Insurers: Questions Remain After Truck Ban Ruling

By Steven Brostoff, Washington Editor

NU Online News Service, June 8, 9:51 a.m.EDT?Mexican trucks may soon be rolling on America'shighways after the United States Supreme Court struck down the lastlegal barrier preventing them from crossing the border.[@@]

Insurance trade group representatives said the decision leavesopen issues concerning safety inspection and reciprocity ofinsurance policies.

The high court's unanimous decision overturned a Ninth CircuitCourt of Appeals ruling which said that the Federal Motor CarrierSafety Administration must conduct an environmental impact studybefore it could allow Mexican trucks to use American highways.

The Supreme Court ruled that FMCSA lacks the discretion toprevent cross-border operations of Mexican trucks and that nothingin the nation's environmental laws requires FMCSA to conduct anenvironmental impact study.

The issue is important to insurance companies due to ongoingconcerns over the safety of Mexican trucks.

David Snyder, vice president and assistant general counsel withthe Washington-based American Insurance Association, said he is notsurprised by the Supreme Court's decision in the case ofDepartment of Transportation v. Public Citizen.

The important thing, Mr. Snyder said, is to assure thatunderwriters will have all the information they need to provideinsurance and that safety efforts are maintained at a very highlevel.

Dave Golden, director of commercial lines for the Des Plaines,Ill.-based Property Casualty Insurers Association of America, addedthat PCI's concerns always revolved around safety.

The FMCSA, he said, has created rules and an infrastructuredesigned to assure that Mexican trucks are held to the same levelof safety as American trucks.

Now, Mr. Golden said, it is up to FMCSA to police thesystem.

The issue centers on a long-standing moratorium that preventedMexican trucks from operating in the U.S. After the North AmericanFree Trade Agreement took effect on Jan. 1, 1994, the government ofMexico challenged the moratorium under NAFTA's dispute resolutionprocess.

In February of 2001, an international arbitration paneldetermined that the "blanket refusal" of the U.S. to approve motorcarrier applications from Mexico violated NAFTA.

President Bush then said he would lift the moratorium afterFMCSA promulgated safety regulations for Mexican trucks andestablished a safety inspection regime. FMCSA issued theregulations and President Bush ended the moratorium in November of2002.

However, the Washington-based public interest group, PublicCitizen, filed a lawsuit challenging the lifting of the moratorium,charging that under the nation's environment laws, FMCSA was firstrequired to conduct an environmental impact study of emissions fromMexican trucks that will be entering the U.S.

The Ninth Circuit Court of Appeals agreed and called for a fullenvironmental impact study before ending the moratorium.

But a unanimous Supreme Court ruled that FMCSA does not have theauthority to countermand the President's order lifting themoratorium, nor does it have authority to categorically excludeMexican trucks from operating in the U.S.

For the insurance industry, the next issue is reopening NAFTAproceedings to allow mutual recognition of policies, Mr. Snydersaid. Currently, Mr. Snyder noted, insurance policies written inthe U.S. are not recognized in Mexico and insurance policieswritten in Mexico are not recognized in the U.S.

"It is ironic that NAFTA allows an 80,000 pound truck loadedwith hazardous chemicals to cross the border, but not a two ounceinsurance policy," he said.

Mr. Golden said the current system is burdensome in that itrequires multiple insurance policies. If a U.S. insurer, he said,wants to cover a U.S. truck in Mexico, it must have a fronting orsimilar type of arrangement with a Mexican insurance company.

It is important, Mr. Golden said, to simplify the process sothat more insurance companies will be able to participate in thismarket if they so choose.