Thirty plus years after its June 1981 introduction, the MCS‐90 endorsement remains a highly misunderstood form. Apparent judicial misapplications of the intended meaning and purpose of the form have added to the confusion.
The MCS‐90 was designed to assure that an at‐fault “for‐hire” or public motor carrier could fulfill its financial responsibility to the public, regardless of the insured’s failure to comply with the underlying insurance policy’s terms and/or conditions. But it was not designed or intended to extend coverage to non‐insureds or create coverage where none existed. Above all, the MCS‐90 was not created to and does not currently provide any insurance coverage within the wording of the form – insurance protection is extended only from the policy to which the endorsement is attached. The current edition of the MCS‐90 can easily be obtained (https://ai.fmcsa.dot.gov/newentrant/MC/Examples/Ins_ex.pdf).
Attachment of the MCS‐90 does nothing more than a guarantee that there will be some source of funds available to pay for bodily injury, property damage or environmental restoration (collectively referred to as “public liability” in the MCS‐90) made necessary by the negligence of the insured and its employees. However, this guarantee does not constitute insurance for one crucial reason: the insurance carrier issuing the MCS‐90 has the right to recover from the entity named in the endorsement any payment made as a direct consequence of the provisions of the form.
In essence, the MCS‐90 is more closely related to a surety bond “guaranteeing” that the insured has and will continuously maintain the coverages types and amounts mandated by law. And if the insured fails to maintain the required insurance coverage, the issuer of the MCS‐90 will stand in the insured’s place – for the public good. But the issuer of the MCS‐90 can and will likely seek full reimbursement from the insured named in the endorsement.
To reiterate, the MCS‐90 is not insurance; it is a financial guarantee protecting the public from the financial consequences of a motor carrier’s failure to carry the statutorily required insurance protection. Any payment made solely under the provisions of the MCS‐90 is recoverable from the defaulting motor carrier.
Remember, the burden to meet the statutory financial requirements placed on motor carriers engaged in interstate commerce is on the motor carrier, not the insurance carrier. When the MCS‐90 is endorsed to a business auto policy, the insurance carrier takes on two roles; the first as insurer and the second as surety. These competing requirements and roles coupled with the fact that a few of the “guarantees” provided by the MCS‐90 are broader than the coverage provided by the underlying business auto policy (BAP)necessitates that the insurer carefully underwrite and confirm the underlying coverages that are to be maintained by the motor carrier.
Carolina Casualty Insurance Company v. Yeates saw the Ninth District court in California join the majority opinion in stating that the MCS‐90 does not create coverage in an underlying BAP where no coverage existed. In fact, the court laid out two tests that must be satisfied before the MCS‐90 can be called upon to respond to a loss:
- The underlying [auto] insurance policy to which the endorsement is attached does not provide coverage for the motor carrier’s accident; and
- The motor carrier’s insurance coverage is either not sufficient to satisfy the federally prescribed minimum levels of financial responsibility or is non‐existent.
The intent of the MCS‐90 appears rather self‐evident on its surface; it is not insurance, simply a safety net for innocent parties injured by the negligence of the named insured. However, sympathetic juries and judges have expanded the protection. Knowing how the form is designed to work should allow the attorney and insurance agents to effectively explain the need for the endorsement to the insured; beyond just, “because the government requires it.” Also, being able to provide the necessary underlying protection will better serve your trucking client and make the underwriter more comfortable with the risk.
Find the MCS-90 Form here – LINK
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