INSURANCE REQUIREMENTS FOR COMMERCIAL MOTOR VEHICLES
The trucking industry was created for the transportation of cargo across interstate and intrastate roads and highways. The trucking industry has always looked for ways to avoid the payment of compensation to injured motorists who are sometimes catastrophically injured due to the negligence of these rather large and forceful machines. Laws were created to protect the public for specific legislative reasons. This included the creation of the Motor Carrier Act of 1935, the Motor Carrier Act of 1980, the Bus Regulation Act of 1982 and then most recently, the Moving Ahead for Progress In the 21st Century Act. All of these new laws were created to protect motoring public from the negligence of truck drivers and motor carriers.
The Department of Transportation has the Federal Motor Carrier Safety Administration to assist in the promulgation of regulations to promote safety. The FMCSA and DOT helped create and implement Federal Motor Carrier Safety Regulations (FMCSR) which, in turn, were written and implemented in order to promote the purpose of the federal regulations. That purpose is to help reduce or prevent truck and bus accidents, fatalities, and injuries.
Part 383.1 of the FMCSR specifically states that the purpose of the FMCSR is to help reduce or prevent truck and bus accidents, fatalities and injuries by requiring drivers to have a single commercial motor vehicle driver’s license and by disqualifying drivers who operate commercial motor vehicles in an unsafe manner.
The purpose of the Interstate Commerce Commission (ICC) statutory law and regulations under the Federal Motor Carrier Safety Act is to ensure that a financially responsible party will be available to compensate third persons injured in a collision with an ICC carrier. The regulations were implemented, at least in part, for the purpose of improving highway safety.
The purposes of these federal laws can only be enforced if insurance is required. When a person has been injured in a commercial motor vehicle accident or tractor-trailer accident, then the individual victim has only one source for compensation. That victim must look to the trucking company and its driver, which in turn, leads to the evaluation of insurance for the driver and that the company that they work for. When reviewing the applicable insurance requirements a lawyer will normally seek the information about the driver, the motor carrier that the driver is working for as well as any companies that are leasing the driver and tractor. Many independent truck drivers would not carry insurance, unless it was required. Many of the smaller trucking companies and independent drivers are not financially stable. The accidents that they cause lead to immense human suffering. In many states the laws allow for naming the insurance company that insures the driver and tractor as a party defendant to the case. Both Federal and State laws have requirements for truck drivers operating on interstate and intrastate highways.
Insurance requirements can be a difficult topic to discuss due to the discrepancies in law. This particular discussion only addresses the Federal requirements of insurance as they apply to truck drivers and motor carriers. In order to have a thorough understanding of why insurance is required, a view of the past helps to establish why a need for the limits to be increased presently exists.
During the first half of the twentieth century, interstate motor carriers attempted to immunize themselves from liability for negligent drivers by leasing trucks and nominally classifying the drivers who operated the trucks as independent contractors. In order to protect the public from the tortious conduct of the often judgment-proof truck-lessor operators, Congress in 1956, amended the Interstate Commerce Carrier Act to require interstate motor carriers to assume full direction and control of the vehicles that they leased as if they were the owners of such vehicles. The purpose of the amendment to the Act was to ensure that interstate motor carriers would be fully responsible for the maintenance and operation of the leased equipment and the supervision of the borrowed drivers, thereby protecting the public from accidents, preventing public confusion about who was financially responsible if accidents occurred, and providing financially responsible defendants.
Federal Commercial Truck Insurance Requirements
The FMCSR, under part 387, requires minimum levels of financial responsibility for motor carriers. Part 387.1 describes the actual purpose of this particular section of the FMCSR and states that the minimum levels of financial responsibility required to be maintained by motor carriers and the purpose of the regulations is to create additional incentives to motor carriers to maintain and operate their vehicles in a safe manner and to assure that motor carriers maintain an appropriate level of financial responsibility for motor vehicles operated on public highways. Part 387.405 prescribes the limits of liability and mandates that the minimum amounts for cargo or public liability are identical to those prescribed for the motor carriers under 49 CFR 387.303.
Part 387.303 is the federal regulation which provides security for the protracted protection of the public with minimum limits of insurance. There is a difference in how this insurance is interpreted. Typically, one would look at whether or not a vehicle weighs 10,000 pounds or more. Small freight vehicles are those commercial motor vehicles that weigh under 10,000 pounds. Once a vehicle reaches the level of 10,001 pounds and above a different insurance minimum coverage becomes higher on a mandatory basis.
These weight parameters are significant and determine whether or not the motor carrier must have a smaller or higher level of insurance. A vehicle carrying 10,000 pounds is roughly equivalent to 5 tons. As noted above, the guidelines for trucks that weigh more than 10,000 pounds are usually broken down into 2 separate categories. Those two categories are separated by whether it is normal cargo or hazardous cargo.
Bodily injury liability is specifically defined to mean injury to the body, sickness or disease, including death resulting from any of these. For purposes of these discussions, this would mean a person, driver, motorcyclist, pedestrian or other victim of a trucking accident has been in an accident with a truck driver and the truck driver and/or motor carrier caused bodily harm to that individual. When a lawyer assists an injured victim that is injured in a motor vehicle accident with a large truck or big rig, lawyers typically will look at the costs related to past and future medical expenses, past and future wage and economic losses, disability, and other factors related to a bodily injury. Many of these accidents result in substantial injuries which will require surgery, amputation, prosthetics and long-term medical care. The costs associated with an accident with a large truck can be catastrophic and life altering costs which the normal human being cannot afford or pay for. In many instances, the lawyer for an injured victim will have to hire, medical experts and life care experts in order to project the future costs associated with the need for life time. Medical costs and medication costs.
The term property damage liability is defined under Part 387.5 to mean damage to or loss of the use of tangible property. In the property damage sense, lawyers are typically looking to the valuation of the damage to cars and other motor vehicles. When the trucks drive into governmental structures, signs and surrounding buildings where structures tangible and real property is damaged, the lawyer will look to obtain compensation for the damage to this property.
Many trucks and motor carriers carry commercial truck cargo coverage. This is a specific type of insurance for cargo that is damaged or destroyed on a particular load. Many times, the insurance will cover full costs of replacement of the damaged cargo as well. The insurance will pay for and cover the cost of cleanup and other site specific damage. These large vehicles will oftentimes cause damage to the asphalt and the traveled roadway which causes a need for repair to the surface of the highway. One accident can cause a million dollars of damage to repair.
The specific types of minimum coverage are generally described in Part 387 of the FMCSR. The categories for the present are set forth below.
Federal Commercial Truck Insurance Minimum Coverage Amounts
Vehicles 10,000 GVW (Gross vehicle weight) or over carrying Non Hazardous Material
- Bodily injury liability $750,000
- Property damage liability $750,000
- Truck cargo coverage $300,000
Vehicles 10,000 GVW (Gross vehicle weight) or over carrying Hazardous Material
- Bodily injury liability $1,000,000
- Property damage liability $1,000,000
- Truck cargo coverage $5,000,000
The transportation of hazardous materials creates a significantly higher minimum amount of coverage due to the catastrophic nature of a potential accident. The harm that can be caused is much greater when the truck driver and motor carrier are transporting dangerous chemicals and materials.
Insurance carrier will evaluate the safety record of the motor carrier in order to determine how high a premium to charge. Most insurance companies will perform an insurance audit on a yearly or annual basis, where they study the safety factors and FMCSR compliance of the trucking company and motor carrier. If a trucking company has a better safety record, then the insurance rates will usually be lower. Some of the worst motor carriers and trucking companies are unable to actually get liability insurance without having a retained self-insurance level. This means that the insurance company may come in and pay to assist in the event of an accident with the understanding that the motor carrier will pay the first $250,000 or the first $500,000 out of their self-insured retention. Many trucking companies use a self-insured retention in order to avoid some of the higher costs of liability insurance. What these trucking companies fail to understand is that if they would have a better safety record, they would be able to get full insurance coverage due to the statistical probability that there would be less chance of an accident by having higher level of safety.
Your personal auto insurance may apply to many property and bodily injury occurrences
Insurance requirements for personal auto and motorcycle coverage varies with different mandatory minimum amounts of coverage state by state. Some states provide for what is called no-fault coverage where your own car insurance will come in and pay the first several thousand dollars of your medical bills, as well as your immediate wage loss benefits. Unfortunately, not all states have no-fault laws. These no-fault insurance coverarges are also called Personal Injury Protection benefits or PIP. In order to understand what your state requires for specific types of coverage that are mandatory, you can contact a local attorney or you can contact your State Insurance Commissioner. Many different types of coverage can be purchased.
No-fault, personal injury protection and medical payment coverage
Many states have insurance laws that provide for the insurance company to provide a minimum level of no-fault, personal injury protection benefits or medical payment coverage. These PIP benefits or no-fault laws have no bearing on whether or not the truck driver or motor carrier is at fault. These are simply a quick and efficient means to get immediate compensation for the injuries and wage loss that results out of a motor vehicle accident with a large truck.
The issue of fault is completely separate and distinct from whether PIP or medical payment coverage applies. It is something that you have purchased on your insurance policy through a contract of insurance. Many individuals believe that because their insurance company makes a payment that that specifically means that the trucking company was at fault. The payment by your insurance carrier has absolutely no bearing on whether or not the truck driver or company that he or she drove for was at fault.
Many states allow the driver of a motor vehicle or motorcycle to buy minimum levels of coverage. They also allow the person and their insurance agent to provide for the purchase of higher levels of coverage to protect your family.
Caveat emptor or buyer beware is the rule that best describes the decision making on the purchase of your insurance coverage. If you do not have a good insurance agent who goes out of the way to advise you about the necessity of having higher levels of coverage, then you may be in a position where you have insufficient insurance coverage for the short-term recovery. Insurance agents have a loyalty and duty that is owed to the customer. However, that same insurance agent is usually under what is called a loss ratio rule with the particular insurance company they sell for. Independent agents will sell policies through many different companies. Regardless, almost all companies place the agent under a specific loss ratio analysis. When an agent sells an average of 100 policies of insurance, the underwriting insurance carrier will require analysis of the agent to determine what percentage of every 100 policies results in a loss. This means that if they sell too many policies to bad drivers who statistically end up with a claim for benefits, the agent may lose their license to sell insurance policies to that company. As result of these insurance industry protocols, it is absolutely necessary that you inquire of your own agent about how much coverage you should purchase.
Uninsured Truck Drivers
The concept of an uninsured truck driver is rare. It does happen. Many independent truck drivers may believe that their policy is in effect, when they have in fact missed a payment deadline. The policy lapses and the truck driver becomes uninsured. There are many smaller independent contractor trucking companies in larger metropolitan areas who, for whatever reason, fail to purchase insurance on a timely basis. Some of the worst truck drivers actually fail to carry any insurance. They do so intentionally due to the high cost of insurance. In order to protect a person from an event where you are hit by an uninsured motorist truck driver you can purchase your own policy of insurance.
Almost all 50 states have laws that allow for the purchase of uninsured and underinsured motorist coverage. These are two distinct topics which will be discussed separately. The uninsured motorist coverage is usually equivalent to the state minimum levels of liability coverage. In other words, if you are required to carry $25,000 of coverage and you are hurt, you may have $25,000 of uninsured motorist coverage. Many states will allow you to reject certain limits of uninsured motorist coverage. Some states let you reject the coverage in its entirety. The important thing to remember is that you have to have enough insurance to cover your injuries. While many trucking companies carry $750,000 of coverage or $1 million of coverage, the trucking companies that have a lapse will have zero coverage.
Most individuals do not realize that purchasing liability coverage as well as uninsured and underinsured motorist coverage is relatively cheap. You can ask your agent for a quote. In many circumstances, you can purchase $1 million of UM and UIM coverage for rather small annual fee. You should always carry at least a minimum of $250,000 of liability coverage per person with accompanying uninsured and underinsured motorist coverage of the same amount. When a person can afford the higher premiums required for additional coverage, it would be wise to carry a minimum amount of $1 million per person. Surprisingly, this may only cost a few hundred dollars extra per year.
In the event that you are hit by an uninsured truck operator or driver then you make a claim for benefits to your own company for uninsured motorist benefits. The simple fact that you buy $100,000 or $500,000 of insurance coverage does not mean that you have a claim for that value. You have to evaluate the fair amount of your damages as it relates to past and future medical expenses, past and future economic and wage loss, past and future loss of consortium for your spouse who performs household services and other services like replacement services for things you can no longer do. Damages will include the noneconomic losses such as pain and suffering, disability, loss of enjoyment of life and mental anguish or loss of time.
The important thing to remember about having uninsured and underinsured motorist coverage is that the cost of medical treatment continues to escalate annually. In the present day it is extremely high. Many people do not have insurance coverage for health benefits even though federal law now requires everyone to carry health insurance. Many people simply cannot afford the cost of health insurance do to the high monthly premiums. In the event that you were severely injured, it is likely that you would have medical bills which would exceed $50-$100,000. Some people get injured badly enough with truck accidents that their medical bills exceed $1 million. For the unfortunate few, the medical bills can exceed the one million dollar mark and leave a person in a destitute stage where bankruptcy may be the only option. If you carry high uninsured and underinsured limits, this may be avoided by carrying high levels of uninsured and underinsured motorist coverage benefits.
Underinsured Truck Drivers
The concept of underinsured truck drivers is a topic that needs to be understood in order to protect yourself. If the damages and injuries are great enough, then the trucking company limits of insurance may not be sufficient to compensate you for your medical and economic losses. Some of the smaller trucking companies take out low levels of insurance at a level of $300,000. Given the present economics of the medical community and the increasing costs of medical treatment and prescriptions, it does not take that substantial of an injury to pass the $300,000 mark. Underinsured motorist coverage is different from uninsured motorist coverage. Underinsured coverage may be mandatory in your state. You can speak to a knowledgeable insurance agent or your state’s insurance commissioner to determine whether your state requires a certain level of underinsured motorist coverage.
In the event that you have underinsured motorist coverage, you can buy higher levels of coverage. Underinsured motorist coverage is defined differently in different states. In some states the underinsured motorist coverage actually is stacked on top of the amount of coverage of the driver that hit you in the full amount of the UIM coverage. In other states, the law has been interpreted to mean that the underinsured motorist coverage is only the difference between the level of coverage of the driver that hit you, and whatever coverage you have. For example, if you are in a state where you only look to the difference between the two levels of coverage and the truck driver had $300,000 of coverage where you have $1 million of UIM coverage and your damages meet or exceed one million dollars, you would have an additional amount of $700,000 of coverage. This is dependent upon having actual compensatory damages that meet and exceed this level of one million dollars. Simply purchasing an amount of coverage does not mean that your damages are in the same amount. Each injury is distinct and depends upon its own characteristics and evaluation.
The concepts of uninsured motorist and underinsured motorist will only come into play in certain limited circumstances with trucking cases. The primary circumstance would be where the truck driver had a lapse in insurance or has a smaller amount of insurance than required by regulation.
Uninsured and underinsured motorist benefits come into play quite frequently in the circumstances where a truck driver or co-driver is injured by another vehicle that causes a collision, regardless of whether that other vehicle is a truck, tractor-trailer or automobile. In those circumstances, if the motor carrier that you worked for has not rejected the highest limits of coverage and purchased only state minimum levels of UIM and UM benefits, you may be able to get additional underinsured motorist benefits from the vehicle that you are operating. The analysis of UIM coverage for a truck driver who is injured by another vehicle is a unique area of the law that has many complexities involved in determining whether or not a driver and/or co-driver can obtain coverage through the insurance on the truck or tractor-trailer. In these types of factual circumstances, you will need the services of a skilled trucking attorney who has an understanding of insurance law.
Congressional attempts to increase the minimum financial liability requirements for motor carriers
On July 19, 2013 United States representative Matt Cartwright, who is a Democrat from Pennsylvania introduced the Safe and Fair and Environment on Highways Achieved through Underwriting Levels Act. This bill was known as H.R. 2730 or the Safe Haul bill. The bill was entitled Safe Haul. This bill sought to have substantial increases from the minimum on the liability limit requirements for motor carriers raising the minimum from 750,000 to a much higher level of $4.42 million with future escalation clauses as medical expenses continue to rise. The current minimum insurance level standard established by Congress in 1980. The bill had been referred to the House committee on Transportation and Infrastructure.
The House voted to block the bill on June 10, 2014. The 214-212 vote was largely along party lines at 210 Republicans and only four\ Democrats voting in favor. The bill had been introduced due to the finding by the FMCSA that concluded in a report to Congress that the current minimum financial responsibility limits for the commercial motor vehicle industry are inadequate to meet the costs of many crashes because of rising medical costs. The FMCSA was concerned that the minimum limits had not been raised in more than 30 years.
The final report by the FMCSA was entitled; Examining the Appropriateness of the Current Financial Responsibility and Security Requirements for Motor Carriers, Brokers and Freight Forwarders – Report to Congress. This report, by the FMCSA, was as a direct result of an executive summary and order by President Obama that resulted from a law called Moving Ahead for Progress in the 21st Century Act. (MAP-21; P.L. 112-141). That law directed a sector of the US Department of Transportation, to issue a report to the Committee on Commerce, Science and Transportation of the Senate and the Committee on Transportation and Infrastructure of the House of Representatives on the appropriateness of the current minimum financial responsibility requirements for motor carriers of property and passengers as well as current bond and insurance requirements for freight forwarders and brokers.
This law came about because the legislative history for minimum insurance requirements on commercial motor vehicles indicated that Congress recognized decades ago that truck accident crash costs would change over time. It has been assumed that the DOT would periodically examine the levels of crash costs and make adjustments as necessary. In conclusion, the FMCSA determined that the current financial responsibility minimum limits of coverage were due for reevaluation. They formed a rulemaking team to evaluate the appropriate level of financial responsibility. In doing so, they reviewed the Motor Carrier Act of 1935, which is known as P.L. 74-255. This early law directed that no certificate or permit shall be issued to a motor carrier, unless that carrier complied with reasonable rules and regulations as the interstate commerce commission prescribe for the protection of the general public.
The next law applicable law was the Motor Carrier Act of 1980. The MCA set the minimum financial responsibility level at $750,000 for the transportation of property, and 5 million for certain hazardous transportation, as well as other limits stated within that Act. The MCA included a section that tied the amount of liability coverage to the fitness of the carrier to operate in interstate commerce as it relates to safety. While this particular study found that major catastrophic motor carrier related crashes are relatively rare occurring at the approximate rate of about 3300 out of every 330,000 crashes per year, the same study found a statistically significant critical finding that the costs for severe and critical injury crashes can easily exceed $1 million. The analysis revealed two categories of injury crash which were labeled as severe and critical.
The same study found that insurance premiums had declined in real terms since the 1980s. In other words, the real value of insurance premiums or inflation adjusted premiums have declined. The study found that the current insurance limits do not adequately cover catastrophic crashes, mainly because of increased medical costs. The report also found that the decreasing value of the current minimum levels of financial responsibilities effectively removing the function of insurance in covering catastrophic crashes. This is because from 1985 until 2013 the medical Consumer Price Index or CPI increased at a significantly higher rate than the Core Consumer Price Index. A table was created showing the necessary amounts of coverage to adjust for inflation. The particular table recommended that the 2013 inflation adjusted liability limit for medical CPI established a much higher need for liability coverage minimum limits to be increased to reflect the following:
CARRIER TYPE 2013 INFLATION ADJUSTED
LIABILTY LIMIT MEDICAL CPI
General Freight $3,188,250
HM (Low) $4,251,000
HM (High) $21,255,000
Small Bus $6,376,500
Large Bus $21,255,000
The same study found the comprehensive date on premiums that motor carriers would incur to meet higher coverage limits was not readily available. The study focused mainly on freight carriers, but was also applicable to applicable to passenger and hazardous materials carriers. The study followed many significant multiple-fatality or multiple-victim crashes such as a rollover near Sherman, Texas in 2008 where 17 passenger fatalities occurred. They studied another rollover crash in Victoria, Texas in 2008 which resulted in one fatality and 46 injuries.
They studied another rollover crash near Williams, California in 2012 where 9 passengers died. The ultimate conclusion of the study was that the current minimum financial responsibility level for motor carriers of property, hazardous materials and passengers were established in the 1980s. Over the past 29 years of insurance premiums declined and given the decreasing real value of the current minimum financial responsibility levels, it effectively removed the function of insurance in covering catastrophic crashes due to medical and other crash related costs increasing significantly. The study concluded that the legislative history of the federal minimum insurance requirements strongly suggested that Congress recognized that the crash costs would change and that, in turn, the FMCSA determined that the present financial responsibility minimums are inadequate to fully cover the cost of some crashes. In other words, the minimum insurance limits were inadequate to cover catastrophic injuries.
Obviously, the trucking industry fought this bill with fierce lobbying efforts. The trucking industry won and the motoring public lost. The FMCSA study found that catastrophic motor carrier crashes that result in costs over $1 million do happen. While these severe catastrphophic accidents may be a lower number of the overall crashes, when they occur, peoples lives are shattered forever.
The authors reviewed studies from The Pacific Institute for Research and Evaluation (PIRE). PIRE fought the bill arguing that truck crashes already result in too high an amount of awards. The Trucking Alliance, however, concluded that the $750,000 limit is inadequate amount of insurance coverage for 42% of crashes and backed higher limits. The bill was fought by the American Trucking Association (ATA). The ATA study argued that there was only a 1.40% chance of a claim exceeding $500,000. The problem and of the self-policing studies by the trucking industry is that they are funded and intentionally skewed to make the Public believe that truck accident victims are being compensated fairly. Statistical analysts are bright enough to pick raw data from different sources that skews to a preconceived result. This is similar to the medical industry where a drug manufacturer will perform a blind placebo study and skew the result it wants to sell the drug on the open market and get FDA approval while other studies in the European Market will have completely different results indicating the same drug is dangerous and kills a statistically high percent of patients. Experts and mathematicians in this day and age can create a model that will say anything they want it to say. This is a very unfortunate reality given the present manner in which industry fights government regulation.
A recent crash occurred in the State of Kansas, where the trucking company only had four trucks. The total coverage for the trucks was $1 million per occurrence. When this particular truck driver failed to maintain an appropriate lane of travel and forced a mother with her four children into oncoming traffic, the mother was forced off of the highway into oncoming tractor-trailer traffic so she nowhere to go but to veer left off of the traveled highway. The mother was killed. One daughter was killed. Another daughter was paralyzed from the chest down. Another one of the siblings had significant lower extremity injuries with extreme scarring and underwent a number of surgeries. $1 million of coverage would not begin to fairly compensate this family with three deaths for the loss of the mother much, much less the loss of the other child. The child that had the paralysis will incur tens of millions of dollars of future medical care. This unfortunate result is because the trucking industry refuses to change its view on safety. This case alone establishes a need to increase the minimum limits of financial responsibility. Cases like these occur across the United States every day.
Conclusion on need for increased insurance limits of minimum financial responsibility
Given the currents lame duck Congress, it is unlikely that the minimum limits of coverage will be increased until we have a new presidency. Congress is not going to help the general motoring public have a fair level of insurance coverage for catastrophic cases. Trucking victims need to have excellent skilled trucking trial lawyers help develop the case. Given the fact that many of these trucking companies are not going to voluntarily increase their insurance limits, the adept lawyer will be able to look at all additional sources of potential liability to help the catastrophically injured obtain a fair amount of recovery.
Lawyers who specialize with expertise in trucking accidents and catastrophic injuries are better suited to assist the truly injured victim. Brad Pistotnik Law is one of the firms that has dedicated years of intense study to aid and assist the victims of large truck crashes. He utilizes a team of experts that understand the Federal Motor Carrier Safety Regulations (FMCSR) as well as accident reconstruction principles and techniques. These experts are able to uniquely provide insight into a more difficult liability situation to identify those defendants who are primarily or even partially responsible for causing injury and death. The normal valuation of cases is no longer an easy task. It requires dedicated lawyers with experts who absolutely understand the entirety of the FMCSR.
49 C.F.R. 383.1
Morris v. JTM Materials, Inc., (Tex. Ct. App. 2002, 78 S.W.3d 28, at pp. 37-38).
Hartford Accident & Indemnity Company v. American Red Ball Transit Company, Inc., 262 Kan. 570, 938 P.1281 (Kan. 1997).
49 C.F.R. § 383.1. Myers v. Hose," 1994 WL 803496, p. 14 (D. Maryland 1994)
Kapche v. City of San Antonio, 176 F.3d 840, 846 (5th Cir. 1999). (footnotes omitted)