As the federal government debates raising the insurance, it’s important to remember that – as a licensed motor carrier – you’ve got to have all of your responsibilities completely understood, especially the financial ones.
The Federal Motor Carrier Safety Administration (FMCSA) requires a minimum level of financial responsibility for motor carriers. What this means is that a fleet must have: l
- Liability coverage for bodily injury or property damage.
- Financial responsibility requirements for passenger carrier brokers.
- Financial responsibility requirements for passenger carrier brokers.
- Self-insurance and trip insurance.
Each of these factors is governed by a set of rules. These rules are designed to outline responsibility for the carrier and the insurer.
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Before we get into the nuts and bolts of each of these rules, we need to dig a little deeper into the meaning behind “financial responsibility.” One of the areas we will touch on today is the MCS-90 endorsement, which covers insurance requirements.
Background on the Motor Carrier Act
In 1980 Congress passed the Motor Carrier Act. This piece of legislation was designed to reduce the panoply of regulations that complicated how for-hire motor carriers should be operated. The goal of the act was to promote more competition among transportation companies.
In particular, price competition was to be the main driver for introducing the bill. Congress wanted to allow motor carriers to use and publish their own rates. This effectively served to eliminate the mandatory use of rates published by a ratings bureau, as was the case prior to the bill.
Still, even though the bill was meant to clarify things, over time the industry tends to complicate itself. Today, insurance companies often differ in the way they address compliance with federal regulations. This is why it is important to make sure you understand the reasons before taking action.
The MCS-90 Endorsement
As we’ve mentioned before, the initial Motor Carrier Act was meant to simplify and clarify, but even it resulted in more regulations being imposed on the trucking industry. Specifically, the Act requires that any vehicles operated by the transportation company “has in effect the minimum levels of minimum responsibility.”
Maintaining proof of responsibility at the vehicles place of business is also required. A motor carrier receives an MCS-90 endorsement once they have demonstrated that they are in compliance with federal regulations.
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Keep in mind however, that attachment of the MCS-90 to your Business Automobile policy (and possibly to any other umbrella insurance policies) does not necessarily mean you are in total compliance with the minimum level of financial responsibility requirement.
Do not assume that federal regulations – and thus the MCS-90 – only apply to interstate commerce. The form clearly states that the federal requirements apply to any for-hire motor vehicle operating anywhere, nationally.
So if you are a petroleum wholesaler delivering diesel fuel to in-state customers, you are still considered a private carrier operating intrastate, thus the minimum financial responsibility regulations still apply to you.
Who is Responsible?
It is important to now that an MCS-90 endorsement is not a warranty from the insurer. It is still the fleet’s obligation to know what the minimum level of is for their business. Obtaining the MCS-90 is one step in demonstrating overall minimum financial responsibility.
By issuing the MCS-90, however, the insurer is bound to pay according to the terms of the endorsement, which states anything “resulting from the negligence in the operation, maintenance, or use of motor vehicles subject to [the Act’s] financial responsibility requirements.”
It is also important to note that the insurer’s obligation to pay in the event of an accident is quite broad. It is also not affected by any term, condition, limitation or exclusion found in the insurance policy. Remember, federal rules take precedence.
In some cases, the insurer even has a right to seek compensation from the insured, where damages occur result in environmental restoration costs. The MCS-90 endorsement is a straight forward way of asserting that the insured reimburse the insurance company for payments made resulting from policy violations.
So, in closing, make sure you understand your full insurance requirements and liabilities before setting out on obtaining an MCS-90. Also make sure your insurer is clear in your policy details.