#motor vehicle insurance
By: Janet L. Kaminski, Associate Legislative Attorney
You asked (1) what the federal and state motor vehicle insurance requirements are for vehicles with a commercial registration, (2) whether there is a specific state law that sets a penalty for a motor carrier that fails to satisfy the federal requirements, and (3) if an insurer is required to notify the Department of Motor Vehicles (DMV) when it cancels a motor vehicle liability insurance policy on a vehicle with a commercial registration.
Federal regulations adopted by the U.S. Department of Transportation ‘ s Federal Motor Carrier Safety Administration (FMCSA) establish the minimum levels of financial responsibility (e.g. insurance policies, surety bonds, self-insurance) that motor carriers operating motor vehicles on public highways must maintain. (A motor carrier is in the business of transporting property or passengers.) The financial responsibility requirements are meant to ensure that the carrier has sufficient means to cover liability for bodily injury, property damage, and environmental restoration.
The federal regulations set the minimum level of financial responsibility that a motor carrier must maintain from $750,000 to $5,000,000, depending on the (1) type of motor vehicle and (2) type or quantity of property or people transported. Federal law permits a state to require a motor carrier to maintain a higher level of financial responsibility.
The federal regulations require motor carriers to keep proof of financial responsibility at their principal place of business and make it available for inspection upon request. Any person who knowingly violates the federal rules is subject to a civil penalty of up to $16,000 per violation. Each day of continued violation constitutes a separate offense.
Either the insurer (or surety) or the carrier may cancel the financial responsibility by providing written notification to (1) the other party 35 days in advance and (2) if the insured is subject to FMCSA jurisdiction, FMCSA 30 days in advance.
State law authorizes the DMV commissioner to adopt regulations that incorporate by reference the federal financial responsibility requirements. The commissioner has done this, making the requirements applicable for certain motor carriers. State law makes a first violation of the regulations an infraction. It permits the DMV commissioner to impose a civil penalty for a second or subsequent violation of up to $10,000 per violation.
The federal financial responsibility requirements for motor carriers do not apply to all vehicles with commercial registrations. As a result, the state legislature expanded the applicability of the mandatory no-fault motor vehicle insurance law effective October 1, 1994. Thus, the owner of any vehicle with a commercial registration, instead of just those subject to the federal requirements, must continuously maintain throughout the vehicle ‘ s registration period, certain minimum financial security. Failure to do so is a class C misdemeanor, which carries a fine up to $500, imprisonment up to three months, or both.
State law also subjects a vehicle owner convicted of operating or allowing the operation of a vehicle with a commercial registration without the required minimum security to a fine between $100 and $1,000. The law requires that DMV suspend his vehicle registration and driver ‘ s license for one month for a first conviction and six months for subsequent convictions. The owner whose registration has been suspended may also have his license plates confiscated and vehicle impounded. DMV is prohibited from restoring his license until he obtains and provides evidence of the required financial security.
Under state law, an insurer is not required to notify DMV of the cancellation of any commercial motor vehicle liability insurance policy. (For details regarding this, see the enclosed report, OLR 2005-R-0758.)
Federal law prohibits motor carriers from operating motor vehicles unless the carrier has obtained and has in effect an appropriate level of financial responsibility (e.g. insurance policies, surety bonds, self-insurance) to cover potential liability for bodily injury, property damage, and environmental restoration. The term motor carrier includes a carrier ‘ s (1) agent, officer, or representative; (2) employee responsible for hiring, supervising, training, assigning, or dispatching drivers; and (3) employees involved with the installation, inspection, and maintenance of motor vehicle equipment and accessories (49 CFR §§ 387.5 and 387.29). The financial responsibility requirements apply to:
1. for-hire and private carriers operating motor vehicles transporting hazardous (a) materials, (b) substances, or (c) wastes;
2. for-hire carriers operating motor vehicles transporting property in interstate or foreign commerce;
3. for-hire carriers transporting passengers in interstate or foreign commerce; and
4. private carriers domiciled in Mexico transporting property in interstate or foreign commerce (49 CFR § 387.3).
For-hire carriers are in the business of transporting, for compensation, (1) the goods or property of another or (2) passengers and their property (49 CFR §§ 387.5 and 387.29).
Minimum Financial Responsibility
Table 1 shows the minimum levels of financial responsibility that a motor carrier of property must maintain under federal regulations. The requirements only apply to a motor vehicle with a gross vehicle weight rating (GVWR) of more than 10,000 pounds. They also apply to a motor vehicle with a GVWR of less than 10,000 pounds if the vehicle is carrying certain hazardous substances, as defined and listed in the federal regulations (49 CFR §§ 387.3 and 387.9).
Table 1: Minimum Levels of Financial Responsibility for Motor Carriers Transporting Property