Blog by Tommy Ruke, The King Pin – Leading Expert in Truck Insurance
INSURED WITH ONE DOT# AND TWO MC#’S
A member said that when viewing Licensing & Insurance for a possible insured, he/she noted that the insured had one DOT# and two MC#’s (one brokerage and one transportation) – What is up?
Here are my thoughts concerning a legal entity having one DOT# and two MC#’s (one for transportation authority and one for brokerage authority). MAP-21 requires an entity who provides transportation and broker services to have authority to do both.
Most everyone feels MAP-21 came up short when it did not require the authority to be in two legal entities – All it requires is both authorities and that the customer understands which services are being offered – Transportation or brokerage. If this is not clear, there are penalties and possible liability but no real enforcement. All that is in place is a statement – “If you find a problem, call the 800 number and we will investigate.”
The much talked about new requirement that MAP-21 imposed on brokers was the increase in the bond from $10,000 to $75,000.
When one legal entity has a DOT# and two authorities, does this pose a problem for an insurer? It would be better to have two separate legal entities insured on separate policies with separate named insureds. But if not, what happens when a crash happens.
Assuming, I know that is not always prudent, but maybe we can because at least this risk has both authorities, the insured has informed the customer what services they are providing. Even though one legal entity, the operations are in separate dba’s. When providing transportation services the contract with customers is for that service and the services to be provided by autos the insured operates under their transportation authority under a shipper carrier’s contract and the BOL is in the transportation company’s name. When offering brokerage services, the agreement with customers is as a broker. They should only broker loads to transportation companies qualified to provide the transportation and the BOL reflects the carrier to be the entity hauling the load not the broker.
One last thing is the set-up of the policy. The named insured on AL, GL and Cargo is the legal entity – The brokerage operation has no legal status. The AL is written on the MCCF. The crash involves a covered auto transporting property for customer under a BOL in the legal entity – Assume (trucking company) the brokerage operation is not involved but if dba was named it would create no additional exposure and since same legal entity, the policy will respond to the limits. There is only one policy, therefore, one set of limits and no additional exposure because all that is owed is damage done and if a lot of damage only one limit on policy is exposed. That is simple – Of course, the problem always has been that if the transportation company also has brokerage operations, then perceived problems.
Assume that the brokered load has the BOL in name of trucking company the load was brokered to and that there is no contract between the broker and the truckers they are providing loads to or if an agreement, trucking company hauling the load holds the brokerage company harmless for liability.
A crash happens when a load is brokered. The broker/legal entity/insured on the policy is named in the suit. The AL policy of the trucker hauling the brokered load would have to defend the broker and coverage would be primary. If case settled within the limits of the trucking company hauling the load, then their AL carrier would have to obtain a release for the broker as well as others who qualify as an insured on the AL policy covering the auto causing the crash.
If case does not settle then the broker’s AL or GL would be involved but no coverage would be provided to the trucking company hauling the load because the MCCF’s “who is an insured” provision would not provide coverage to the trucking company hauling the load because there was no written agreement or if a written agreement, the trucking company hauling the load is holding the broker harmless.
The AL or GL would address the suit in excess of the coverage on the AL of the trucker hauling the load depending on how the suit was drafted but not on both and would be excess of coverage on the AL policy on the auto that caused the crash.
Should the insurance company insuring the legal entity with both transportation and brokerage authority need an excess premium under hired car coverage? I would think so because it would have to address the case where the insured, either operating as a transportation company or brokerage company, was named in a suit when another trucking company is providing transportation arranged by the legal entity/insured. The AL and GL policy would provide AL to the legal entity in excess of the coverage on the AL policy of the trucker hauling the load.
I know this is a long answer but the question got me thinking about one DOT# and two MC#’s for one legal entity.