Opinion ID: 809906
Heading Depth: 3
Heading Rank: 1

Heading: Prior Compensation Received from DATS

Text: On appeal, Wilshire first contends that the district court erred in rejecting Wilshire’s argument that its MCS-90 obligation did not apply because the Herrods received compensation from DATS in excess of the minimum required under the MCA. In other words, Wilshire claims the public policy behind the MCS-90 endorsement – to ensure safeguarding financial protection in the event a member of the public is injured due to a motor carrier’s negligence – has been satisfied here by virtue of the Herrods’ settlement with DATS and, therefore, the MCS-90 endorsement attached to Espenschied’s liability insurance policy is not triggered. The district court rejected Wilshire’s argument, holding that the financial responsibility requirements apply individually to each motor carrier and each motor carrier is responsible for the judgment entered against it. Like the district court, we perceive nothing in the MCS-90 endorsement, the MCA, or the relevant regulations that would suggest that a motor carrier’s MCS-90 insurer may avoid paying a negligence judgment entered against its insured on the basis that the injured member of the public has received compensation from a different motor carrier’s insurer in settlement of claims against that motor carrier. -8- A commercial motor carrier may operate only if registered to do so, 49 U.S.C. § 13901, which requires proof of financial responsibility that is “sufficient to pay . . . each final judgment against the registrant [motor carrier] for bodily injury to, or death of, an individual resulting from the negligent operation, maintenance, or use of motor vehicles,” id. § 13906(a)(1) (emphasis added); see also 49 C.F.R. §§ 387.7, 387.301(a)(1); Distribution Servs., 320 F.3d at 489 (noting that MCA imposes a liability insurance requirement “upon each motor carrier registered to engage in interstate commerce” (emphasis added)). These provisions establish that the financial responsibility requirements to engage in the transportation of interstate commerce are specific to the individual motor carrier. Further, the MCS-90 endorsement provides that an insurer agrees to pay “any final judgment recovered against the insured” resulting from the insured’s negligence in the operation, maintenance, or use of motor vehicles. 49 C.F.R. § 387.15 (emphasis added). Accordingly, the text of the MCS-90 endorsement supports the conclusion that an MCS-90 insurer’s obligation to pay a final judgment is specific to its insured. 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. See also Carolina Cas. Ins. Co. v. E.C. Trucking, 396 F.3d 837, 841-42 (7th Cir. 2005) (rejecting argument that MCS-90 insurer was relieved of obligation to pay final -9- judgment rendered against its insured on the basis that injured party received compensation via a loan-receipt agreement in settlement of claims against another defendant). Finally, to the extent Wilshire relies on Yeates in support of its argument, it misconstrues Yeates. In Yeates, we held that an MCS-90 endorsement is triggered if the underlying insurance policy does not provide liability coverage and the motor carrier’s other insurance is insufficient to meet the mandated federal minimum or is nonexistent. Yeates, 584 F.3d at 879. In delineating this standard, we further stated that “[o]nce the federally-mandated minimums have been satisfied, however, the endorsement does not apply.” Id. Wilshire latches on to this statement to argue that, because the Herrods have received in excess of the federally mandated minimum through their settlement with DATS, the minimum has been satisfied and, therefore, the MCS-90 endorsement attached to Espenschied’s policy does not apply. But Wilshire reads our statement in Yeates out of context. We explained in Yeates that the MCS-90 endorsement serves as a “surety in the event judgment against the [motor] carrier is for some reason unsatisfied.” Id. at 880-81. We stated: Conceivably, the motor carrier may carry adequate insurance coverage providing recovery – at least to the FMCSA prescribed minimums – for a judgment in favor of an injured party. Or, the carrier may choose to pay the judgment out of its own pocket. In either of these cases, the purposes behind the MCS-90 are satisfied, and the endorsement is unnecessary. On the other hand, if, for example, the carrier fails to maintain insurance (or sufficient insurance) on a truck involved in an accident and fails to pay out of its own pocket for its liability to the injured party, the MCS-90 endorsement’s purpose is clearly implicated. - 10 - The endorsement in this circumstance would effectuate a minimum level of recovery for the injured party from the MCS-90 provider. Id. at 881 (citation omitted). Accordingly, once the federally mandated minimum has been satisfied as against a particular motor carrier, either by virtue of the motor carrier’s liability coverage or payment out of pocket, that particular motor carrier’s MCS-90 endorsement does not apply. But what Wilshire seeks is to be relieved of any MCS-90 surety obligation simply because the Herrods received payment from another motor carrier, even though the judgment against Wilshire’s insured, Espenschied, remains unsatisfied. We find no error in the district court’s rejection of Wilshire’s argument. Because the federally mandated minimum has not been met, as against Espenschied, Wilshire’s MCS-90 endorsement (theoretically) is implicated. Our holding is limited to the situation where, as here, a negligence judgment has been entered against a motor carrier and has not been satisfied as against that particular motor carrier. In that instance, the motor carrier’s MCS-90 insurer may not evade payment of the judgment against its insured on the basis that the injured party has received compensation elsewhere. We express no opinion on whether Espenschied is a “motor carrier.”