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MCS-90 Is Not Insurance... So What Is It?

Posted by Kevin Forbes on Mar 30, 2017 9:00:00 AM

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The Federal Motor Carrier Act of 1980 placed a number of requirements on interstate truckers at the same time it led to widespread deregulation of the industry.  One of these requirements involved proof of financial responsibility.  To ensure the safety of the public against damage caused by motor carriers who may not have the liquidity to pay resulting claims, the law requires that motor carriers be able to demonstrate the ability to pay any claims up to a statutory minimum.

Motor Carriers And MCS-90

In practice, this has resulted in the MCS-90 endorsement.  The MCS-90 endorsement attaches to an insurance policy issued to a motor carrier by a standard insurance company.  The endorsement constitutes proof that the motor carrier has met the financial requirements of the federal regulations for motor carriers.  Through the endorsement, regulators can ensure that sufficient funds exist to meet a defined minimum for paying out a claim on an accident caused by a motor carrier.

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The MCS-90 will only effectively come into play when a number of requirements have been met:

  • the insurance policy itself does not provide coverage for the underlying accident,
  • the accident results in a judgment against the carrier for negligently operating a motor vehicle,
  • the damaged party has no other source for recovery
  • the damaged party is a third party who suffered bodily injury, property damage, or has a rightful claim for environmental restoration.

Why Motor Carriers Should Worry About MCS-90

Because the MCS-90 exists to fulfill the requirements of a federal statute with an explicit public policy aim, it has a number of unique features with which insured motor carriers need to familiarize themselves to reduce their exposure. 

First, as alluded to above, it is worth noting that the MCS-90 really exists as a form of public surety rather than as a form of insurance.  It exists to assure the public that the damaged party will receive at least a minimum of recovery for their loss regardless of the illiquidity of the responsible motor carrier

Second, the MCS-90 attaches to the motor carrier rather than any specific vehicle.  This means that an insurance company issuing a MCS-90 endorsement may be obligated to pay a claim or judgment initially even when the policy excludes coverage for the accident.  This isn’t quite the get out of jail free card it appears, as we will cover shortly. 

Third, a MCS-90 does not in any way provide an insurer with a duty to defend the insured. 

Finally, and perhaps most importantly, the MCS-90 allows the insurer to seek reimbursement from the insured for any amounts paid under the MCS-90 properly excluded by the carrier’s insurance policy.

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Common Problems For Motor Carriers Caused By MCS-90

The most common MCS-90 claim involves an insured motor carrier causing an accident with a vehicle not covered by their automobile policy.  In this situation, where a judgment against the motor carrier attaches, the insurance company will have to pay out the claim to satisfy the judgment up to the statutory minimum initially.  However, the insurance company can then immediately turn around and extract the monies paid from the insured motor carrier. READ MORE: The MCS-90 Endorsement (Explained in less than 5 minutes)

What Should You Do Next?

While the MCS-90 may appear that it provides certain additional protection for trucking companies, ultimately the agreement contained within the MCS-90 is for the insured to reimburse the insurer for any amounts paid under the endorsement negates that protection.  For this reason, trucking companies should always ensure they keep their policies and covered vehicles as up to date as possible.

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Topics: Claims, Trucking & Logistics, For Your Business, Risks In The Trucking Industry, mcs-90