12-5680.131-RSK October 31, 2013

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

MICHAEL MCCOMB, as parent and )

special administrator of the )

Estate of Giselle McComb, )

deceased, , )

)

Plaintiff, )

)

 v. ) No. 12 C 5680

) 

NATIONAL CASUALTY COMPANY, JOSE )

BUGARIN, and BUGARIN TRUCKING, )

INC., )

)

Defendants. )

MEMORANDUM OPINION

Before the court are the parties’ cross-motions for summary

judgment. For the reasons explained below, we grant defendant

National Casualty Company’s (“NCC”) motion and deny plaintiff

Michael McComb’s motion.

BACKGROUND

This is an insurance coverage dispute regarding NCC’s

obligation to insure Jose Bugarin and Bugarin Trucking, Inc.

(collectively “Bugarin” unless otherwise noted). In May 2010, J.

L. Shandy Transportation, Inc. (“J.L. Shandy”) leased a tractor and

trailer from Bugarin Trucking. (Joint Stip. Facts ¶ 4.) On

December 28, 2010, Jose Bugarin was driving the tractor-trailer

when it collided with a vehicle driven by Giselle McComb. (Id. at
- 2 -

¶ 5.)1 McComb died as a result of the accident. (Id. at ¶ 8.) 

Michael McComb, as the special administrator of the decedent’s

estate, has filed a wrongful death action in this district 

against Bugarin, J.L. Shandy, and others. (See Compl., Michael

McComb v. Jose Bugarin et al., Case No. 1:11-CV-00256 (N.D. Ill.),

attached as Ex. B to Joint Stip. Facts, ¶¶ 11-12.) At the time of

the accident, J.L. Shandy was insured by an insurance policy issued

by NCC. (See Joint Stip. ¶ 1; see also Policy No. OTO002356,

attached as Ex. A to Joint Stip. Facts (the “NCC Policy”).) 

Bugarin and Bugarin Trucking did not maintain their own insurance. 

(See Joint Stip. Facts ¶ 7.) 

McComb has filed this suit seeking a declaration that: (1) the

NCC Policy “affords coverage to Bugarin” for the underlying action

(Count I); and (2) the policy’s “MCS-90 Endorsement” applies to the

underlying action (Count II). (See Compl. ¶¶ 8, 14-15.)

DISCUSSION

A. The Declaration That McComb Seeks in Count I is Moot

NCC has been defending Bugarin in the underlying action

pursuant to the NCC Policy. (Joint Stip. Facts ¶ 10.) In its

motion for summary judgment, NCC concedes that the policy covers

Bugarin. (See NCC Mem. at 3-5; see also NCC Policy at 13, 20, 22.) 

Indeed, NCC contends — without contradiction by McComb — that it

1/ Although not discussed in the parties’ stipulated facts, NCC appears

to concede that Bugarin was working for J.L. Shandy at the time of the accident. 

(See NCC Mem. at 4.)
- 3 -

has never disputed coverage. (See NCC Mem. at 5.) McComb has not

stated any objections to the scope of NCC’s concession or otherwise

objected to NCC’s motion to dismiss Count I. So, Count I is

dismissed as moot.

B. Whether Count II is Ripe

There has been no judgment in the underlying lawsuit, which

raises the question whether McComb’s claim regarding the MCS-90

Endorsement is ripe. The general rule is that it is premature to

enter a declaratory judgment regarding indemnification before the

insured is found liable in the underlying suit. See, e.g., Medical

Assur. Co., Inc. v. Hellman, 610 F.3d 371, 375 (7th Cir.2010) (a

claim for declaratory relief regarding indemnification is not ripe

“until liability has been established”). This rule is based upon

the practical recognition that judicial resources spent resolving

indemnification may be wasted if the insured ultimately prevails in

the underlying suit. Lear Corp. v. Johnson Electric Holdings Ltd.,

353 F.3d 580, 583 (7th Cir. 2003) (“A declaration that A must

indemnify B if X comes to pass has an advisory quality; and if the

decision would not strictly be an advisory opinion (anathema under

Article III) it could be a mistake, because it would consume

judicial time in order to produce a decision that may turn out to

be irrelevant.”). A court will sometimes proceed to rule on

indemnification when it has already spent time and effort

adjudicating the insurer’s duty to defend. See, e.g., Hess v.
- 4 -

Travelers Cas. and Sur. Co. of America, No. 11 C 1310, 2013 WL

623981, *6 (N.D. Ill. Feb. 20, 2013) (Grady, J.). That is not our

case: NCC agrees that it must defend Bugarin. (See infra.) On the

other hand, this case has been pending on our docket for more than

a year and the parties have briefed cross-motions for summary

judgment based almost entirely on the scope of NCC’s duty to

indemnify Bugarin. The parties have spent significant resources

litigating this discrete legal issue, and we anticipate that a

ruling will have a real and immediate impact on the parties’

settlement posture in the underlying suit. Under the

circumstances, we think it is appropriate to resolve the question

of indemnification at this time.

C. The MCS-90 Endorsement

The Motor Carrier Act of 1980 (“MCA”) provides that commercial

motor carriers must be “willing and able to comply with minimum

financial responsibility requirements established by the Secretary

. . . .” 49 U.S.C. § 13902(a)(1)(A)(vi). Motor carriers

transporting non-hazardous property must demonstrate financial

responsibility of at least $750,000. See 49 CFR § 387.9; see also

49 U.S.C. § 31139(b)(2). They can demonstrate the required level

of financial responsibility in one of three ways: (1) an MCS-90

Endorsement; (2) a surety bond; or (3) self-insurance with the

Federal Motor Carrier Safety Administration’s (“FMCSA”)

authorization. See 49 C.F.R. § 387(d)(1)-(3). J.L. Shandy has
- 5 -

elected to obtain an MCS-90 Endorsement, which is attached to the

NCC Policy. The Endorsement states in pertinent part:

ENDORSEMENTS FOR MOTOR CARRIER POLICIES OF INSURANCE FOR

PUBLIC LIABILITY UNDER SECTIONS 29 AND 30 OF THE MOTOR

CARRIER ACT OF 1980

* * *

The policy to which this endorsement is attached provides

primary or excess insurance, as indicated by “X”, for the

limits shown:

X This insurance is primary and the company shall not be

liable for amounts in excess of $1,000,000 for each

accident.

* * *

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. . . . 

(NCC Policy at 44); see also 49 C.F.R. § 387.15 (prescribing the

necessary language). A majority of courts interpreting the MCS-90

Endorsement have held that the Endorsement only applies where: “(1)

the underlying insurance policy to which the endorsement is

attached does not provide coverage for the motor carrier’s

accident, and (2) the motor carrier’s insurance coverage is either

not sufficient to satisfy the federally-prescribed minimum levels
- 6 -

of financial responsibility or is non-existent.” Carolina Cas.

Ins. Co. v. Yeates, 584 F.3d 868, 871 (10th Cir. 2009) (emphasis in

original); see also Canal Ins. Co. v. Carolina Cas. Ins. Co., 59

F.3d 281, 283 (1st Cir. 1995) (the endorsement “simply covers the

public when other coverage is lacking”). So, for example, if a

motor carrier’s insurance policy did not cover an accident

involving a leased vehicle, then the endorsement would require the

insurer to pay a final judgment against the insured. See Yeates,

584 F.3d at 884-85, n.11. The insurer would have the right to

repayment, but the insurer (not the injured party) would bear the

risk that the motor carrier could not pay. See id. at 885 (the

endorsement “merely shifts the risk of non-payment from the injured

party to the MCS-90 insurer”). But if there is coverage under the

policy, and the coverage meets or exceeds the minimum financialresponsibility requirement, then the endorsement does not apply. 

See id. Although it appears that our Court of Appeals has not

squarely addressed the issue, it has cited Yeates with approval. 

See Auto-Owners Ins. Co. v. Munroe, 614 F.3d 322, 327 (7th Cir.

2010) (describing the nature of the insurer’s obligation under the

endorsement, citing Yeates). 

NCC argues that the MCS-90 Endorsement does not apply in this

case because (1) the policy does cover the accident (see infra),

and (2) the policy limit of that coverage ($1 million) exceeds the

federally-mandated minimum. (See NCC Mem. at 5-10.) Moreover, by
- 7 -

the policy’s express terms, the $1 million limit applies to

liability stemming from a single accident no matter how many

insureds are involved. (See NCC Policy at 25 (“Regardless of the

number of covered ‘autos’, ‘insureds’, premiums paid, claims made

or vehicles involved in the ‘accident’, the most we will pay for

the total of all damages and ‘covered pollution cost or expense’

combined, resulting from any one ‘accident’ is the Limit of

Insurance for Liability Coverage shown in the Declarations.”).) 

This is a straightforward application of the majority rule. McComb

argues, however, that the MCS-90 Endorsement creates a separate and

independent duty to indemnify Bugarin, even if that means that

NCC’s total liability for its insureds exceeds the $1 million

policy limit. (See Pl.’s Resp. at 3.)

McComb bases his argument primarily on the Tenth Circuit’s

unpublished decision in Herrod v. Wilshire Ins. Co., No. 11-4029,

499 Fed. Appx. 753 (10th Cir. Oct. 11, 2012). In Herrod,

Espenschied Transport leased a trailer from DATS Trucking, Inc. 

Id. at 756. The trailer was involved in an accident killing

motorist Kimball Herrod. Id. At the time, Espenschied was insured

by Wilshire Insurance Company pursuant to a commercial vehicle

liability policy containing an MCS-90 Endorsement. Id. The

decedent’s estate later settled its lawsuit against Espenschied and

DATS, with DATS’s insurers agreeing to pay the estate approximately

$2.3 million. Id. For its part, Espenschied executed a confession
- 8 -

judgment for approximately $1.3 million. Id. When the plaintiff

presented the judgment to Wilshire and demanded payment, Wilshire

refused, arguing that the plaintiff had received compensation from

DATS exceeding the MCA’s minimum requirements. Id. at 757. The

Herrod court concluded that the MCS-90 endorsement required

Wilshire to pay the judgment entered against its insured, even if

the plaintiff had already received compensation from DATS’s

insurer. Id. at 757-58 (“Neither the text of the statute nor that

of the regulations indicates or implies that an MCS–90 insurer may

avoid paying a negligence judgment against its insured on the basis

that the injured party has received compensation from another motor

carrier’s insurer in settlement of claims against that carrier.”). 

McComb argues that if Bugarin had obtained an MCS-90 endorsement in

its own name, then the total amount available to cover McComb’s

damages would exceed $1 million. (See Pl.’s Resp. at 2 (“[H]ad

both Shandy and Bugarin obtained the requisite minimum amount of

insurance coverage, there would have been at least $1.5M in

insurance coverage available to McComb rather than only $1M.”).)2

So, according to McComb, the policy underlying the MCA dictates

that NCC should be liable to pay a final judgment as though there

were two endorsements. (Id. at 3-4.)

We reject McComb’s argument for two independent reasons.

2/ McComb presumes that Bugarin is subject to the MCA’s financial

responsibility requirements, but concedes that there is no evidence in the record

establishing that fact. (See Pl.’s Resp. at 2-3.) The parties disagree about

whose burden it was to present such evidence. (See NCC Resp. at 4-6.) For the

reasons we are about to explain, we find it unnecessary to reach that issue.
- 9 -

First, we agree with NCC that the Endorsement only applies to

a final judgment against the named insured (J.L. Shandy). The term

“insured” in the MCS-90 Endorsement 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.” 49 C.F.R. § 387.5 (emphasis added). There is some

support in the case law for McComb’s position that the Endorsement

applies more broadly. See John Deere Ins. Co. v. Nueva, 229 F.3d

853, 859-60 (9th Cir. 2000); see also Adams v. Royal Indem. Co., 99

F.3d 964, 970-71 (10th Cir. 1999). But since John Deere and Adams

were decided, the FMCSA has clarified that the endorsement only

applies to the named insured:

Question: Does the term "insured," as used on Form

MCS-90, Endorsement for Motor Carrier Policies of

Insurance for Public Liability, or "Principal", as used

on Form MCS-82, Motor Carrier Liability Surety Bond, mean

the motor carrier named in the endorsement or surety

bond?

Guidance: Yes. 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 any party other

than the carrier named in the endorsement or surety bond

or its fiduciary. 

FMCSA Regulatory Guidance, 70 Fed. Reg. 58065, 58066 (Oct. 5,

2005). Courts interpreting the endorsement in light of this

guidance have held that the endorsement only applies to the named

insured. See Ooida Risk Retention Group, Inc. v. Williams, 579
- 10 -

F.3d 469, 477 (5th Cir. 2009); Sentry Select Ins. Co. v. Thompson, 

665 F.Supp.2d 561, 565-69 (E.D. Va. 2009); Armstrong v. U.S. Fire

Ins. Co., 606 F.Supp.2d 794, 825-26 (E.D. Tenn. 2009); see also

Illinois Nat. Ins. Co. v. Temian, 779 F.Supp.2d 921, 927 (N.D. Ind.

2011) (“Courts addressing the meaning of ‘insured’ in the MCS–90

endorsement since the FMCSA guidance have consistently held that

the endorsement’s coverage does not extend beyond the named

insured.”). We believe that these authorities are persuasive. 

McComb has not suggested that the FMCSA exceeded its authority when

it adopted § 387.5, and its guidance is consistent with the

regulation’s plain language. See Forkwar v. Progressive Northern

Ins. Co., Inc., 910 F.Supp.2d 815, 826 (D.Md. 2012) (concluding

that the FSCSA’s guidance is consistent with the regulation’s

language and “entitled to respect”). Moreover, we agree with the

courts that have held that the different methods of evidencing

financial responsibility should be interpreted consistently. The

form applicable to the surety-bond alternative (Form MCS-82) is a

free-standing agreement applicable to the “Motor Carrier Principal”

only. See 49 CFR § 387.15. If J.L. Shandy had elected to obtain

such a bond in lieu of the Endorsement, it plainly would not apply

to third parties like Bugarin. It would be strange, then, to

interpret the regulations to impose varying degrees of financial

responsibility depending on the form of proof the motor carrier

elected to obtain. See Sentry Select, 665 F.Supp.2d at 568 (“Here,
- 11 -

because the MCS–90 was promulgated for precisely the same purpose

as a surety bond or self-insurance, it would make no sense to reach

a different result based on how Milligan chose to discharge his

federally mandated financial responsibility duties.”); see also

Temain, 779 F.Supp.2d at 928 (similar).

Second, we do not believe that Herrod’s reasoning supports

extending its holding to apply to this case. By its terms, the

MCS-90 endorsement applied to the unpaid judgment against

Wilshire’s insured. Nevertheless, Wilshire argued that it was not

required to pay the judgment because the plaintiff in the

underlying case had already received compensation exceeding the

MCA’s minimum threshold from another insurer. As the Herrod court

pointed out, there is no basis for such an exception in the

regulations or the endorsement itself. By contrast, NCC is not

attempting to avoid its obligation to cover its named insured (or

Bugarin, for that matter). It is only attempting to limit its

liability exposure consistent with the policy’s express terms. See

Auto-Owners, 614 F.3d at 327 (“[T]he MCS–90 does not modify the

terms of the policy, but instead obliges the insurer to pay up to

$750,000 of a final judgment regardless of the terms of the

policy.”). The endorsement is intended to protect the public. At

the same time, the MCA does not make insurers strictly liable for

any and all damages arising from accidents involving insured motor

carriers. Cf. Carolina Causalty, 584 F.3d at 888 (“[W]e are
- 12 -

unwilling to read the Motor Carrier Act and the FMCSA regulations

as requiring Carolina Casualty to bear responsibility it did not

anticipate or otherwise bargain for once the public policy purposes

of the regulations have been satisfied.”); Kline v. Gulf Ins. Co.,

466 F.3d 450, 456 (6th Cir. 2006) (“The federal government balanced

the need to compensate victims with the needs of industry and

determined the appropriate minimum compensation for members of the

public.”).

In sum, we hold that the MCS-90 Endorsement does not apply to

the underlying lawsuit and does not require NCC to pay damages in

excess of the $1 million policy limit.

CONCLUSION

The plaintiff’s motion for summary judgment [18] is denied. 

The defendants’ motion for summary judgment [19] is granted.

DATE: October 31, 2013

ENTER: ___________________________________________

John F. Grady, United States District Judge