The Lawletter Vol 35 No 7, May 6, 2011
In the realm of interstate motor carrier law, federal law mandates that any policy of insurance covering the motor carrier contain a special surety endorsement to assure that in the event of damage or loss, a judgment obtained by the injured party against a negligent motor carrier will be paid. Under the Federal Motor Carrier Act ("FMCA") and its implementing regulations, insurers of interstate motor carriers must pay unpaid judgments of plaintiffs who prevail against motor carrier insureds, up to the policy limits so long as federal minimum coverage is met, in the event that (1) the carrier's insurance denies coverage (e.g., through exclusions, use of nonscheduled vehicles, insured noncooperation, breached policy terms, and the like), and (2) no other insurance will cover the loss.
The most common endorsement used to comply with the FMCA mandate is the so-called MCS-90 form, with the "MCS" standing for "Motor Carrier Safety." This form may be found at 49 C.F.R. § 387.15. The MCS-90 endorsement comes into play only regarding acts of negligence by permissive users of the motor carrier; intentional acts are not covered. Even if a nonscheduled vehicle was employed by the carrier during the actionable loss, the MCS-90 surety clause will pay the claim; the plain language of the MCS-90 form itself compels this reading:
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 liability described herein, any final judgment recovered against the insured for public liability resulting from 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.
49 C.F.R. § 387.15 (emphasis added); see also T.H.E. Ins. Co. v. Larsen Intermodal Serv., Inc., 242 F.3d 667 (5th Cir. 2001). The "public liability" covered by the MCS-90 surety terms encompasses third-party claims against the motor carrier for injuries including bodily injury, property damage, and environmental damage requiring restoration. 49 C.F.R. § 387.15.
Because the MCS-90 endorsement is mandated under federal law, if the policy between the insurer and carrier fails to include the stock MCS-90 surety terms, such terms are to be read into the insurance contract. Great W. Cas. Co. v. Gen. Cas. Co. of Wis., 734 F. Supp. 2d 718 (D. Minn. 2010). As a result, the MCS-90 surety mandate is often a useful tool to compel unpaid judgments against a negligent motor carrier to be satisfied up to the federal minimums, as well as the policy limits, when the carrier's insurer has denied the claim and no other insurance will satisfy the judgment.