Ever agreed to represent a party injured in an 18-wheeler or other commercial motor vehicle collision just to be stiff-armed by an insurance carrier claiming that the insurance policy in question had been canceled mere days or weeks before the collision?

Insurance carriers love to find ways to try to weasel out of insurance coverage after a wreck. Experienced practitioners know to treat them with a healthy dose of skepticism.

In this case, the insurance carrier may still have to pay $750,000 or more. Simply tell the adjuster, “I don’t care about coverage, the MCS-90 endorsement covers this wreck.”

While insurance coverage may have in fact been canceled—meaning the insurance carrier is no longer contractually obligated to provide coverage under the policy—in many cases federal law keeps the commercial motor vehicle insurance carrier on the hook for at least $750,000 via the MCS-90 endorsement when a wreck occurs within 35 days of a policy cancellation. See 49 C.F.R. §§ 387.7(b)(1), 387.9; KLLM Transp. Servs. v. Hallmark Cty. Mut. Ins. Co., No. 04-16-00066-CV, 2016 Tex. App. LEXIS 10089, at *6 (Tex. App.—San Antonio Sep. 14, 2016)

To be clear, the MCS-90 endorsement is not an insurance policy. Rather, it works like a guarantee or a surety. Canal Ins. Co. v. Coleman, 625 F.3d 244, 247 (5th Cir. 2010) (“The endorsement creates a suretyship, which obligates an insurer to pay certain judgments against the insured arising from interstate commerce activities, even though the insurance contract would have otherwise excluded coverage.”) The insurance carrier must pay up to at least the minimum limits for commercial motor vehicles—generally $750,000—on a judgment for injuries sustained in a collision that occurs when the endorsement is in effect.

So where does the 35-day time frame after policy cancellation come from? The endorsement is attached to the policy when it is issued. KLLM Transp. Servs 2016 Tex. App. LEXIS 10089, at *5. To cancel the MCS-90 endorsement, the insurer must provide at least 35 days written notice of cancellation to the policyholder and at least 30 days written notice to the Federal Motor Carriers Safety Administration. 49 C.F.R. §§ 387.7(b)(1) & 387.313(d) Cancellation is not effective until after the notice period.

In many instances, this timeframe is actually longer than 35 days. The 35-day period starts from the time a carrier sends the required notices, not from the date of cancellation—so if the carrier waits a day, a week, etc,, to send the required notices, the period that the endorsement is effective will extend that much longer. It is possible for the date of policy cancellation and the date the endorsement is withdrawn to be the same day. However, to accomplish this, the carrier would have to know it was cancelling the policy at least 35 days from the date it planned to cancel the policy and issue the notice letters 35 days before the policy cancellation. Under the fact pattern at issue here, this is rare due to the practicalities of selling and cancelling insurance (e.g. a carrier doesn’t know that an owner operator will fail to make a premium payment 35 days in advance of that failure).

As in all areas of law, there are numerous exceptions and nuances to recovering under the MCS-90 endorsement. For example, insurers do not have a duty to provide a defense to the policyholder under the MCS-90 endorsement. T.H.E. Ins. Co. v. Larsen Intermodal Servs., 242 F.3d 667, 677 (5th Cir. 2001) Likewise, the MCS-90 endorsement only applies to collisions that occur within the United States. Canal Indem. Co. v. Galindo, 344 F. App’x 909, 911 (5th Cir. 2009) Depending on the facts of the case, the insurance carrier may file a separate suit seeking a declaratory judgment that the endorsement does not apply to the collision. However, insurance carriers routinely lose these suits or file them simply as leverage for settlement negations in the underlying personal injury case.

This article is not a substitute for the many in-depth articles and CLE presentations available on MCS-90 endorsements and the surrounding law. The intent of this article is simply to raise awareness of the endorsement’s existence and how it can apply in a specific situation that confronts many practitioners.  All attorneys engaged in a personal injury practice should read one or the more of the detailed presentations about the MCS-90 endorsement. But remember, don’t get bogged down in talking about coverage if the insurance policy was canceled before the collision—just say, “the MCS-90 endorsement covers the wreck.”