For the commercial motor carrier, insurance is often one of the greatest operating expenses a company must face. And truth be told, the regulations regarding insurance, and filing the associated documents, can be rather confusing. So we’re going to take a couple of minutes to discuss the two main categories of commercial motor carriers and the effects of these categories on motor carrier insurance requirements.
The Interstate Motor Carrier
An Interstate Motor Carrier is defined as:
- for-hire and private carriers operating motor vehicles transporting hazardous (a) materials, (b) substances, or (c) wastes;
- for-hire carriers operating motor vehicles transporting property in interstate or foreign commerce;
- for-hire carriers transporting passengers in interstate or foreign commerce; and
- private carriers domiciled in Mexico transporting property in interstate or foreign commerce (49 CFR § 387.3).
In other word, if you’re transporting any cargo across state boundaries, you’re an Interstate Motor Carrier. An Interstate Motor Carrier is subject to all federal regulations adopted by the U.S. Department of Transportation Federal Motor Carrier Safety Administration (FMCSA). According to current federal laws, the minimum amount of liability insurance an Interstate Motor Carrier must have is $750,000. However, the minimum amount is also dependent on the (a.) the type of cargo a carrier chooses to haul, and (b.) the quantity of property or people being transported. For example, Hazardous Waste Carriers are required to have $1 million in liability coverage, and Hazardous Cargo Carriers are required to have $5 million in liability coverage.
All Interstate Motor Carriers are required to file an Assurance of Financial Responsibility form, like the MCS-90, with the DOT. And under federal regulations, a person who knowingly violates any of the insurance laws is subject to a $16,000 penalty per violation per day.
The Intrastate Motor Carrier
The Intrastate Motor Carrier is defined the same as an Interstate Motor Carrier, except the Intrastate Motor Carrier remains within a single state’s boundary. And because of that, they are not subject to federal law but state law. However, most states have adopted the federal guidelines proposed by FMCSA and have added their own laws governing the actions of Intrastate Motor Carriers. Some states actually require greater amounts of limited liability insurance. Typically, states determine the amount of limited liability insurance based on equipment weight and the amount, and type, or cargo being transported. For example, Florida, which is one of the strictest states in the U.S., requires trucks weighing between 26,000 and 35,000 lbs to carry a minimum of $50,000 in combined property and bodily liability insurance.
Penalties regarding insurance violations vary from state to state, but on average run about $10,000 per violation per day. And some states do not require an Intrastate Motor Carrier to file an Assurance of Financial Responsibility form. Those exempt are:
- Alaska
- Arizona
- Delaware
- Florida
- Hawaii
- Maryland
- Nevada
- New Jersey
- Oregon
- Pennsylvania
- Vermont
- Wyoming
Regardless if you’re running Interstate or Intrastate, the FMCSA recommends that all motor carriers get supplemental insurance. More often than not, the high costs involved with tractor-trailer accidents far exceeds limited liability, which in turn could put your company at risk for bankruptcy.