The United States Court of Appeals for the Fifth Circuit recently ruled that an MCS-90 Endorsement to a commercial trucking insurance policy was limited to the amounts of the endorsement. It did not provide coverage for the maximum amount under the general automobile insurance policy. This settled a dispute between plaintiff insurer and defendants in this declaratory action. The death beneficiary defendants claimed the endorsement surety coverage limit should be the same as the general liability limit.
What is an MCS-90 endorsement?
The MCS-90 endorsement is a federal requirement for interstate motor carriers. It is required as an attachment to any insurance liability policy for for-hire motor carriers engaging/operating in interstate commerce. 49 CFR §§387.3, 387.7. The purpose of the MCS-90 endorsement is to assure a motor carrier’s compliance with the federal minimum levels of financial responsibility. See Canal Ins. Co. v. Coleman, 625 F. 3d 244 (5th Cir. 2010). As of this posting, the federal minimum limit of liability for interstate motor carriers is $750,000 for general for-hire vehicles in interstate commerce with a gross vehicle weight of 10,001 or more pounds. See 49 CFR § 387.9.
Wesco Ins. Co. v. Rich et al.
In Wesco Ins. Co. v. Rich et al., 22-60283 (5th Cir. 01/12/20223), the insurer issued a policy to a commercial trucking company with a $1,000,000 limit for a “covered auto,” defined here as a 2012 Volvo Tractor. The separate MCS-90 policy endorsement, a surety agreement, provided $750,000 in coverage for “any final judgment recovered against [the trucking company] for public liability resulting from negligence in the operation” of any vehicle.
The subject of the controversy was a woman’s death as the result of a collision with a 2010 Freightliner operated by the trucking company. Notably, this was not the “covered auto” under the policy—a fact agreed to by the parties. Therefore, the general liability policy of $1,000,000 did not come into play. The insurance company filed a petition for declaratory judgment in federal court regarding the amount of coverage under the separate MCS-90 endorsement. By the time the matter reached the appellate court, the only issue remaining between the parties was the amount of coverage through the insurer’s policy/endorsement.
The Court acknowledged that the separate MCS-90 endorsement made the insurer liable up to $750,000 per accident, regardless of whether the vehicle is described in the policy. The amount provided under the endorsement was the minimum limit of $750,000. The defendant death beneficiaries claimed that the “blank” filled in with $750,000 of surety/endorsement coverage was supposed to be filled in with the maximum policy coverage amount of $1,000,000.
Defendants attempted to argue the endorsement constituted a unilateral change in the policy for which the insurer had no authority. The Court swept that argument aside, recognizing the policy and endorsement were separate and distinct grounds for coverage. The defendants separately attempted to argue that the insurer was “reading out” its general liability limit of $1,000,000 with this separate endorsement amount. The Court again declined to follow this argument. The Court noted that, as a separate surety agreement with a separate limit, the MCS-90 endorsement indeed coexisted with the general policy liability limit under separate terms.
The Court stated that the defendants’ true argument was that the policy and endorsement should not be treated as “separate standalone documents.” The Court again disagreed with this premise. The language of the policy set up a clear and unambiguous distinction between the policy and the endorsement:
In consideration of the premium stated in the policy to which this endorsement is attached, the insurer…agrees to pay, within the limits of liability described herein, any final judgment recovered against [the trucking company]….
Therefore, the Court limited coverage for damages caused by the operation of the non-covered automobile to $750,000 under the MCS-90 endorsement.
This US Fifth Circuit case makes clear that MCS-90 endorsements, as required by federal law, set forth a separate ground for insurance liability coverage. They are mandatory suretyship agreements aimed at ensuring minimum federal financial responsibility laws in the realm of interstate motor carriers, regardless of other liability policy terms. The endorsements are not dependent upon the policy-in-chief. Those main policies may, indeed, have a higher liability limit under separate and more restrictive conditions. This does not mean the insurer will owe that higher limit if the conditions of the general liability policy are not met.
 There are separate, higher limits for vehicles engaged in certain cargo-carrying activities.