Opinion ID: 170978
Heading Depth: 1
Heading Rank: 10

Heading: Application to Carolina Casualty

Text: Carolina Casualty argues that under the majority approach, State Farm's $750,000 payment to the Yeateses satisfied the regulatory purpose behind the FMCSA regulations. Thus, it is entitled to a declaratory judgment that it has no liability under the MCS-90 endorsement to the Yeateses. In particular, since Carolina Casualty's policy with Bingham Livestock did not cover the truck involved in the accident, it has no duties under its general liability policy. Further, because the truck was transporting non-hazardous cargo and because the State Farm Insurance payout satisfied Bingham Livestock's financial responsibility requirements, Carolina Casualty contends its duties under the MCS-90 endorsement are not implicated. The Yeateses respond that under either the old Empire Fire approach or the approach we adopt today, Carolina Casualty remains potentially liable. In essence, the Yeateses contend the public liability guarantee under Carolina Casualty's MCS-90 endorsement should stack [13] with all other applicable liability policy limits to satisfy as much of their judgment as possible. We agree with Carolina Casualty and conclude that the MCS-90 endorsement here is not triggered. First, there is another insurance policy, the State Farm policy, available to satisfy a liability judgment against Bingham Livestock. In fact, State Farm has already made a $750,000 policy limit payment irrespective of any actual final judgment against Bingham Livestock to the Yeateses. Second, Bingham Livestock's insurance coverage, by virtue of the State Farm policy, is not insufficient to meet the federally-mandated minimum level for the type of cargo it was transporting at the time of the accident. No one disputes the truck was transporting non-hazardous cargo and that the requisite minimum level of financial responsibility was therefore $750,000. Rather, the Yeateses contend the MCS-90 endorsement language in the Carolina Casualty policy still allows for an additional recovery against Carolina Casualty. We disagree. The Carolina Casualty policy endorsement states: The policy to which this endorsement is attached provides primary ... insurance... for the limits shown: This insurance is primary and the company shall not be liable for amounts in excess of $1,000,000 for each accident. R., App. at 79. The Yeateses seize on the language in the endorsement providing [i]n consideration of the premium stated in the policy ... 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... regardless of whether or not each motor vehicle is specifically described in the policy. Id. They claim this particular MCS-90 provision in conjunction with Carolina Casualty's $1 million policy limit precludes a declaratory judgment in Carolina Casualty's favor. But the Yeateses' reading of the MCS-90 endorsement, in light of the majority approach we adopt today, is unpersuasive. The schedule of limits, attached as the second page of Carolina Casualty's MCS-90 endorsement, delineates the same limits contained in 49 C.F.R. § 387.9. R., App. at 80 (containing table with limits as prescribed by the FMCSA regulations). While Carolina Casualty's policy provided a $1 million limit, this is explained as a result of the higher limits required for transport of oil and certain hazardous cargo. The question remains whether an insurer that provides an MCS-90 endorsement to satisfy the regulatory requirements for multiple types of cargonon-hazardous and hazardousnecessarily exposes itself to the highest possible limits as delineated by its underlying insurance policy. We think not. A recent Sixth Circuit case rejected a similar argument. In Kline v. Gulf Insurance Co., a motor carrier chose to self-insure for $1 million, the requisite financial responsibility requirements under the FMCSA regulations for the cargo the carrier transported. 466 F.3d at 452. The carrier also obtained an excess liability insurance policy for $1 million (for claims over $1 million) and an umbrella policy for any claims above $3 million from two insurers. Id. The umbrella policy apparently contained an MCS-90 endorsement. Id. Kline, the injured party, obtained a $3.2 million judgment against the carrier, but was unable to collect from the self-insured trucking company as it had declared bankruptcy. Id. Although Kline did collect $1 million against the excess insurer and $200,000 from the umbrella insurer, $2 million of the judgment remained unsatisfied. Id. Kline sought to collect the additional amounts from the umbrella insurer, arguing the attached MCS-90 endorsement operated to satisfy a portion of his unpaid judgment. Id. The Sixth Circuit held the MCS-90 endorsement inapplicable. Specifically, the court noted that the purpose of the [MCS-90] endorsement is to give full security for the protection of the public up to the limits prescribed [by federal regulation]. Kline, 466 F.3d at 455 (emphasis added) (citing 46 Fed.Reg. 30,974 (1981)); id. at 456 (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.). Additionally, [r]ead as a whole, the MCS-90 incorporated the limits of liability in the original insurance policy; it did not replace them. Id. at 455. Moreover, according to the court, the MCS-90 endorsement's language stating `[t]he insurance policy to which this endorsement is attached ... is amended to assure compliance by the insured [with the MCA]' suggested the insurer intended to offer $1 million in coverage only if the law required such coverage. Id. Because the carrier self-insured to the minimum regulatory amount, the court determined the MCS-90 endorsement's public policy purpose was not implicated. Id. And, as Kline had already collected $1.2 million of her judgment, her recovery already exceeded the $1 million regulatory minimum level of financial responsibility for the carrier. Id. Thus, the court concluded the purposes underlying the MCA and the regulatory regime had been served and the MCS-90 did not operate to make the umbrella insurer liable on any amount its policy did not otherwise mandate. [14] Id. at 456. This reasoning is persuasive here. The Yeateses have already collected $750,000 the regulatory minimum compensation levelfrom State Farm on any hypothetical judgment they may eventually receive against Bingham Livestock. Therefore the public policy purposes underlying the MCS-90 have been satisfied. The Carolina Casualty policy, by its own terms, does not extend coverage to the truck involved in the accident. Accordingly, we are 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. We therefore conclude that State Farm's $750,000 payment satisfied Bingham Livestock's minimum financial responsibility requirements under federal law and the MCS-90 endorsement attached to the Carolina Casualty policy does not supply additional coverage. The Yeateses therefore cannot recover under this endorsement. [15]