To explain what an MCS-90 form is and what it provides, it is important to understand the regulations put in place that make the MCS-90 necessary.
The need for an MCS-90 endorsement starts out in part because of the Federal Motor Carrier Act of 1980. This act states that each motor carrier participating in interstate, for-hire commerce, is required to show proof that they have a financial responsibility equal to or greater than the minimums set by each state. Each motor carrier can show proof of this financial responsibility in one of three ways.
The motor carrier can choose to self-insure their company. By self-insuring, the motor carrier is essentially stating that they have the financial responsibility to cover any and all claims that arise from their company’s negligence and that they are legally liable to pay.
The motor carrier can choose to provide proof of financial responsibility by providing a surety bond. A surety bond is a promise for one party (the party who issued the surety bond) to pay on behalf of another party (the party who the bond was issued to) in case they fail to pay.
The motor carrier can choose to procure insurance through the standard market. If, and when, the motor carrier chooses this option, this is when the MCS-90 endorsement will come into play.
The MCS-90 is nothing more than a guarantee that there will be some source of funds to pay for a loss in which the insured was legally liable. This guarantee is mainly for the purpose of the public in ensuring them that there will be no financial consequences if a motor carrier doesn’t have the minimums required.
The MCS-90 states that it “covers all vehicles owned, operated, or maintained by the insured regardless of whether or not each motor vehicle is specifically described in the policy.” However, if a claim is paid out under the MCS-90, the insurance company may recoup its losses by subrogating the claims paid against the motor carrier. This is another reason why it is so vitally important to have all equipment listed on a scheduled unit policy.
In conclusion, the MCS-90 is a very complex and confusing endorsement but one that is very vital to a motor carrier. While it does not provide the insurance itself, it is an important part of a motor carrier’s portfolio and can go a long way to help motor carriers and insurers protect themselves.
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