68
RISK MANAGEMENT
ACT
SEPTEMBER 2013
THE
AUTHOR
Brent Moody
is assistant vice
president of casualty
underwriting at NBIS.
MCS-90. They also carry a $4 million
dollar follow-forming excess auto liability
policy to satisfy the FMCSA minimum
requirement. They also purchase a $5
million excess liability policy bringing
their total auto limits of liability to $10
million. Then, the unthinkable occurs.
Damages are deemed to be the following:
■
Cost of hazardous pollutant cleanup:
$3.5 million
■
Property damage inflicted by spilled 1
pollutant: $1.5 million
■
Bodily injury claims from exposure to
pollutant totaling $6.5 million
The court renders the company liable
for $11.5 million in total damage to
the public. The MCS-90 will trigger
coverage up to $1 million. Since both
excess liability policies follow form of
the primary auto, they will also respond.
Payments will be made on the insured’s
behalf by the three insurers involved all
the way up to the $10 million, leaving
the insured responsible for the additional
$1.5 million in damages. As if this is
not debilitating enough, the primary
auto insurer turns around and seeks
reimbursement from the insured citing
its policy’s pollution exclusion. Both
excess carriers follow suit as they follow
primary carrier’s pollution exclusion.
Now you have a company that had an
unfortunate accident, believed they had
pollution coverage available via the MCS-
90, who is now liable for $1.5 million
in damages in addition to being liable
for the $10 million initially paid by the
three insurance companies! It is hard to
imagine that a single accident could lead
to the financial demise of a large, well
established trucking firm. This illustrates
how the MCS-90 was not designed to help
the insured. Rather, it was designed by the
government to protect the public in claim
situations involving tractor-trailers.
What is the solution?
The CA 9948 Pollution Liability-
Broadened Coverage for Covered Auto
endorsements. By endorsing the CA 9948
to the primary auto policy, a company can
ensure that they have adequate protection
should a claim involving a covered auto
hauling hazardous materials occur. Be
certain any excess policies purchased
follow form of the CA 9948, full limits
will when be available in the event of
a pollution-related loss. If a primary
insurer is unwilling to endorse the CA
9948, a separate contractor’s pollution
policy may be purchased to eliminate the
gap in coverage. There are several viable
options available to ensure you and your
company is protected against a pollution-
related nightmare. Review your current
insurance program. Make sure you have
the coverage you need. Don’t fall victim
to a case of misinterpretation when there
could be so much at stake!
■
‘‘
”
The MCS-90 is one
of the most misunderstood
endorsements in the
insurance industry.
