Financial Responsibility and Insurance Requirements for Minnesota Motor Carriers

The Federal Motor Carrier Safety Administration (“FMCSA”) requires that certain motor carriers maintain minimum levels of financial responsibility (e.g., insurance policies or surety bonds). The purpose of such regulations is to create additional incentives for motor carriers to maintain and operate their vehicles in a safe manner. See 49 C.F.R. § 387.1. Minnesota motor carriers should become familiar with the FMCSA financial responsibility requirements, develop a relationship with an insurance broker familiar with the transportation industry, and obtain adequate levels of insurance that meet or exceed federal requirements.

Motor Carriers Covered by DOT Financial Responsibility Regulations
With a few exceptions discussed below, the following types of motor carriers are subject to FMCSA regulations regarding financial responsibility:

For-hire motor carriers operating motor vehicles that transport property in interstate or foreign commerce. 49 C.F.R. § 387.3(a); and

Motor carriers operating motor vehicles that transport hazardous materials in interstate, foreign, or intrastate commerce. 49 C.F.R. § 387.3(a).

Motor Carriers Excluded From DOT Financial Responsibility Regulations
The FMCSA financial responsibility regulations “do not apply to a motor vehicle that has a gross vehicle weight rating (GVWR) of less than 10,001 pounds . . . [or] if the vehicle is used to transport any quantity of a Division 1.1, 1.2, or 1.3 material, any quantity of a Division 2.3, Hazard Zone A, or Division 6.1, Packing Group I, Hazard Zone A, or to a highway route controlled quantity of a Class 7 material as it is defined in 49 CFR 173.403, in interstate or foreign commerce.” 49 C.F.R. § 387.3(c)(1).

Further, the regulations do not apply to “the transportation of non-bulk oil, non-bulk hazardous materials, substances, or wastes in intrastate commerce, except that the rules in this part do apply to the transportation of a highway route controlled quantity of a Class 7 material as defined in 49 CFR 173.403, in intrastate commerce.” 49 C.F.R. § 387.3(c)(2).

Public Liability Insurance
Motor carriers that fall within the scope of 49 C.F.R. § 387.3 are prohibited from operating a motor vehicle until the motor carrier “has obtained and has in effect the minimum levels of financial responsibility” proscribed by 49 C.F.R. § 387.9. The minimum level of insurance that is required will depend on how much the CMV weighs, where the CMV travels (interstate or intrastate), and what the CMV carries (e.g., passengers, nonhazardous materials or hazardous materials). 49 C.F.R. § 387.9.

For instance, a for-hire motor carrier operating a motor vehicle with a gross vehicle weight rating in excess of 10,000 lbs. that transports nonhazardous property in interstate or foreign commerce must maintain a minimum of $750,000.00 of public liabilityinsurance. 49 C.F.R. § 387.9. The term “public liability” means “liability for bodily injury or property damage and includes liability for environmental restoration.” 49 C.F.R. § 387.5.Motor carriers must also maintain proof of such insurance “at the motor carrier’s principal place of business.” 49 C.F.R. § 387.7(d).

Cargo Insurance
In addition to public liability insurance, most for-hire motor carriers voluntarily elect to obtain cargo insurance to cover damage to products that might occur while the products are in the carrier’s control.

For certain motor carriers, however, cargo insurance is mandatory, not optional. For example, “household goods motor carriers” are required to maintain a minimum of $5,000.00 of cargo insurance per vehicle. 49 C.F.R. § 387.303(c). The term “household goods motor carrier” means “a motor carrier that, in the ordinary course of its business of providing transportation of household goods, offers some or all of the following additional services: (i) Binding and nonbinding estimates; (ii) Inventorying; (iii) Protective packing and unpacking of individual items at personal residences; (iv) Loading and unloading at personal residences.” 49 C.F.R. 375.103. The term “does not include any motor carrier providing transportation of household goods in containers or trailers that are entirely loaded and unloaded by an individual other than an employee or agent of the motor carrier . . . [or] any motor carrier that acts as a service for the delivery of furniture, appliances, or other furnishings between a factory or a store and an individual’s household.” 49 C.F.R. 375.103.

Non-Owned Auto Insurance
Motor carriers and other employers may also want to consider purchasing “non-owned auto” insurance coverage. This type of coverage would protect the motor carrier from situations involving employee use of personal vehicles. For instance, a Minnesota employer could be liable under the theories of negligent hiring, negligent retention, or negligent supervision if an employee runs errands for the company using his/her own vehicle and negligently causes a vehicular accident.

Best Practices for Ensuring Adequate Insurance Coverage For Your Fleet
In addition to complying with applicable FMCSA regulations regarding financial responsibility, motor carriers looking to purchase insurance should take the following steps:

Identify the entire fleet;
Discuss operations with an insurance broker;
Obtain adequate insurance limits given the risk involved;
Select an appropriate deductible, but in doing so, motor carriers must be sure not to take on more than they can risk losing;
Consider obtaining “non-owned” auto insurance coverage;
Consider requiring employees to provide proof of insurance for their own vehicles;
Consider a separate holding company for the company’s assets;
Discuss umbrella liability insurance with an insurance broker to protect assets, net worth, and future earnings;
Use the DOT’s Pre-Employment Screening Program (“PSP”) to vet all applicants and ensure drivers are qualified;
Make sure owner operator agreements with leased owner operators are updated, apply with applicable federal law including the Truth in Leasing Act, and adequately preserve the driver’s status as in “independent contractor”;
If you operate as a transportation broker, strongly consider putting your brokerage operation under a separate name, authority, and insurance from your motor carrier operation; and
Do not broker loads without the proper brokerage authority/bond.

Resources for Reviewing Your Motor Carrier Insurance Program
The first step to ensuring that your motor carrier operation has adequate insurance coverage is to develop a relationship with an insurance broker that is familiar with the unique insurance and financial responsibility requirements applicable to the transportation industry. In Minnesota, we are fortunate to have Truck Writers, Inc., a locally owned insurance brokerage serving the transportation industry. For many years, Truck Writers, Inc. has served many of TMB’s transportation clients.

Truck Writers, Inc.
Attn: Shawn M. Sullivan, CEO
8970 West 35W Service Drive NE
Building 200
Blaine, MN 55449-6744
Local: 763-785-0500
Toll-Free: 1-800-634-8612
Fax: 763-785-9360
www.truckwriters.com

Conclusion
Minnesota motor carriers should become familiar with the FMCSA financial responsibility requirements, consult with an insurance broker familiar with the transportation industry, obtain adequate levels of insurance that meet or exceed FMCSA requirements, and periodically review their insurance program.
If your company has questions about DOT insurance and financial responsibility requirements, contact one of the transportation law attorneys of Trepanier MacGillis Battina P.A.

About the Author:
Minnesota transportation attorney Craig W. Trepanier advises clients, drafts contracts, and litigates disputes in a variety of industries, including representation of Minnesota motor carriers and household goods moving companies. Craig may be reached at 612.455.0502 or craig@trepanierlaw.com. Trepanier MacGillis Battina P.A. is a Minneapolis transportation law firm located in Minneapolis, Minnesota.