A bodily injury claim against an interstate trucker was not covered by the trucker’s basic commercial auto policy, but was covered by an MCS-90 financial responsibility endorsement which was attached to the policy. ( Global Hawk Ins. Co. v. Century-National Ins. Co. (2012) 203 Cal.App.4th 1458)
Facts
E & Z Express Trucking was a motor carrier engaged in interstate trucking. An E & Z truck rear ended a vehicle driven by Sebastian Padilla. Padilla presented a claim for his bodily injuries to E & Z’s commercial auto liability insurer, Global Hawk Insurance Company. However, Global Hawk denied the claim on the ground that E & Z’s truck was not listed in Global Hawk’s policy. Global Hawk apparently overlooked the fact that because E & Z was a motor carrier engaged in interstate trucking, Global Hawk’s policy included a financial responsibility endorsement (MCS-90 endorsement) which covered E & Z’s liability arising out of the use of any motor vehicle, whether or not described in the policy.
After Global Hawk denied coverage for Padilla’s claim, Padilla submitted a claim for uninsured motorist (UM) benefits to his own auto insurer, Century-National Insurance Company. After verifying that Global Hawk had denied coverage, Century-National paid its $100,000 UM policy limit to Padilla, and Padilla executed a UM subrogation agreement in favor of Century-National.
Global Hawk later filed a rescission action against E & Z, Padilla, Century-National and others, claiming that E & Z had made material misrepresentations on E & Z’s application for the Global Hawk policy. Century-National in turn filed a cross-complaint for subrogation and declaratory relief against E & Z and Global Hawk, seeking reimbursement of the $100,000 in UM benefits that Century-National had paid to Padilla.
The trial court ruled that Global Hawk did not have the right to rescind E & Z’s policy; that E & Z was legally responsible for Padilla’s injury; and that even though E & Z’s liability was not covered under Global Hawk’s basic policy, E & Z’s liability was covered under the MCS-90 financial responsibility endorsement which was attached to the policy. The trial court ruled that under the circumstances, Global Hawk was obligated to reimburse Century-National for the $100,000 in UM benefits that Century-National had paid to Padilla. Global Hawk appealed.
Holding
The Court of Appeal affirmed. The court acknowledged that Century-National’s claim against E & Z was not covered under Global Hawk’s basic auto policy, because the truck E & Z had been operating at the time of the accident was not listed on the Global Hawk policy. Nevertheless, the Global Hawk policy included an MCS-90 endorsement, which provided that Global Hawk would pay within its policy limits any judgment resulting from E & Z’s negligence, “ whether or not [the motor vehicle involved in the accident] is specifically described in the policy.” Thus, even though Global Hawk’s basic policy form did not cover E & Z’s liability to Century-National (as subrogee of Padilla), Global Hawk’s MCS-90 endorsement did cover such liability.
The appellate court acknowledged that an MCS-90 endorsement is only triggered when (1) the underlying insurance policy to which the endorsement is attached does not otherwise provide coverage, and (2) there is no other insurance available to satisfy the judgment against the insured. However, according to the appellate court, Padilla’s UM coverage through Century-National could not be deemed to be “other insurance”available to satisfy the judgment against E & Z. Rather, Padilla’s coverage through Century-National provided “[first party UM coverage] directly to the injured driver [Padilla] and does not involve third party liability coverage to satisfy the liability of E & Z ….” As such, Global Hawk was obligated to indemnify E & Z for its liability to Century-National as subrogee of Padilla.
Comment
Federal law requires that an MCS-90 endorsement be attached to any liability policy issued to motor carrier engaged in interstate trucking. The endorsement obligates the insurer to indemnify the insured carrier for liability resulting from negligence “regardless of whether or not each motor vehicle is specifically described in the policy.” The endorsement prevents the possibility that some vehicles may inadvertently (or even intentionally) be left off of a policy to the detriment of injured third parties.
Note that if the insurer is compelled to pay a judgment under the MCS-90 endorsement that is not otherwise covered under the basic policy, the insurer has a right to be reimbursed by the insured. However, the insurer’s right to reimbursement is only meaningful if the insured actually has sufficient assets with which to repay the insurer.