What Is An MCS-90 Form And Does My Company Need It?
In 1980, Congress passed the Motor Carrier Act of 1980, in other words known as the ‘MCA’, which not only deregulated the trucking industry and greatly reduced existing barriers to entry, but it also addressed safety issues and set forth guidelines for financial responsibility for trucking accidents. Essentially, there was a growing concern that trucking companies would not have the financial means to satisfy obligations for compensation of bodily injury or property damage caused by an accident when they were found to be liable. This concern led to the public availability of information showing that transportation companies had the financial responsibility to operate trucks on the road.
An MCS-90 form is an endorsement that attaches to a commercial auto liability policy issued to a motor carrier by their insurance company. The endorsement essentially provides written and documented proof that the motor carrier has satisfied the minimum financial requirements set forth by the Department of Transportation. When insurance companies issue the MCS-90 endorsement regulators can verify that adequate financial assets exist to pay out monies to a third party in the event a motor carrier is found liable for property damage or bodily injury.
Minimum required levels of financial responsibility
Because of the Motor Carrier Act of 1980, certain levels of financial responsibility are required to be met in order to protect the public from risks created by motor carriers in their daily course of operations. Financial responsibility only applies to for-hire carriers operating motor vehicles transporting property in interstate or foreign commerce and to motor carriers transporting hazardous material.
These minimum levels of financial responsibility are outlined as follows:
Non-hazardous cargo $750,000
Oil & certain hazardous substances $1,000,000
Hazardous substances and radioactive material $5,000,000
Financial responsibility can be determined one of three ways:
- Transferring the risk to a commercial auto insurance policy. When the insurance policy take effect, the insurance carrier will file an MCS90 endorsement proving you’ve met the minimum requirements of the FMCSA
- Through the purchase a surety bond which will have much of a same effect as the insurance policy
- Proving to the Federal Department of Transportation that you can self-insure in the case of an accident. This is a much more involved process as you’ll have to provide P&L statements, bank statements and a host of other documents for approval. In addition, nearly all motor carriers choose not to pursue this route since they are looking to offset this type of risk from their balance sheet.
When does the MCS-90 expire?
The MCS-90 form is an endorsement to your commercial auto policy, and as such, follows the effective dates set forth in your policy declarations page. In other words, the MCS-90 endorsement will also expire on the date your policy expires. For that reason, to make sure that you are compliant with federal DOT rules and regulations, you must make sure that you renew your insurance with your incumbent insurance carrier (in which case they would update the MCS-90 form on your behalf) or that the filings are completed through your new insurance carrier prior to your policy’s expiration date.
Who needs an MCS-90 form?
This question arises very frequently, but can be answered quite easily. An MCS-90 endorsement must be filed if your meet at least one of the following conditions:
- If you are a motor carrier participating in interstate (crossing state lines) commerce
- If you are a private and/or for-hire intrastate motor carrier who transports hazardous material or portable tanks exceeding a 3,500 gallon capacity
Because insurers see this endorsement as being “on the hook” for any accident that occurs under the motor carriers DOT, they are more and more cautious and hesitant against motor carriers who do not properly disclose how many vehicles they have running under their fleet. It’s extremely important that a motor carrier schedule each vehicle that they are running under their policy. When insurers check inspection reports and they see that a vehicle was tagged under an insured’s DOT number without being reported, they are much more inclined to cancel the policy.
Example of why an MCS-90 form is needed (and how it can backfire)
Travis is an extremely cautious driver who has had his CDL for over 10 years and never had any moving violations or accidents in his professional career. Travis typically hauls hazardous material along his standard 1200 mile route which he has been doing for the past 2 years. On a rainy, foggy morning, a driver in a compact car changes into the same lane as Travis and realizes the cars in front of him are slowing down quickly. The driver who is now panicked forcefully slams on his breaks causing a chain reaction with Travis who does the same.
Before Travis can gain any control, his truck and trailer have flipped. He has not only wrecked two other vehicles, but the passengers are severely hurt and his cargo is also leaking into a nearby stream. Numerous federal agencies were called in, including the EPA, who ultimately determined that the total damages were approximately $3.5M. Because his insurance carrier had filed an MCS-90 endorsement with the DOT, they were obligated to cover the damages, however, since his policy specifically had an exclusion for pollution and environmental clean up Travis found himself having to pay back the $3.5M to his insurance carrier.