Transportation Update: Does the MCS-90 Endorsement in Your Policy Afford Coverage When a Trailer You Leased to Another Company is Involved in a Fatal Accident?
On February 25, 2016, the U.S. Eleventh Circuit Court of Appeals, in the case Nat'l Specialty Ins. Co. v. Martin-Vegue, affirmed a judgment in favor of an insurer in connection with a fatal trucking accident. The opinion is notable because it examines liability insurance coverage and the applicability of the policy's MCS-90 endorsement.
On November 29, 2012, Andrii Plys was driving a tractor-trailer carrying a load of pebbles from California to Florida. During the trip, Plys collided with Howard Martin-Vegue's vehicle on Interstate 95 in Florida killing Martin-Vegue. Martin-Vegue's surviving spouse, Audrey, filed suit in Florida state court against Plys and motor carrier ABS Transport, Inc. ("Transport"). ABS Freight Transportation, Inc. ("Freight") leased the trailer involved in the accident to Transport under an equipment lease and was not sued. National Specialty Insurance ("National Specialty") had issued liability insurance policies to both companies.
Audrey settled with Transport and as to Plys, she settled all claims "except to the extent that there is other liability insurance coverage available to him." The settlement exhausted Transport's insurance plan, but Audrey believed there was additional insurance coverage under the liability policy issued to Freight.
National Specialty filed suit for declaratory judgment against Audrey in federal court, seeking a ruling that there was no coverage under Freight's insurance policy because:
- Plys was not an insured under its terms; and
- The MCS-90 endorsement did not apply.
The district court denied insurance coverage and Audrey appealed.
Whether Plys was operating the tractor-trailer on behalf of Transport or Freight was contested. In short, the Freight policy would apply if Plys was driving on behalf of Freight. However, if Plys was driving on behalf of Transport, then there would be no coverage.
The Eleventh Circuit examined whether the district court was correct in finding that Plys was not insured under the Freight policy. Then it considered whether coverage was available under the policy's MCS-90 endorsement.
The Eleventh Circuit found that, at the time of the accident, Plys was using the trailer under a written lease, on behalf of Transport. Consequently, Plys was not an insured. The court also concluded that because Transport was the motor carrier for hire, not Freight, the district court correctly found that the MCS-90 endorsement was not implicated. The district court's ruling was affirmed.
D. Why Is This Important?
- Performing due diligence before leasing a tractor from an independent trucking company that provides its employee to drive the tractor could help identify potential red flags.
- MCS-90 endorsements, which guarantee a minimum level of coverage in the event an insured becomes liable, but coverage is otherwise excluded, do not apply in every situation.
- According to the Eleventh Circuit's analysis, an insurer's obligation under a MCS-90 endorsement is triggered only when (a) the underlying insurance policy to which the endorsement is attached does not provide liability coverage for the accident, and (b) the carrier's other insurance coverage is either insufficient to meet the federally mandated minimums or non-existent.