Indiana Supreme Court Finds MCS-90 Does Not Apply to Wrongful Death Truck Crash Involving Truck Transporting Non-Hazardous Cargo Intrastate

We previously discussed the potential significance of an MCS-90 insurance policy endorsement in a truck accident case in discussing Prime Insurance Co. v. Wright. Such an endorsement is considered a guarantee of sorts, or suretyship, by an insurance company that a federally-regulated motor carrier will meet its public financial responsibility obligation under the Motor Carrier Act of 1980 as required and regulated by the Federal Motor Carrier Safety Administration.

Recently, in Progressive Southeastern Insurance Co. v Brown, the Indiana Supreme Court addressed whether an MCS-90 endorsement applies when a commercial truck crash occurs during an intrastate trip involving the transportation of non-hazardous cargo. In Brown, the commercial truck driver, Bruce Brown, an employee of B&T Bulk, a Mishawaka-based motor carrier out of Mishawaka, Indiana, was driving a truck and empty trailer when his truck crossed the centerline, striking another vehicle killing the driver, Dona Johnson.

Ms. Johnson’s surviving spouse brought a wrongful death case against Brown and B&T on his own behalf and on behalf of his widow’s estate. Progressive Southeastern Insurance Company then filed a separate declaratory judgment case against Johnson, B&T and Brown requesting a declaration from the court that it should not owe any duty to defend or indemnify B&T or Brown, because the insurance policy it had issued did not include the truck and trailer and, although Progressive had provided B&T with an MCS-90 endorsement, the endorsement should not apply. State Farm Mutual Automobile Insurance Company, Johnson’s insurer, intervened in the case and joined with Johnson’s widow and her estate, Brown, and B&T, in arguing that the MCS-90 endorsement should apply binding Progressive to pay any final judgment in the case. The trial court agreed with Progressive that the truck and trailer were not insured autos and that Progressive had no duty to defend or indemnify Brown. However, the trial court found the MCS-90 endorsement applied, which ruling Progressive appealed.

The undisputed evidence of the case was that Brown had been driving the truck and trailer to pick up cement—a non-hazardous property—in Logansport, Indiana, for delivery to South Bend, Indiana, without crossing over any Indiana State lines. If the MCS-90 applied, Progressive would have to pay the judgment, even though the insurance contract with Progressive had been determined to otherwise exclude coverage and Progressive would be left having to seek reimbursement from its insured. The issue for the Court was whether the MCS-90 applied as required under Section 30 of the Motor Carrier Act, 49 U.S.C. § 31139.

Section 30 of the Act provides that the minimum financial responsibility requirements provided by MCS-90 apply to motor carriers transporting property between 1) a place in a State and a place in another State, 2) a place in the same State through a place outside of the State, or 3) a place outside of the United States. The requirements also apply if the carrier is transporting hazardous property.

All parties agreed that Brown was not transporting hazardous property. So, the question was whether Brown was engaged in interstate commerce at the time of the crash. Federal law mandates the MCS-90; thus, the Court looked to federal law to answer the question of whether Brown was engaging in interstate commerce at the time of the crash. The Court noted there are three approaches courts have used to evaluate the interstate character of a trip: 1) the trip specific approach, which narrowly looks at whether the property was being transported on an interstate trip, 2) the shipper’s intent at the time of the shipment which could make an intrastate trip interstate if the goods were being transported to an interstate terminal, or 3) the broad, public-policy approach of whether the policy of the Motor Carrier Act would be advanced by applying the MCS-90.

The Court agreed with those courts that had rejected the broad, public-policy approach to the application of the MCS-90. It then concluded, without specifically choosing a preference for one of the remaining approaches, that the MCS-90 would not be applicable under either of the remaining two approaches. However, the Court noted that despite federal limitations, the question remained as to whether Indiana had created its own regulation governing insurance requirements for motor carriers transporting non-hazardous cargo within Indiana’s borders that would apply the MCS-90.

The Court found Indiana’s legislature had adopted federal regulations governing minimum motor carrier financial responsibility under Indiana Code § 8-2.1-24-18(a). Section 18(a) requires all intrastate motor carriers to comply with the minimum financial responsibility requirements under 49 C.F.R. § 387.3(b) if they are transporting hazardous property. But, the Court concluded the requirements do not apply if they are transporting non-hazardous property in spite of at least one prior Indiana Court of Appeals decision suggesting otherwise, Sandberg Trucking, Inc. v. Johnson. In Sandberg, the Court of Appeals reasoned it would be “absurd” to hold that Indiana’s legislature had incorporated the federal regulations, making them applicable to intrastate travel, while adopting a regulation that nullified the entire adoption. The Supreme Court overruled the Sandberg decision to the extent the opinion would require it to read each provision of the regulation and decide when to replace “interstate” with “intrastate.” Consequently, the Court reversed the trial court’s judgment that the MCS-90 endorsement applied. You can read the decision here.