety net .... [I]t simply covers the public when other coverage is lacking."
Employees of carriers cannot recover under MCS-90.
The MCS-90 includes an employee exclusion which prevents injured employees -- either direct or statutory -- from recovering damages under the endorsement, whether or not they are driving at the time of the injury. However, state law governs the enforceability of such exclusions in the underlying insurance policy.
Vehicles not listed in insurance policy covered by MCS-90 endorsement
The public policy underlying the MCS-90 rule is partly to protect the public against unlisted equipment. Thus, the MCS-90 endorsement applies "regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere." The endorsement serves to protect the public from inadvertent or intentional omission of vehicles from required insurance policies. Likewise, the MCS-90 endorsement extends coverage for leased or non-owned vehicles. When a permitted or licensed motor carrier leases or hires a truck and driver, state and federal regulations vest control and responsibility of the leased equipment in the lessee.
MCS-90, high deductibles and "fronting" policies
Does the MCS-90 endorsement require the insurer to provide "first dollar" coverage and pay any loss under the insurance policy, irrespective of the amount of the deductible? The Fourth, Fifth and Sixth Circuits have held that the MCS-90 endorsement does not require the excess carrier to satisfy a judgment below its liability floor simply because it is the first solvent insurer. A Louisiana appellate court reached the opposite result.
Cancellation - 35 days notice to insured, 30 days notice to FMCSA
Once the MCS 90 Endorsement is issued and the requisite form is filed, the endorsement coverage remains in effect until it is canceled in accordance with the federal regulations. Cancellation of the endorsement is only effective upon "the company or the insured ... giving (1) thirty-five (35) days notice in writing to the other party . . . and (2) if the insured is subject to FMCSA's [the Federal Motor Carrier Safety Administration's] jurisdiction, by providing thirty (30) days notice to the FMCSA."
Tractor and trailer may have separate MCS-90 endorsements
A few cases have allowed recovery under an MCS-90 endorsement on an insurance policy issued to the owner of a trailer, treating the operator of the tractor as a permissive user of the trailer even when there is no claim or judgment against the trailer owner, as the MCS-90 states that the insurer must pay "a judgment" with no requirement that the judgment be one against the named insured. However, this issue remains controversial.
MCS-90 does not create duty to defend
Federal courts have consistently stated that the MCS-90 endorsement does not create a duty to defend claims which are not covered by the policy but only by the endorsement.
Accidents on intrastate trips
There is a conflict in the cases as to whether the MCS-90 endorsement to motor carrier's liability policy unambiguously applies to liability for an accident during purely intrastate trip. Although the endorsement is federally mandated coverage to be carried by registered interstate motor carriers, it contains no terms limiting the coverage to the use or operation of the vehicle in interstate commerce. However, other courts have reached a contrary result. In handling a case of an interstate carrier hauling an intrastate load, note the line of authority holding that where a shipment from one state is destined to another state, it is an "interstate" shipment from beginning to end. But a Georgia case confirms that where an intrastate carrier with no interstate authority is hauling dirt on a purely intrastate trip, an MCS-90 is not invoked.
Insurer's right to reimbursement from motor carrier
The MCS-90 endorsement states, in pertinent part, "The insured agrees to reimburse the company . . . for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement." Thus, while the MCS-90 endorsement ensures that a motor carrier has independent financial responsibility to pay for losses sustained by the general public arising out of its operations, the endorsement is designed to protect the public, not the policyholder; the obligation the endorsement creates runs to the public, not to the insured. Under the MCS-90, ultimate responsibility lies with the insured trucking company.
Additional resources provided by the author
More information on web site and in seminar paper delivered to Georgia Trial Lawyers Association Auto Torts Seminar at Amelia Island, Florida, July 2009.
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