Part 387 of the Federal Motor Carrier Safety Administration (FMCSA) Regulations set forth the financial requirements for motor carriers. In part 387, the code discusses endorsements for policies of insurance and surety bonds. These must be in the form prescribed by the FMCSA and approved by the OBM. Endorsements to policies of insurance and surety bonds shall specify that coverage thereunder will remain in effect continuously until terminated.
Two examples are the MCS-90 and MCS-82. The practical effect of the required MCS-90 and MCS-82 endorsement is that they allow a successful Plaintiff to collect a judgment obtained against a Defendant motor carrier, up to the minimum required level of financial responsibility, from the motor carrier’s insurer or bonding company; even if the motor carrier is bankrupt, insolvent, fails to conform to policy requirements triggering a reservation of rights letter from the insurance company, or is simply financially unable to pay such a judgment.
A person who obtains a judgment against a motor carrier can recover up to the amount of the MCS-90 or MCS-82 endorsement from the insurer or bonding company, even if the vehicle involved in the accident is not a scheduled vehicle, or that insurer or bonding company has denied coverage for the motor carrier’s refusal to cooperate in the defense of the case or otherwise. John Deere Ins. Co. v. Nueva, 229 F.3d 853 (9th Cir. 2000).
The endorsement essentially reads as a surety to require payment by the insurer if there is an unpaid final judgment. A final judgment means a trial verdict as opposed to a voluntary settlement. The endorsement would only come into play if the tort claimant opted to take its case to trial and obtained a verdict in its favor. If a trucking company with a deductible program has succeeded in treating his or her prepetition tort claims as unsecured claims and then works to negotiate voluntary settlements to get the claims finalized, the voluntary settlements do not trigger the endorsement and can be paid as allowed unsecured claims.
This story appears in the August 2020 issue of The Jere Beasley Report. For more like this, visit the Report online and subscribe.