Effects of State Laws & Insurance Coverage Jim Wescoe Weber Gallagher Simpson Stapleton Fires & Newby, LLP

Transcription

1 Effects of State Laws & Insurance Coverage Jim Wescoe Weber Gallagher Simpson Stapleton Fires & Newby, LLP TRUCKING INDUSTRY DEFENSE ASSOCIATION 3601 EAST JOPPA ROAD BALTIMORE, MD T F

2 Effects of State Laws & Insurance Coverage Overview

3 Overview Trucking Regulations Programs For Meeting Financial Responsibility Requirements Insurance Policy Issues MCS 90 Conclusions

4 Trucking Regulations Federal Motor Carrier Act governs all interstate shipments State Financial Responsibility Acts governs intrastate shipments and often mirror the Federal Motor Carrier Act

5 Federal Motor Carrier Act Requires registration as an Interstate Motor Carrier To register, a motor carrier must meet minimum levels of financial responsibility FMCA sets forth means of meeting financial responsibility and rules governing motor carriers

6 Surety Bonds Financial Responsibility Requirements are met by posting a bond with the FMCSA Bond is generally provided by an insurance carrier Insurance carrier acts as indemnitor, not as insurer MCS 90 is not required

7 Qualified Self Insurance The motor carrier meets the financial responsibility requirements internally. The self funded program must be approved by the FMCSA Approval requires actuarial review of losses, financial review of trucking company and posting of collateral Typically only very large motor carriers have the ability to be self-funded Not subject to insurance policy issues such as permissive use and MCS 90

8 Insurance A set premium is paid for a specific amount of coverage The insurance company pays all covered losses up to the limit of coverage The minimum limit of liability coverage for an interstate motor carrier is $750,000 The limit for hazardous material carriers and buses is $5,000,000 Requires the filing of an MCS 90 endorsement by the insurance carrier

9 Alternative Insurance Examples Deductible Insurance Programs Captives Risk Retention Groups

10 Deductible Insurance Programs Coverage provided under an insurance policy In exchange for a lower premium, the insured pays the first portion (the deductible amount) of the loss Deductibles range in size from thousands to millions of dollars

11 Captives Similar entities come together to act in the manner of an insurance carrier Captive is fronted by insurance policy Captive members acts as reinsurers to the fronting policy MCS 90 meets financial responsibility requirement

12 Risk Retention Group Similar entities come together to act in the manner of an insurance carrier Captive is NOT fronted by insurance policy i.e. no MCS 90 Financial responsibility meet through other means

13 Interaction of Financial Responsibility Requirements and Legal Liability Legal liability of truck driver often flows to trucking company and, potentially, the insurance carrier Financial responsibility requirements in place to ensure payment of award by either trucking company or insurance company Trigger for payment differs between trucking company and insurance carrier

14 Qualified Self Insured Trucking Company Trigger The driver is an agent of the motor carrier Most state laws hold the agency responsible for the acts of the agent Respondent superior translates to let the master answer

15 Qualified Self Insured Trucking Company Trigger Motor carrier is only responsible for the driver when the driver is in the course and scope of employment The motor carrier may be responsible regardless of the vehicle involved, if the driver is working for the motor carrier at the time of the loss.

16 Qualified Self Insured Trucking Company Trigger Placard liability laws This principle creates many issues when vehicles are leased permanent and trip leases Leased, borrowed and hired trailers create further questions and issues

17 Insurance Forms Policies can be manuscript or through a service such as ISO 3 general ISO forms used in the trucking industry: Truckers Business Auto Motor Carrier

18 Insurance The insuring agreement Who is an insured What is insured Other Insurance clause MCS 90

19 The Insuring Agreement We will pay all sums an insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto.

20 Who is an Insured? The ISO policy specifies 5 groups: a. You for any covered auto: b. Anyone else while using with your permission a covered auto. c. The owner or anyone else from who you hire or borrow a covered auto that is a trailer while the trailer is connected to another covered auto that is a power unit d. The lessor of a covered auto that is not a trailer or any employee, agent or driver of the lessor while the auto is leased to you under a written agreement between the lessor and you does not require the lessor to hold you harmless and then only when the leased auto is used in your business as a motor carrier for hire.

21 Who is an Insured? Exclusions in the Who is an insured section: Numerous Significant in lease situations. Considerations to be reviewed: Who owns the tractor Who employs and directs the driver

22 Covered Autos All policies, manuscript or ISO, specify what vehicles are covered Generally use symbol codes to designate covered units Examples: owned autos, any auto, hired autos, specifically described autos. The driver and vehicle must be covered for the policy to apply

23 The Other Insurance clause When two or more policies cover the same driver and/or vehicle this clause must be considered Motor Carrier Form: primary or excess depending on who is required to hold the other harmless in a written lease Business Auto Form: For any auto you own, this coverage form provides primary insurance.. Truckers Form:.. Primary for any covered auto hired or borrowed by you..

24 The MCS-90 Endorsement mandated by the FMCA to be on all commercial auto policies Purpose is to protect the public from being entangled in coverage disputes of insurance companies Insurer must pay final judgment regardless of any condition, provision or limitation of the policy Pay final judgments to the public

25 The MCS-90 Insurance Company right of reimbursement Significant amounts of case law on how the MCS-90 affects which policy is primary

26 Conclusions for Insurance Companies A thorough coverage investigation is needed on every case Possible that some involved parties are not an insured and the policy would not indemnify them Other coverage potentials may exist If no coverage found, MCS-90 implications

27 Conclusion for Qualified Self Insured Motor Carriers In lease situations, there may be an insurance policy that can provide indemnification OR An insurance company may look to the motor carrier for indemnity Placard liability may hold the motor carrier responsible, possible right of reimbursement from insurance