8.4 Garage/Auto Dealers, Truckers and Motor Carrier Forms, MCS-90 & New York Commercial Auto PIP Endorsements

Garage/Auto Dealers, Truckers and Motor Carrier Forms, MCS-90 & New York Commercial Auto PIP Endorsements

Exam Focus: Section 8.3 covered the Business Auto Coverage Form. The outline names three more commercial auto forms — garage (now auto dealers), truckers and motor carrier — plus commercial carrier regulation under the Motor Carrier Act of 1980 and the MCS-90 endorsement, and a family of New York commercial auto PIP endorsements. The most commonly missed concept is garagekeepers coverage and its three forms of liability.

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The Four Commercial Auto Coverage Forms

Auto Dealers (Garage) Coverage Form

The garage/auto dealers form exists because a dealership's exposures do not decompose neatly into “auto” and “general liability.” It packages:

• Covered autos liability, including autos held for sale, service loaners and demonstrators.
• General liability for the premises and operations of the dealership — the showroom slip-and-fall, the service department's completed work.
• Garagekeepers coverage for customers' autos in the insured's care, custody or control.
• Auto dealers physical damage on the inventory, usually written on a reporting basis with a monthly statement of values.

Garagekeepers — the three ways it can be written

This is the tested distinction.

1. Legal liability only. Pays for damage to a customer's auto only if the insured is legally liable. If the fire that destroys the customer's car was nobody's fault, the customer recovers nothing.
2. Direct primary. Pays for covered damage to the customer's auto regardless of fault, and pays first, ahead of the customer's own policy.
3. Direct excess. Pays regardless of fault, but only after the customer's own collision or comprehensive coverage is exhausted; it commonly also picks up the customer's deductible.

Exam Cue: “regardless of the insured's liability” signals direct coverage. “Pays first” is direct primary; “pays after the customer's own policy” is direct excess.

Truckers and Motor Carrier Forms

Both forms add mechanics the Business Auto form lacks:

• Trailer Interchange coverage — physical damage to trailers the insured does not own but holds under a written interchange agreement, a routine practice in for-hire trucking.
• Non-trucking liability (“bobtail”) — coverage for an owner-operator's tractor while it is not in the business of the motor carrier to whom it is leased; the carrier's policy covers the unit while under dispatch, and non-trucking liability covers personal use.
• The Motor Carrier form has largely superseded Truckers because its definitions track modern federal terminology and it accommodates private as well as for-hire carriage.

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Commercial Carrier Regulation and the MCS-90

The Motor Carrier Act of 1980

Federal deregulation of trucking was paired with minimum financial responsibility requirements so that an injured member of the public would not be left uncompensated by a thinly capitalised carrier. The limits, now codified at 49 U.S.C. § 31139 and in the Federal Motor Carrier Safety Regulations, are keyed to the cargo:

The MCS-90 Endorsement

The Endorsement for Motor Carrier Policies of Insurance for Public Liability (Form MCS-90) is attached to satisfy the federal requirement. It behaves less like insurance and more like a surety:

• The insurer agrees to pay any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements, even if the vehicle is not listed on the policy and even if a policy exclusion would otherwise apply.
• The insured then agrees to reimburse the insurer for any payment the insurer would not have been obligated to make under the policy terms. The endorsement protects the public, not the insured.
• It applies to the judgment stage: MCS-90 does not create a duty to defend, and most courts treat it as inapplicable until a judgment is entered and other coverage is exhausted.

Adjuster Cue: if a fact pattern says a policy exclusion defeats coverage for an interstate trucking loss but a member of the public holds an unsatisfied judgment, the MCS-90 is the answer — pay the judgment, then seek reimbursement from the insured.

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New York Commercial Auto Endorsements

The Hired Auto and Non-Owned Auto Problem

The Business Auto symbols (Section 8.3) cover hired and non-owned exposures through symbols 8 and 9. New York publishes a Hired Auto and Non-Owned Auto Liability — New York endorsement for insureds — and, in the businessowners program, BP 04 36 — to add that exposure where the base form does not carry it.

The New York PIP Family on Commercial Auto

Article 51 applies to commercial vehicles registered in New York just as it does to private passenger autos, so the commercial auto program carries its own PIP endorsement set that parallels the personal forms in Section 2.4.

Other Selected Business Auto Endorsements Named in the Outline

• CA 20 01 Lessor — Additional Insured and Loss Payee: protects the lessor of a leased auto both as an additional insured for liability and as loss payee for physical damage.
• CA 20 24 Mobile Equipment: brings specified mobile equipment under the auto policy where the CGL would otherwise respond.
• CA 99 03 Auto Medical Payments, CA 99 10 Drive Other Car, CA 99 17 Individual Named Insured and CA 99 33 Employees as Insureds — covered in Section 8.3.

Individual Named Insured (CA 99 17) deserves a second look: it converts a business auto policy into something that behaves like a personal auto policy for a sole proprietor and resident family members, adding personal-auto-style coverages so the proprietor does not need a separate personal policy.