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Tenth Circuit Joins Majority Jurisdictions in Recognizing Limited Scope of MCS-90 Endorsement
Insurance Law Update
Tenth Circuit Court of Appeals
In Carolina Casualty Ins. Co. v. Yeates,__ F.3d __, 2009 WL 2809387 (10th Cir. (Utah) Sept. 3, 2009), the Tenth Circuit Court of Appeals reconsidered its 20-year-old decision in Empire Fire & Marine Ins. Co. v. Guar. Nat’l Ins. Co., 868 F.2d 357 (10th Cir. 1989), to determine the scope and application of federally mandated insurance for interstate commercial motor carriers.
Tymer Yeates was severely injured in an automobile accident involving a truck owned by Bingham Livestock. State Farm insured the Bingham Livestock truck involved in the accident, and promptly paid its $750,000 policy limit to Yeates. Carolina Casualty insured Bingham Livestock under a general liability policy that did not cover the truck. However, the policy contained an MCS-90 endorsement providing that Carolina Casualty would pay up to $1 million for “any final judgment recovered against [Bingham Livestock] for public liability resulting from negligence in the operation, maintenance or use of motor vehicles.” An MCS-90 endorsement is a specific type of endorsement that complies with a federal regulation requiring interstate trucking companies to maintain insurance or other surety that will pay any final judgment recovered against the motor carrier for bodily injury or death resulting from negligence.
Carolina Casualty filed an action for a declaratory judgment that the MCS-90 endorsement was not necessary to provide federally mandated minimum coverage because federal regulations require a minimum of $750,000 for accident claims, and State Farm had already tendered its $750,000 policy limit. The district court rejected Carolina Casualty’s argument based on the Tenth Circuit’s decision in Empire, finding that the Carolina Casualty policy also provides primary insurance for the accident under the MCS-90 endorsement and therefore would cover any final judgment resulting from the Yeates accident. In Empire, the Tenth Circuit concluded that an MCS-90 endorsement amends contrary language in the policy to which it is attached, even if the policy otherwise would have limited the insurer’s liability to providing only excess coverage. Cases interpreting Empire have allowed recovery under policies that otherwise would not provide liability coverage or that provide only excess coverage.
On appeal, a panel of the Tenth Circuit affirmed the district court’s decision, but the Tenth Circuit later granted Carolina Casualty’s request for an en banc rehearing. En banc, the Tenth Circuit reversed the district court, finding that an MCS-90 endorsement applies only when: (1) the policy to which the endorsement is attached does not provide coverage for the accident; and (2) the motor carrier’s coverage is either nonexistent or does not satisfy the federally prescribed minimum levels of financial responsibility. Because the State Farm policy satisfied the $750,000 minimum levels of financial responsibility, the MCS-90 endorsement in the Carolina Casualty policy was never triggered. In reaching this result, the Tenth Circuit joined the majority of Circuit Courts of Appeal in recognizing the limited scope of the MCS-90 endorsement.
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