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Interstate Trucking Insurance Requirements The Mcs-90 Endorsement

Edward C. Bassett, Jr., Esq.
Mirick O’Connell
1800 West Park Drive, Suite 400
Westborough, MA 01581-3926
ebassett@mirickoconnell.com

The Federal Motor Carrier Safety Administration (FMCSA) requires motor carriers to maintain minimum limits of insurance before being authorized to operate commercial motor vehicles in interstate commerce. Carriers that fail to maintain the required insurance will be fined and their authority to operate will be suspended or revoked.

The minimum levels of insurance are set forth in 49 C.F.R. § 387.9:

  1. For-hire carriage of nonhazardous property in interstate or foreign commerce with a gross vehicle weight rating of 10,000 or more pounds — $750,000.
  2. For-hire and private carriage of hazardous substances as specified in 49 C.F.R. § 387.9 in interstate, foreign, or intrastate commerce with a gross vehicle weight rating of 10,000 or more pounds — $5,000,000.
  3. For-hire and private carriage of oil, hazardous wastes, hazardous materials, and hazardous substances as specified in 49 C.F.R. § 387.9 in interstate or foreign commerce in any quantity or in intrastate commerce with a gross vehicle rating of 10,000 or more pounds — $1,000,000.
  4. For-hire and private carriage of certain types of hazardous materials as specified in 49 C.F.R. § 387.9 in interstate or foreign commerce with a gross vehicle weight rating of less than 10,000 pounds — $5,000,000.[1]

Property and hazardous material carriers must have either a Form MCS-90 (insurance) or MCS-82 (surety bond) confirming coverage for these minimum levels of insurance. Under special circumstances, a carrier may operate on a self-insured basis if the FMCSA determines that it meets specific financial requirements.

In summary, interstate carriers transporting non-hazardous materials must maintain minimum insurance of $750,000. Carriers transporting oil must maintain a policy of at least one million dollars. Carriers transporting hazardous materials must maintain a policy of five million dollars. In addition to these minimum policies, the motor carriers are required to obtain an MCS-90 or MCS-82 endorsement. The MCS-90 endorsement specifies:

In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of the liability described herein, any final judgment recovered against the insured for public liability resulting from the negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 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. Such insurance as is afforded, for public liability, does not apply to injury to or death of the insured’s employees while engaged in the course of their employment, or property transported by the insured, designated as cargo. It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment , within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured. However, all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company. The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim or suit involving a breach of the terms of the policy, and 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 … The limits of the company’s liability for the amount prescribed in this endorsement apply separately to each accident and any payment under this policy because of any one accident shall not operate to reduce the liability of the company for the payment of final judgments resulting from any other accident.[2]

The MCS-90 endorsement requires the insurer to act as a surety to injured persons (excluding the insured’s employees) if for some reason there is no coverage under the insurance contract.

Before the MCS-90 supplants the insured’s policy, the following must occur:

  1. Based on a condition, provision, stipulation or limitation in the insured’s policy, the insurer has denied coverage;
  2. There is a judgment against the insured;
  3. The judgment is a final judgment for negligence in the operation of a motor vehicle;
  4. There is no other source of recovery from the insured;
  5. The plaintiff is a third party (not an employee of insured) who suffered personal injuries; and
  6. The motor vehicle was being used in interstate commerce and the accident occurs within the United States.

Typically the MCS-90 endorsement comes into play when a plaintiff is injured by a motor vehicle that is not listed as a “covered vehicle” under the policy. The MCS-90 endorsement will also apply if there are conditions or limitations in the insurance policy which exclude coverage for the accident. For example, if the insured provides late notice or no notice and a default judgment enters, there is still coverage under the MCS-90 endorsement. The MCS-90 endorsement requires payment of a final judgment even if the insured violated the insurance contract by failing to cooperate with the insurer. See Campbell v. Bartlett, 975 F.2d 1569 (10 th Cir. 1992). The MCS-90 endorsement does not require a defense of the insured but instead establishes a duty to pay an injured plaintiff where there is a final judgment against the insured.

The MCS-90 endorsement creates an obligation to the public to pay any judgment resulting from negligence in the operations, maintenance or use of motor vehicles even if the vehicle is not identified or covered under the insurance policy to which the endorsement is attached. In Pierce v. Providence Wash. Ins. Co., 784 N.E.2d 52, 54 (2002), the Court held that the MCS-90 endorsement is required “to provide a safety net to members of the public injured as a result of negligent operation of tractor trailers used in interstate commerce.”

Although the MCS-90 endorsement may appear to be a windfall to an insured who violated the terms of the insurance contract, it is important to note that after the insurer pays the MCS-90 limits, the insurer then has an absolute right to recover the full amount of the judgment or settlement directly from the insured.

Two issues that are often litigated when dealing with the MCS-90 endorsement are: (1) who is the “insured” under the endorsement; and (2) was the motor carrier engaged in interstate commerce at the time of the crash. If the defendant is not the “named insured” in the insurance policy or if the accident occurred in intrastate commerce, the MCS-90 may not apply.

Who is the Insured?

The MCS-90 specifies that the insurer will pay any final judgment against the insured, but it does not define “the insured”. In order to determine “who is the insured”, you must first examine the insurance policy.

Most often the “named insured” in a typical policy is the “motor carrier”. Motor carrier is defined in the federal regulations as:

A for-hire motor carrier or a private motor carrier. The term includes, but is not limited to, a motor carrier’s agent, officer, or representative; an employee responsible for hiring, supervising, training, assigning, or dispatching a driver; or an employee concerned with the installation, inspection, and maintenance of motor vehicle equipment and/or accessories. 49 C.F.R. § 387.5

In some policies permissive drivers are defined as additional insureds, but they are unlikely to fall within the definition of a named insured. In an early line of cases courts held that the MCS-90 endorsement covered permissive users in addition to the named insured. See John Deere Ins. Co. v. Nuvea, 229 F.3d 853 (9th Cir. 2000). However, in 2005 in response to pressure from the insurance industry the FMCSA amended its “regulatory guidance” on the issue.

Under 49 CFR 387.5, “insured and principal” is defined as “the motor carrier named in the policy of insurance, surety bond, endorsement, or notice of cancellation, and also the fiduciary of such motor carrier.” Form MCS-90 and Form MCS-82 are not intended, and do not purport, to require a motor carrier’s insurer or surety to satisfy a judgment against *48 any party other than the carrier named in the endorsement or surety bond or its fiduciary.

Since the FMCSA amended its “regulatory guidance” many courts have held that the MCS-90 endorsement provides coverage tothe named insured only. Forkwar v. Progressive N. Ins. Co. Inc., 910 F.Supp.2d 815 (D. Md. 2012)[3]. Despite the FMCSA’s “regularity guidance” it appears as if this issue is still unresolved. For a detailed analysis of the various cases deciding who is the insured, see Leizerman, Litigating Truck Accident Cases, Vol. 1, Section 3.5 AAJ Press (2017-2018 edition). Because of this uncertainty, whenever dealing with an MCS-90 case, it is imperative to include the “named insured” carrier as a defendant.

Interstate Commerce

The MCS-90 endorsement only applies to accidents that occur when the motor carrier is engaged in interstate commerce (when transporting goods from one state to another). An often litigated issue is whether the crash occurred in interstate commerce when transporting goods between two locations in the same state.

Some courts hold that a motor carrier is engaged in interstate commerce even if the “specific trip” was between two locations in the same state (intrastate) if the essential character of the truck company’s business is interstate. Some courts resolve the issue by determining if the truck company has a fixed and persisting intent to engage in interstate commerce. See QBE Ins. v. P&F Container Serv., 828 A.2d at 935 (App. Div. 2003).

However, other courts held that the focus must be on the specific trip during which the crash occurred to determine if the motor carrier was engaged in interstate commerce. In Thompson v. Harco Nat’l Ins. Co., 120 S.W.3d at 511 (2003), the Court held that the MCS-90 did not apply to a trip between two locations in one state even though the trip was part of a larger interstate trip. In Canal Ins. Co. v. Coleman, 625 F.3d at 244 (5th Cir. 2010), the Court described this line of cases as the majority view.

Despite the fact that almost all courts agree that the MCS-90 endorsement only comes into play when the crash occurred in interstate commerce, see Heron v. Transportation Casualty Insurance Co., 650 S.E.2d 699 (2007). In Heron, the Virginia Supreme Court held that the language of the MCS-90 is clear, plain and unambiguous. Since the MCS-90 endorsement contains no language limiting the coverage to accidents occurring in interstate commerce the Court concluded that the endorsement covered interstate and intrastate accidents.

Punitive Damages

Punitive damages are often an important aspect of the interstate trucking case. Some courts hold that a “final judgment” to be paid by MCS-90 does not include any judgment for punitive damages. In Hartford Acc. & Indem. Co. v. American Red Ball Transit Co., 938 P.2d 1281 (1997), the Court held that punitive damages were not payable under MCS-90 because of that state’s public policy against allowing insurance to cover punitive damages. However, see Campbell v. Bartlett, 975 F.2d 1569 (10th Cir. 1992), where the Court upheld an award for compensatory and punitive damages in an MCS-90 case. The Court specifically rejected the argument that punitive damages should not be awarded against an insurer since such an award would defeat the public policy purpose of punitive damages.

Conclusion

If a vehicle or driver is not specifically listed in the insurance policy, the insurer will seize upon the opportunity to deny coverage. Similarly, if the insured did not notify the insurer promptly of the accident or failed to cooperate, then the insurer will quickly deny coverage. Fortunately, in interstate trucking cases, although there may not be coverage under the insurance policy, the MCS-90 provides a “safety net” to an injured third party in the same amounts as set forth in the insurance policy.


[1] This summary and a detailed analysis of the Financial Responsibility Requirements for Interstate Motor Carriers can be found at David N. Nissenberg The Law of Commercial Trucking, 3rd Edition, Section 14.07.

[2] 49 C.F.R. § 387.15. See Fried, Rogers, Goldberg, Understanding Motor Carrier Claims, 5th Edition, Section X – Insurance Coverage.

[3] See also Carlson v. American Int’l Group, Inc.. 130 A.D. 3d 1477 (2015).

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