Carrier Act Does Not Impose Per-Person Limit
July 14, 2009
The 7th U.S. Court of Appeals recently held that the MCS-90 endorsement to an automobile policy issued to a trucking company, which incorporated compliance with the federal Motor Carrier Act, did not have the effect of expanding coverage under the policy beyond the per-accident limit stated in the policy. Carolina Casualty Insurance Co. v. Estate of Karpov, 559 F.3d 621 (Mar. 17).
The insurer, Carolina, was represented by Robert Brown of Spangler, Jennings & Dougherty, Merrillville, Indiana. Stuart Scott of Spangenberg, Shibley & Liber, LLP, Cleveland, Ohio, represented the claimants.
A driver for a trucking company, Net Trucking Inc., rear-ended a stopped automobile in a construction zone on the Indiana Toll Road in 2005. The collision set off a chain reaction that led to the death of four individuals, numerous other injuries, and property damage to both automobiles and the toll road itself.
Net Trucking and the driver were insured under a policy issued by Carolina. The policy stated that Carolina's maximum liability for any one accident, regardless of the number of claimants or vehicles involved, was $1 million.
Attached to the Carolina policy, as required for all commercial trucking insurance policies, was an MCS-90 endorsement. That endorsement contained language indicating that the policy provided coverage in the amount of the limit designated by an "X," and the "X" reflected a limit of $1 million per accident. In addition, however, the endorsement stated that the policy was amended "to assure compliance by the insured, within the limits stated herein, as a motor carrier of property" under applicable sections of the federal Motor Carrier Act of 1980.
Carolina initiated an interpleader action naming as defendants the driver, the insured and those persons injured in the 2005 accident, seeking a declaration that its liability was limited to $1 million for the entire accident. The company also deposited $1 million into the district court registry for the benefit of the various claimants.
Various of the claimants argued that the Motor Carrier Act, compliance with which was assured by the MCS-90 endorsement, expanded coverage from the $1 million per accident stated in the policy to $750,000 per person. The parties filed cross motions for summary judgment, and the district court ruled in favor of Carolina. The claimants took this appeal.
In an opinion by Judge Daniel A. Manion, the 7th Circuit affirmed. He observed that, in his view, the $1 million per accident limitation in the policy was clear and unambiguous. Nevertheless, he analyzed the claimants' position that the Motor Carrier Act, as incorporated by the MCA-90 endorsement, established a $750,000 per-person liability minimum.
One section of the Act relied on by the claimants, 49 U.S.C. §31139(b)(1)-(2), provides that the Secretary of Transportation is to prescribe regulations to require minimum levels of financial responsibility for motor carriers, and that the level of financial responsibility to be established "shall be at least $750,000." In the claimants' view, according to Manion, the $750,000 amount set forth in the statute is to apply on a per-person basis by virtue of 49 U.S.C. §13906(a)(1).
That section indicates that motor carriers registering with the Secretary under the Act must carry insurance or other security not less than that required by section 31139. It further states that the security must be "sufficient to pay not more than the amount of the security, for each final judgment against the registrant for bodily injury to, or death of, an individual resulting from the negligent operation" of a motor vehicle. The claimants argued that the "each final judgment . . . for bodily injury to . . . an individual" imposed a requirement that the $750,000 minimum applied on a per-person basis and not on a per-accident basis.
Manion disagreed. He pointed out that the claimants' argument ignored the "not more than the amount of security" language, which was construed by Hamm v. Canal Ins. Co., 10 F. Supp. 2d 539 (M.D.N.C. 1998), aff'd, 178 F.3d 1283 (4th Cir. 1999). The court in Hamm stated that the clear meaning of the "not more than" language is that the amount to be paid need not exceed the amount of the security established by the statute or the policy itself. Hamm further indicated that the minimum imposed by statute was $750,000.
Manion said that Hamm and another similar case, Stevens v. Fireman's Fund Ins. Co., 2002 WL 31951274 (S.D. Ohio Nov. 7, 2002), aff'd, 375 F.3d 464 (6th Cir. 2004), were correct and that the statutory language refers to the $1 million security per-accident limit that Net Trucking obtained from Carolina.
Alternatively, Manion said that, even if the statute did establish a $750,000 per-person minimum, the MCS-90 endorsement expressly stated that it provides coverage "within the limits stated" in the endorsement, which set the limit at $1 million.
In addition, Manion relied on an illustration for the proper form of the MCS-90 endorsement, taken from a Secretary of Transportation regulation, 49 C.F.R. §387.15. The illustration phrases the policy limit as contained in the endorsement in terms of an "each accident" limit.
The claimants also made an argument based on the legislative history of the Motor Carrier Act and public policy. Manion summarily rejected this position, stating that neither legislative history nor public policy could overcome the "clear" statutory language and regulatory form, which establish $750,000 as the minimum amount of financial responsibility, and the policy language which defines the liability on a per-accident basis.
In sum, the court held that the $1 million per accident policy limit governed, that the Motor Carrier Act did not require a higher limit, and that summary judgment in favor of Carolina therefore was affirmed.
