FMCSA Issues Advance NPRM on Minimum Financial Responsibility

The Federal Motor Carrier Safety Administration has issued an advance notice of proposed rulemaking indicating that the agency is considering raising the minimum financial responsibility levels for for-hire motor carriers, hazardous materials carriers, freight forwarders and brokers. 79 Fed. Reg. 70839 (November 28, 2014). The current minimum levels of liability coverage for personal injury and property damage have not changed since 1985.

Although the FMCSA notice does not include a specific proposal to increase the minimum liability requirements, it does state that its recent report to Congress by the DOT’s Volpe Transportation Systems Center provided preliminary support for increasing the current levels of financial responsibility.  The agency is seeking additional information before proceeding with the rulemaking.

The Volpe study found that fewer than one percent of all commercial motor vehicle crashes (about 3,300 out of 330,000 total crashes) per year resulted in claims for injury death, and/or

property damages that exceed the current minimum levels of financial responsibility. The study also claimed that liability insurance rates for the same level of coverage (e.g., $750,000 or $1 million) have declined slightly on average in nominal terms since 1985, hovering around $5,000 per power unit.

In addition, the agency’s report to Congress states that at inflation-adjusted rates, the $750,000 minimum requirement for motor carriers established in 1985 would be $1.623 million in current dollars; using a Consumer Price Index adjuster for medical expenses, that amount would be $3.188 million in current dollars. The $5 million minimum for certain hazardous materials carriers would be $10.825 million in today’s dollars; using a medical expenses CPI adjuster the limit would be $21.255 million in current dollars.

The FMCSA seeks information on the following topics:

  • Current insurance premium rates by type of carrier, the relationship between premium rates and safety performance, and the ratio of premium increase to increases in minimum liability insurance requirements;
  • How often do damages from crashes exceed the current minimum liability levels, and how often do carriers go bankrupt following a crash with damages in excess of the minimum requirements;
  • How often is the minimum level of financial responsibility exceeded by damages caused by the unintentional release of hazardous materials from a carrier required to have $5 million in coverage;
  • Whether an increase in financial responsibility requirements would affect small and large motor carriers differently, and how would an increase affect the ability of carriers to obtain liability insurance coverage;
  • How would increased minimum standards affect carrier safety; for example, would carriers put off “optional costs” such as safety programs, preventive maintenance and investments in new technology, to cover the high cost of premiums; and
  • What minimum levels of financial responsibility are needed to adequately protect against uncompensated losses associated with crashes, and how would increasing minimum levels affect settlement amounts in crash litigation.

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