Opinion ID: 170978
Heading Depth: 2
Heading Rank: 2

Heading: Interplay of the MCS-90 Endorsement and Liability Insurance

Text: The language of the MCS-90 endorsement and the underlying regulations evince several key conclusions with respect to the financial responsibility requirements. [6] First, the financial responsibility provisions require motor carriers to demonstrate they are adequately insured in order to protect the public from risks created by the carriers' operations. See id. §§ 387.1, 387.7. From the express language of the Motor Carrier Act and the regulations, these provisions are intended to impose a mandatory requirement that motor carriers obtain a minimum level of liability insurance, depending on the cargo they carry. See id. § 387.9. Second, the provisions were designed to ensure the collectability of a judgment not to relieve the injured member of the public from the requirement that he or she obtain a final judgment of legal liability against the motor carrier and its insurers as a prerequisite. See id. § 387.15, Illus. I ([T]he insurer ... agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence .... (emphasis added)). Third, an MCS-90 endorsementas one of the acceptable methods of demonstrating financial responsibilityis ambiguous with respect to how it interacts with the underlying insurance policy. The endorsement states that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the [insurance company] from liability or from the payment of any final judgment, within the limits of liability herein described. Id. On one hand, this provision may suggest the endorsement modifies the underlying policy to the extent the policy is inconsistent. But on the other hand, the endorsement further provides that all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company. Id. It is precisely this ambiguity that has created the confusion about the effect of an MCS-90 endorsement on an injured party's right to recover a negligence judgment against a motor carrier. The tension between these competing clauses in the MCS-90 endorsement leads to confusion because courts are typically confronted with two determinations involving the endorsement that must be resolved contemporaneously: (1) the proper allocation of insurance liability among multiple insurers and the motor carrier, and (2) any possible public financial responsibility because of a shortfall in available sources for satisfaction of a judgment against the motor carrier, at least up to the prescribed minimum amount under the regulations. When we decided Empire Fire over 20 years ago, the MCS-90 landscape was sparse. Since then, our reasoning in Empire Fire has been relegated to a minority position. See Appleman on Insurance Supp. to § 4467 (Supp.2008) (describing the circuit split and the various approaches). To better explain our decision today, we provide a brief summary of the competing approaches to the interpretation and application of the MCS-90 endorsement.