August 28,

Federal Highway Administration issues an Advance Notice of Proposed Rulemaking

1980
to implement Section 30 of the Motor Carrier Act of 1980.
By what percentage would a motor carrier's insurance premiums be increased if the minimum limits were
set for carriers of nonhazardous materials at $500,000? $750,000? $1 million? If set at $1 million for
carriers of hazardous materials? $5 million? Assume that most carriers meet the current limits of
$100,000 (per person/$300,000 (for all persons) as set by the ICC.
What will the economic impact of increased insurance premiums be on carriers of nonhazardous
materials? Would small and minority controlled carriers be affected differently than other such carriers?
Will the insurance industry be able to provide motor carriers with the expanded coverage required by the
Act 1 year after the Act takes effect? 2 years? 3 years?
January 26,
Federal Highway Administration issues a Notice of Proposed Rulemaking to
1981
implement Section 30 of the Motor Carrier Act of 1980.
It is also vitally important in this rulemaking action to consider the economic conditions under which the
motor carrier industry operates. Congress expressed a need for the Department to pay particular
attention to the economic impacts on small and minority motor carriers and independent owner-operators.
This rulemaking attempts to recognize the unique problems of small business.
In light of the comments received, information contained in the initial regulatory flexibility analysis, and the
intent of Congress to focus on safety without putting undue economic burdens on the motor carrier and
insurance industries, it has been determined that special consideration must be given to small companies
that would be affected by these proposed rules. This decision is further supported by the Regulatory
Flexibility Act (Pub. L. 96-354) of September 19, 1980, the purpose of which is to provide more, flexible
regulatory approaches for small business entities.
Since, by their own admission, most large carriers now maintain financial responsibility coverage equal to
or greater than the mandated levels, there should be minimal adverse effect on large motor carriers. As
indicated by the draft regulatory evaluation and the initial regulatory flexibility analysis, medium and small
insurance companies may be forced to drop the business of underwriting liability coverage for motor
carriers if the higher limits are imposed as of July 1, 1981. The primary reason for withdrawing from this
area of underwriting would be the inability to secure sufficient reinsurance treaty protection at the higher
levels. Also, certain States have requirements that prevent an insurance company from underwriting
coverage in excess of 10 percent of its surplus (policy holder premium retention). These requirements
may greatly curtail participation of the medium and small insurance companies in the underwriting of
motor carrier insurance.
For the first and second year, the small motor carriers, depending upon the commodity carried, will be
required to maintain the minimum-levels proposed in the schedule of limits set forth in 387.9.
As of July 1, 1983, all motor carriers, regardless of size, would be required to meet the minimum levels
depending upon commodities carried.
June 11,
Final Rule implementing Section 30 is issued by FHWA.
1981
The NPRM stated, "the legislative history of section 30 indicates a congressional belief that increased
financial responsibility will lead to improved safety performance as unsafe motor carriers will incur higher
premiums than safe carriers, or will be unable to obtain coverage." Numerous commenters took exception
to the congressional belief stated above. The American Insurance Association (AIA) whose membership,
it claims, writes 41 percent of all motor carrier coverage, made the following statements which generally
sum up the position taken by the other respondents.
"The congressional belief is not substantiated by the facts. Individual insurers can refuse to
voluntarily provide coverage based on objectively poor accident history, financial instability or failure to

meet prescribed safety standards No comments were received to contradict this statement. It
should be noted, however, that the majority of the State residual market rate levels are higher than those
of the voluntary market. Thus it is believed that there is some incentive, though perhaps to a lesser
degree than originally contemplated, that will lead to improved safety performance.

July 2, 1984

FHWA final rule on extension to January 1, 1985

In light of the foregoing. It is evident that there are very diverse views concerning what can reasonably be
considered "protection of the public."
For those who oppose the extension, it appears that the public can be adequately protected only if motor
carriers are insured to levels adequate to cover "worst case accidents. This, of course, would be an ideal
situation for a number of reasons, such as providing adequate awards to injured parties as well as
protecting the assets of the motor carrier involved in such an event
On the other hand, those commenters who favor the extension appear to consider the minimum levels
currently in effect reasonable protection since those limits cover liability claims in the vast majority of
cases.
The FHWA agrees with those in opposition that "worst case" accidents can and do occur, leaving
a trail of destruction and suffering in their wake. It is also understood, as pointed out in their
comments, that these catastrophic accidents result in liability claims which can be above even the
highest minimum levels mentioned in Section 30.
The FHWA feels confident that the Congress was fully aware of the catastrophic accidents which
have occurred over the past decade or so when they passed the MCA of 1980. The Congress, in
passing the MCA of 1980, called for minimum levels of financial responsibility to enhance safety and
adequately protect the public. The Congress also gave the Secretary the authority to lower those
minimum levels for a specified period of time if the reduction would prevent a serious disruption in service
and-would not adversely affect public safety. It can therefore be reasonably deduced that the Congress'
intent for reasonable protection did not include those damages incurred as a result of an extremely limited
number of "worst case" accidents. It is reasonable to assume this is still true since the Congress saw fit to
give the Secretary the authority to extend the "phase-in period" from 2 years to 3 years in the STAA of
1982.
With all things considered (i.e., protection of the public, the stability of the motor carrier industry,
the ability of' the insurance industry to provide the coverage and the particular needs of small and
minority motor carriers) the question which begs to be answered is what minimum levels of
financial responsibility are sufficient? We stress the word "minimum" as it has appeared since the
inception of the MCA of 1980.
The FHWA firmly believes, based on its data and the data provided by the insurance industry, that with
only two one-hundredths of one percent of all commercial vehicle accidents resulting in settlements of
more than $500,000, the current minimums are sufficient. This is not to say that the FHWA does not
strongly endorse and encourage motor carriers to maintain levels of liability coverage sufficient to cover
their assets and fully protect their concerns. What is at issue here is the absolute minimum which
must be maintained before a motor carrier subject to these rules may operate its vehicles on the
public highway system.