FMCSA Rules and Regulations

§261.147 Liability requirements.


(a)Coverage for sudden accidental occurrences. An owner or operator of a hazardous secondary material reclamation facility or an intermediate facility subject to financial assurance requirements under §261.4(a)(24)(vi)(F) of this chapter, or a group of such facilities, must demonstrate financial responsibility for bodily injury and property damage to third parties caused by sudden accidental occurrences arising from operations of the facility or group of facilities. The owner or operator must have and maintain liability coverage for sudden accidental occurrences in the amount of at least $1 million per occurrence with an annual aggregate of at least $2 million, exclusive of legal defense costs. This liability coverage may be demonstrated as specified in paragraphs (a) (1), (2), (3), (4), (5), or (6) of this section:

(a)(1) An owner or operator may demonstrate the required liability coverage by having liability insurance as specified in this paragraph.

(a)(1)(i) Each insurance policy must be amended by attachment of the Hazardous Secondary Material Facility Liability Endorsement, or evidenced by a Certificate of Liability Insurance. The wording of the endorsement must be identical to the wording specified in §261.151(h). The wording of the certificate of insurance must be identical to the wording specified in §261.151(i). The owner or operator must submit a signed duplicate original of the endorsement or the certificate of insurance to the Regional Administrator, or Regional Administrators if the facilities are located in more than one Region. If requested by a Regional Administrator, the owner or operator must provide a signed duplicate original of the insurance policy.

(a)(1)(ii) Each insurance policy must be issued by an insurer which, at a minimum, is licensed to transact the business of insurance, or eligible to provide insurance as an excess or surplus lines insurer, in one or more States.

(a)(2) An owner or operator may meet the requirements of this section by passing a financial test or using the guarantee for liability coverage as specified in paragraphs (f) and (g) of this section.

(a)(3) An owner or operator may meet the requirements of this section by obtaining a letter of credit for liability coverage as specified in paragraph (h) of this section.

(a)(4) An owner or operator may meet the requirements of this section by obtaining a surety bond for liability coverage as specified in paragraph (i) of this section.

(a)(5) An owner or operator may meet the requirements of this section by obtaining a trust fund for liability coverage as specified in paragraph (j) of this section.

(a)(6) An owner or operator may demonstrate the required liability coverage through the use of combinations of insurance, financial test, guarantee, letter of credit, surety bond, and trust fund, except that the owner or operator may not combine a financial test covering part of the liability coverage requirement with a guarantee unless the financial statement of the owner or operator is not consolidated with the financial statement of the guarantor. The amounts of coverage demonstrated must total at least the minimum amounts required by this section. If the owner or operator demonstrates the required coverage through the use of a combination of financial assurances under this paragraph, the owner or operator shall specify at least one such assurance as “primary” coverage and shall specify other assurance as “excess” coverage.

(a)(7) An owner or operator shall notify the Regional Administrator in writing within 30 days whenever:

(a)(7)(i) A claim results in a reduction in the amount of financial assurance for liability coverage provided by a financial instrument authorized in paragraphs (a)(1) through (a)(6) of this section; or

(a)(7)(ii) A Certification of Valid Claim for bodily injury or property damages caused by a sudden or non-sudden accidental occurrence arising from the operation of a hazardous secondary material reclamation facility or intermediate facility is entered between the owner or operator and third-party claimant for liability coverage under paragraphs (a)(1) through (a)(6) of this section; or

(a)(7)(iii) A final court order establishing a judgment for bodily injury or property damage caused by a sudden or non-sudden accidental occurrence arising from the operation of a hazardous secondary material reclamation facility or intermediate facility is issued against the owner or operator or an instrument that is providing financial assurance for liability coverage under paragraphs (a)(1) through (a)(6) of this section.

(b) Coverage for nonsudden accidental occurrences. An owner or operator of a hazardous secondary material reclamation facility or intermediate facility with land-based units, as defined in §260.10 of this chapter, which are used to manage hazardous secondary materials excluded under §261.4(a)(24) of this chapter or a group of such facilities, must demonstrate financial responsibility for bodily injury and property damage to third parties caused by nonsudden accidental occurrences arising from operations of the facility or group of facilities. The owner or operator must have and maintain liability coverage for nonsudden accidental occurrences in the amount of at least $3 million per occurrence with an annual aggregate of at least $6 million, exclusive of legal defense costs. An owner or operator who must meet the requirements of this section may combine the required per-occurrence coverage levels for sudden and nonsudden accidental occurrences into a single per-occurrence level, and combine the required annual aggregate coverage levels for sudden and nonsudden accidental occurrences into a single annual aggregate level. Owners or operators who combine coverage levels for sudden and nonsudden accidental occurrences must maintain liability coverage in the amount of at least $4 million per occurrence and $8 million annual aggregate. This liability coverage may be demonstrated as specified in paragraph (b)(1), (2), (3), (4), (5), or (6) of this section:

(b)(1) An owner or operator may demonstrate the required liability coverage by having liability insurance as specified in this paragraph.

(b)(1)(i) Each insurance policy must be amended by attachment of the Hazardous Secondary Material Facility Liability Endorsement or evidenced by a Certificate of Liability Insurance. The wording of the endorsement must be identical to the wording specified in §261.151(h). The wording of the certificate of insurance must be identical to the wording specified in §261.151(i). The owner or operator must submit a signed duplicate original of the endorsement or the certificate of insurance to the Regional Administrator, or Regional Administrators if the facilities are located in more than one Region. If requested by a Regional Administrator, the owner or operator must provide a signed duplicate original of the insurance policy.

(b)(1)(ii) Each insurance policy must be issued by an insurer which, at a minimum, is licensed to transact the business of insurance, or eligible to provide insurance as an excess or surplus lines insurer, in one or more States.

(b)(2) An owner or operator may meet the requirements of this section by passing a financial test or using the guarantee for liability coverage as specified in paragraphs (f) and (g) of this section.

(b)(3) An owner or operator may meet the requirements of this section by obtaining a letter of credit for liability coverage as specified in paragraph (h) of this section.

(b)(4) An owner or operator may meet the requirements of this section by obtaining a surety bond for liability coverage as specified in paragraph (i) of this section.

(b)(5) An owner or operator may meet the requirements of this section by obtaining a trust fund for liability coverage as specified in paragraph (j) of this section.

(b)(6) An owner or operator may demonstrate the required liability coverage through the use of combinations of insurance, financial test, guarantee, letter of credit, surety bond, and trust fund, except that the owner or operator may not combine a financial test covering part of the liability coverage requirement with a guarantee unless the financial statement of the owner or operator is not consolidated with the financial statement of the guarantor. The amounts of coverage demonstrated must total at least the minimum amounts required by this section. If the owner or operator demonstrates the required coverage through the use of a combination of financial assurances under this paragraph, the owner or operator shall specify at least one such assurance as “primary” coverage and shall specify other assurance as “excess” coverage.

(b)(7) An owner or operator shall notify the Regional Administrator in writing within 30 days whenever:

(b)(7)(i) A claim results in a reduction in the amount of financial assurance for liability coverage provided by a financial instrument authorized in paragraphs (b)(1) through (b)(6) of this section; or

(b)(7)(ii) A Certification of Valid Claim for bodily injury or property damages caused by a sudden or non-sudden accidental occurrence arising from the operation of a hazardous secondary material treatment and/or storage facility is entered between the owner or operator and third-party claimant for liability coverage under paragraphs (b)(1) through (b)(6) of this section; or

(b)(7)(iii) A final court order establishing a judgment for bodily injury or property damage caused by a sudden or non-sudden accidental occurrence arising from the operation of a hazardous secondary material treatment and/or storage facility is issued against the owner or operator or an instrument that is providing financial assurance for liability coverage under paragraphs (b)(1) through (b)(6) of this section.

(c)Request for variance. If an owner or operator can demonstrate to the satisfaction of the Regional Administrator that the levels of financial responsibility required by paragraph (a) or (b) of this section are not consistent with the degree and duration of risk associated with treatment and/or storage at the facility or group of facilities, the owner or operator may obtain a variance from the Regional Administrator. The request for a variance must be submitted in writing to the Regional Administrator. If granted, the variance will take the form of an adjusted level of required liability coverage, such level to be based on the Regional Administrator's assessment of the degree and duration of risk associated with the ownership or operation of the facility or group of facilities. The Regional Administrator may require an owner or operator who requests a variance to provide such technical and engineering information as is deemed necessary by the Regional Administrator to determine a level of financial responsibility other than that required by paragraph (a) or (b) of this section.

(d)Adjustments by the Regional Administrator. If the Regional Administrator determines that the levels of financial responsibility required by paragraph (a) or (b) of this section are not consistent with the degree and duration of risk associated with treatment and/or storage at the facility or group of facilities, the Regional Administrator may adjust the level of financial responsibility required under paragraph (a) or (b) of this section as may be necessary to protect human health and the environment. This adjusted level will be based on the Regional Administrator's assessment of the degree and duration of risk associated with the ownership or operation of the facility or group of facilities. In addition, if the Regional Administrator determines that there is a significant risk to human health and the environment from nonsudden accidental occurrences resulting from the operations of a facility that is not a surface impoundment, pile, or land treatment facility, he may require that an owner or operator of the facility comply with paragraph (b) of this section. An owner or operator must furnish to the Regional Administrator, within a reasonable time, any information which the Regional Administrator requests to determine whether cause exists for such adjustments of level or type of coverage.

(e)Period of coverage. Within 60 days after receiving certifications from the owner or operator and a qualified Professional Engineer that all hazardous secondary materials have been removed from the facility or a unit at the facility and the facility or a unit has been decontaminated in accordance with the approved plan per Sec. 261.143(h), the Regional Administrator will notify the owner or operator in writing that he is no longer required under Sec. 261.4(a)(24)(vi)(F) to maintain liability coverage for that facility or a unit at the facility, unless the Regional Administrator has reason to believe that that all hazardous secondary materials have not been removed from the facility or unit at a facility or that the facility or unit has not been decontaminated in accordance with the approved plan.

(f)Financial test for liability coverage.

(f)(1) An owner or operator may satisfy the requirements of this section by demonstrating that he passes a financial test as specified in this paragraph. To pass this test the owner or operator must meet the criteria of paragraph (f)(1)(i) or (ii) of this section:

(f)(1)(i) The owner or operator must have:

(f)(1)(i)(A) Net working capital and tangible net worth each at least six times the amount of liability coverage to be demonstrated by this test; and

(f)(1)(i)(B) Tangible net worth of at least $10 million; and

(f)(1)(i)(C) Assets in the United States amounting to either:

(1) At least 90 percent of his total assets; or

(2) at least six times the amount of liability coverage to be demonstrated by this test.

(f)(1)(ii) The owner or operator must have:

(f)(1)(ii)(A) A current rating for his most recent bond issuance of AAA, AA, A, or BBB as issued by Standard and Poor's, or Aaa, Aa, A, or Baa as issued by Moody's; and

(f)(1)(ii)(B) Tangible net worth of at least $10 million; and

(f)(1)(ii)(C) Tangible net worth at least six times the amount of liability coverage to be demonstrated by this test; and

(f)(1)(ii)(D) Assets in the United States amounting to either:

(1) At least 90 percent of his total assets; or

(2) at least six times the amount of liability coverage to be demonstrated by this test.

(f)(2) The phrase “amount of liability coverage” as used in paragraph (f)(1) of this section refers to the annual aggregate amounts for which coverage is required under paragraphs (a) and (b) of this section and the annual aggregate amounts for which coverage is required under paragraphs (a) and (b) of 40 CFR 264.147 and 265.147.

(f)(3) To demonstrate that he meets this test, the owner or operator must submit the following three items to the Regional Administrator:

(f)(3)(i) A letter signed by the owner's or operator's chief financial officer and worded as specified in §261.151(f). If an owner or operator is using the financial test to demonstrate both assurance as specified by §261.143(e), and liability coverage, he must submit the letter specified in §261.151(f) to cover both forms of financial responsibility; a separate letter as specified in §261.151(e) is not required.

(f)(3)(ii) A copy of the independent certified public accountant's report on examination of the owner's or operator's financial statements for the latest completed fiscal year.

(f)(3)(iii) If the chief financial officer's letter providing evidence of financial assurance includes financial data showing that the owner or operator satisfies paragraph (f)(1)(i) of this section that are different from the data in the audited financial statements referred to in paragraph (f)(3)(ii) of this section or any other audited financial statement or data filed with the SEC, then a special report from the owner's or operator's independent certified public accountant to the owner or operator is required. The special report shall be based upon an agreed upon procedures engagement in accordance with professional auditing standards and shall describe the procedures performed in comparing the data in the chief financial officer's letter derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in such financial statements, the findings of the comparison, and the reasons for any difference.

(f)(4) The owner or operator may obtain a one-time extension of the time allowed for submission of the documents specified in paragraph (f)(3) of this section if the fiscal year of the owner or operator ends during the 90 days prior to the effective date of these regulations and if the year-end financial statements for that fiscal year will be audited by an independent certified public accountant. The extension will end no later than 90 days after the end of the owner's or operator's fiscal year. To obtain the extension, the owner's or operator's chief financial officer must send, by the effective date of these regulations, a letter to the Regional Administrator of each Region in which the owner's or operator's facilities to be covered by the financial test are located. This letter from the chief financial officer must:

(f)(4)(i) Request the extension;

(f)(4)(ii) Certify that he has grounds to believe that the owner or operator meets the criteria of the financial test;

(f)(4)(iii) Specify for each facility to be covered by the test the EPA Identification Number, name, address, the amount of liability coverage and, when applicable, current closure and post-closure cost estimates to be covered by the test;

(f)(4)(iv) Specify the date ending the owner's or operator's last complete fiscal year before the effective date of these regulations;

(f)(4)(v) Specify the date, no later than 90 days after the end of such fiscal year, when he will submit the documents specified in paragraph (f)(3) of this section; and

(f)(4)(vi) Certify that the year-end financial statements of the owner or operator for such fiscal year will be audited by an independent certified public accountant.

(f)(5) After the initial submission of items specified in paragraph (f)(3) of this section, the owner or operator must send updated information to the Regional Administrator within 90 days after the close of each succeeding fiscal year. This information must consist of all three items specified in paragraph (f)(3) of this section.

(f)(6) If the owner or operator no longer meets the requirements of paragraph (f)(1) of this section, he must obtain insurance, a letter of credit, a surety bond, a trust fund, or a guarantee for the entire amount of required liability coverage as specified in this section. Evidence of liability coverage must be submitted to the Regional Administrator within 90 days after the end of the fiscal year for which the year-end financial data show that the owner or operator no longer meets the test requirements.

(f)(7) The Regional Administrator may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in his report on examination of the owner's or operator's financial statements (see paragraph (f)(3)(ii) of this section). An adverse opinion or a disclaimer of opinion will be cause for disallowance. The Regional Administrator will evaluate other qualifications on an individual basis. The owner or operator must provide evidence of insurance for the entire amount of required liability coverage as specified in this section within 30 days after notification of disallowance.

(g)Guarantee for liability coverage.

(g)(1) Subject to paragraph (g)(2) of this section, an owner or operator may meet the requirements of this section by obtaining a written guarantee, hereinafter referred to as “guarantee.” The guarantor must be the direct or higher-tier parent corporation of the owner or operator, a firm whose parent corporation is also the parent corporation of the owner or operator, or a firm with a “substantial business relationship” with the owner or operator. The guarantor must meet the requirements for owners or operators in paragraphs (f)(1) through (f)(6) of this section. The wording of the guarantee must be identical to the wording specified in §261.151(g)(2). A certified copy of the guarantee must accompany the items sent to the Regional Administrator as specified in paragraph (f)(3) of this section. One of these items must be the letter from the guarantor's chief financial officer. If the guarantor's parent corporation is also the parent corporation of the owner or operator, this letter must describe the value received in consideration of the guarantee. If the guarantor is a firm with a “substantial business relationship” with the owner or operator, this letter must describe this “substantial business relationship” and the value received in consideration of the guarantee.

(g)(1)(i) If the owner or operator fails to satisfy a judgment based on a determination of liability for bodily injury or property damage to third parties caused by sudden or nonsudden accidental occurrences (or both as the case may be), arising from the operation of facilities covered by this corporate guarantee, or fails to pay an amount agreed to in settlement of claims arising from or alleged to arise from such injury or damage, the guarantor will do so up to the limits of coverage.

(g)(1)(ii) [Reserved]

(g)(2)(i) In the case of corporations incorporated in the United States, a guarantee may be used to satisfy the requirements of this section only if the Attorneys General or Insurance Commissioners of:

(g)(2)(i)(A) The State in which the guarantor is incorporated; and

(g)(2)(i)(B) Each State in which a facility covered by the guarantee is located have submitted a written statement to EPA that a guarantee executed as described in this section and §264.151(g)(2) is a legally valid and enforceable obligation in that State.

(g)(2)(ii) In the case of corporations incorporated outside the United States, a guarantee may be used to satisfy the requirements of this section only if:

(g)(2)(ii)(A) The non-U.S. corporation has identified a registered agent for service of process in each State in which a facility covered by the guarantee is located and in the State in which it has its principal place of business; and if

(g)(2)(ii)(B) The Attorney General or Insurance Commissioner of each State in which a facility covered by the guarantee is located and the State in which the guarantor corporation has its principal place of business, has submitted a written statement to EPA that a guarantee executed as described in this section and §261.151(h)(2) is a legally valid and enforceable obligation in that State.

(h)Letter of credit for liability coverage.

(h)(1) An owner or operator may satisfy the requirements of this section by obtaining an irrevocable standby letter of credit that conforms to the requirements of this paragraph and submitting a copy of the letter of credit to the Regional Administrator.

(h)(2) The financial institution issuing the letter of credit must be an entity that has the authority to issue letters of credit and whose letter of credit operations are regulated and examined by a Federal or State agency.

(h)(3) The wording of the letter of credit must be identical to the wording specified in Sec. 261.151(j).

(h)(4) An owner or operator who uses a letter of credit to satisfy the requirements of this section may also establish a standby trust fund. Under the terms of such a letter of credit, all amounts paid pursuant to a draft by the trustee of the standby trust will be deposited by the issuing institution into the standby trust in accordance with instructions from the trustee. The trustee of the standby trust fund must be an entity which has the authority to act as a trustee and whose trust operations are regulated and examined by a Federal or State agency.

(h)(5) The wording of the standby trust fund must be identical to the wording specified in Sec. 261.151(m).

(i)Surety bond for liability coverage.

(i)(1) An owner or operator may satisfy the requirements of this section by obtaining a surety bond that conforms to the requirements of this paragraph and submitting a copy of the bond to the Regional Administrator.

(i)(2) The surety company issuing the bond must be among those listed as acceptable sureties on Federal bonds in the most recent Circular 570 of the U.S. Department of the Treasury.

(i)(3) The wording of the surety bond must be identical to the wording specified in §261.151(k) of this chapter.

(i)(4) A surety bond may be used to satisfy the requirements of this section only if the Attorneys General or Insurance Commissioners of:

(i) The State in which the surety is incorporated; and

(ii) Each State in which a facility covered by the surety bond is located have submitted a written statement to EPA that a surety bond executed as described in this section and §261.151(k) is a legally valid and enforceable obligation in that State.

(j)Trust fund for liability coverage.

(j)(1) An owner or operator may satisfy the requirements of this section by establishing a trust fund that conforms to the requirements of this paragraph and submitting an originally signed duplicate of the trust agreement to the Regional Administrator.

(j)(2) The trustee must be an entity which has the authority to act as a trustee and whose trust operations are regulated and examined by a Federal or State agency.

(j)(3) The trust fund for liability coverage must be funded for the full amount of the liability coverage to be provided by the trust fund before it may be relied upon to satisfy the requirements of this section. If at any time after the trust fund is created the amount of funds in the trust fund is reduced below the full amount of the liability coverage to be provided, the owner or operator, by the anniversary date of the establishment of the Fund, must either add sufficient funds to the trust fund to cause its value to equal the full amount of liability coverage to be provided, or obtain other financial assurance as specified in this section to cover the difference. For purposes of this paragraph, “the full amount of the liability coverage to be provided” means the amount of coverage for sudden and/or nonsudden occurrences required to be provided by the owner or operator by this section, less the amount of financial assurance for liability coverage that is being provided by other financial assurance mechanisms being used to demonstrate financial assurance by the owner or operator.

(j)(4) The wording of the trust fund must be identical to the wording specified in §261.151(l).
[73 FR 64769 Oct. 30, 2008]

FMCSA Rules and Regulations

2009/06/10 - Minimum Levels of Financial Responsibility for Motor Carriers

DEPARTMENT OF TRANSPORTATION
Federal Motor Carrier Safety Administration
49 CFR Part 387
[Docket No. FMCSA-2006-26262]
RIN 2126-AB05
Minimum Levels of Financial Responsibility for Motor Carriers
AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.
ACTION: Notice of proposed rulemaking (NPRM); request for comments.
SUMMARY: The Federal Motor Carrier Safety Administration (FMCSA) proposes amendments to its regulations concerning minimum levels of financial responsibility for motor carriers to allow Canada-domiciled carriers to maintain, as acceptable evidence of financial responsibility,insurance policies issued by Canadian insurance companies legally authorized to issue such policies in the Canadian Province or Territory where the motor carrier has its principal place of business. Currently, Canada-domiciled motor carriers operating in the U.S. must maintain as evidence of financial responsibility, insurance policies issued by U.S. insurance companies. The proposed change would not affect the required minimum levels of financial responsibility that carriers must now maintain under the regulations. This action is in response to a petition for rulemaking filed by the Government of Canada.
DATES: Public comments are requested on all aspects of this proposed rule by August 10, 2009.
ADDRESSES: You may submit comments identified by Docket No. FMCSA-2006-26262 and/or RIN 2126-AB05, by any of the following methods—Internet, facsimile, regular mail, or hand-deliver.
Federal eRulemaking Portal: Federal Docket Management System (FDMS) Web site athttp://www.regulations.gov. The FDMS is the preferred method for submitting comments, and we urge you to use it. In the Comment or Submission section, type Docket ID Number “FMCSA-2006-26262”, select “Go”, and then click on “Send a Comment or Submission.” You will receive a tracking number when you submit a comment.
Mail, Courier, or Hand-Deliver: U.S. Department of Transportation, Docket Operations (M-30), West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590. Office hours are between 9 a.m. and 5 p.m., ET, Monday through Friday, except Federal holidays.
Fax: (202) 493-2251.
Docket: Comments and material received from the public, as well as background information and documents mentioned in this preamble, are part of docket FMCSA-2006-26262, and are available for inspection and copying on the Internet athttp://www.regulations.gov. You may also view and copy documents at the U.S. Department of Transportation's, Docket Operations Unit, West Building Ground Floor, Room W12-140, 1200 New Jersey Ave SE., Washington, DC.
Privacy Act: All comments will be posted without change including any personal information provided to the Federal Docket Management System (FDMS) at http://www.regulations.gov. Anyone can search the electronic form of all our dockets in FDMS, by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). The DOT's complete Privacy Act Statement was published in the Federal Register on April 11, 2000 (65 FR 19476), and can be viewed athttp://docketsinfo.dot.gov.
FOR FURTHER INFORMATION CONTACT: Mr. Thomas Yager, Chief, FMCSA Driver and Carrier Operations. Telephone (202) 366-4325 or e-mail MCPSD@dot.gov.
SUPPLEMENTARY INFORMATION:
Legal Basis for the Rulemaking
Section 30 of the Motor Carrier Act of 1980 (1980 Act) (Pub. L. 96-296, 94 Stat. 793, 820, July 1, 1980) authorized 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 1980 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. The Form MCS-90 endorsement for motor carriers transporting property is entitled “Endorsement for Motor Carrier Policies of Insurance for Public Liability Under Sections 29 and 30 of the Motor Carrier Act of 1980.” (See 49 CFR 387.15.)
Section 18 of the Bus Regulatory Reform Act of 1982 (Bus Act) (Pub. L. 97-261, 96 Stat. 1102, 1120, 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 Bus Act provided that such 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 of the Bus Act. The regulations implementing that law are found at 49 CFR part 387, subpart B. The Form MCS-90B endorsement for for-hire motor carriers of passengers is entitled “Endorsement for Motor Carrier Policies of Insurance for Public Liability Under Section 18 of the Bus Regulatory Reform Act of 1982.” (See 49 CFR 387.39.)
This notice of proposed rulemaking (NPRM) is based on the Secretary's authority to establish methods and procedures to ensure that certain motor carriers of property and passengers maintain the minimum financial responsibility liability coverage mandated by 49 U.S.C. 31138(c)(1) and 31139(f)(1). This authority was delegated to FMCSA by the Secretary pursuant to 49 CFR 1.73(f).
Background
The Government of Canada (Canada) Petition for Rulemaking
On September 29, 2005, Canada submitted a petition for rulemaking to amend 49 CFR part 387. Canada specifically requested that FMCSA amend §387.11, which provides that a policy ofinsurance 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 insurancepolicies for Canada-domiciled motor carriers of property operating in the U.S. and to issue the Form MCS-90 endorsement for public liability 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 of property 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. It suggests 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. FMCSA estimates there are approximately 9,000 Canada-domiciled for-hire motor carriers of property and passengers and freight forwarders actively operating commercial motor vehicles (CMVs) in the United States that are subject to the current financial responsibility rules.
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 insurancecompany 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.
Canada's proposal, if adopted through this rulemaking, would eliminate the need for Canadianinsurance companies to link with a U.S. insurance company to legally insure Canadian motor carriers of property 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 need 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 similar financial responsibility requirements on freight forwarders. Therefore, FMCSA proposes to amend those sections for consistency.
Canada explained that, for many years, it has recognized and accepted non-commercial motor vehicle liability policies issued in either country as acceptable proof of financial responsibility. All jurisdictions in Canada accept the signing and filing of a Power of Attorney and Undertaking (PAU) by U.S.-licensed insurers as valid proof of financial responsibility for U.S.-domiciled motor vehicles of all categories. In essence, the PAU provides that the U.S. insurer will comply with and meet the minimum coverage and policy limits required in any Canadian jurisdiction in which a crash involving its insured occurs. The PAU is similar to FMCSA's requirements under §§387.11 and 387.15 (MCS-90 Form).
The Security and Prosperity Partnership of North America
The Security and Prosperity Partnership of North America (SPP) is an effort to increase security and enhance prosperity among the Untied States, Canada, and Mexico through greater cooperation and information sharing. The President of the United States, the Prime Minister of Canada, and the President of Mexico (the Leaders) announced this initiative on March 23, 2005. Among other things, 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. See http://www.spp.gov, and click on link to “2005 Report to Leaders.” One of the Prosperity Priorities of the SPP is to “Seek ways to improve the availability and affordability of insurance coverage for carriers engaged in cross-border commerce in North America.” At http://www.spp-psp.gc.ca/progress/prosperity_08_06-en.aspx, 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 Administration Regulation 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 businesses. FMCSA recognized the importance of considering these requests and granted the petition by initiating a rulemaking proceeding to solicit public comment on Canada's proposal.
Advance Notice of Proposed Rulemaking
On December 15, 2006 (71 FR 75433), FMCSA published an advance notice of proposed rulemaking (ANPRM) in response to Canada's petition for rulemaking to amend 49 CFR part 387. The ANPRM also requested public comment on a petition for rulemaking from the Property Casualty Insurers of America (PCI) which requested that FMCSA make revisions to the Forms MCS-90 and MCS-90B endorsements to clarify that language in the endorsements imposing liability for negligence “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.
The PCI petition was the result of a Federal District Court decision holding that the Form MCS-90B endorsement applied to a crash that occurred in Mexico. As a result, 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.”
However, in September 2007, the U.S. Court of Appeals for the Fifth Circuit issued a decision,Lincoln General Ins. Co. v. De La Luz Garcia, 501 F.3d 436 (5th Cir., 2007), effectively overturning the District Court decision that had prompted PCI to file its petition. Because the Court of Appeals decision essentially provided PCI with the relief requested in its petition, and because the issues raised in that petition are different from the issues raised in Canada's petition, FMCSA has decided that a regulatory change need not be considered at this time, and this issue will not be addressed further in this NPRM.
Discussion of the Comments Received on the ANPRM
FMCSA received comments on the ANPRM from the following parties: The American InsuranceAssociation (AIA), the Insurance Bureau of Canada (IBC), the Canadian Trucking Alliance (CTA), the Holland America Line, Inc. (HAL), the National Association of Professional Surplus Lines Offices, Ltd. (NAPSLO), and the Public Utilities Commission of Ohio (PUCO). The Canadian Government and the Property Casualty Insurers of America submitted supplemental comments.
Generally, the commenters agree with the amendments requested by Canada. For example, AIA believes that “* * * granting [Canada's] petition is in the public interest.” HAL believes that whatever rules FMCSA adopts the Agency should apply the rules to both motor carriers of property and motor carriers of passengers.
One commenter opposed the granting of the petition. NAPSLO expressed concerns that changes to the regulations may expose U.S. carriers and motorists to “a potential increase in risk in connection with foreign carriers.”
Specific Concerns Raised by Commenters
NAPSLO argues there is already a process for Canadian companies to do business in the U.S. NAPSLO states:
The [National Association of Insurance Commissioners (NAIC)] has adopted a streamlined application process for foreign companies in its International Insurance Department [(IID)]. Through the application process, the Canadian companies would become approved surplus lines insurers, and thus, meet the existing criteria. By obtaining approval from the NAIC's IID, a Canadian carrier would become approved as a surplus lines writer in the vast majority of states. The reason for this process is to streamline the approval process. A Canadian insurer could become approved in the vast majority of states through a single application process. The other states have an established process for alien insurance companies desiring to operate in their states. Thus, there is a long established process for alien companies intending to operate in the U.S.
Although not opposed to the Canada petition for rulemaking, PUCO believes FMCSA should ensure that policies of insurance maintained by foreign motor carriers operating in the United States are as “reliable and comprehensive” as those currently required. PUCO emphasizes that the enforceability of the rules must be seamless and efficient.
FMCSA Response:
FMCSA acknowledges the commenters' concerns but does not, however, believe maintaining the status quo is appropriate or necessary to ensure financial protection for U.S. citizens in the event of a crash involving a Canada-domiciled motor carrier.
Currently, Canada-domiciled carriers have two options for satisfying the U.S. insurancerequirements. The first is to obtain two separate insurance policies, one with a Canadianinsurance company for its operations in Canada and the other with a U.S. insurance company for its operations in the U.S. The second option is to obtain insurance from a Canadian insurer under contract with a U.S. insurer through a fronting arrangement. Both options result in the imposition of costs on Canada-based motor carriers that are significantly greater than the costs for U.S.-based carriers operating in Canada. FMCSA estimates that this rulemaking would result in discounted net benefits of approximately $273 million over a 10-year period, or $30,000 for each Canada-based motor carrier that conducts operations in the U.S. during this period. As noted above, there are approximately 9,000 such carriers.
While the approach that NAPSLO supports may provide a solution, it would require each Canadian insurance company to essentially seek authority from State insurancecommissioners to issue policies in the U.S. Based on the information provided by NAPSLO it is not clear that this approach would necessarily provide the needed coverage for Canada-domiciled carriers in each State in which the insured Canadian carrier intends to operate in the U.S. if the NAIC's IID is not recognized in certain States.
FMCSA believes the proposed rulemaking is needed to provide reciprocity between the U.S. and Canada and that it is inappropriate to impose on Canada-based carriers and insurancecompanies requirements that Canada does not impose on U.S.-based motor carriers andinsurance companies.
Under the current fronting arrangements between U.S. and Canadian insurance companies, Canadian insurance companies are under contract to pay claims against public liability policies that include the Form MCS-90/MCS-90B endorsement executed by a U.S. insurance company. The fact that the fronting arrangements exist is an indication that there are sufficient legal processes in place to assure U.S. insurance companies that their Canadian counterparts could be forced to honor their contractual obligations in the event that the Canadian insurancecompany attempted to avoid paying a claim for a crash that occurred in the U.S. The continued use of these fronting arrangements over the years also suggests that Canadian insurers typically honor their contractual obligations without the need for legal actions--it is unlikely that U.S. insurance companies would continue to sign such arrangements if the Canadian insurance companies they were dealing with exhibited a reluctance to honor their commitments. Therefore, FMCSA believes the experience U.S. insurance companies have had with Canadian insurance companies through fronting arrangements serves as proof Canadian insurers have the financial ability and the corporate values to honor their commitments without the need for legal action. The only apparent need for the current fronting arrangements is to fulfill FMCSA's insurance requirements, not because of problems obtaining payments from Canadian insurance companies.
With regard to PUCO's comments, FMCSA believes that the regulatory change sought by Canada would not compromise the financial protection provided under the current insuranceregime. The legal processes between the U.S. and Canada that support the fronting arrangements, combined with the demonstrated willingness of Canadian insurance companies to honor their financial obligations, suggests there will continue to be financial protection for U.S. citizens who file claims following a crash involving a commercial motor vehicle operated by a Canada-domiciled motor carrier insured by a Canadian insurance company.
Discussion of Response to Specific Questions Included in the ANPRM
FMCSA specifically requested that comments provide responses to questions and issues raised in the ANPRM. The questions and the responsive comments are set out below.
Question 1:
What has been the experience in collecting damage claims filed with Canadian insurancecompanies for incidents that occur in the United States, particularly as it relates to motorists or other claimants for crashes involving passenger cars driven in the United States but insured by Canadian firms?
Comments (IBC and Canada): Canada and IBC indicated that U.S. citizens and businesses that file claims against the drivers of passenger cars insured by Canadian insurers receive the same quality of claims service and settlement as from U.S. insurance companies. Both stated that they were not aware of any cases where legitimate damage claims involving passenger cars driven in the U.S. and insured by Canadian insurance companies were not paid to U.S. citizens or businesses.
FMCSA Response:
The comments suggest that claims involving Canada-domiciled carriers would be honored by Canadian insurers. Although the commenters discuss current experiences involving passenger cars operating under a substantially lower threshold of financial responsibility than motor carriers are required to maintain, the full cooperation of Canadian insurers in these matters is a good indicator that the insurers would provide comparable levels of cooperation in the event claims are filed by U.S. citizens.
In addition, the on-going practice of fronting arrangements between U.S. insurers and Canadian insurers provides a strong indicator that Canadian insurance companies are fully capable of providing the required levels of financial responsibility for Canada-domiciled motor carriers operating in the U.S. It is unlikely that U.S. insurers would take financial risks of entering into a fronting agreement with Canadian insurers without some assurances that the Canadian insurance companies are willing and able to pay claims.
Question 2:
How does Canada's consumer protection system ensure that claims filed by U.S. citizens and businesses receive proper consideration?
Comments (IBC): The IBC stated that legal and regulatory insurance systems in Canada require that a Canadian insurance company that issues an automobile insurance policy respond to a claim arising from an incident in Canada or in the U.S. The Canadian provincial and territorial Superintendents of Insurance are responsible under their respective insurance laws for the market conduct of all insurers licensed in their jurisdictions. Market conduct includes the fair and prompt settlement of claims.
FMCSA Response:
FMCSA agrees with IBC that Canada's requirements for automobile insurance provide protection for U.S. citizens in the event of an automobile crash. Based on the information available to FMCSA and included in the docket referenced at the beginning of this notice, there is no indication that Canadian insurance companies would be non-responsive to claims filed by U.S. citizens or businesses against Canadian-domiciled carriers. As indicated above, Canadianinsurance companies currently honor their commitments under their fronting agreements with U.S. insurance companies and there is no reason to conclude that these companies would be less likely to honor claims filed directly with them.
FMCSA is engaged in an on-going process with its Canadian counterparts to identify opportunities for establishing reciprocity arrangements, whenever practicable, concerning certain motor carrier requirements. Based upon the information currently available and the comments to the ANPRM, the Agency has preliminarily determined that the Canadian processes for providing consumer protection in the event of a crash between a commercial vehicle and a passenger car are comparable to what is provided in the U.S. We believe U.S. entities would have their claims processed in a timely manner in the event they obtain a final judgment against a Canadian-insured, Canada-domiciled motor carrier in a U.S. court.
Question 3:
Would it be more difficult to execute a U.S. court judgment against a Canadian motor carrier insured by a Canadian insurance company, as compared to a Canadian motor carrier insured by a U.S. insurance company?
Comments (IBC): The IBC believes it would not be more difficult because Canadian insurers, as a normal business practice, pay U.S. judgments against their policyholders. In insuring Canadian motor carriers which operate in the U.S., Canadian insurance companies know theinsurance product they are selling to these motor carriers includes a promise to pay U.S. judgments. IBC is not aware of any instance where a Canadian-licensed insurer has refused or failed to pay a judgment against its Canadian policy holder to a U.S. citizen, to the full extent of its legal obligation.
FMCSA Response:
FMCSA agrees with IBC that Canadian insurers, as a normal business practice, pay U.S. judgments against their policy holders. The Agency is not aware of any instances in which a U.S. insurance company, operating in a fronting arrangement with a Canadian insurancecompany, has experienced problems with a Canadian partner fulfilling its financial obligations to satisfy judgments against a Canada-domiciled motor carrier. The extensive experience that U.S. insurers have had in working with Canadian insurers provides significant assurance that in the event of a judgment against a Canada-domiciled carrier, the Canadian insurer will pay, up to the applicable limits on the Form MCS-90 or MCS-90B, any legitimate claims filed by U.S. citizens or businesses.
Question 4:
Under Canadian law, would Canadian insurance companies be legally bound to make payment to U.S. claimants based on a final judgment issued by a U.S. court?
Comments (IBC): The IBC stated that a Canadian insurance company would be legally bound to make payments to U.S. claimants based on a final judgment issued by a U.S. court. It points out that legislation pertaining to automobile insurance in each of Canada's provinces and territories provides that coverage under automobile insurance policies is provided when the vehicle is in Canada or the United States or while being transported between those countries. It is therefore clear from this wording of this legislation that it is intended that the liability coverage under a Canadian automobile insurance policy will cover crashes in the U.S.
FMCSA Response:
FMCSA believes that fronting arrangements between U.S. and Canadian insurance companies would not exist unless there were sufficient legal processes to ensure that U.S. insurancecompanies could take action to receive payment from any Canadian company that refused to honor its contractual obligations. While the specific legal processes to ensure that Canadianinsurance companies honor their contractual obligations may differ from the legal processes that would be used by a U.S. entity filing a claim directly against a Canadian insurance policy, the track record of Canadian insurance companies does not suggest that U.S. entities would need to resort to legal actions to have their claims honored. Canadian insurance companies have been working cooperatively with U.S. insurance companies for years and there is no reason to believe that the Canadian companies would adopt new practices to avoid paying claims if this rulemaking proceeds.
Question 5:
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?
Comments (IBC): The only change FMCSA is proposing would be the name of the insurancecompany that signs the endorsement for Form MCS-90 or Form MCS-90B. There would be no change in the payment of claims because there would be no change in which insurancecompany has the contractual obligation to pay claims. IBC does not foresee an increase in unpaid claims, and it does not anticipate adverse economic impacts on U.S. entities.
FMCSA Response:
FMCSA does not believe there would be an increased likelihood of unpaid claims if Canada-domiciled carriers operating in the U.S. are allowed to operate under insurance policies issued by Canadian companies. The Forms MCS-90 and MCS-90B require that the insurer pay any final judgment against the motor carrier. Therefore, if there is a court decision against a Canada-domiciled motor carrier concerning a commercial motor vehicle crash, the Canadian insurer must pay the claim. Canadian insurance companies, through fronting arrangements described above, are currently fulfilling the financial obligations associated with satisfying U.S. judgments against Canada-domiciled carriers. There is no reason to believe that they would be financially unable to, or refuse to fulfill their financial obligations if they execute the Forms MCS-90 or MCS-90B as the insurer rather than as an agent of a U.S. insurer.
Question 6:
Although the petition proposes amending only §387.11, is there any reason why the rulemaking should not be extended to include insurance policies issued to Canadian passenger carriers and freight forwarders?
Comments(CTA, HAL, AIA, and IBC): Generally, the commenters support including Canadian passenger carriers and freight forwarders in the proposed changes.
FMCSA Response:
FMCSA agrees with commenters that the rulemaking should not be limited to insurance for motor carriers of property. Accordingly, this proposal would permit Canada-domiciled motor carriers of passengers and freight forwarders to operate in the U.S. under insurance policies issued by Canadian insurance companies.
The Proposed Rule
FMCSA proposes amendments to 49 CFR 387.11 to allow Canadian insurance companies, licensed in the province or territory where the motor carrier has its principal place of business, to issue proof of financial responsibility for Canada-domiciled motor carriers by executing the Forms MCS-90 and MCS-90B directly rather than as the agent of a U.S. insurer. FMCSA also proposes amendments to other sections of part 387 to ensure consistency withinpart 387. These include §387.35, which applies the requirements of §387.11 to motor passenger carriers; §387.315, which imposes the same requirements on motor carriers that must file evidence of insurance with FMCSA; and 49 CFR 387.409, which applies these requirements to freight forwarders.
In order to implement this proposal, FMCSA proposes to revise §§387.11 and 387.35 to add a new paragraph (d), that would allow an insurance policy to satisfy the financial responsibility requirements of the subpart if the insurer is:
Legally authorized to issue a policy of insurance in the Province or Territory of Canada in which a 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 brought in any State in which the motor carrier operates.
The Agency would also revise §387.315 to add a new paragraph (d) that would allow a certificate of insurance to be accepted by FMCSA if issued by an insurance company that is authorized to issue insurance policies:
In the Province or Territory of Canada in which a motor carrier has its principal place of business or domicile, and will designate in writing upon request by FMCSA, a person upon whom process, issued by or under the authority of a court of competent jurisdiction, may be served in any proceeding at law brought in any State in which the carrier operates.
The Agency would also revise §387.409 to add a new paragraph (d) that would allow a certificate of insurance to be accepted by FMCSA if issued by an insurance company that is authorized to issue insurance policies:
(d) In the Province or Territory of Canada in which a freight forwarder has its principal place of business or domicile, and will designate in writing upon request by FMCSA, a person upon whom process, issued by or under the authority of a court of competent jurisdiction, may be served in any proceeding at law brought in any State in which the freight forwarder operates.
The conforming amendments to part 387 would enable Canadian insurers to execute the Forms MCS-90 and MCS-90B endorsements, and allow Canadian insurers to file certificates ofinsurance required under part 387, to protect the public and to ensure that anyone injured or killed by a Canada-domiciled motor carrier is compensated after a claim is filed. In the event that the matter requires court action to determine fault in the crash, the payment would typically be made after a settlement agreement is reached, or a U.S. claimant receives a final judgment issued by a U.S. court against the Canada-domiciled motor carrier. Filing of the FMCSA insurance forms and endorsements by Canadian insurers would subject Canada-domiciled motor carriers to all applicable Federal laws and regulations that require minimum levels of financial responsibility to cover public liability and property damage for the transportation by commercial motor vehicle in the U.S.
Methods and Databases (Technologies) for Ensuring the Validity of Canadian Insurers
Before an insurance company can submit certificates of insurance or other evidence of financial security to the FMCSA, it must first be assigned a filer account number. The account number is also used to bill a service fee to the insurance companies ($10 fee for each filing).
For example, procedures for assigning a Canadian insurance company an account filer number would include the following:
The Canadian insurance company must submit a request to FMCSA in writing to open a filer account. The letter must include the home office address of the insurance company. FMCSA will also need a billing address if the address is different from the home office address, the name of a contact person within that insurance company, their telephone number, e-mail address and fax number.
The Canadian insurance company must provide a copy of its license to write insurancepolicies.
FMCSA staff will verify with the Canadian Government point of contact whether the Canadian insurance company is licensed or admitted in Canada to write insurancepolicies for Canadian motor carriers.
After all the above information is received, FMCSA will then assign the Canadian insurancecompany a filer account number.
If the proposed rule is implemented, Canadian insurers would sign the Forms MCS-90 and MCS-90B, including any other form or documentation required under part 387 to be filed on behalf of motor carriers, thereby satisfying the minimum public liability requirements of FMCSA. Canada's Department of Finance has indicated that Canadian insurers are all monitored for financial solvency by Provincial or Federal insurance regulators, and the regulator can provide FMCSA with a short statement confirming that the Canadian insurer seeking to sign the MCS-90 form, or any other security authorized by part 387, is supervised for financial solvency. A Canadian agency would: (a) Respond to verification requests on demand when an insurer new to FMCSA seeks to sign the MCS-90 form and all other MCS and BMC insurance forms required by part 387; (b) on an annual basis, verify a list of Canadian insurers that have signed the MCS-90 form and all other MCS and BMC forms required by part 387 to ensure that the list is still accurate; and (c) respond to re-verification requests on demand if there were a specific concern (for example, a news article on the financial health of a particular company). Canadian insurers would also assume responsibility for insurancefilings on behalf of their clients as a result of this rulemaking.
Approaches Considered
After reviewing the comments received in response to the ANPRM, FMCSA considered two options: (1) Issue a proposed rule to amend part 387 to allow Canadian insurance companies to issue insurance policies for Canada-domiciled carriers and freight forwarders, and (2) maintain the status quo which would entail withdrawal of the ANPRM. The Agency chose the option of publishing an NPRM amending part 387, including changes to §§387.11, 387.35, 387.315, and 387.409 to ensure consistency throughout part 387 for the insurancerequirements for motor carriers of property and passengers and freight forwarders. Based on the comments received, there was no discernible adverse impact on U.S. entities that would likely result from proceeding with an NPRM, as requested by the Canadian government in its petition.
Costs and Benefits of the Proposed Rule
Regulatory Impact Analyses
In examining the economic impact of this rulemaking, FMCSA considered two options: (1) The Agency's proposed amendments to 49 CFR Part 387 that would permit Canadian insurancecompanies to issue insurance policies for Canada-domiciled carriers and freight forwarders operating CMVs in the U.S., and (2) the Agency's alternative of maintaining the status quo which would entail withdrawal of the ANPRM. Under the first option, FMCSA decided to include within the scope of the proposal active Canada-domiciled for-hire motor carriers of property and passengers and freight forwarders. It is assumed that a small proportion of Canada-domiciled motor carriers and freight forwarders may elect to continue with the status quo, at least in the short term, and choose not to seek direct insurance representation by a Canadianinsurance company for their U.S. operations. Those carriers and freight forwarders are assumed to be a negligible percentage of the total affected entities and are thus not considered in the analysis.
The RIA examines the direct costs of implementing the proposed rule in terms of administrative costs incurred by the FMCSA and in forgone revenue by U.S. insurancecompanies (of which there are approximately five) currently representing Canadian motor carriers and freight forwarders. In addition, the RIA examines the functional impact of rule compliance under this option from the perspectives of the FMCSA's Enforcement and Compliance Division and the Canadian motor carriers.
Under the second option, the same population of Canadian motor carriers is considered. The RIA examines the direct costs of maintaining the status quo, which consist mainly of compliance costs currently incurred by Canadian motor carriers. The RIA specifically analyzes the comparative cost burden currently being borne by Canadian motor carriers versus that currently being borne by U.S. motor carriers. FMCSA will continue to seek information to refine its estimates of the cost burden. FMCSA specifically requests comments from U.S. insurers on these cost issues. Any additional information will be included in the docket referenced at the beginning of this notice.
FMCSA notes that cost information used in its analyses was obtained from the Agency's data base, Canada Finance, the American Insurance Association, the Property Casualty Insurers Association of America and publicly available information.
The RIA also examines the benefits of this rulemaking which are largely the relief of a disproportional cost and administrative burden and inconvenience currently being borne by Canada-domiciled motor carriers in comparison to their U.S. counterparts. Other benefits include the elimination of trade barriers (i.e., disproportionate cost burden) in accordance with the goals of the North American Free Trade Agreement (NAFTA), and increased cooperation among the U.S. and Canada pursuant to the Security and Prosperity Partnership (SPP) of North America.
This analysis is conducted under the assumption that there are approximately 9,000 1 active Canada-domiciled motor carriers and freight forwarders conducting CMV operations in the U.S. The FMCSA Licensing and Insurance (L&I) system provides up-to-date information about authorized for-hire motor carriers who must register with FMCSA under 49 U.S.C. §§13901 and 13902. The L&I database was the primary database utilized in the analysis because it does not include overlapping carrier data. Under MCMIS, a motor carrier may have multiple carrier classifications and thus may be counted more than once. The Agency did, however, use MCMIS as a source to obtain the number of Canada-domiciled for-hire carriers exempt from registration under 49 U.S.C. 13901 and 13902 since they are not found in the L&I database.
1 Licensing and Insurance database, at http://li-public.fmcsa.dot.gov, and the Motor Carrier Management Information System (MCMIS) database, at http://MCMIS.fmcsa.dot.gov, as of February 20, 2009.
The RIA finds that the proposed rulemaking yields a positive discounted net benefit of $273 million estimated over a 10-year period. This amounts to approximately $30,000 per carrier over that period. These quantified net benefits accrue to the Canada-domiciled for-hire motor carriers and freight forwarders which are impacted by this rulemaking, of which there are approximately 9,000 actively operating CMVs in the U.S. The essential impact of this rulemaking would be the relief of a disproportional cost burden which, in turn, is the expected net benefit of approximately $273 million over a 10-year period.
Rulemaking Analyses and Notices
Executive Order 12866 (Regulatory Planning and Review) and DOT Regulatory Policies and Procedures
For purposes of Executive Order 12866 (Regulatory Planning and Review) and DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979), FMCSA has made a preliminary determination that this action is not a significant regulatory action within the meaning of that Executive Order from an economic standpoint or otherwise. While the Agency estimates a positive discounted net benefit of approximately $273 million over a 10-year period, the net benefits are for Canada-domiciled motor carriers. Because the benefits pertain to foreign entities, they are not considered for the purposes of determining whether the rulemaking is significant under Executive Order 12866. Therefore, the Agency has determined this action is not an economically significant regulatory action under section 3(f), Regulatory Planning and Review, because it would not have an annual effect on the United States' economy of $100 million.
FMCSA acknowledges that U.S. insurance companies would experience a reduction in revenues because they would no longer receive payments for the fronting arrangements with Canadianinsurance companies. However, the Agency believes that a significant portion of the payments they received from Canadian insurance companies were used to offset the legal and administrative costs the U.S. companies incurred to participate in the fronting arrangement. Although there may be some degree of financial loss to U.S. companies, the amount of the loss is expected to be small, as evidenced by the fact that, except for NAPSLO, the U.S.insurance industry has not expressed opposition to Canada's petition. FMCSA requests comments on this issue.
A full regulatory evaluation has been prepared in support of this rulemaking. The regulatory evaluation is included in the docket referenced at the beginning of this notice.
Regulatory Flexibility Act
FMCSA has considered whether this rulemaking action would have a significant impact under 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), and has preliminarily determined this action would not have a significant economic impact on a substantial number of small entities.
Executive Order 13132 (Federalism)
This proposed action has been analyzed in accordance with the principles and criteria contained in Executive Order 13132 (64 FR 43255, August 10, 1999). E.O. 13132 does not require a Federalism assessment under any circumstances. We have determined that this proposed action would not affect the States' ability to discharge traditional State government functions.
International Trade and Investment
The Trade Agreement Act of 1979 (19 U.S.C. 2531-2533) prohibits Federal agencies from establishing standards that create unnecessary obstacles to the foreign commerce of the United States. Legitimate domestic objectives such as safety are not considered unnecessary obstacles. In developing rules, the Trade Act requires agencies to consider international standards and where appropriate, that they be the basis of U.S. standards. FMCSA has assessed the potential effect of the proposed rule and determined that that the expected economic impact of this rule is minimal and should not affect trade opportunities for U.S. firms doing business in Canada or for Canadian firms doing business in the United States.
Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (Public Law 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 $136.1 million or more in any one year, must prepare a written statement incorporating various assessments, estimates, and descriptions that are delineated in the Act. FMCSA has preliminarily determined that this proposal would not have an impact of $136.1 million or more in any one year.
Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), a Federal agency must obtain approval from the Office of Management and Budget for each collection of information it conducts, sponsors, or requires through regulations. FMCSA has determined this action would not have an impact on OMB Control Number 2126-0008, “Financial Responsibility for Motor Carriers of Passengers and Motor Carriers of Property,” an information collection burden which is currently approved at 4,529 annual burden hours per year through March 31, 2010.
National Environmental Policy Act
The Agency analyzed this proposed rule for the purpose of the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.), the Council on Environmental Quality Regulations Implementing NEPA (40 CFR parts 1500 to 1508), and FMCSA's NEPA Implementation Order 5610.1 (issued on March 1, 2004, 69 FR 9680). This action is categorically excluded (CE) from further environmental documentation under Appendix 2.6.v. of Order 5610.1, which contain categorical exclusions for regulations prescribing the minimum levels of financial responsibility required to be maintained by motor carriers operating in interstate, foreign, or intrastate commerce. In addition, FMCSA believes the proposed action would not involve extraordinary circumstances that would affect the quality of the environment. Thus, the proposed action does not require an environmental assessment or an environmental impact statement.
We have also analyzed this proposed rule under the Clean Air Act (CAA), as amended, section 176(c), (42 U.S.C. 7401 et seq.) and implementing regulations promulgated by the Environmental Protection Agency. Approval of this proposed action is exempt from the CAA's general conformity requirement since it involves 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). It 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 the action merely relates to insurance coverage across international borders between the U.S. and Canada.
Environmental Justice
FMCSA has considered the environmental effects of this proposed rule in accordance with Executive Order 12898 and DOT Order 5610.2 on addressing Environmental Justice for Minority Populations and Low-Income Populations, published April 15, 1997 (62 FR 18377) and has preliminarily determined that there are no environmental justice issues associated with this proposed rule nor any collective environmental impact resulting from its promulgation. Environmental justice issues would be raised if there were “disproportionate” and “high and adverse impact” on minority or low-income populations. None of the regulatory alternatives considered in this proposed rulemaking would result in high and adverse environmental impacts.
Executive Order 12630 (Taking of Private Property)
The Agency has analyzed this proposed rule under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. We do not anticipate that this proposed action would effect a taking of private property or otherwise have implications under Executive Order 12630.
Executive Order 12372 (Intergovernmental Review)
The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities do not apply to this proposed rule.
Executive Order 13211 (Energy Supply, Distribution, or Use)
FMCSA has analyzed this proposed action under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. The Agency has preliminarily determined that it is not a significant energy action within the meaning of section 4(b) of the Executive Order and would not likely have a significant adverse effect on the supply, distribution, or use of energy. Therefore, the Agency would not anticipate that a Statement of Energy Effects would be required.
Executive Order 12988 (Civil Justice Reform)
FMCSA has preliminarily determined that this proposed rulemaking meets 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.
Privacy Impact Assessment
FMCSA conducted a privacy impact assessment of this proposed rule as required by section 522(a)(5) of the Transportation, Treasury, Independent Agencies, and General Government Appropriations Act, 2005, Public Law 108-447, div. H, 118 Stat. 2809, 3268, (December 8, 2004) [set out as a note to 5 U.S.C. 552a]. The assessment considers any impacts of the proposed rule on the privacy of information in an identifiable form and related matters. FMCSA has preliminarily determined this proposal contains no privacy impacts.
Executive Order 13045 (Protection of Children)
FMCSA has analyzed this proposal under Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks.” The Agency has preliminarily determined that this proposed rulemaking would not cause any environmental risk to health or safety that may disproportionately affect children.
Executive Order 13175 (Tribal Consultation)
FMCSA has analyzed this action under Executive Order 13175, dated November 6, 2000, and has preliminarily determined that the proposed action would not have substantial direct effects on one or more Indian tribes; would not impose substantial compliance costs on Indian tribal governments; and would not preempt tribal law. Therefore, a tribal summary impact statement would not be required.
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.
For the reasons discussed above, FMCSA proposes to amend title 49, Code of Federal Regulations, chapter III, subchapter B, as set forth below:
PART 387—MINIMUM LEVELS OF FINANCIAL RESPONSIBILITY FOR MOTOR CARRIERS
1. The authority citation for part 387 continues to read as follows:
Authority: 49 U.S.C. 13101, 13301, 13906, 14701, 31138, and 31139; and 49 CFR 1.73.
2. In §387.11:
a. In paragraph (c), in the last line, remove the period at the end of the sentence, and add in its place “; or”; and
b. Add paragraph (d) to read as follows:
§387.11 State authority and designation of agent.
* * * * *
(d) A Canadian insurance company legally authorized to issue a policy of insurance in the Province or Territory of Canada in which a Canadian motor carrier has its principal place of business or domicile, and that 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 brought in any State in which the motor carrier operates.
3. In §387.35:
a. In paragraph (c), in the last line, remove the period at the end of the sentence, and add in its place “; or”; and
b. Add paragraph (d) to read as follows:
§387.35 State authority and designation of agent.
* * * * *
(d) A Canadian insurance company legally authorized to issue a policy of insurance in the Province or Territory of Canada in which a Canadian motor carrier has its principal place of business or domicile, and that 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 brought in any State in which the motor carrier operates.
4. In §387.315:
a. In paragraph (c), in the last line, remove the period at the end of the sentence, and add in its place “; or”; and
b. Add paragraph (d) to read as follows:
§387.315 Insurance and surety companies.
* * * * *
(d) In the Province or Territory of Canada in which a Canadian motor carrier has its principal place of business or domicile, and will designate in writing upon request by FMCSA, a person upon whom process, issued by or under the authority of a court of competent jurisdiction, may be served in any proceeding at law brought in any State in which the carrier operates.
5. In §387.409:
a. In paragraph (c), in the last line, remove the period at the end of the sentence, and add in its place “; or”; and
b. Add paragraph (d) to read as follows:
§387.409 Insurance and surety companies.
* * * * *
(d) In the Province or Territory of Canada in which a Canadian freight forwarder has its principal place of business or domicile, and will designate in writing upon request by FMCSA, a person upon whom process, issued by or under the authority of a court of competent jurisdiction, may be served in any proceeding at law brought in any State in which the freight forwarder operates.
Issued on: June 4, 2009.
Rose A. McMurray,
Acting Deputy Administrator.
[FR Doc. E9-13581 Filed 6-9-09; 8:45 am]

Commercial learner's permit (CLP)

Anyone operating a commercial motor vehicle (CMV) as defined in §383.5 is required to have either a commercial driver’s license (CDL) or commercial learner's permit (CLP). A CLP is a temporary, state-issued permit (valid for up to 180 days) that allows the holder to operate — for training purposes — a CMV for which he or she is not yet fully licensed.
Major revisions to the federal CLP rules took effect on July 8, 2011, although states were given until July 8, 2014, to comply. The following is based on these updated rules.
Drivers must hold a CLP for at least 14 days before obtaining a CDL or any CDL upgrade that requires a skills test. When engaged in behind-the-wheel training, the CLP holder must carry the CLP and his or her regular driver's license, and must be accompanied by someone who holds a valid CDL.
A vehicle for which a CLP may be needed is any commercial motor vehicle used in commerce, whether interstate or intrastate, that meets one of the following criteria:
Has a gross combination weight rating or gross combination weight of 26,001 or more pounds, whichever is greater, inclusive of a towed unit with a gross vehicle weight rating or gross vehicle weight of more than 10,000 pounds, whichever is greater;
Has a gross vehicle weight rating or gross vehicle weight of 26,001 or more pounds, whichever is greater; or
Is designed to transport 16 or more passengers, including the driver.
Note that CLP holders are not authorized to operate vehicles used in the transportation of hazardous materials, although they can train on tank vehicles that have been purged of all residue if they have the tank vehicle endorsement.
CLP holders are subject to the same disqualification rules as CDL holders (see §383.51).
Conditions (§383.25)

For purposes of behind-the-wheel training on public roads or highways, a CLP is considered to be a valid CDL if the CLP holder:
Is accompanied at all times by the holder of a CDL that is valid for the CMV being operated (that is, the CDL holder must be physically present at all times in the front seat of the vehicle next to the CLP holder or, in the case of a passenger vehicle, directly behind or in the first row behind the driver and must have the CLP holder under observation and direct supervision);
Holds a valid driver’s license issued by the same jurisdiction that issued the CLP;
Passed a general knowledge test for the CMV that he or she operates or expects to operate; and
Is at least 18 years old.
Endorsements (§383.93)

Drivers are required to obtain endorsements to operate certain types of commercial motor vehicles. The following are the only endorsements allowed on a CLP:
P for passenger
N for tank vehicle
S for school bus
CLP holders with a passenger or school bus endorsement are prohibited from transporting most passengers. Those with a tank endorsement can only operate empty, purged tank vehicles.
If a CLP applicant fails the air-brake component of the knowledge test, he or she will have an “L” (air brake) restriction on the permit and will be restricted from operating a vehicle equipped with any type of air brakes.