The transportation industry is unique in that it operates under federal oversight and is designed to protect the general public when large commercial vehicles travel across state lines. While most motor carriers understand they need Liability coverage that complies with federal law, many don't fully understand how the required federal filings and the MCS-90 endorsement affect their exposure and that of insurance companies.

Eden Hancock, CIC, TRS, senior area vice president at RPS, breaks down how these filings work, why they exist and the impact they have on coverage, cancellation rights and claims.

What Is a Federal Filing?

A federal filing is required any time a for-hire motor carrier crosses state lines. The insured applies to the Federal Motor Carrier Safety Administration (FMCSA) to obtain a Motor Carrier (MC) number after already having a DOT number. Once insurance is bound, the insurance carrier completes the federal filing on behalf of the insured.

This filing is publicly accessible and serves as proof to the general public that properly insured motor carriers are operating on US roadways. As Hancock explains, the purpose is to ensure that "80,000-pound tractor-trailers are properly insured as they're going on our roads."

Minimum limits vary depending on the cargo:

  • $750,000 for most truckers
  • $1 million for auto haulers and certain gasoline/fuel transport
  • Up to $5 million for certain hazardous operations and certain gasoline/fuel transport

Where the MCS-90 Comes In

The Motor Carrier Act of 1980 placed a number of requirements on both insurance companies and interstate motor carriers. One requirement involved proof of financial responsibility. It states that no motor carrier shall operate a motor vehicle unless it has demonstrated the ability to pay any claim up to the statutory minimum limit.

While larger trucking firms can self-insure, this requirement is typically met via an Auto Liability insurance policy. Proof of compliance is typically done with an MCS-90 endorsement, which is added to a motor carrier's Auto Liability policy.

Coverage May Apply for Excluded Losses

"This means the MCS-90 can require the insurer to respond to a claim even if the loss would normally be excluded under the policy," says Hancock. "For example, consider an insured with a scheduled-unit policy. The motor carrier begins the year with 15 units but adds another unit during the policy term without notifying its insurer. If that 16th vehicle is involved in an accident, the policy form alone may clearly exclude coverage. However, because the MCS-90 endorsement is in force, the insurance company may still have to pay the claim."

It's important to note that while the insurer may have to pay the claim, it can later pursue reimbursement from the insured. Although subrogation isn't common, trial attorneys are increasingly aware of the endorsement and are actively invoking it, especially in catastrophic losses and in scenarios where units or drivers were never reported as required.

The Impact to Cancellation Terms

Another impact of the MCS-90 is one that most trucking companies don't anticipate. The endorsement requires the insurer to provide the FMCSA with at least 35 days' notice of the policy's cancellation. This requirement can create situations where coverage continues even when the insured wants to cancel for any reason, the insured still owes the premium for that extended period and policies with federal filings cannot be flat-cancelled.

As Hancock notes, "The insured might be responsible for an additional 35 days of premium after they've tried to cancel the policy."

The MCS-90 does three major things:

  • It expands the insurer's obligation to pay claims — even if a unit or driver wasn't scheduled or the policy would otherwise have excluded the loss (though the insurer may later seek reimbursement).
  • It alters policy cancellation and premium obligations by requiring 35 days' notice and continuing accrual of premiums.
  • And it increases vehicle-level documentation requirements when removing a truck from the policy because the insurer must confirm the unit is no longer owned or operating under the insured's authority before it can safely be deleted.

Speak to Your Clients

Hancock offers clear guidance for agents: Be sure to report units and drivers promptly, know that cancellations cannot occur immediately, understand the increased documentation requirements and explain that the insurer may pay a claim and then pursue reimbursement.

"Agents need to properly educate their insured about the obligation of the endorsement and the cancellation provisions," she says.

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