What happens when an exclusion in your commercial auto policy looks like it will prevent recovery of subrogation damages? In the episode of On Subrogation: MCS-90 Federal Motor Carrier Act of 1980 below, Rathbone Group attorney and experienced subrogation litigator Jason Sullivan discusses how this legislation plays into the field of insurance law.
For subrogation professionals handling commercial vehicle claims, understanding MCS-90 can mean the difference between closing a subrogation case with no recovery and identifying a viable path to reimbursement. Because interstate motor carriers are subject to federal financial responsibility requirements, coverage may exist even when a policy exclusion appears to bar payment.
MCS-90, part of the Federal Motor Carrier Act of 1980, requires all commercial carriers involved in interstate commerce to show proof of financial responsibility in one of three ways:
- Self-insurance certification
- Surety bond
- Traditional insurance coverage
If you are managing a subrogation claim that involves an automotive insurance carrier, you may be able to satisfy the judgment with an MCS-90 endorsement. For this discussion, let’s focus on traditional insurance coverage from the perspective of policies that include an MCS-90 rider:
What is an MCS-90 Rider?
An MCS-90 rider, also known as an endorsement, is not an insurance policy but a contingency clause. MCS-90 riders ensure that even if there is an exclusion under the policy in a given subrogation claim, the insurance carrier will still pay for the damages caused by the commercial carrier. Simply put, MCS-90 promises that whatever the damages, no matter whose fault it is, the claim will get paid out.
This rider is often described as creating a surety-like obligation for the insurer. While the insurer may ultimately have defenses under the underlying policy, MCS-90 can require payment to an injured party despite those defenses. This challenging legal structure makes the rider an important consideration at the outset of both the claims handling process and subrogation investigation.
MCS-90 minimums are:
- $750,000 for non-hazardous material
- $1,000,000 for hazardous material
- $5,000,000 for portable containers over 3500 gallons
This acts as a public safety measure to ensure that victims of accidents caused by commercial carriers are compensated regardless of policy exclusions or coverage disputes.
How Does MCS-90 Apply to Your Subrogation Claim?
If you have a subrogation claim like this come across your desk, the first thing to do is reach out to the other carrier to see if they have an MCS-90 rider on their policy. If they refuse to cooperate and you cannot determine whether there is an MCS-90 rider, litigation may be required to receive the information and secure a judgment that will force MCS-90 coverage.
Early identification of MCS-90 issues can significantly affect subrogation claim strategy. A thorough insurance investigation into the motor carrier’s operations, regulatory filings, and policy arrangements may uncover routes to recovery that might be overlooked if the claim were evaluated solely under traditional coverage principles.
Subrogating with MCS-90: Double-Edged Sword or Dual Asset?
Besides overriding any policy exclusions, MCS-90 has implications for both sides of a subrogation dispute. For instance, you may have this coverage, and then your insured causes an accident with negligent/tortious actions. You will not be able to avoid paying the damages under MCS-90, but you do then retain the right to pursue subrogation recovery against your insured.
On the other hand, if you are an injured party by a commercial vehicle, look to MCS-90 coverage to recover damages. Additionally, if an exclusion did apply under the policy, insurance carriers who are forced to pay under the MCS-90 rider can then pursue the commercial carrier for reimbursement.
For subrogation lawyers, adjusters, and specialists, the key takeaway is that policy exclusions should not automatically bar evaluation of subrogation potential. Federal motor carrier regulations may create additional obligations that open the door to successful recovery efforts.
Find More Education On Subrogation
Looking for more informational resources on subrogation topics and the nuances of insurance law? Visit Rathbone Group’s YouTube channel and podcast library for more On Subrogation, and our Subrogation Blog for more informative articles unpacking important strategies and tips for subrogating parties.
Have a topic or question in mind we haven’t yet covered? Reach out at video@rathbonegroup.com or podcast@rathbonegroup.com to see your suggestion discussed on a future episode. And for more on Rathbone Group’s award-winning subrogation services, inquire at info@rathbonegroup.com.