There is some disagreement between the courts in the way they are interpreting and applying the MCS-90 Endorsement and its relationship to the underlying insurance policy.

The majority of jurisdictions consider the insurer’s obligations under the MCS-90 endorsement to be that of a surety and not a modification of the insurance policy. Under the majority view, the insurer’s duty to pay a judgment under the MCS-90 endorsement arises from the endorsement’s specific language which guarantees a source of recovery to an injured party, rather than from an insurance obligation.

Courts who follow this approach have found that the obligation of an insurer to pay under MCS-90 is triggered only when (1) the underlying insurance policy, to which the endorsement is attached, does not otherwise provide coverage and (2) no other insurer is available to satisfy the judgment or the insurance coverage is insufficient to satisfy the federally prescribed minimum levels of financial responsibility.

Under this case law, the MSC-90 endorsement is also only implicated as between an injured member of the public and the insurer. It does not alter the relationship between the insurer and the insured carrier. It also gives the injured person the right to demand payment directly from the insurance company as well as gives the insurer the right to demand reimbursement from the insured carrier. The Tenth Circuit, which includes Oklahoma, has adopted this majority view. See Carolina Cas. Ins. Co. v. Yeates, 584 F.3d 868 (10th Cir. 2009).

The minority view, on the other hand, is that the MCS-90 endorsement indirectly modifies the insurance policy essentially extending the insurance benefits. Under this view, each policy is viewed independently as the endorsements are found to only negate limiting provisions in the policy to which it is attached and does not establish primary liability over other policies. The Tenth Circuit in Carolina Casualty, supra, recognized that under this approach “an insurer may be forced to indemnify the motor carrier for its negligence to a greater extent than it bargained for and without a right to reimbursement from another primary insurer.”

As the law continues to remain in a state of flux, it is a good idea to consult with an attorney with experience and training in cargo losses, damaged cargo, and insurance coverage when adjusting a loss that occurs in transit. Some issues in Oklahoma may need to be analyzed under Oklahoma law for contractual agreements between the brokers, haulers, warehouses, etc. Indemnification can be a contractual commitment separate from Carmack. These agreements to indemnify may or may not be covered by insurance.