Mr. and Mrs. Yeates were severely injured when the vehicle Mrs. Yeates was driving was struck head-on by a livestock truck owned by Bingham Livestock. The Yeateses sued Bingham Livestock and the truck driver. Bingham Livestock carried two insurance policies, one issued by State Farm and one issued by Carolina Casualty.
State Farm tendered its policy limits of $750,000 to the Yeateses. The Carolina Casualty policy did not specifically cover automobile accidents, but included a federally mandated MCS-90 endorsement, which provided Carolina Casualty would pay up to $1,000,000 for “any final judgment recovered against [Bingham Livestock] for public liability resulting from negligence in the operation, maintenance or use of motor vehicles.”
Federal law requires interstate common carriers to carry this MCS-90 endorsement which will provide insurance coverage up to $750,000. The endorsement prevents insurance companies from denying claims even though the vehicle in the accident is not listed in the policy.
Carolina Casualty sued seeking a judicial ruling that the MCS-90 endorsement does not apply here. Carolina Casualty argued that the MCS-90 endorsement is only implicated when the motor carrier has less than $750,000 in liability protection. In this case, since State Farm already provided the minimum $750,000 in liability protection, according to Carolina Casualty, the MCS-90 was not needed to provide the minimum mandatory coverage.
The US Court of Appeals for the 10th Circuit ruled that the MCS-90 did indeed provide insurance coverage for this crash. The court ruled that the fact that State Farm paid its $750,000 policy limits did not relieve Carolina Casualty of its duty to pay. According to the 10th Circuit, the federal regulations requiring a minimum of $750,000 in coverage provides a floor, and not a ceiling. Carolina Casualty Company v. Yeates, 533 So.2d 1202 (10th Cir. 2008).
This case is a reminder to always pursue the MCS-90 coverage every time an interstate common carrier is involved. Whenever one suspects the MCS-90 may be implicated, you should review the policy, the MCS-90 endorsement, as well as the MCS-90 implementing statute and applicable regulations, i.e. 49 U.S.C. §13906(f), and 49 C.F.R. § 387.15.
Keep in mind that if the insurance company alleges that the MCS-90 has been cancelled for any reason, including failure to pay, the insurance company must make sure the cancellation procedures set forth in 49 C.F.R. § 387.15 have been strictly followed.
Another issue comes up when the insurance company fails to provide an MCS-90 endorsement with the policy. Depending on the circumstances, courts might incorporate the MCS-90 endorsement into the policy. If the policy does not contain the MCS-90 endorsement, and the court refuses to incorporate one, then the insured may have a negligence action against its insurance agent if the agent failed to advise the insured of the need for the MCS-90, or failed to advise the insurance company of the need for the MCS-90.