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Insurance Law

Truckers’ and Motor Carriers’ Commercial Vehicle Insurance – New Appleman on Insurance Law Library Edition, Chapter 69

By Jay Barry Harris, Lee Applebaum, and Jennifer Tatum Root, Attorneys, Fineman, Krekstein & Harris, P.C.

Chapter 69 examines the insurance of commercial vehicles with a particular emphasis on insurance in the commercial trucking industry. This chapter explores federal and state regulation of truckers' and motor carriers' insurance, the scope of liability coverage under the most common forms of insurance in the trucking industry, the allocation of coverage among multiple insurers, cargo liability insurance, insurance particular to transporters of hazardous materials, self-insurance of motor carriers, and insurance for the commercial transportation of passengers.

Section 69.01 discusses the regulatory environment governing motor carrier insurance, beginning with an overview of financial responsibility regulation of motor carriers in Section 69.01[1], which introduces the primary federal statutes that authorized these regulations and the administrative framework enforcing them.

Section 69.01[2] commences a detailed treatment of the MCS-90 endorsement. As explained in Section 69.01[2][a], most motor carriers satisfy minimum financial responsibility requirements by purchasing a liability insurance policy containing an MCS-90 endorsement, which is designed to protect the public by requiring the insurer to compensate members of the public injured by negligent use of an insured vehicle. Section 69.01[2] goes on to describe issues surrounding cancellation of the MCS-90 and the limited availability in some states of direct actions against insurance carriers through the MCS-90. Section 69.01[2] also deals with the MCS-90's employee exclusion, in addition to limitations of coverage based upon use of the vehicle and the business of the motor carrier.

Section 69.01[3] addresses two views of the nature of MCS-90 coverage. The majority of courts subscribe to a view of the MCS-90 endorsement as operating like a surety bond that provides a source of compensation for public liability resulting from motor vehicle accidents. A minority of courts view the MCS-90 as an expansion of existing insurance coverage, effectively reading MCS-90 coverage into deficient policies.

Section 69.01[4] pertains to differing interpretive approaches to the MCS-90, which applies exclusively to interstate commerce. The majority view examines the trip-specific usage of a vehicle at the time of the loss to determine whether an accident occurred in the course of interstate commerce. Other courts employ a more generalized approach focused on the shipper's intent in order to determine the MCS-90's applicability.

Section 69.01[5] explains that most courts adhere to the position that the MCS-90 does not impose upon an insurer a duty to defend its insured, although a minority of courts have found that the endorsement creates a duty to defend.

Section 69.01[6] explores issues relating to an insurer's claims for reimbursement in the MCS-90 context. The MCS-90 provides an automatic right of reimbursement for indemnity, but courts are split with respect to an insurer's ability to recover the costs of defense from its insured. Section 69.01[6][c] discusses the requirement that an insurer acting upon its subrogation or indemnification rights notify its insured with a reservation of rights letter. Section 69.01[6][e] concludes the analysis of the MCS-90 endorsement by touching upon an MCS-90 insurer's subrogation rights against other insurers.

Section 69.01[7] concerns regulation of motor carrier insurance by state and municipal governments. After a survey of state compulsory financial responsibility laws, this section explains distinctions among categories of motor carriers: private, common, and contract carriers. Although federal law now only maintains a distinction between private and for-hire carriers, some states retain the old definitional scheme by subdividing for-hire carriers into common carriers holding themselves open to the general public and contract carriers serving only certain customers under contract.

Semi-Truck Motor Carrier Commercial Vehicle

Section 69.02 probes the major issues that define the scope of truckers' and motor carriers' commercial vehicle coverage.

Section 69.02[1] introduces the most common forms of insurance in the trucking industry: the Truckers, Business Auto, and Motor Carrier Forms issued by the Insurance Services Office. Section 69.02[1][c] discusses non-trucking (or "bobtail") policies that provide coverage for trucks only when they are not used in the business of the motor carrier. Section 69.02[1][d] details how courts interpret the business use exclusion in non-trucking policies through three analytical lenses: the commercial interest, under dispatch, and scope of employment approaches.

Section 69.02[2] compares the Truckers, Business Auto, and Motor Carrier Forms to commercial general liability insurance.

Section 69.02[3] examines who is covered as an insured. In addition to the named insured expressly stated in the policy, insurance may also extend to those using a covered vehicle with the permission of a named insured and owners of leased or borrowed vehicles. Although permissive user coverage is subject to multiple exceptions, some state laws broaden such coverage. Section 69.02[3][d] discusses the interplay of leasing agreements and hold harmless clauses between a vehicle lessor and lessee. Leasing arrangements play an increasingly important role in determining which party is insured under the other's policy, reflecting the prevalence of the Motor Carrier Form since the official withdrawal of the Truckers Form in 2010.

Section 69.02[4] analyzes what constitutes a covered "auto," the standard policy term for a covered motor vehicle. "Any auto" coverage covers all vehicles meeting the policy definition of "auto." "Owned autos only" coverage is limited to autos owned by the policyholder and trailers connected to an owned truck, but may also cover temporary substitute autos. Scheduled auto coverage is restricted to autos specifically listed in the policy, but under some circumstances also provides coverage to vehicles acquired after the policy takes effect. Some policies broaden coverage to all autos leased, hired, rented, or borrowed by the policyholder. Courts generally resolve disputes regarding whether a vehicle qualifies as a "hired auto" by determining whether the insured exercised dominion and control and exclusive possession over the vehicle.

Section 69.02[5] is devoted to judicial interpretations of the word "use." Because an insurer is obligated by the terms of its policy to cover losses caused by accidents resulting from the ownership, maintenance, or use of a covered vehicle, the term "use" takes on special importance. Aside from collisions involving a vehicle being driven, accidents resulting from "use" of a vehicle have been interpreted to encompass losses caused by cargo or debris thrown from a moving vehicle. A vehicle can also be "used," for coverage purposes, in many ways even while stationary (e.g., jump-starting another vehicle or changing a flat tire). Courts generally consider a vehicle in use when it is being towed.  Case law is less clear regarding accidents resulting from hazards created by material after it spills from a covered vehicle onto the roadway.

Section 69.02[6] details the complexities of coverage for accidents that occur during loading and unloading. Section 69.02[6][a] sets forth three interpretive approaches to defining when loading and unloading constitutes "use" of a covered vehicle. Under the "complete operation" rule adopted by a majority of jurisdictions, courts consider the entire loading or unloading operation as incident to "use" of the vehicle. Under the now largely discarded "coming to rest" rule, loading and unloading is defined narrowly to involve only the physical movement onto or from a vehicle, with coverage beginning when an object is picked up and ending as soon as it temporarily comes to rest. Some jurisdictions, however, refuse to follow either rule, but instead evaluate the strength of the causal connection between the loading or unloading accident and use of the vehicle to determine whether coverage exists. Accidents caused by unsafe loading docks are the topic of Section 69.02[6][b]. Section 69.02[6][c] discusses "loading and unloading clauses" that broaden the scope of coverage in non-standard policies.

Section 69.02[7] considers coverage provided by a motor carrier's insurer for a vehicle leased by the insured under a permanent lease agreement. This coverage generally extends only when the vehicle is used in the business of the lessee motor carrier and is designed not to cover the lessor's use of the vehicle for personal purposes. Section 69.02[7][b] describes several factual situations where coverage is often disputed, including travel from home to pick up a load, rest stops en route, and return trips after delivery. Section 69.02[7][c] explains how coverage may apply even though no cargo is being transported when driving to or from a garage for maintenance or repair of the leased vehicle, but the lessee's coverage generally does not apply when hauling a load for another motor carrier or while on a purely personal mission.

Section 69.02[8] examines the 13 standard coverage exclusions listed in the Truckers, Business Auto, and Motor Carrier Forms.

Section 69.02[9] concerns "placard liability" or "logo liability," which is a doctrine that presumes a motor carrier is liable for any vehicle bearing its Department of Transportation identification placard, company name, or business logo.

Section 69.02[10] concentrates on trip leases-where a vehicle under permanent lease is subleased to another motor carrier on a short-term or single-trip basis. The trip lessee's insurance provides coverage while in the business of the trip lessee, which generally includes transporting cargo on its behalf and traveling to pick up the trip lease load. If the trip lease is deemed to terminate upon delivery, the lessee's insurance will not provide coverage for a return trip.

Section 69.02[11] discusses the impact of compulsory no-fault insurance and uninsured and underinsured motorist coverage under state law.

Section 69.03 discusses priority of coverage; the allocation of insurance where more than one insurer provides coverage. Section 69.03[1] summarizes the clauses in policies that operate to make coverage either primary or excess over other insurance. Section 69.03[2] observes that in most jurisdictions the presence of an MCS-90 endorsement does not affect priority of coverage, but a small minority of courts interpret the MCS-90 as overriding an excess clause in an endorsed policy. Section 69.03[3] addresses the impact of lease relationships on priority of coverage, describing when the lessor's insurance is primary, when a lessee motor carrier's insurance is primary, and when both policies are co-primary.

Section 69.04 is concerned with cargo insurance. Because motor carriers are liable for damage to the cargo they transport-and because the commercial vehicle insurance policies discussed in the preceding sections specifically exclude coverage for cargo being hauled-motor carriers typically purchase separate insurance for cargo. Section 69.04[1] introduces Motor Truck Cargo liability coverage, the principal form of cargo insurance for motor carriers. Section 69.04[2] provides a background of the principal federal law governing motor carriers' liability for cargo, the Carmack Amendment, and discusses the impact of the 2010 U.S. Supreme Court decision, Kawasaki v. Regal-Beloit, which substantially clarified this area of law. Section 69.04[3] offers a synopsis of major issues concerning the scope of cargo liability coverage, discussing coverage (or lack thereof) for several types of losses that insurers dispute: lost or stolen cargo; loss of use, delay, and other consequential damages; diminution in value claims; physical damage caused by a collision between the load and another object, but not involving contact with the vehicle itself; and damage caused by upset of the conveying vehicle. Section 69.04[4] looks at mandatory cargo liability insurance requirements imposed on interstate motor carriers by federal law, referencing the federal forms that must be submitted to prove compliance. These requirements only apply to transporters of household goods since new regulations took effect in 2011.

Issues specific to pollution and the transportation of hazardous materials are the subject of Section 69.05. Section 69.05[1] explains the federal regulations that mandate specific levels of liability coverage for motor carriers transporting hazardous materials, depending on the type of material and the truck's gross vehicle weight. Section 69.05[2] discusses coverage for pollution.  It examines the standard policy definition of the word "pollutant," the limited coverage for "covered pollution costs" where pollution causes bodily injury or property damage, and the standard exclusion that eliminates coverage for all pollution costs arising from spills and discharges that occur before loading or after unloading.

Section 69.06 covers self-insurance, where a motor carrier provides for its own financial responsibility. Section 69.06[1] introduces the concept of the self-insured retention, a pool of funds set aside by the "self-insured" that must be exhausted before triggering an insurer's limited coverage. Self-insured retention policies vary with respect to allocating responsibility for the investigation of claims and the costs of defense, but generally obligate the insurer to defend the insured only after the retention is spent. Most policies also grant the insurer broad discretion regarding settlement of claims where claimed damages exceed the self-insured retention. Section 69.06[2] describes the administrative process of becoming an authorized self-insured motor carrier under federal regulations and considers issues pertinent to federally approved self-insurance of motor carriers.

Finally, Section 69.07 discusses insurance issues in the context of the commercial transportation of passengers. Section 69.07[1] explains federally mandated insurance requirements for passenger carriers. Coverage minimums depend on the seating capacity of the insured vehicle. Section 69.07[2] addresses differences between federal and state compulsory insurance requirements for passenger carriers and observes the variation in state law. The chapter ends with a brief discussion of frequently litigated issues concerning coverage for injuries to passengers.

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Jay Barry Harris is is a partner with Fineman, Krekstein & Harris, P.C., and a seasoned litigator with more than 30 years of experience. He represents businesses in complex civil litigation with a focus in the trucking industry and insurance coverage matters. On behalf of trucking companies, Jay handles a variety of matters including property damage and personal injury claims, cargo, employment-related issues and contract disputes. He advises his clients in risk management and compliance matters. Jay also represents insurers involved in insurance coverage disputes. Along with Jennifer Tatum Root, Jay oversees the Fineman Krekstein & Harris Medicare Secondary Payer Act Blog.

Lee Applebaum is a partner with Fineman, Krekstein & Harris, P.C., practicing in Pennsylvania and New Jersey. He has wide range of litigation and insurance coverage experience.  He is the author of numerous articles and book chapters, oversees the Pennsylvania Insurance Bad Faith Case Law Blog and is a leading national expert on state business courts.

Jennifer Tatum Root is an associate with Fineman, Krekstein & Harris, P.C. and licensed to practice in Pennsylvania and New Jersey.  Jennifer focuses her practice in insurance defense and has experience in insurance coverage matters.

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  • Anonymous
    Is a driver of a motor carrier hauling hazardous material covered under the liability of the motor carrier? The way I read it, he is. Under FMCSA regulation 385.402, a person who handles loads, transports and unloads is a haz/mat employee. A haz/mat employee is under the meaning of PHMSA regulation 171.8, which is covered under the FMCSA 387.9 . What is your answer? Thank you
  • Anonymous

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