Motor Carrier Public Liability Endorsements and Financial Responsibility Laws


The trend of trucking deregulation that started over 20 years ago has not materially changed original regulatory schemes governing required insurance and financial responsibility. Motor carriers operating under federal permits and intrastate carriers operating under state authority must still secure liability coverage in order to maintain an operating permit or otherwise provide proof of ability to self insure. Typically statutory coverage of this nature is implemented through a two-part process which involves a public filing and an endorsement.

Motor carriers or their insurers will make a filing with the appropriate agency as proof that insurance coverage has been issued conforming to the applicable regulation or statute. The endorsement conforms the motor carrier's coverage to the relevant requirements of the law governing the truckers' operations. In this manner, the insurance is extended to protect the public from accidents or negligent operations.

In the vast majority of situations, these endorsements and filings are not relevant because the equipment will be covered by commercial auto insurance on approved forms, issued by a solvent insurer. In the usual case, when the permit carrier's equipment is listed in the declarations or is otherwise covered, endorsements such as the federal MCS-90 will not apply because the insurance contract itself provides the necessary protection to the public. Occasionally, however, underwriting error, insolvency, illegal trucking operations, or other unforeseen circumstances create scenarios where a vehicle is not covered. In these scenarios, state and federal financial responsibility laws become important because the filings and endorsements may create indemnity for judgments arising out of the ownership or use of such equipment.

The scope of this discussion is to explain these endorsements and hopefully to clarify some confusing questions over how and where these filings are made. Intrastate filing procedures are also discussed but the treatment and interpretation of intrastate forms such as Form "E" and Form "F" will differ by state. The discussion of Texas intrastate filing procedures, while not directly relevant to other states, is useful to illustrate one particular version of intrastate insurance requirements that are similar to the schemes adopted by other states.

Financial Responsibility for Interstate Motor Carrier

While federal regulations imposing financial responsibility requirements have not changed, the agencies of government that administer the laws have dramatically shifted. In the Motor Carrier Act of 1980, Congress originally authorized the Interstate Commerce Commission ("ICC") to implement financial responsibility regulations. 49 U.S.C.A. § 13906. These regulations, which are still in effect, were first promulgated by the ICC. Congress abolished the ICC in 1995, however, in part, because of competing jurisdiction between the ICC and the Department of Transportation. See ICC Termination Act of 1995. Pub. L. 104-88, December 29, 1995, 109 Stat. 803. Today, most of the responsibilities, duties, and powers related to motor carrier safety, including administration of financial responsibility laws, are vested with a sub-agency of the Department of Transportation, known as the Federal Motor Carrier Safety Administration. ("FMCSA") Pub. L. 106-159 effective December 9, 1999.

Required Limits

In order to operate as a motor carrier in interstate commerce, either as a private carrier or as a for-hire carrier, the carrier is required to register with the FMCSA. Motor Carrier Act of 1980, 49 USCA § 10927. These regulations stipulate that no motor carrier shall operate a commercial motor vehicle in interstate commerce until the motor carrier has first obtained and has in effect the minimum levels of financial responsibility established by the FMCSA. USCA § 10927 (a)(1) (West 1994). The legislative purpose of insurance requirements is to ensure that permitted motor carriers have independent financial means to pay for injuries to the general public arising out of trucking operations. Travelers Ins. Co. v. Transport Ins. Co., 787 F.2d 1133, 1139 (7th Cir. 1986). The minimum level of coverage for private and for hire motor carriers is dependent on the carriage and type of equipment and the commodity being transported.

  • For hire motor carriers with a gross vehicle weight rating exceeding 10,000 lbs. and which transport non-hazardous property - $750,000.
  • For hire and private motor carriers with gross weight ratings exceeding 10,000 lbs. and which haul oil, hazardous waste, or hazardous materials or substances must establish financial responsibility coverage of not less than $1,000,000.
  • Both for hire and private carriers operating portable tanks, cargo or hopper-type vehicles with capacities in excess of 3,500 water gallons must obtain financial responsibility limits of at least $5,000,000.
  • Motor carriers of passengers, i.e. buses, have separate regulations, and separate limits, depending upon seating capacity. Buses with a seating capacity of 16 passengers or more are required to be insured for at least $5,000,000.

Exemptions and Limits of Interstate Jurisdiction

Many commercial vehicles are not subject to federal rules concerning insurance limits because they operate only within state boundaries or are otherwise exempt from federal jurisdiction. 49 USCA § 13501(o). States still retain authority over insurance requirements and financial responsibility for intrastate motor carrier operations. Since the operations of intrastate carriers are not subject to federal regulation, state financial responsibility laws play a very important role in assuring financial protections to the public.

In addition to intrastate carriers, there are several other types of exempt motor carrier operations. Some carriers are exempted from federal financial responsibility regulation while hauling certain types of commodities. Motor vehicles controlled and operated by agricultural cooperative associations are exempt. 49 USC § 13506(a) (5). Similarly, trucking operations conducted by subsidiaries of a corporate family and which involve the transportation of goods or commodities of the parent corporation also fall outside of the DOT's jurisdiction. Id. at § 13505(b). There are many exemptions applicable to motor carriers of passengers, such as school buses, vehicles providing taxicab service, commuter vehicles and vehicles, chartered by schools. 49 C.F.R. § 387.27(b).

As a practical matter, many private or corporate trucking operations make dual insurance filings both with the FMCSA and in the state or states of registration in order to ensure that their fleet operations meet all potentially applicable financial security requirements. For example, corporate risk managers or their insurers might choose dual filings to ensure that certain kinds of back haul operations are covered even though their fleet operations may otherwise be exempt from DOT regulations.

MCS-90 Endorsement

For motor carriers subject to federal regulation, insurers must cause the motor carrier's insurance policies to be endorsed for public liability under Sections 29 and 20 of the Motor Carrier Safety Act of 1980. See 49 C.F.R. § 387.15; 49 C.F.R. § 387.39 (for busses). The most widely-used endorsement for this purpose is the MCS-90. Several similar endorsements are in use, depending upon how the motor carrier chooses to meet its financial responsibility requirements, but all of the forms are similar in operation and effect.

An MCS-90 endorsement amends the motor carrier's policy to assure compliance with the Motor Carrier Act and the rules and regulations of the Federal Motor Carrier Safety Administration. The endorsement must be issued in the exact name of the motor carrier and must be maintained at the motor carrier's principal place of business. The MCS-90 endorsement is subject to special cancellation requirements that operate independently of the policy's cancellation provisions. The endorsement must remain in effect continuously until canceled or replaced.

Cancellation may be effected by either the insured or the insurer with 35 days' notice in writing to the other party. If the insured carrier is subject to FMCSA jurisdiction, 30 days' notice must also be given to the FMCSA, beginning on the date notice is received by the FMCSA. 49 C.F.R. § 387.15. All endorsements and filings are deemed public information. Registered DOT carriers must keep a copy on file at their principal place of business and produce such information to the public for inspection. 49 C.F.R. § 387.7(e); 49 C.F.R. § 387.29 same for buses; 49 C.F.R. § 387.7(b)(1); 49 C.F.R. § 387.31(b)(1) (for busses).

The MCS-90 endorsement creates special liabilities for the insurer. The insurer agrees to pay under the policy, within the limits of liability, for public liability resulting from the insured's negligence 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 term public liability is defined to include bodily injury, property damage, and environmental restoration. The term environmental restoration is defined to mean restitution for the loss, damage, or destruction of natural resources arising out of the accidental discharge, dispersal, release, or escape into or upon the land, atmosphere, watercourse, or body of water, of any commodity transported by a motor carrier.

It is surprising that the rules and procedures by which insurers file notices of coverage within the FMCSA are largely left to the agency's operation manuals. It has been held that the act of filing the notice of such coverage automatically imposes the obligations of the MCS-90 endorsement upon the party filing the notice, even if no MCS-90 endorsement is actually issued. See Northland Ins. Co. v. New Hampshire Ins. Co. 63 F.Supp.2d 128, 139 (U.S.D.C. New Hampshire, 1999). Insurers, and presumably authorized agents, are allowed to file proof of financial responsibility electronically, through a password-protected system. Access is available online through FMCSA's web site.

Single State Registration

The FMCSA is the primary repository for financial responsibility filings and has exclusive jurisdiction over interstate carriers. However, state transportation agencies now play an important role in the interstate registration process. Formerly, interstate motor carriers registered separately in all states in which they operated. The old system featured the use of "bingo stamps," issued by individual states that would be attached to the motor carrier's ICC permit. Congress directed the DOT to simplify the registration system through Single State Registration ("SSRS"). See, 49 U.S.C.A. § 14504a.

Under the SSRS system, an interstate motor carrier chooses its base registration state and then files a copy of its proof of insurance along with its application in the base registration state. 49 CFR § 1023.3. Once approved, the base registration state issues a registration receipt which authorizes the motor carrier to operate in all jurisdictions under its federal permit. See 49 CFR §§1023 and 1162 (1994) and 43 Tex. Admin. Code § 218.17(b). A copy of the registration receipt is then carried in the cab and presented on demand for inspection by the DOT or law enforcement agencies. See 43 Tex. Admin. Code § 218.17(d)(1). It should be remembered that the SSRS concerns only registration of interstate motor carriers and should not be confused with the procedures followed by intrastate motor carriers that are administered exclusively by the state.

Intrastate Financial Responsibility Laws

For intrastate motor carriers and private carriers otherwise exempt from DOT jurisdiction, financial responsibility lies within the state of operation. See Tex. Transp. Code § 642.002 et seq. State insurance requirements vary widely but all of these laws stipulate that all operators of commercial motor vehicles must provide proof of financial responsibility in amounts established by regulation or statute.

Intrastate filing: "Form E" and "Form F"

Intrastate motor carrier operators will most often use "Form E" and "Form F" to comply with state insurance requirements. Forms "E" and "F" are standard industry forms used for the specific purpose of meeting public liability requirements under commercial auto policies.

Form "E" certifies that the motor carrier named on the form is in compliance with the insurance provisions of the motor carrier laws of the state to which the certificate is issued. Similar to the MCS-90, Form "E" applies on a "continuous until cancelled" basis to all motor vehicles operated by the insured carrier named on the form, regardless of whether the autos are specifically listed in the policy. Form "E" is filed with the appropriate agency in various states where the insured carrier operates. In Texas, Form "E" is filed with the Motor Carrier Division of the Texas Department of Transportation.

Form "F" is the companion endorsement to Form "E", and constitutes certification or proof of financial responsibility "under the provisions of any State Commission having jurisdiction, and amends the policy to provide insurance . . . in accordance with such law or regulation to the extent of the coverage and limits required."

Although similar in effect to the MCS-90, Forms "E" and "F" are potentially broader obligations because these forms more directly incorporate financial responsibility laws into the insurance contract. Unlike the MCS-90, Form "F" does not specifically express the limits of public liability within the endorsement itself. Not surprisingly, it has been widely argued that Form "F", therefore, increases the limits in the body of the policy to the extent that the policy is greater than what the law would require. State decisions on this question are not in agreement. See Tri State Pipe and Equipment, Inc. v. Southern County Mutual Ins. Co., 8 S.W.3d 394, 398 (Tex. App. - Texarkana, 1999 no writ); Progressive Ins. Co. v. Ramirez, 277 Ga. 392, 588 S.E. 2d 751 (2003); Guaranty Nat'l Ins. Co. v. Koch , 242 Ill. App. 3d 692, 611 N.E. 2d 91(1993).

Forms "E" and "F" operate in a manner similar to the MCS-90 and make the insurer an insurer of last resort when no other insurance applies. Nat'l Cas. Co. v. Lane Exp., Inc., 998 S.W.2d 256, 263 (Tex. App. - Dallas 1999 no writ). This may occur, for example, when a motor carrier fails to pay the required premium, or when another carrier that does have coverage on the vehicle is insolvent. A basic illustration of how the Forms operate is illustrated in Nat'l Cas. Co. v. Lane Exp., 998 S.W.2d at 257. In Lane, an intoxicated driver operating under Lane's dispatch had an accident. Id . Lane had several policies, two of which specifically listed the truck involved in the accident. One insurer refused to indemnify based on cancellation, and the other was in receivership. Id. at 258. Lane's registration with the Texas DOT was based on a Form "E" filing of National Casualty and a Form "F" endorsement. Even though National Casualty did not list the truck, Form F obligated it to pay Lane's judgment. Id.

Case Decisions Interpreting MCS-90

With a few important exceptions, the body of federal case law interpreting this endorsement has grown more fairly uniform. It is now well settled that the MCS-90 endorsement operates as a suretyship that inures to the benefit of the public and rests on top of the motor carrier's liability policy. See Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 283 (1st Cir. 1995); John Deere Ins. Co. v. Truckin U.S.A. 122 F.3d 270 274-75 (5th Cir. 1997). It is widely agreed that the endorsement is not insurance coverage per se. The endorsement does not obligate an insurer to defend a motor carrier accident. Rather, the endorsement stipulates only that the insurer will pay any judgment awarded against the insured subject to reimbursement from the motor carrier.

The endorsement runs directly to the public, to pay judgments resulting from negligence in the operations, maintenance, or use of motor vehicles, even if the vehicle is not identified or covered under the policy. Canal Ins. Co. v. First Gen. Ins. Co., 889 F.2d 604, 614 (5th Cir. 1989); Industrial Indem. Co. v. Truax Trucklines, Inc., 45 F.3d 986, 991 (5th Cir. 1995) (endorsement obligated insurer to pay $750,000 limits even though policy did not cover lessor's truck); National Am. Ins. Co. v. Century State Carriers, Inc., 785 F. Supp. 793, 795 (N.D. Ind. 1992) (unlisted, borrowed tractor operated by insured driver while on drinking binge held covered by endorsement on policy of driver's employer). The endorsement applies only when no other policy provides coverage. John Deere Ins., 122 F.3d at 275.

Unlisted Vehicles

The public policy that underlies the purpose for the endorsement is key in all of the reported decisions. The most fundamental public policy is to protect the public against unlisted equipment. The endorsement serves to protect the public from inadvertent or intentional omission of vehicles from required insurance policies. Royal Indemnity Co., 99 F.3d 964, 968 (10th Cir. 1996).

Another clear purpose of the endorsement is to extend coverage for leased or non-owned vehicles. John Deer Ins. Co v. Nueva, 229 F. 3d 853. 857 (9th Cir. 2000). When a permitted or licensed motor carrier leases or hires a truck and driver, state and federal regulations vest control and responsibility of the leased equipment in the lessee. See 49 C.F.R. § 376(12)(c) and Northland Ins. Co. v. Bennett, 533 N.W. 2d 867(1995)(comparison of federal and Minnesota lease regulations). Federal regulations also require the carrier's name and ICC Number to be displayed on the leased vehicle. 49 C.F.R. § 1057.11(c)(1). Such regulations are designed to protect the public by preventing regulated carriers from evading liability for accidents through lease operations. Transamerican Freight Line v. Brada Miller Freight Sys., 423 U.S. 28, 37, 96, S.Ct. 299, 234, 46 L. Ed. 2d 169 (1975). The MCS-90 endorsement also plays an important supplemental role to the leasing regulations by assuring that interchanged, leased, or substitute vehicles which operate under federal permits carry the same required protection as the regulated carrier's own equipment. See Empire Fire & Marine Ins. Co. v. Guardian National Ins. Co., 868 F.2d 357, 362-63 (10th Cir. 1989). These public policies have led some courts to hold that the endorsement follows permissive users and non-owned vehicles in a manner that significantly expands the omnibus clause of the policy. Adams v. Royal Indemnity Co., supra, 999 F.3d 969. Some of these results have been unexpected and controversial.

Who Is An Insured

Perhaps the most controversial decisions are those cases holding that the endorsement constructively expands the definition of insureds within the underlying policy. One example of this result can be found in Pierre v. Providence Washington Ins. Co., 730 N.Y.S.2d 50, 286 A.D.2d 139 (2001), in which a court considered the effect of an MCS-90 endorsement attached to the policy of the owner of a trailer even though the owner was not using or operating the trailer. In Pierre, a tractor, under lease to interstate hauler, Blue Hen, was involved in an accident while hauling a trailer that was owned by Blue Hen Lines.

The Plaintiff commenced an action against the lessor and the driver, but did not pursue Blue Hen. Shortly thereafter, the court entered a default judgment against the lessor and driver. Plaintiff subsequently served an action on the judgment against Blue Hen's insurer demanding payment under an MCS-90 endorsement to Blue Hen's policy. Blue Hen's insurer contended that the MCS-90 endorsement only responded to judgment against the named insured, Blue Hen. The court ultimately held Blue Hen's insurer liable under the endorsement because the MCS-90 states that the insurer must pay "a judgment" with no requirement that the judgment be one against the named insured. Id. at 553. The court reasoned that to limit the endorsement to judgments against the "named insured" defeated the public policy behind the endorsement to provide protection whenever a registered interstate motor carrier leases equipment and an accident results. Id .

The Second Circuit has also held that an MCS-90 responds to judgments arising out of the use of a trailer even if the use does not arise out of the named insured's use. Integral Ins. Co. v. Lawrence Fulbright Trucking, 930 F.2d 258 (2nd Cir. 1991). In Fulbright, the owner and operator of a tractor under lease to another carrier injured a motorist while towing Fulbright's trailer. Fulbright had previously planned to sell the trailer to the tractor operator, but since the sale was conditional, Fulbright retained registration and title. In a declaratory judgment action, Fulbright's insurer argued that the MCS-90 had no application to an accident that did not arise out of Fulbright's ownership, maintenance, or use, as it was uncontroverted that Fulbright did not have control or even possession of the trailer at the time.

The court nevertheless held that Fulbright's insurer had to pay because Fulbright's MCS-90 endorsement extended indemnity to Fulbright's status as owner and the accident arose out of a "use" of the trailer even though it was not Fulbright's use. According to the Second Circuit, the endorsement's plain meaning required Fulbright's insurer to pay any judgment even though unrelated to Fulbright's use.

The Second Circuit noted that such endorsement only requires (1) a final judgment against the insured which (2) arises out of the negligent operation, maintenance or use of the motor vehicle. Id. at 261. See also, Reliance Nat'l Ins. Co. v. Lewis et. al ., 2001 U.S. Dist. Lexus 12901 (August 24, 2001) (endorsement extends to vicarious "logo liability" of non-negligent carrier based solely on carrier's DOT logo).

The Tenth Circuit has followed the same reasoning, holding that the MCS-90 effectively expands the definition of insured because the endorsement itself does not define "insured." In Adams v. Royal Indem. Co ., 99 F.3d 964, 969 (10th Cir. 1996) the injured motorist attempted to tap two policies said to insure a trailer that was involved in a wreck. Hofer had borrowed the trailer from Geigley who, in turn, had leased the trailer from a partnership. Neither policy listed the trailer, but it was urged that the protection of the endorsement followed the omnibus clause under Geigley's policy.

The Tenth Circuit agreed, holding that Geigley's MCS-90 extended to the Hofer judgment because Hofer was a permissive user. Through this reasoning, the Tenth Circuit once again expanded the scope of the MCS-90 by reading it in connection with the permissive use or omnibus clause, but at the same time reading out the covered auto definitions.

The Ninth Circuit has also held that the endorsement follows equipment operated by permissive users who are not named insureds for injuries negligently caused to the public. See, John Deere Ins. Co. v. Nueva, 229 F. 3d 853, 856 (9th Cir. 2000). Nueva is yet another trailer case where legal title was owned by an insured whose policy contained an MCS-90 endorsement. The insured had conditionally sold the trailer to another party that took possession and then "leased" the trailer to Garcha. Garcha's accident would not have ordinarily been covered by the insured's policy because the omnibus clause limits permissive use to covered autos and the trailer was not covered. According to the Ninth Circuit however, the MCS-90 negated the covered auto limitation for permissive uses and obligated John Deere to pay a judgment against a party that it did not insure. Id at 856.

This kind of expansive interpretation of the endorsement recently prompted trucking industry representatives to petition the DOT for a new rule that would change the endorsement's reach to only the motor carrier named in the endorsement.

Other Issues

Courts have sometimes held that MCS-90 endorsements trump exclusions when such exclusions would defeat financial protection for the public. For example it has been held that the endorsement trumps non-cooperation and notice clauses. Campbell v. Bartlett , 975 F.2d 1596, 1580-81 (10th Cir. 1992).

Another important question which remains unanswered is whether the endorsement applies irrespective of the motor carrier's operations at the time that the accident occurs. In other words, once such an endorsement is issued by a motor carrier's insurer, does it apply regardless of whether the ICC/DOT has jurisdiction over the particular trip being undertaken when the accident occurs? This question has been litigated on many occasions and cases can be found cutting both ways. Royal Indemnity Co. v. Jacobsen, 863 F. Supp. 1537, 1542 (D. Utah 1994) (MCS-90 applied to accident during intrastate trip hauling ICC exempt commodities). But see, General Security Ins. Co. v. Barreentine, 2002 WL 31477118, 829 So.2d 980, 983 (Fla. 1st Dist. 2002) (endorsement did not apply to intrastate accident); Branson v. MGA Ins. Co., Inc., 673 So.2d 89, 92 (Fla. 5th Dist. 1996) (MCS-90 did not apply to intrastate accident involving commodities exempt from ICC jurisdiction); Standard Ins. Co. v. McKissack , 153 S.W.2d 997(Tex. Civ. App.-Fort Worth, writ ref'd)("public is not in a position to know if motor carrier is operating within permit").

Concerning this question, state court decisions interpreting forms "E" & "F" may not be important because the MCS-90 endorsement specifically says that the coverage applies whether…such negligence occurs on any route or territory to be served by the insured or elsewhere. The better-reasoned view is that once such an endorsement is issued the insurer has agreed to provide the coverage independent of whether federal regulations actually required the protection at the time of the accident. Fawley Motor Lines v. Cavalier Poultry Corp., 235 F. 2d 416, 418 (4th Cir. 1956).

Although there do not appear to be any reported opinions, it seems likely that the MCS-90 could respond in other unexpected ways to motor carrier judgments. As just one example, it seems likely that public liability endorsements, including the MCS-90 would supercede named driver exclusions. MCS-90 and equivalent Form "E" coverage could apply to judgments involving accident scenarios such as intentional acts, intoxication, deviations from scope, fleeing the scene, drinking binges, etc. Undoubtedly, public liability endorsements such as the MCS-90 have potential application to judgments based on pollution or environmental injury. Most Business Auto and Trucking Policies broadly exclude property damage or bodily injury liability caused by the escape of pollutants. Nevertheless, when such incidents arise out of the ownership and use of vehicles, judgments of such liability arguably fall within the broad environmental restoration protections of the endorsement.

The endorsement does not cover injury to or death of the insured's own employees in the scope of their employment because they are not deemed to be members of the public. Perry v. Harco Nat. Ins. Co., 129 F.3d 1072, 1074 (9th Cir. 1997). The endorsement's limits apply on a per-accident basis. Hamm v. Canal Ins. Co. 10 F. Supp. 2d 539 (M.D. N.C. 1998).

No Effect on Priority or Allocation of Coverage

Since the endorsement operates only to protect the public, it is now fairly settled that the endorsement has no relevance to primary versus excess contests between insurers. When two or more insurance policies have been implicated, it has often been argued that the MCS-90 policy is primary. But, nearly all Federal Circuit Courts are now in agreement that MCS-90-style endorsements do not determine priority of coverage contests. The majority view holds that these endorsements, being only for the benefit of the public, do not affect the allocation of liability or priority among insurers. See e.g. Carolina Cas. Ins. Co. v. Underwriters Insurance Co., 569 F. 2d 304 (5th Cir. 1978); Allstate Insurance Co. v. Liberty Mut. Ins. Co., 368 F. 2d 121, 124 (3rd Cir. 1966); Old Republic Ins. v. Canal Ins. Co., 876 F. Supp. 80, 84 (D. Md. 1994); Empire Fire & Marine Ins. Co. v. J. Transport, Inc., 880 F. 2d 1291, 1295 (11th Cir. 1989). Rather, these issues are to be decided by the excess and other insurance clauses of the policies. The Tenth Circuit still holds that the presence of an ICC endorsement makes that policy primary. See Argonaut Insurance Co. v. National Indemnity Co., 435 F.2d 718, 720 (10th Cir. 1971).

Subrogation

The subrogation component within public liability endorsements potentially increases tensions between motor carriers and their insurers when coverage problems arise. As such, defense counsel to motor carriers should exercise extra caution on cases defended under reservation of rights. Under these forms, if an insurer pays a judgment only by reason of the endorsement, and if the insurer would not otherwise be obligated to pay under the policy, the insurer has a right of reimbursement against its insured motor carrier. See Harco Nat. Ins. Co. v. Babac Trucking, Inc. 107 F.3d 733 (9th Cir. 1997). It is rarely in the motor carrier's interests when such endorsements are potentially implicated because the financial risk runs straight back to the company through the subrogation clause. Many of the reported decisions in this area are actually disguised contests between the truckers and their insurer featuring inventive arguments to find conventional coverage under the policy itself. In these situations, there may be an even greater potential for conflict. From the insurer's perspective, the decision is often made to extend a defense under reservation of rights even though the MCS-90 itself creates no defense obligations. If the insurer chooses to defend a motor carrier by reason of potential indemnity under an MCS-90, the costs to defend such claims are not recoverable in subrogation against the motor carrier. Harco, 107 F.3d at 736; T.H.E. Ins. Co. v. Larsen Intermodal Services, 242 F.3d 667 (5th Cir. 2001).

Foreign Motor Carriers

The DOT has recently promulgated interim rules clearing the way for the issuance of U.S. DOT Operating Authority to Mexican trucking companies. 49 C.F.R. parts 368 and 387. Generally, these rules impose all of the existing FMCSA safety regulations plus additional inspection and pre-certification requirements. A dual application process has been created. One for a Mexican domiciled motor carrier operating beyond commercial zones, and a second application process for Mexican motor carriers seeking only to operate in municipalities and commercial zones within 25 miles of the border. See Vol. 67 Fed. Reg. P. 12654 (March 19, 2002).

For motor carriers domiciled in Mexico and seeking US operating authority beyond the commercial zones, proof of financial responsibility must be made through a United States insurance company on the same conditions as those that would apply to domestic motor carriers. 49 C.F.R. § 350(a)(8). For Mexican domiciled motor carriers seeking only to operate in commercial zones along the United States/Mexican border, proof of financial responsibility may be satisfied through 24-hour insurance certificates. 49 C.F.R. § 387.7(b)(3). Typically, these 24?hour commercial zone policies are issued through a master policy sold through general agents and sometimes through trade unions in Mexico. The certificates are usually issued on a 24-hour basis, and such policies must be endorsed with a BMX-90 endorsement or equivalent federal filing as would be the case with domestic registration and financial responsibility requirements.

The DOT's interim rule further provides that Mexican motor carriers will receive a distinctive U.S. DOT number, such that their special operating status can be ascertained based on the cab number.

Conclusion

While sometimes complicated by intrastate versus interstate distinctions, this country's system for assuring financial responsibility to the public has proven to be an effective, common sense program. This cannot often be said of government regulations.