Minimum Levels of Financial Responsibility for Motor Carriers; Petitions for Rulemaking

AGENCY:

Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION:

Advance notice of proposed rulemaking (ANPRM); request for comments.

SUMMARY:

The Federal Motor Carrier Safety Administration (FMCSA) announces it is considering whether to amend its financial responsibility requirements for motor carriers in response to two petitions for rulemaking. The Government of Canada (Canada) petitioned FMCSA to amend these requirements to permit, as acceptable evidence of financial responsibility, a policy of insurance issued by a Canadian insurance company legally authorized to issue such policies in the Province or Territory of Canada where the motor carrier has its principal place of business. Canada believes the FMCSA's current regulations place Canada-domiciled motor carriers operating in the United States at a competitive disadvantage with U.S.-domiciled carriers. The Property Casualty Insurers Association of America (PCI) petitioned FMCSA to make revisions to the MCS-90 and MCS-90B endorsements to clarify that language in the endorsements imposing liability for negligence occurring “on any route or in any territory authorized to be served by the insured or elsewhere” does not include liability connected with transportation within Mexico. FMCSA seeks input from the public in the form of data or other information in response to several questions posed in the ANPRM to assist the Agency in evaluating these proposals.

DATES:

Comments must be received by February 13, 2007.

ADDRESSES:

You may submit comments identified by the docket number (FMCSA-2006-26262) by any of the following methods:

• Web site: http://dms.dot.gov. Follow the instructions for submitting comments on the DOT electronic docket site.
• FAX: 1-202-493-2251.
• Mail: Docket Management System, U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590-0001.
• Hand Delivery: Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., e.t., Monday through Friday, except Federal holidays.
• Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments.

Instructions: All submissions must include the Agency name and docket number or Regulatory Identification Number (RIN) for this regulatory action. Internet users may access comments received by DOT at: http://dms.dot.gov. Note that comments received will be posted without change to http://dms.dot.gov,, including any personal information provided. Refer to the Privacy Act heading for further information. If addressing a specific section or question in this ANPRM, please clearly identify the section heading or question number for each topic addressed in your comments.

Docket: Copies or abstracts of all documents referenced in this notice are in the docket for this rulemaking: FMCSA-2006-26262. For access to the docket to read background documents or comments received, go to http://dms.dot.gov at any time or to Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., e.t., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Mr. Thomas Yager, Chief, Division of Driver and Carrier Operations (MC-PSD), FMCSA, 400 Seventh Street, SW., Washington, DC 20590; Telephone (202) 366-4009, or FAX 202-366-8842.

SUPPLEMENTARY INFORMATION:

Legal Basis for the Rulemaking

Section 30 of the Motor Carrier Act of 1980 (Pub. L. 96-296, 94 Stat. 793, July 1, 1980) directed the Secretary of Transportation (Secretary) to prescribe regulations establishing minimum levels of financial responsibility covering public liability, property damage, and environmental restoration for the transportation of property for compensation by motor vehicles in interstate or foreign commerce. Section 30(c) of the Act provided that motor carrier financial responsibility may be established by evidence of one or a combination of the following if acceptable to the Secretary: (1) Insurance; (2) a guarantee; (3) a surety bond issued by a bonding company authorized to do business in the United States; and (4) qualification as a self-insurer (49 U.S.C. 31139(f)(1)). Section 30(c) required the Secretary to establish, by regulation, methods and procedures to assure compliance with these requirements. In June 1981, the Secretary issued regulations implementing Section 30, which are codified at 49 CFR Part 387, subpart A.

Section 18 of the Bus Regulatory Reform Act of 1982 (Pub. L. 97-261, 96 Stat. 1121 (September 20, 1982) directed the Secretary to prescribe regulations establishing minimum levels of financial responsibility covering public liability and property damage for the transportation of passengers for compensation by motor vehicle in interstate or foreign commerce. Section 18(d) of the Act provided that motor carrier financial responsibility may be established by evidence of one or a combination of the following if acceptable to the Secretary: (1) Insurance, including high self-retention; (2) a guarantee; and (3) a surety bond issued by a bonding company authorized to do business in the United States (49 U.S.C. 31138(c)(1)). Section 18(d) required the Secretary to establish, by regulation, methods and procedures to assure compliance with these requirements. In November 1983, the Secretary issued regulations implementing Section 18, which are codified at 49 CFR Part 387, subpart B.

This advance notice of proposed rulemaking (ANPRM) is based on the Secretary's authority to establish methods and procedures to assure that for-hire motor carriers of property and passengers maintain acceptable evidence of financial responsibility in accordance with 49 U.S.C. 31138(c)(1) and 31139(f)(1). This authority has been delegated to FMCSA by the Secretary pursuant to 49 CFR 1.73(f).

Background

The Canada Petition

The Government of Canada (Canada) submitted a Petition for Rulemaking to amend 49 CFR part 387 on September 29, 2005. Canada specifically requested that FMCSA amend § 387.11, which provides that a policy of insurance or surety bond does not satisfy FMCSA's financial responsibility requirements unless the insurer or surety furnishing the policy or bond is—

(a) Legally authorized to issue such policies or bonds in each State in which the motor carrier operates; or

(b) Legally authorized to issue such policies or bonds in the State in which the motor carrier has its principal place of business or domicile, and is willing to designate a person upon whom process, issued by or under the authority of any court having jurisdiction of the subject matter, may be served in any proceeding at law or equity brought in any State in which the motor carrier operates; or

(c) Legally authorized to issue such policies or bonds in any State of the United States and eligible as an excess or surplus lines insurer in any State in which business is written, and is willing to designate a person upon whom process, issued by or under the authority of any court having jurisdiction of the subject matter, may be served in any proceeding at law or equity brought in any State in which the motor carrier operates.

Canada asked FMCSA to consider amending this provision to permit insurance companies, licensed either provincially or federally in Canada, to write motor vehicle liability insurance policies, to issue the Form MCS-90 endorsements on insurance policies to meet FMCSA's financial responsibility requirements. Form MCS-90 is the endorsement for motor carrier policies of insurance for public liability, which for-hire motor carriers of property must maintain at their principal place of business. Motor carriers domiciled in Canada and Mexico must also carry a copy of the Form MCS-90 on board each vehicle operated in the United States.

At present, the combined effects of §§ 387.7 and 387.11 require Canada-domiciled motor carriers operating in the United States to either: (1) Obtain insurance through a Canada-licensed insurer, which enters into a “fronting agreement” with a U.S.-licensed insurer, whereby the U.S. insurer permits the Canadian insurer to sign the Form MCS-90 as its agent, and the entire risk is contractually “reinsured” back to the Canadian insurer by the U.S. insurer; or (2) obtain two separate insurance policies, one valid in Canada written by a Canadian insurer and one valid in the United States written by a U.S. insurer. Canada indicates that the first option is by far the most common. Canada suggested that the result of these requirements is an additional administrative burden, inconvenience, and cost not faced by U.S.-domiciled motor carriers operating into Canada. Approximately 17,000 Canadian motor carriers with 184,000 power units operate in the United States.

Canada requested that FMCSA amend 49 CFR part 387 so that an insurance policy issued by a Canadian insurance company satisfies the financial responsibility requirements. The insurance company must be legally authorized to issue such a policy in the Province or Territory of Canada in which the Canadian motor carrier has its principal place of business or domicile. The company must also be willing to designate a person upon whom process, issued by or under the authority of any court having jurisdiction of the subject matter, may be served in any proceeding at law or equity brought in any State in which the motor carrier operates.

If accepted, the amendment would eliminate the need for Canadian insurance companies to link with a U.S. insurance company to legally insure Canadian motor carriers that operate in the United States. It should be noted that although Canada's petition only seeks to amend 49 CFR 387.11, its proposal necessarily implicates other sections of part 387, which would have to be changed for the sake of consistency. Section 387.35 applies the § 387.11 requirements to motor passenger carriers, which must obtain a Form MCS-90B endorsement. Furthermore, § 387.315 imposes the same requirements on motor carriers who must file evidence of insurance with FMCSA and § 387.409 applies these requirements to freight forwarders.

The Security and Prosperity Partnership of North America (SPP) reinforces the resolution of cross-border motor carrier insurance issues. The President of the United States, the Prime Minister of Canada, and the President of Mexico announced this initiative on March 23, 2005. The initiative reflects the goal of improving the availability and affordability of insurance coverage for motor carriers engaged in cross-border commerce in North America. On June 27, 2005, a Report to the Leaders was signed on behalf of the United States by the Secretaries of Homeland Security, Commerce, and State. One of the stated initiatives in the report is to “Seek ways to improve the availability and affordability of insurance coverage for carriers engaged in cross-border commerce in North America.” The following key milestone is stated for this initiative:

U.S. and Canada to work towards possible amendment of the U.S. Federal Motor Carrier Safety Regulations to allow Canadian insurers to directly sign the MCS-90 form concerning endorsement for motor carrier policies of insurance for public liability: by June 2006.

Canada advocates a change to part 387 to assist in meeting the stated goals of the SPP. Achieving a seamless motor vehicle liability insurance policy between Canada and the United States for motor carriers would contribute to enhancing the competitive and efficient position of North American business. FMCSA recognizes the importance of considering these requests, and has granted the petitions by initiating this rulemaking proceeding to solicit public comment on the safety, legal, and economic ramifications of Canada's proposal and PCI's related proposal.

The PCI Petition

The Property Casualty Insurers Association of America's (PCI) petition, filed on July 2, 2004, was prompted by a Federal Court decision holding that the Form MCS-90B endorsement applied to a crash that occurred in Mexico, based on language in the endorsement stating that it applied to transportation “on any route or on any territory authorized to be served by the insured or elsewhere.” PCI requested that the endorsement be amended by inserting the phrase: “within the United States of America, its territories, possessions, Puerto Rico, and Canada” following the words “or elsewhere.”

PCI believes a territorial limitation excluding transportation in Mexico would work in concert with Canada's request because granting Canada's request without addressing PCI's request could put both U.S. and Canadian insurers in the position of violating the Mexican Federal law, which requires third-party liability insurance to be written by Mexico-domiciled insurers alone. PCI suggested that application of the Form MCS-90 and MCS-90B endorsements to accidents occurring in Mexico also appears to contradict the original intent of the endorsements to apply to interstate commerce within the United States, not internationally.

Request for Information and Comments

FMCSA requests data and comments in response to the following questions, as well as on other issues related to the two petitions.

A. Regarding the proposal to allow Canadian insurance companies to issue commercial motor vehicle insurance policies covering Canadian motor carriers while operating in the United States:

(1) What has been the experience of motorists or other claimants for crashes involving other types of vehicles, such as passenger cars driven in the United States but insured by Canadian firms, in collecting damage claims filed with Canadian insurance companies for incidents that occur in the United States? Are the consumer protection systems in place in Canada adequate to ensure proper consideration of claims filed by U.S. citizens and businesses?

(2) Would it be more difficult to execute a U.S. court judgment against a Canadian motor carrier insured by a Canadian insurance company compared to a Canadian motor carrier insured by a U.S. insurance company?

(3) Would Canadian insurance companies be legally bound, under Canadian law, to make payment to U.S. claimants based on a final judgment issued by a U.S. court?

(4) If Canadian insurance companies were allowed to write coverage for Canadian motor carriers operating in the United States, would there likely be economic impacts associated with a potential increase in unpaid claims?

(5) Although the petition proposes amending only § 387.11, is there any reason why the proposal should not be extended to include insurance policies issued to Canadian passenger carriers and freight forwarders?

B. Regarding the PCI proposal to modify text in Form MCS-90 to exclude coverage for transportation occurring in Mexico:

(1) How would U.S. and Canadian insurance companies be impacted by defining the term “any territory” to include or exclude transportation within Mexico?

(2) Does the manner in which “any territory” is defined have any impact on the U.S. public? If so, whom would it affect in particular?

(3) How have the courts addressed the meaning of the term “any territory” on the MCS-90 or MCS-90B form?

(4) Is there a U.S. public interest in including any territory outside the United States in the coverage provided by the MCS-90 or MCS-90B endorsement?

(5) Would applying the MCS-90 and MCS-90B endorsements to transportation in Mexico expose U.S. and Canadian motor carriers and insurers to criminal liability?

(6) What evidence is there to support PCI's contention that the endorsements were not intended to apply to transportation in Mexico?

If addressing a specific request for comments in this ANPRM, please clearly identify the related section heading or question number for each topic addressed in your comments.

Privacy Act

Anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477) or you may visit http://dms.dot.gov.

Comments received after the comment closing date will be included in the docket and the Agency will consider late comments to the extent practicable. FMCSA may, however, issue a notice of proposed rulemaking at any time after the close of the comment period.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review) and DOT Regulatory Policies and Procedures

FMCSA has determined this ANPRM is not a significant regulatory action within the meaning of Executive Order 12866 and the Department of Transportation regulatory policies and procedures (44 FR 11034, February 26, 1979).

The Agency is not yet in a position to analyze fully any potential actions it may initiate in response to this ANPRM. FMCSA seeks comments about the following issues to guide our analysis for a potential notice of proposed rulemaking:

(1) The costs and benefits of potentially effective and reasonably feasible alternatives to the current regulations, including improving the current regulation and reasonably viable non-regulatory actions; and

(2) Any preliminary impact assessments of these regulatory and non-regulatory alternatives.

Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by the Small Business Regulatory Enforcement and Fairness Act (RFA) (Pub. L. 104-121), requires Federal agencies to analyze the impact of regulatory alternatives on small entities, unless FMCSA certifies that a regulatory alternative will not have a significant economic impact on a substantial number of small entities, and to consider non-regulatory alternatives that could achieve our goal while minimizing the burden on small entities. The RFA applies to rules only at the proposed and final stage and, therefore, does not apply to this ANPRM. FMCSA requests comments on the potential impacts on small entities to assist its small entity analysis if the Agency decides to issue a Notice of Proposed Rulemaking.

Executive Order 13132 (Federalism)

Although the Agency believes there are no Federalism issues, we are not yet in a position to analyze fully any potential actions in accordance with the principles and criteria contained in Executive Order 13132 (64 FR 43255, August 10, 1999).

The Agency specifically requests comment from State and local officials on any Federalism issues.

Unfunded Mandates Reform Act of 1995

The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4; 2 U.S.C. 1532) requires each agency to assess the effects of its regulatory actions on State, local, and tribal governments and the private sector. Any agency promulgating a final rule likely to result in a Federal mandate requiring expenditures by a State, local, or tribal government, or by the private sector of $120.7 million or more in 2003 dollars in any one year, must prepare a written statement incorporating various assessments, estimates, and descriptions that are delineated in the Act. Although FMCSA believes there would be no unfunded mandates arising from any change in the current regulatory standards, the Agency is not yet in a position to analyze fully any potential actions it may initiate and that may meet the requirements of the Unfunded Mandates Reform Act.

FMCSA seeks specific comments whether such impacts are likely for any regulatory or non-regulatory alternative for Agency consideration.

Paperwork Reduction Act

Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), a Federal agency must obtain approval from OMB for each collection of information it conducts, sponsors, or requires through regulations. This ANPRM calls for no new collection of information. However, the Agency is not yet in a position to analyze fully any potential action we may initiate that may fall within the scope of the Paperwork Reduction Act.

National Environmental Policy Act

This ANPRM is not expected to have environmental impacts, although the Agency is not yet in a position to analyze fully any potential actions under the requirements of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and our environmental procedures Order 5610.1, issued on March 1, 2004, 69 FR 9680. The Agency believes potential actions we may initiate in response to this ANPRM may be categorically excluded (CE) from further environmental documentation under Appendix 2.6.d. and 2.6.v. of Order 5610.1, which contain categorical exclusions for regulations concerning the training, qualifying, licensing, certifying, and managing of personnel and regulations establishing financial responsibility requirements. In addition, FMCSA believes potential actions the Agency may initiate would not involve extraordinary circumstances that would affect the quality of the environment.

Clean Air Act

FMCSA is not yet in a position to analyze fully any potential actions under the requirements of the Clean Air Act (CAA), as amended, section 176(c), (42 U.S.C. 7401-7671) and implementing regulations promulgated by the Environmental Protection Agency. FMCSA believes potential actions the Agency may initiate would be exempt from the CAA's general conformity requirement since they would involve policy development and civil enforcement activities, such as investigations, inspections, examinations, and the training of law enforcement personnel. See 40 CFR 93.153(c)(2). The Agency anticipates potential actions we may initiate in response to this ANPRM would not result in any emissions increase or result in emissions that are above the general conformity rule's de minimis emission threshold levels, because potential actions would merely relate to insurance coverage across borders.

The Agency seeks comment on the effect on the environment of any potential action alternatives.

Executive Order 12630 (Taking of Private Property)

The Agency is not yet in a position to analyze fully any potential actions that may constitute a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

FMCSA seeks comment on whether potential actions it may initiate in response to this ANPRM would constitute a taking of private property or otherwise have implications under Executive Order 12630.

Executive Order 12372 (Intergovernmental Review)

The Agency is not yet in a position to analyze fully any potential actions that may require intergovernmental consultation on Federal programs and activities under Executive Order 12372, as amended.

FMCSA seeks comment on whether potential actions the Agency may initiate in response to this ANPRM would require any intergovernmental consultation on Federal programs and activities under Executive Order 12372, as amended.

Executive Order 13211 (Energy Supply, Distribution, or Use)

FMCSA is not yet in a position to analyze fully any potential actions that may affect energy supply, distribution, or use under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.

The Agency seeks comment on whether potential actions the Agency may initiate in response to this ANPRM would affect any regulatory or non-regulatory alternatives that may significantly affect energy supply, distribution, or use.

Executive Order 12988 (Civil Justice Reform)

The Agency is not yet in a position to analyze fully any potential actions that may meet applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

The Agency seeks comment on whether potential actions FMCSA may initiate in response to this ANPRM would meet the standards in Executive Order 12988.

List of Subjects in 49 CFR Part 387

• Buses
• Freight
• Freight forwarders
• Hazardous materials transportation
• Highway safety
• Insurance
• Intergovernmental relations
• Motor carriers
• Motor vehicle safety
• Moving of household goods
• Penalties
• Reporting and recordkeeping requirements
• Surety bonds