Transportation attorney Robert Moseley sees insurers neglecting to charge premium for an exposure they incur when they write policies for interstate motor carriers for hire.
"One of the things that insurance companies typically don't account for–and don't charge premium for–is the exposure under the MCS-90," said Mr. Moseley, who heads the transportation industry group of Smith Moore Leatherwood in Greenville, S.C. He explained that the MCS-90 is basically the surety bond that is filed with the Federal Motor Carrier Safety Administration, a division of the U.S. Department of Transportation.
That bond is not subject to policy conditions and terms, he said–explaining, for instance, that when the form is attached to a motor-carrier insurance policy, it would respond to pay an accident claim caused by an unscheduled vehicle.
For example, he said an insured might be operating five trucks and only paying to insure three. If one of the two uninsured trucks has an accident, "that surety bond kicks in and the insurance company has to pay the claim even though there was no premium received for that truck," he said.
While an insurer can seek reimbursement from the trucking company after paying the claim, "as a practical matter that doesn't happen" because if the insured didn't have enough money to pay the premium, it does not have enough to repay the insurer either, according to Mr. Moseley, who represents trucking companies and their insurance carriers in disputes involving commercial transportation accidents, as well as federal and state safety regulations.
"I don't think insurers do a very good job of accounting for the increased risk relating to that bond," he said. In fact, "they generally just add that on to the policy without any premium," he added. "They make the [bond] filings either with the federal or the state authorities without calculating the fact that this increases their exposure."
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