{"id":10969,"date":"2023-03-10T11:17:23","date_gmt":"2023-03-10T15:17:23","guid":{"rendered":"https:\/\/archive-lynchlaw.pfgsandbox.com\/?p=10969"},"modified":"2023-03-13T12:37:57","modified_gmt":"2023-03-13T16:37:57","slug":"mcs-90-endorsement","status":"publish","type":"post","link":"https:\/\/archive-lynchlaw.pfgsandbox.com\/?p=10969","title":{"rendered":"Driving Settlement Negotiations with the MCS-90 Endorsement"},"content":{"rendered":"

\"truck<\/span><\/b>Driving Settlement Negotiations with the MCS-90 Endorsement<\/h2>\n

Originally Published in the February 2023 Issue of The Transportation Lawyer by the Transportation Lawyer’s Association<\/a><\/p>\n

Defending motor carriers in accident litigation when insurance coverage is nonexistent due to policy exclusions or otherwise poses unique challenges.\u00a0 Damages arising from both minor and catastrophic accidents can be significant, and absent insurance coverage, injured parties traditionally had limited options for recovery.\u00a0 Cognizant of public safety concerns associated with motor carrier accidents, Congress enacted the Motor Carrier Act of 1980, and created provisions that require motor carriers engaged in interstate commerce to provide proof of minimum levels of financial responsibility.\u00a0 The required level of financial responsibility ranges between $750,000.00 and $5,000,000.00 and is determined by the type of carriage the motor carrier engages in and the commodity it transports 1.<\/sup><\/span>\u00a0 The Motor Carrier Act also gave rise to the MCS-90 endorsement (MCS-90) as an accepted method of providing the required proof.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

What the MCS-90 Is and Is Not\u00a0<\/span><\/h2>\n

The MCS-90 operates as an attachment to the carrier\u2019s insurance policy and is intended to protect motorists injured by motor carriers without adequate insurance coverage.\u00a0\u00a0 The MCS-90 functions as a surety to guarantee payment to injured parties.\u00a0 Any insurance policy issued to an interstate motor carrier must include the MCS-90, and even when not physically attached to the policy, courts must impute the terms of the MCS-90 into the policy as a matter of law 2<\/sup>.<\/span>\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

\u00a0It is crucial to recognize the difference between the MCS-90 and insurance coverage as <\/span>traditionally provided under a policy.\u00a0 The MCS-90 is not additional insurance and cannot be stacked 3<\/sup>.<\/span>\u00a0 Availability of payment pursuant to the MCS-90 is triggered only in instances where adequate insurance coverage is unavailable.\u00a0\u00a0 This may occur when, (1) the underlying insurance policy to which the endorsement is attached does not otherwise provide coverage,\u202f<\/span>and<\/span><\/i>\u202f(2) either no other insurer is available to satisfy the judgment against the motor carrier, or the motor carrier’s insurance coverage is insufficient to satisfy the federally-prescribed minimum levels of financial responsibility 4<\/sup>.<\/span>\u00a0 \u00a0<\/span>\u00a0<\/span><\/p>\n

As set forth on the endorsement form, the MCS-90 obligates an insurer to pay any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance, or use of motor vehicles subject to the financial responsibility requirements of the Motor Carrier Act 5<\/sup>.<\/span>\u00a0 The insurer\u2019s obligation to make payment exists regardless of whether the motor vehicle involved is specifically described in the policy or whether the loss was otherwise excluded by the terms of the policy 6<\/sup>.<\/span>\u00a0 \u00a0The underlying purpose of the MCS-90 is the protection of the public, not the inadequately insured carrier, and the endorsement contains a provision explicitly providing an insurer with the right to recover from the insured 7<\/sup>.<\/span>\u00a0 The \u201cendorsement does not extinguish the debt of the insured; it transfers the right to receive the insured’s debt obligation from the judgment creditor to the insurer.” 8<\/sup><\/span><\/p>\n

Despite a denial of insurance coverage based on policy exclusions, and even when denial is proper pursuant to policy language, the insurer remains obligated to pay up to the applicable limits of the MCS-90.\u00a0 Beyond this obligation to pay, however, the insurer\u2019s obligations are limited.\u00a0 It is well settled in the courts that because the MCS-90 is not an insurance policy, the insurer has no duty to defend the carrier in an action where it applies. 9<\/sup><\/span>\u00a0 It is also established that the insurer has no duty to settle.<\/span> 10<\/sup> <\/span>\u00a0<\/span><\/p>\n

A Recent Example of Settlement Negotiated with the MCS-90<\/h2>\n

Although the MCS-90 may appear to be the last resort when no insurance coverage exists, if used strategically, it can serve as a valuable tool for negotiating with all involved parties including an injured plaintiff, the insurer, and the motor carrier.<\/span>\u00a0<\/span><\/p>\n

In a recent case our firm handled, our client\u2019s insurer denied coverage based on the failure to list the vehicle involved in an accident on the insurance policy.\u00a0 The injured plaintiff advanced a claim for damages above the limits of the MCS-90 coverage applicable to this particular carrier.\u00a0 Through negotiations at a court-required mediation with plaintiff\u2019s counsel and the insurer, we were able to reach a settlement relieving the carrier from substantial financial liability involving a plaintiff who had approximate annual earnings of $900,000.00 and had recently retired.\u00a0 Additionally, we were able to negotiate an agreement with the insurer whereby it waived any and all claims and agreed not to recover from the carrier.\u00a0 To further assist in a resolution, the carrier agreed to indemnify and defend the driver who was also named as a defendant.\u00a0 Ultimately, the client was only obligated to pay a settlement amount consisting of a fraction of the plaintiff\u2019s initial claim, and we were able to arrange an installment plan for payment.\u00a0 This enabled the plaintiff to recover for injuries sustained, the client to avoid extreme financial hardship, and all parties, including the insurer, to resolve the matter without additional protracted litigation and costs related thereto.\u00a0<\/span>\u00a0<\/span><\/p>\n

Education of all Participants is Key<\/h2>\n

At the outset, it is imperative to ensure that all participants understand the unique nature, purpose, and application of the MCS-90 endorsement.\u00a0 The majority of counsel representing plaintiffs injured in motor vehicle accidents do not have extensive knowledge of motor carrier regulations, particularly if their experience is primarily in litigating accidents that do not involve commercial vehicles.\u00a0 If a plaintiff\u2019s attorney is unfamiliar with motor carrier litigation, they are unlikely to understand the nuances of the application of the MCS-90 and may not even be aware of its availability.<\/span>\u00a0<\/span><\/p>\n

Confirming that representatives of the insurer, including insurer\u2019s counsel if involved, are thoroughly informed regarding application of the MCS-90 is also of utmost importance.\u00a0 Although they may have cursory knowledge of the MCS-90, it is foreseeable that they have not encountered instances where it was applied or are unaware of relevant legal precedent and developments.<\/span>\u00a0<\/span><\/p>\n

The motor carrier client should also be fully apprised of the purpose of the MCS-90 and how it functions in relation to the carrier\u2019s specific circumstances.\u00a0\u00a0 It must be impressed upon the carrier that the MCS-90 does not operate as insurance coverage after a denial of policy coverage or absolve the carrier of financial responsibility arising from a plaintiff\u2019s claim.<\/span>\u00a0<\/span><\/p>\n

Finally, it is critical that counsel defending the motor carrier be proactive in ensuring that the MCS-90 is explained thoroughly to the court presiding over the matter.\u00a0 This includes comprehensive briefing of not only the general purpose and application of the MCS-90 but citation to definitive legal precedent supporting the carrier\u2019s position.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Interests and Concerns of Parties<\/h2>\n

When approaching plaintiff\u2019s counsel to discuss settlement in matters where payment under the MCS-90 is available, it may be worthwhile to advise that it potentially offers the most direct means of recovery.\u00a0 Additionally, because the MCS-90 only applies when adequate insurance coverage does not exist, it may be the only viable means for recovery.\u00a0 This is worth noting, especially when a carrier has insufficient financial resources to pay damages, is insolvent, or has ceased business operations, and a plaintiff will experience extreme difficulty collecting a judgment award.\u00a0 Engaging plaintiff\u2019s counsel in a realistic and straightforward discussion of the amount available based on the MCS-90 can assist in reaching a settlement and assuring plaintiff of certain recovery.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Although the MCS-90 can provide a plaintiff with a means of recovery, it must be clarified that the MCS-90 does not negate the plaintiff\u2019s burden of establishing liability.\u00a0\u00a0 MCS-90, \u201c . . .provisions were designed to ensure the\u202f<\/span>collectability<\/span><\/i>\u202fof a judgment \u2014 not to relieve the injured member of the public from the requirement that he or she obtain a final judgment of legal liability against the motor carrier and its insurers as a prerequisite.\u201d 11<\/sup><\/span>\u00a0<\/span><\/p>\n

With respect to the insurer, although it has no duty to defend or settle cases where the MCS-90 is triggered, it may be advantageous for it do so.\u00a0 From the insurer\u2019s perspective, participating in the carrier\u2019s defense can avoid a default judgment, provide certainty of a judgment, and reduce liability where solid, meritorious defenses can be raised.\u00a0 When faced with the unavoidable obligation to make payment based on the MCS-90 endorsement, a prudent insurer should aim to reduce that amount.<\/span>\u00a0<\/span><\/p>\n

In instances where the insurer does not provide a defense, the insurer\u2019s participation in settlement negotiations can also serve to reduce potential exposure.\u00a0 This is likely to be a more attractive option for the insurer when the success of financial recovery from the carrier is questionable or when a settlement can be reached within the applicable limits of the MCS-90.\u00a0\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

A level of confusion and disagreement exists with respect to the application of the reimbursement provisions of the MCS-90 to settlements that do not constitute final judgments.\u00a0 While there is a dearth of caselaw on this particular issue, the Fifth Circuit has provided guidance, explaining that, \u201cIf the insurer must pay a final judgment under the MCS-90, there is no reason why it could not seek a favorable settlement rather than risk litigating to a final judgement that could be more onerous.\u201d 12<\/sup><\/span>\u00a0 On a broader scale, permissible application of the MCS-90 to settlements also comports with the public policy interest in promoting settlement.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Counsel defending the motor carrier should clarify with the insurer that while there is no duty for the insurer to settle pursuant to the MCS-90, the insurer is not precluded from doing so.\u00a0 By eliminating any confusion that a final judgment is the only method of resolution in matters involving the MCS-90, counsel can effectively remove that roadblock to negotiating a settlement.<\/span>\u00a0<\/span><\/p>\n

From the motor carrier client\u2019s perspective, the MCS-90 endorsement may not appear at first glance to be an advantageous option.\u00a0\u00a0 While the MCS-90 may substantially or fully satisfy a plaintiff\u2019s judgment, the client may still face significant financial liability.\u00a0 If the plaintiff\u2019s judgment exceeds the available limits of the MCS-90 endorsement, the client can be liable for repayment of the excess amount in addition to repayment to the insurer by virtue of the insurer\u2019s statutory right to recover amounts it paid under the MCS-90.\u00a0<\/span>\u00a0<\/span><\/p>\n

In such circumstances, working with the insurer to negotiate a settlement that potentially reduces the insurer\u2019s financial exposure can also provide the opportunity to reach an agreement limiting or foregoing the insured\u2019s right to recover from the client.\u00a0\u00a0 In the interest of resolving a matter, the insurer may be amenable to such an agreement, especially if it will be difficult or impossible to recoup any payments made under the MCS-90 due to the carrier\u2019s tenuous financial position.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Another consideration in representation of the carrier exists if the driver of the involved vehicle is named as a defendant.\u00a0 Counsel must emphasize that the MCS-90 only requires the insurer to satisfy judgments against the carrier and does not apply to judgments entered against the driver as the carrier\u2019s employee.<\/span> 13 <\/span><\/sup>\u00a0<\/span><\/p>\n

To avoid a conflict by representing both the interests of the carrier and the driver, counsel can attempt to negotiate an agreement where the carrier indemnifies the driver and assumes the driver\u2019s defense.\u00a0 By agreeing to indemnify and defend the driver, the carrier assumes all responsibility; however, the carrier also avoids another layer of litigation directly with the driver, which foreseeably will arise once the driver realizes that required insurance coverage was not in place.\u00a0\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Familiarity with the purpose, requirements, and application of the MCS-90 is essential when tasked with the defense of a motor carrier lacking adequate insurance coverage.\u00a0\u00a0 By gaining a comprehensive understanding of the MCS-90 and ensuring all interested participants are thoroughly informed of its availability and application, a transportation practitioner will create an effective avenue to facilitate resolutions in the face of litigation.<\/span><\/p>\n

The Lynch Law Group Transportation and Litigation Practice Groups<\/h2>\n

Frank Botta<\/a> is a Partner and Chair of both the Transportation<\/a> and Litigation Practice Groups<\/a>. He is an active member of the Transportation Lawyers Association, where he served as the organization\u2019s President (2017 \u2013 2018) and currently serves on the Executive Committee.<\/span><\/p>\n

For assistance understanding MCS-90 and what it means for you, contact at fbotta@archive-lynchlaw.pfgsandbox.com<\/a> or by phone at 724-776-8000.<\/span><\/p>\n

Elizabeth Lodovico<\/a> is an Associate in the Litigation Practice Group<\/a>. \u00a0She brings a passion for client satisfaction and an innovative business sense to her practice, ensuring excellent results for her clients.<\/p>\n

 <\/p>\n

Endnotes<\/h4>\n

1 49 C.F.R. \u00a7 387.303
\n2 Transport Indem. Co. v. Carolina Cas. Ins. Co., 652 P.2d 134, 145 (Ariz. 1982); Cagle v. Wesco Ins. Co., Civil Action No. 2:21-CV-52-RWS, 2021 U.S. Dist. LEXIS 253756, at *10 (N.D. Ga. Dec. 6, 2021).
\n3 Carolina Cas. v. Yeates, 584 F.3d 868, 886 (10th Cir. 2009).
\n4 Yeates at 878.
\n5 Id. at 887.
\n6 Wesco Ins. Co. v. M.O.S. Express, No. 2:21-00374-KD-N, 2021 U.S. Dist. LEXIS 238743, at *6 (S.D. Ala. Dec. 13, 2021).
\n7 Yeates, at 878.
\n8 Travelers v. Western Am. Specialized Transp. Servs., Inc., 409 F.3d, 256 260 (5th Cir. 2005).
\n9 Harco Nat\u2019l Ins. Co. v. Bobac Trucking, 107 F.3d 733, 736 (9th Cir. 1997).
\n10 Progressive Commercial Cas. Ins. Co. v. Xpress Transport Logistics, LLC, No. H:21-2683, 2022 WL 103555 (S.D. Tex. 2022).
\n11 Yeates at 875.
\n12 T.H.E. Ins. Co. v. Larsen Intermodal Servs., 242 F.3d 667,676 (5th Cir. 2001).
\n13 Ooida Risk Reten. Group, Inc. v. Williams, 579 F.3d 469, 478 (5th Cir. 2009) (citing FMCSA, Regulatory Guidance for Forms Used To Establish Minimum Levels of Financial Responsibility of Motor Carriers, 70 FR 58065-01 (Oct. 5, 2005)).<\/p>\n

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