For insurers seeking to boost the bottom line, significant recovery opportunities exist under form MCS-90, the Endorsement for Motor Carrier Policies of Insurance for Public Liability under sections 29 and 30 of the Motor Carrier Act of 1980. What follows below is a discussion of MCS-90, including a historical primer. We will also discuss recovery strategies and practicalities for reimbursing insurers for payments made where the insurer would otherwise have no payment obligations.
Opening the Recovery Door
Motor carriers must meet certain financial responsibility requirements through the purchase of insurance and by filing proof of insurance with the applicable government agencies. Endorsements to trucking insurance policies, for example, evidence a motor carrier meets financial responsibility laws. Under the Act, these endorsements are mandatory.
Key language from MCS-90 includes a mandatory payment requirement for the insurer and a reimbursement from the insured provision, where no coverage is afforded. It stipulates, “In consideration of the premium stated in the policy, to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, 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 sections 29 and 30 the Motor Carrier Act of 1980.” This is so regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere.
The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim, or suit involving a breach of the terms of the policy. It is also agreed that the insured will reimburse for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in the endorsement.
Ensuring these details are clearly met only proves to strengthen the insurer’s case, making issues more clear-cut when the insured fails to do what is required under the policy, such that no coverage is ultimately afforded. These finer details are important because construction of the provisions of an insurance policy is a question of law. 1 A court’s primary objective is to ascertain and give effect to the intent of the parties to the contract, while construing the policy as a whole and “tak[ing] into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract,” according to the findings of Travelers Insurance Co. vs. Eljer Manufacturers Inc. If the words of a policy are clear and unambiguous, then “a court must afford them their plain, ordinary, and popular meaning,” states the court in Allianz Insurance Co. v. Guidant Corp. The court “will not strain to find ambiguity in an insurance policy where none exists,” as explained in McKinney v. Allstate Insurance Co. and Crum &Forster Managers Corp.
Although some courts have incorporated MCS-90 Endorsement into policies as a matter of law, not all have. Prestige Casualty Co. v. Mich. Mutual Insurance Co.; Travelers Insurance Co. v. Transportation Insurance. Co.; and Hagans v. Glen Falls Insurance Co. are solid examples.
Moreover, “the reimbursement provision of the MCS-90 permits the insurer to recover any payment, not just final judgments, that the insurer would not have been obligated to pay except for the agreement contained in the MCS-90.”