If you're starting out as a motor carrier, there are certain certificates and endorsements you'll need in order to legally operate over the road. One of these endorsements is the MCS-90 endorsement, required by the Federal Motor Carrier Act of 1980 for any motor carrier involved in interstate commerce, under most circumstances. In essence, an MCS-90 represents proof of financial responsibility in the event of an accident or other event where the carrier is held responsible.
There are plenty of instances where an MCS-90 is needed and others where the endorsement can actually be waived in lieu of other proof. The following explains when you'll need one, as well as situations where the endorsement isn't required.
Situations Where You'll Need One
If you're a motor carrier involved in over-the-road trucking, there are at least 3 instances where an MCS-90 endorsement is a mandatory requirement:
- If you purchase insurance through the standard market - An MCS-90 endorsement is a standard requirement for any motor carrier looking to establish proof of financial responsibility through insurance. In most cases, it's the insurance company that obtains the MCS-90 on your behalf.
- If your drivers travel out of state - Motor carriers who participate in for-hire interstate commerce (such as delivering goods from one state to another) are required to have an MCS-90 endorsement. Motor carriers who haul non-hazardous goods strictly within the boundaries of the state may not be subject to this requirement, in most cases.
- If you transport hazardous materials - Both private and for-hire motor carriers operating in-state or across state lines must obtain an MCS-90 endorsement if they transport hazardous materials. MCS-90 endorsements are also required for motor carriers operating portable tanks or hopper-type vehicles capable of carrying over 3,500 gallons.
You Won't Need It If You Self-Insure
If you decide to self-insure your fleet instead of buying insurance through the standard market, then you won't be subject to the MCS-90 endorsement requirement. Many motor carriers, especially companies with sizable truck fleets, self-insure as a way to reduce insurance costs and avoid the collateral requirements that are often required by insurance companies.
In order to self-insure, motor carriers must demonstrate that they are able and willing to handle any financial claims that arise due to their company's negligence. That's usually done through a thorough accounting of the motor carrier's current financial state and its ability to fulfill cargo, property damage and liability obligations in the event of a claim.
You may also be able to bypass the MCS-90 endorsement requirement by providing a surety bond. Surety bonds also act as guarantees of financial responsibility. In the event of a claim, the issuer of the surety bond pays on your behalf if for some reason you fail to pay. The surety bond may be in the amount of the minimum liability limit, which ranges from $750,000 to $5,000,000 depending on the type of cargo being transported on a regular basis.
You May Need Additional Insurance
Keep in mind that an MCS-90 endorsement isn't insurance -- it's simply a certificate that verifies a company's financial responsibility if a serious accident occurs. Although your insurance company may pay out a claim based on the terms of the MCS-90 endorsement, you may end up owing your insurance company for the claim amount paid. This can happen in cases where the total cost of the claim exceeds the minimum liability limit, usually if environmental clean-up is involved.
Supplementing your commercial truck insurance with umbrella coverage could help cover claim amounts that exceed the minimum limits. In the case of claims that call for environmental clean-up, having environmental liability insurance could help shield you and your company from any outsized liability and the potential for your insurance company to demand reimbursement for any claims initially paid to the other party.
For more information, talk to a commercial truck insurance company like Metropolitan Insurance Service Consultants.
