Opinion ID: 170978
Heading Depth: 1
Heading Rank: 8

Heading: Triggering Circumstances

Text: It follows from the regulatory scheme and the text of the endorsement that the surety obligation is triggered only when the underlying insurance policy does not provide coverage and either (1) no other insurance policy is available to satisfy the judgment against the motor carrier, or (2) the motor carrier's insurance coverage is insufficient to meet the federally-mandated minimum level. See Distrib. Servs., Inc., 320 F.3d at 490; Larsen Intermodal Servs., Inc., 242 F.3d at 672. First, if no other insurance policy is available the purposes behind the MCS-90 are clearly implicated. As the majority of circuits have recognized, the primary purpose of the MCS-90 is to assure that injured members of the public are able to obtain judgment from negligent authorized interstate carriers. John Deere Ins. Co. v. Nueva, 229 F.3d 853, 857 (9th Cir.2000). Where, for example, a motor carrier fails to obtain insurance on a particular vehicle [11] or driver, no liability policy would extend to cover the carrier's potential negligence on the public highways. If an injured party obtains judgment, he or she would be left to rely solely on the financial stability of the motor carrier to satisfy judgment. This is the exact situation the endorsement contemplates and is designed to address. See 49 C.F.R. § 387.15, Illus. I (stating the endorsement imposes an obligation on the MCS-90 insurer to make payment of any final judgment ... irrespective of the financial condition, insolvency or bankruptcy of the insured). Under this scenario, the motor carrier becomes a judgment-debtor to the injured party, the judgment-creditor. The endorsement would then operate to read out any exclusions or limitations and thereby require the MCS-90 insurer, as a surety, to pay the injured party. However, the endorsement does not extinguish the debt of the insured; it transfers the right to receive the insured's debt obligation from the judgment creditor to the insurer. W. Am. Specialized Transp. Servs., Inc., 409 F.3d at 260. And most importantly, it merely shifts the risk of non-payment from the injured party to the MCS-90 insurer. See 49 C.F.R. § 387.15, Illus. I (stating the insurance company has a right to reimbursement from the motor carrier for payment of such a judgment). In this way, the endorsement satisfies its public policy purpose. Second, and similarly, the endorsement may be implicated where the sum of all liability coverage applicable to a motor carrier's accident is insufficient to meet the financial responsibility minimums. This situation may arise where all the motor carrier's insurance policies providing coverage for a specific accident have policy limits, in aggregate, which are set too low. The federal regulatory scheme provides for different minimum financial responsibility coverage amounts. Motor carriers must maintain at least $750,000 in financial responsibility coverage for vehicles transporting non-hazardous cargo, $1 million for vehicles transporting oil and certain hazardous substances, and $5 million for other hazardous substances and radioactive materials. See id. § 387.9. Motor carriers may obtain multiple MCS-90 endorsements attached to multiple insurance policies, each providing proof of the requisite level of financial responsibility for a particular type of cargo. See Regulatory Guidance for the Federal Motor Carrier Safety Regulations, 62 Fed.Reg. 16,370, 16,403 (Apr. 4, 1997). Or, alternatively, as in this case, the motor carrier may obtain one policy with an attached endorsement meeting the highest requisite minimum for the type of cargo it transports. The carrier may then maintain other insurance policies covering the carrier's liability risk for various vehicles but lacking any MCS-90 endorsement, such as the State Farm policy here. Either way, the MCS-90 endorsement may be implicated where a motor carrier improperly transports cargo using vehicles that are not insured up to the requisite minimums for that cargo. In such a circumstance, the liability insurance coverage would be insufficient to meet the above minimums and the MCS-90 endorsement(s) would operate to satisfy the deficiency. Once again, if an insurer, which otherwise has no liability for an accident but for the MCS-90 endorsement, pays out the financial responsibility minimums as governed by the regulations, that insurer is not without recourse; it may still seek reimbursement from the motor carrier.