Henry Seaton -- info@transportationlaw.net

FMCSA’s insurance rules are crazy and flawed

Q  We are a small carrier that obtained a U.S. Department of Transportation number by filing an MCS-150 and checking the block for exempt for-hire freight. We transported newspaper inserts at the time. We use owner-operators who have their own equipment that they insure and who place our name and DOT number on their trucks. We now are handling magazines and books and have been told we can be fined for every day we don’t have authority. Can this be right?

AYes, it is. After years of inaction, the Federal Motor Carrier Safety Administration now is fining carriers that have DOT numbers but no authority as much as $4,000 to $7,000 per day for hauling regulated shipments. At one time, what was regulated and what was exempt made a real difference when entry controls restricted for-hire carriers’ access to manufactured goods. But after deregulation, it makes no economic difference whether you are hauling newspaper inserts that are exempt or magazines that are regulated.

Other examples of the dichotomy between regulated and exempt shipments are even more inexplicable. Bananas are regulated, while strawberries are not. Shipments that have a prior or subsequent movement by air are exempt, but expedited shipments in which motor carrier service is substituted for air freight is regulated – unless it results from inclement weather.

No procedures are in place to track private and exempt carriers.

FMCSA’s primary obligation is enforcing the safety regulations that apply to all commercial motor vehicles regardless of whether the freight being transported is exempt, regulated or moving in private carriage. The only distinction between exempt and regulated carriers from a regulatory point of view relates to licensing and insurance. Regulated carriers who transport regulated freight must file an OP-1 application, obtain an MC number and post evidence of insurance in the amount of at least $750,000 per occurrence if they operate commercial vehicles weighing more than 10,001 lbs. GVWR.

The shipping public can check with the FMCSA Licensing and Insurance website (go to www.fmcsa.dot.gov, click on the Registration & Licensing tab) and confirm that the regulated carrier is licensed, authorized and insured before using it. Similarly, FMCSA can revoke any regulated carrier’s authority if its insurer cancels its public liability insurance.

Unfortunately, the same rules do not apply for private and exempt carriers. Many who think they are exempt carriers, including you, obtain a DOT number and do not recognize that you must maintain an MCS-90 evidencing a minimum of $750,000 per occurrence in insurance on each vehicle that bears your logo and DOT number. Although new carriers who will be subject to FMCSA audit procedures may learn of these requirements the hard way, to my knowledge there is no procedure in place to ensure the public that exempt or private carriers operating commercial motor vehicles are insured adequately.