Court Decision – In case of semi rig’s collision and wrongful death action, held that MCS-90 endorsement attached to insurance policy of motor carrier whose trailer was being hauled by a rig driven by a third party and pulled by a third party’s tractor unit would apply in the event there was a judgment in the case (context here was motion for summary judgment), despite the facts that (1) third party was hauling the trailer at time of the accident, (2) another third party had entered into a lease subject to purchase with tractor’s owner, and (3) that third party itself had entered into an Owner Operator Lease Agreement with yet another third party with obligation to do the maintenance.

Shropshire v. Shaneyfelt, 12 cv 1657 (U.S. District Court for the Western District of Pennsylvania, July 12, 2013. Copy of court-issued opinion available here.

Policy strength of the MCS-90 endorsement is strong indeed – given this remoteness between policy-holder and party who was operating the truck at the time of the accident.

REMARKS – The MCS-90 endorsement mandated by the Motor Carrier Act held not to require issuer of that endorsement to pay out to another insurance company – in light of MCS-90’s design that was to protect an “injured member of the public” harmed by “negligent authorized interstate [motor] carriers”. It simply does not apply “between two or more insurance companies”. COMMENT: At some point the federal court systems will need to resolve this question about application of MCS-90 as between two or more insurance companies. The law is unsettled in the various jurisdictions – including as interpreted by federal and state courts.

Carolina Casualty Insurance Co. v. Canal Insurance Co., Case No. 2:11-cv-736 (U.S. District Court for the Southern District of Ohio, April 18, 2013). Free copy from the court available here.

Legal Take-Away:

Application of MCS-90 to cases between two or more insurance companies is unsettled in the law.

Practical Take-Away:

Until law is resolved on the application of MCS-90 to cases between two or more insurance companies, counsel for insurance carriers (1) should assume for planning purposes that MCS-90 will not apply to such circumstances, and (2) should always – in the context of an accident case presenting this situation – explore the possibility of making a good faith claim for recovery in such circumstances unless and until the law is settled to say otherwise.

UPCOMING: The Motor Carrier Act of 1980 mandates that MCS-90 and Form F endorsements protect the public from uncompensated losses – if the endorsee motor carrier operates “in interstate commerce”. Can a mistake by the driver as to routing that is not intended by the company employing the driver, “override and negate the authorized fixed and persisting intent of a shipper and interstate common carrier that the transportation involved be interstate”?

The 2nd Circuit ruled that it can do so. 

Before the U.S. Supreme Court

Lyons v. Lancer Ins. Co.

12-529

On a Petition for a Writ of Certiorari to the U.S. Court of Appeals for the 2nd Circuit

Petitioner’s Reply Brief on the Merits available here (subscription required). 2013 WL 543282.

Petitioner here argues that there is a conflict between the circuits: 

“Notwithstanding the holding in Lyons v. Lancer, Courts, other than the Second Circuit have already held that a bus driver does not have the legal authority to act, nor is he a shipper with the authority to override the fixed and persisting intent of an actual shipper in determining whether transportation was interstate or intrastate. Consumers v. Sons Trucking Inc. IV, U.S. Court of Appeals Fifth Circuit No. 01-20201 (dated and filed October 8, 2002); Canal Insurance Company v. Owens, et al., 211 U.S. Dist. Lexis 118329 (dated and filed October 12, 2011).”

Legal doctrine take-away: 

“Deregulation” was premised in part on the “financial responsibility” minimums for insurance of motor carriers against harm to others. But that requirement applies only to an interstate motor carrier.

Practical business take-away: 

At issue here is whether or not the protection built into the “deregulation” of the motor carrier industry in 1980 will have an unpredictable gap where a driver has opted to routing that is intrastate notwithstanding the employer motor carrier’s “intent” that would render the carrier “interstate” in character.

This is about predictability that the MCS-90 and Form F endorsements will be enforceable on behalf of those harmed by motor carriers.

INSURANCE (MCS 90) / Context: Lawsuit following three-fatality truck accident. Where neither motor carrier deemed responsible for accident nor defendant insurance company intended that such insurance company insure operation of the tractor used in the accident, and such insurance company therefore did not issue an MCS-90 – held: The court refused to rule that MCS-90 coverage was “implied in law”.

“[Defendant insurance company] did not undertake to insure [defendant motor carrier’s] trucking operations and, importantly from a ‘policy’ standpoint, the victims had available to them the $3,000,000 coverage provided by [tractor lessee’s] insurers. Tragically, that coverage is not adequate, but it nevertheless far exceeds the statutory minimum.

“In sum, the Court will not rewrite the [defendant insurance company’s] policy to incorporate a MCS-90 endorsement.”

Grange Mutual Casualty Co. v. Pinson Trucking Co., Inc., Slip copy, 2013 443619 (U.S. District Court for the Middle District of Georgia, February 5, 2013). Free copy available here.  Continue reading

CASE STUDY: MOTOR CARRIER & INSURANCE / California Court of Appeals for the 1st District rules that one insurer can recover from another insurer under an MCS-90 endorsement – Any operative effect elsewhere in light of prevailing contrary law?

Global Hawk Insurance Co. v. Century-National Insurance Co., 203 Cal.App.4th 1458, 138 Cal.Rptr. 363, (California Court of Appeal, 1st Dist. February 29, 2012). Free copy of opinion available here.

Take-Away:

Despite prevailing precedent elsewhere, in California Court of Appeals 1st District on these facts, issuer of MCS-90 endorsement can be required to reimburse directly another insurer. Put another way, MCS-90 extends beyond just the driving public who may be injured by an otherwise judgment proof motor carrier.

What Happened: 

  • Motor Carrier #2′s driver injured in collision with Motor Carrier #1’s truck.
  • Issuer of Motor Carrier #1’s MCS-90 was also its liability policy insurer.
  • Motor Carrier #1’s colliding truck not listed on schedule of liability policy.
  • Motor Carrier #2’s driver filed claim with Motor Carrier #1’s MCS-90 endorser and liability insurer (one and the same company) – and was declined due to absence of truck from liability policy vehicle schedule.
  • Motor Carrier #2’s uninsured motorist policy insurer paid driver $100,000 policy limits because Motor Carrier #1 “uninsured” as to particular truck.

Arguments & Decision:

Issuer of MCS-90 to Motor Carrier #1: MCS-90 functions as a “surety” – “not insurance”. It’s “protected class” is “the public that share the roads with big rigs” – not other insurers.

Uninsured Motorist Policy Insurer to Motor Carrier #2: Despite citation of cases from around the U.S., no California court has held what MCS-90 issuer argues here – that MCS-90’s “protected class” is restricted to “the public” and inoperative as to other insurers. If direct reimbursement not allowed here between insurers, it raises unfair procedural to those MCS-90 meant to protect: Those harmed by “fly-by-night” motor carriers that lack financial resources to shoulder financial responsibilities.

The Court: Despite absence of relevant Motor Carrier #1 truck from liability policy, MCS-90 endorsement required insurer to reimburse uninsured motorist insurer that paid out claim to $100,000 policy limit after liability insurer for Motor Carrier #1 refused on grounds that relevant truck was absent from policy schedule.

So What?

The question for the future is whether or not this holding will be limited to its specific facts (whose detail would consume more paragraphs) – at least within the jurisdiction covered by the California intermediate level appellate court that issued this ruling.

The case appears to go against a major en banc (full circuit of judges after initial decision by a three-judge panel of this circuit) holding for the U.S. Court of Appeals for the 10th Circuit which ruled that an MCS-90 endorsement applies only where both (1) underlying insurance policy to which MCS-90 endorsement is attached does not provide coverage for a motor carrier’s accident, and (2) motor carrier’s insurance coverage is either not sufficient to satisfy the federally-prescribed minimum levels of financial responsibility or it is non-existent. Carolina Casualty Insurance Co. v. Yeates, 584 F.3d 868, 875-79 (10th Cir. 2009)(See multiple precedents from around the federal appellate circuits).

Global Hawk’s core subtlety is that (1) there was liability insurance coverage for the motor carrier, and (2) such coverage was in fact sufficient to cover federally-mandated minimum financial responsibility – but neither (1) nor (2) was true of the particular truck involved in the accident.

Petition for review by the California Supreme Court was denied June 13, 2012, but legal argument on this MCS-90 point remains: 

The question nationwide is whether or not this holding will eventually be adopted elsewhere in the nationwide – or whether instead it stands as a minor one-off instance of judicial activism that will comprise at best a distinctly minority position, with decisions like Carolina Casualty Insurance Co. v. Yeates continuing to comprise the majority view.