The Insurance Report - June 2005

FILING FUNDAMENTALS
By Roland L. Enz - President, California Plus Insurance Service, Inc.

Your operating authority, whether with the Department of Motor Vehicles or the Federal Motor Carrier Safety Administration, remains active only if you have proof of insurance on file, filed by your insurance company. This proof of insurance is called “The Filing.” It is, in fact, a Certificate of Insurance, authorized by those government agencies that require it. Each agency has its own form and only that form will be accepted. We will explore the forms’ legal ramifications later in this column. The filing and the filing process is one of the most frustrating and misunderstood aspects of your authority and its relationship with the insurance company. It never fails – no matter how much time is devoted explaining this process to the insured, confusion still exists.

In California, the trucking industry (intrastate) is regulated by the Department of Motor Vehicles. The old PUC still regulates household goods movers and public transportation, but since we are dealing with trucking here, we will leave the PUC out. If you have a vehicle over 10,000 GVW, whether you are a private carrier or for hire, you will need a filing. The filing (MCP 65) is made directly by the insurance company to the DMV. This filing only supports the liability required by California Law. No cargo filing is required.

The California Department of Motor Vehicles, Motor Carrier Division has not caught up to the new electronic age. They are still posting by hand and sometimes are as much as two weeks behind. What does this mean? Even though you have purchased insurance and your insurance company has made the filing, on your behalf, your authority is not active until it is actually posted. If you are operating and the filing has not yet been posted, you are operating illegally and you could be cited and your equipment confiscated.

If you have a lapse in coverage on your renewal, your authority will be suspended until the DMV receives a $150 reinstatement fee. It is critical to have continuity in renewing policies. Another related problem is the renewal itself. Each year, as your insurance expires, the insurance company will send out the required 30 day notice of termination to the Department of Motor Vehicles. You can see instantly of a looming problem. If you wait until the last minute to renew your insurance (which everyone does) and if the insurance company promptly makes the filing, there is still the possibility that the filing will not be posted for up to two weeks after the DMV has received it.

The Federal Motor Carrier Safety Administration regulates interstate commerce. Your MC authority is supported by the BMC91 for liability and the BMC34. Unlike California, if you are a common carrier, you are required to have a cargo filing. Also, unlike California, the filings made by your insurance company are done electronically and will show up the next day. Now that we know that you cannot work until the various regulating authorities have received the appropriate filing from the insurance company, what else can we expect? We have just scratched the surface of the impact of these filings.

Your operating authority cannot be terminated by the insurance company unless they give them 30 days notice of termination. With that in mind; 1) the insurance company will usually notify both the state and federal regulators of the expiration of your insurance policy 30 days prior to its expiration; 2) if you want to cancel your insurance policy, the insurance company has to give that same 30 day notice. Since this is a voluntary cancellation, both the 30 days and mail time have to be taken into consideration. You will have to pay for coverage up until the termination date. There are some ways of getting around this. One way is to put your authority into suspension. When you do this, the insurance company should cancel to that date. Another way is to replace the canceled coverages with another company. The canceling company may accept a Hold Harmless Letter, canceling to the date of the new policy, but the letter must come from the new company.

The filing has major ramifications as to what it covers, especially in California. Since the filing does not list vehicles, the assumption is that everything that runs under your authority or that is in your name is insured by the insurance policy making that representation. This is the main concern for having all equipment on the insurance policy. Insurance companies frown on risks that are not covering all of their equipment. You have to see their point; they have made representation to the state that you have insurance on your vehicles. In the event of a loss involving a vehicle that was not on the policy, your company will still pay the loss. In fact, if you have a fleet of trucks but only one is insured and a filing has been made in your name, you have coverage for all of them. Deleting vehicles that you own (and continue to own) creates a dilemma for the insurance company and the insured. Most insurance companies will accept a Non-Op Certificate from the Department of Motor Vehicles. The DMV will only issue Non-Op Certificates after the expiration of the annual registration date. They will not issue a Non-Op Certificate during the year of or after a partial year expiration. Documentation is essential in the deletion of vehicles and it is important that you discuss this with your insurance agent.

As you can see, the insurance filing is very important. It represents to the state and to the citizens of the state that you have adequate insurance protecting them and that the state will receive notification in the event of an expiration, termination or cancellation. Understanding this filing is an essential part of understanding your insurance, your business and the rules that govern trucking.
If you have any comments or would like to discuss any other insurance-related issues, please feel free to contact me at California Plus Insurance Service by calling toll free 1-800-699-7101.