NOTICES
PENNSYLVANIA PUBLIC UTILITY COMMISSION
Insurance Coverage Requirements for Motor Carriers; Doc. No. M-00041816
[35 Pa.B. 3373] Public Meeting held
May 19, 2005Commissioners Present: Wendell F. Holland, Chairperson; Robert K. Bloom, Vice Chairperson; Kim Pizzingrilli
Declaratory Order By the Commission:
By Order entered August 6, 2004, we initiated a declaratory order proceeding to address the effect of exclusionary clauses possibly found in insurance policies issued to motor carriers, and the effect of those clauses on coverage mandated by statute and regulation. Specifically, we were concerned about valid claims for recovery being denied on the basis that a particular vehicle or driver involved in an accident was not listed on the motor carrier's insurance policy. We noted that we had previously addressed this issue in Petition of Thomas Redfield, Docket No. P-00950951 (Order entered October 4, 1995), wherein we found that coverage was available to claimants, regardless of whether a particular carrier vehicle involved in an accident was listed on the insurance policy. Notwithstanding our decision in Redfield, we became aware that insurers may be denying valid claims based on the unlisted vehicle theory. Therefore, we initiated the present proceeding to remove any uncertainty over mandated coverage requirements.
Our August 6, 2004 Order was served on all motor carrier insurers actively providing coverage in Pennsylvania. In addition, our Order was published on August 21, 2004, in the Pennsylvania Bulletin. 34 Pa.B. 4661. Comments were to be filed within twenty (20) days of the date of publication. Comments were filed by Eric F. Ewing, the Insurance Federation of Pennsylvania, Inc. (''IFP''), the Property and Casualty Insurers Association of America (''PCIAA''), Philadelphia Parking Authority (''PPA''), and Prime Insurance Syndicate, Inc. (''Prime'').
Summary of Comments
Mr. Ewing, the chief executive officer of Citizens Insurance Services, LLC, a Pennsylvania corporation registered in Pennsylvania to sell insurance products, commended the Commission for its initiative in addressing the problems arising in the marketplace for liability insurance and the resulting expenses of the public due to uninsured and underinsured commercial motor vehicle operators. Mr. Ewing encouraged the Commission to broaden its inquiry beyond the effect of exclusionary clauses to include the practice of regulated carriers to self-insure. We decline Mr. Ewing's suggestion, and will limit the scope of this Order to the particular issue for which we solicited comment.
IFP and PCIAA, insurance trade associations, commented that the resolution of the effect of exclusionary policy provisions requires resolution of possibly competing public policy goals; one ensuring that the public is adequately protected by the financial security in place, and the other protecting traditional underwriting and contractual interpretation principles underpinning the insurance market. IFP and PCIAA cited the Superior Court's decisions dealing with exclusionary clauses as frustrating the intent of federal and state transportation regulators to ensure adequate coverage for injured members of the public. IFP and PCIAA urge the Commission to limit its Order to taxicab coverage and not attempt to reach beyond the traditional privities of contract in insurance arrangements.
PPA commented that exclusionary clauses found in individual insurance policies issued to common carriers, are void to the extent that those clauses would provide less coverage than mandated by law. PPA has issued regulations that explicitly address exclusionary clauses in insurance contracts, and indicates that these clauses are subordinate to insurance coverage required by law.
Prime commented that if the Commission upholds its prior decision on this matter, it ''will have a disastrously negative impact upon Prime and upon other companies writing commercial automobile coverage, particularly for taxicabs, in Pennsylvania.'' Prime commented that if it was forced to provide coverage for vehicles and operators that it did not willingly and specifically undertake to insure, it will be unable to participate in this market in Pennsylvania and will begin an orderly withdrawal. Prime argued that a more effective approach would be to make insurers provide proof of insurance specific to the vehicle and operator, not the carrier. Finally, Prime commented that ''the Commission has no lawful authority to regulate the contents or terms of the insurance contracts which Prime or any other insurer issues.'' While the Commission has the power to regulate motor carriers and to require motor carriers to carry insurance, Prime argued that the Commission is not permitted to regulate the insurance industry or the insurers doing business in Pennsylvania.
Discussion
Section 331(f) of the Public Utility Code, 66 Pa.C.S. § 331(f), provides that: ''The commission, with like effect as in the case of other orders, and in its sound discretion, may issue a declaratory order to terminate a controversy or remove uncertainty.'' Given the conflicting comments, we believe that sufficient uncertainty surrounds the extent of coverage mandated by statute and regulation. Therefore, we will exercise our discretion and issue a declaratory order to remove any uncertainty.
Section 512 of the Public Utility Code, 66 Pa.C.S. § 512, provides the Commission with extensive authority over motor carrier insurance requirements. That provision provides, in part, that:
The commission may, as to motor carriers, prescribe by regulation or order, such requirements as it may deem necessary for the protection of persons or property of their patrons and the public, including the filing of surety bonds, the carrying of insurance, or the qualifications and conditions under which such carriers may act as self-insurers with respect to such matters. All motor carriers of passengers, whose current liquid assets do not exceed their current liabilities by at least $100,000.00, shall cover each and every vehicle, transporting such passengers, with a public liability insurance policy . . . in such amounts as the commission may prescribe. . . .Pursuant to this broad statutory charge, the Commission promulgated regulations governing motor carrier insurance requirements. 52 Pa. Code Chapter 32. Those regulations require motor carrier insurers to file with the Commission a certificate of insurance to provide for the payment of claims resulting from the operation, maintenance, or use of a motor vehicle in the carrier's authorized service. 52 Pa. Code §§ 32.11, 32.12.1 A motor carrier may not operate without the Commission's approval of the certificate filed by its insurer. Id. The certificate of insurance, commonly known as a Form ''E,'' is in a form prescribed and approved by the Commission. 52 Pa. Code § 32.2(a).2 That Form ''E'' provides, in relevant part:
UNIFORM MOTOR CARRIER BODILY INJURY AND PROPERTY DAMAGE LIABILITY CERTIFICATE OF INSURANCE
(Executed in Triplicate) Filed with (name of Commission)
This is to certify that the (Insurance Company), has issued to (Motor Carrier) a policy of policies of insurance effective from (Date and Time) at the address of the insured stated in said policy or policies and continuing until cancelled as provided herein, which by attachment of the Uniform Motor Carrier Bodily Injury and Property Damage Liability Insurance Endorsement, has or have been amended to provide automobile bodily injury and property damage liability insurance covering the obligations imposed upon such motor carrier by the provisions of the motor carrier law of the State in which the Commission has jurisdiction or regulations promulgated in accordance therewith. (Emphasis added.)By filing the Form ''E,'' an insurer certifies that a policy of insurance has been issued to the motor carrier, which ''by attachment of the uniform motor carrier bodily injury and property damage liability insurance endorsement, has been amended to provide automobile bodily injury and property damage liability insurance covering the obligations imposed upon such motor carrier by the provisions of the motor carrier law . . .'' of Pennsylvania. The ''uniform motor carrier bodily injury and property damages liability insurance endorsement,'' known as a Form ''F,'' provides, in relevant part:
UNIFORM MOTOR CARRIER BODILY INJURY AND PROPERTY DAMAGE LIABILITY INSURANCE ENDORSEMENT It is agreed that:
The certification of the policy, as proof of financial responsibility under the provisions of any State motor carrier law or regulations promulgated by any State commission having jurisdiction with respect thereto, amends the policy to provide insurance for automobile bodily injury and property damage liability in accordance with the provisions of such law or regulations to the extent of the coverage and limits of liability required thereby; provided only that the insured agrees to reimburse the company for any payment made by the company which it would not have been obligated to make under the terms of this policy except by reason of the obligation assumed in making such certification. (Emphasis added.)The Form ''F'' endorsement constitutes an amendment of the underlying insurance policy to provide that coverage shall be in accordance with the coverage required by ''any State motor carrier law or regulations promulgated by any State commission with jurisdiction'' over the motor carrier. Accordingly, by filing the Form ''E'' certification, coupled with the Form ''F'' endorsement, the insurer certifies to the Commission that it is providing coverage in accordance with the law, notwithstanding any potentially contrary terms contained in an individual policy of insurance.
Our statute and regulations clearly require coverage on each and every vehicle used by a motor carrier in its authorized service. 66 Pa.C.S. § 512, 52 Pa. Code §§ 32.11, 32.12. As noted earlier, the Public Utility Code requires coverage for ''each and every vehicle.'' 66 Pa.C.S. § 512. In addition, Commission regulations provide that an insurer must file with the Commission a Form ''E'' to cover bodily injury or property damage ''resulting from the operation, maintenance or use of a motor vehicle in the insured authorized service.'' 52 Pa. Code §§ 32.11, 32.12. Vehicle lists utilized by an insurer and insured as part of the private insurance contract cannot be used to defeat coverage for all vehicles used by a carrier in its service, as required by law.
An insurer's public Form ''E'' filing, coupled with the Form ''F'' endorsement, is a certification that it is providing coverage in accordance with applicable law. Similar to limits of coverage, an insurer may not escape responsibility for payment of valid accident claims on the theory that the governing statute and regulations are directives to the motor carrier, not the insurer. Adopting this rationale would make the insurer's Form ''E'' filing of little value.3 As the Court held in Metro Transportation Company v. North Star Reinsurance Company, 912 F.2d 672 (3rd Cir., 1990), an insurer who files a Form ''E'' with the Commission is responsible to provide coverage mandated by law. Moreover, the Form ''F'' endorsement referenced in the Form ''E'' constitutes a formal amendment to the motor carrier's insurance policy to make it consistent with the requirements of Pennsylvania law. Therefore, we hereby reaffirm our decision in Redfield, finding that exclusionary clauses contained in an insurance policy will not defeat coverage mandated by law.
Finally, in addition to vehicular exclusionary clauses, we must address the remaining issue of driver exclusionary clauses. It is our understanding that coverage is being denied by insurer(s) on the theory that a driver, involved in an accident, does not appear on an approved list maintained by the insurer. Again, we believe that the statute and regulations are clear in requiring coverage for accident claims ''resulting from the operation, maintenance or use of a motor vehicle in the insured authorized service.'' There is no qualification on this requirement that only ''listed'' drivers are covered in the event of an accident. Rather, all losses are covered as long as they occurred in ''the insured authorized service.'' Based on the clear language of the statute and regulations, we find that the Form ''E'' certification, coupled with the Form ''F'' endorsement, defeats any driver exclusionary clause found in an individual insurance policy.
We note that our decision today is consistent with Federal practice involving interstate carriers. Progressive Casualty Insurance Co. v. Hoover, 809 A.2d 353 (Pa. Supreme, 2002) (Pennsylvania Supreme Court held that the interstate commerce endorsement mandates payment for liability regardless of whether the vehicles are scheduled in a policy.); Adams v. Royal Indemnity Co., 99 F.3rd 964 (10th Cir., 1996) (10th Circuit Court of Appeals held that the interstate commerce endorsement modified the underlying insurance policy to provide coverage regardless of whether each motor vehicle is specifically described in the policy.). In addition, our position is consistent with various States which have addressed this matter. Hindel v. State Farm Mut. Ins. Co. of Bloomington, Ill., 97 F.2d 777 (7th Cir., 1938) (7th Circuit Court of Appeals held that the interstate commerce endorsement requires coverage for unlisted vehicles.); Fidelity & Casualty of New York v. Jacks, 165 So. 242 (Supreme Ct. A1., 1936) (Supreme Court of Alabama, in holding coverage is available for an unlisted vehicle, stated that ''It is not for the passenger, boarding a vehicle of such carrier, to inquire whether the particular vehicle so publicly employed has been put into the service in conformity with lawful regulations; nor for a shipper via such carrier to inquire what vehicle of such owner receives and carries his freight; nor for the public to be deprived of the security provided in the bond against the carrier's negligence by reason of another wrongful act of such carrier in putting into service a vehicle in violation of the rules with which he shall comply.''); Ross v. Stephens, 496 S. E.2d 705 (Supreme Ct. Ga., 1998) (Supreme Court of Georgia held that regulation mandated coverage for vehicles not specifically described in the policy.); American National Fire Insurance Company v. Levy, 594 N.Y. S.2d 118 (Supreme Ct., Queen County, N.Y., 1992) (New York Supreme Court, Queens County, held that Form F endorsement amends the insurance policy of the carrier to provide protection for all vehicles operated under the motor carrier's certificate, whether or not the vehicles are listed in the insurance policy.); Thompson v. Amalgamated Cas. Ins. Co., 207 F.2d 214 (U.S. App. D.C. 1953) (D.C. Court of Appeals held endorsement to policy requires coverage in accordance with law, notwithstanding terms of policy, and coverage is extended to drivers not named in policy.).
It is significant to note that those states, from a policy viewpoint, refused to place the risk of loss for a potentially uninsured motor carrier vehicle on the public. See Hindel. Further, those cases noted that an insurer's exposure, by virtue of filing a Form ''E'' certification, is not infinite nor without redress. The certification requires insurance coverage be provided in accordance with the limits established by law.4 Also, an insurer is able to seek reimbursement from an insured for any payments made by the ''company which it would not have been obligated to make under the terms of (the) policy except by reason of the obligation assumed in making such certification.'' Form ''F.''5 To the extent a carrier is not abiding by the terms of its insurance contract, the insurer should take aggressive action to ensure compliance and seek out whatever remedies are available under its agreement with the motor carrier.6 However, the remedy is not to deny claims that are to be covered under the minimum requirements of Pennsylvania law.
Further, for the reasons cited in Redfield, we do not find the holding in Czarnecki v. Delco Cab, Inc., 419 A.2d 139 (Pa. Super., 1980), persuasive or dispositive on the issue of the effect of exclusionary clauses on coverage mandated by law. In Redfield, we stated:
In Czarnecki, the court stated that despite the statutory scheme and its public interest theme, there did not appear to be any intent on the part of the legislature to supersede the express language of the contract of insurance. The court found that the burden of insurance was placed on the common carrier, not the insurer, and in the absence of a clear legislative directive, the court refused to find such a liability on the part of insurers.It is significant that Czarnecki, while briefly discussing the existence of the Form E Certificate, the statute and the regulations, completely failed to discuss the content and import of the Form E Certificate. Czarnecki makes no mention whatsoever of the insurer's statement in a Form E Certificate that ''a policy or policies of insurance . . . has or have been amended to provide automobile bodily injury and property damage liability insurance covering the obligations imposed upon such motor carrier by the provisions of the motor carrier law of the State.''In the case now before the Commission, as in Metro I and Metro II, the Form E Certificate filed by the insurance company indicates that the policy of insurance has been changed to provide for coverage of the carrier's obligations in accordance with the motor carrier law of Pennsylvania and regulations promulgated in accordance therewith. It is the insurance policy, as amended by the endorsement described in the Form E Certificate, which dictates the result here. We need not address the issue of whether our statute, contrary to Czarnecki, automatically serves to amend or read coverage into the policy. (Footnote omitted.) The policy itself, as certified by the insurer here, provided coverage as required by the motor carrier laws of Pennsylvania. That law includes 66 Pa.C.S. § 512 and 52 Pa. Code § 32.11. Metro II. (Emphasis in original.)Also, the Superior Court's recent pronunciation in Lebanon Coach Company v. Carolina Casualty Insurance Company, 675 A.2d 279 (Pa. Super, 1996), is not controlling. In Lebanon Coach, the vehicle involved in the accident was not owned by the operator. The Superior Court held that the expanded coverage required by Commission regulation does not apply to vehicles not owned by the operator that are insured by the vehicle's owner. Further, to the extent that Lebanon Coach affirms Czarnecki, we decline to follow that holding. We note that the Commission was not involved in either the Lebanon Coach or Czarnecki proceeding. Further, it is the interpretation of the Commission's enabling statute and regulations that is critical to the disposition of this case, and the Commission is afforded great deference to its interpretation. Dee Dee Cab Inc. v. Pa. P.U.C., 817 A.2d 393 (Pa. Cmwlth., 2003), Allocatur Denied, 836 A.2d 123 Pa. Supreme, 2003).
Finally, we wish to address several specific comments submitted. First, IFP and PCIAA comment that the Commission should limit its order to taxicab coverage, exempting other carrier groups. We reject this comment. The sound legal premise underlying the result today, and in Redfield, is equally applicable to all carrier types. There is no reason to differentiate between taxicabs and other carriers on this issue.7
Also, Prime comments that the current procedure be modified so that Form E's are vehicle specific, only covering a particular vehicle identified on the form submitted for filing to the Commission. We reject this comment. The current practice is to have an insurer file a Form E certification with the Commission certifying that the motor carrier's entire operation is insured in accordance with law. To adopt Prime's comment would defeat the very security that the Form E was designed to provide. If we were to adopt a vehicle specific Form E, the public would not know, on any particular trip, if the vehicle utilized was actually identified in the Form E and therefore insured, a result we reject.
Finally, Prime comments that the Commission does not have the authority to regulate the insurance industry or insurers, which it allegedly is doing by virtue of interpreting required coverage. We reject this comment. The Commission is authorized to prescribe insurance requirements for motor carriers. Requiring motor carriers to carry insurance on all vehicles and drivers providing public utility service is, without question, within the Commission's authority. Requiring Form E certifications from an insurer certifying that a carrier has procured insurance in accordance with statutory and regulatory requirements is also, without question, within the Commission's authority. As explained herein, the Form ''E'' certifies that the insurance company is providing coverage in accordance with the requirements of Pennsylvania law and the referenced Form ''F'' is a formal amendment to the insurance policy to make it conform to Pennsylvania law. We agree with PPA's observation that
. . . the Form E filed by the insurer on behalf of the motor carrier trumps the insurance policy between those parties when in comes to the responsibility to the public of the insurer to meet the obligations set forth in our standards. Otherwise, the Form Es are worthless and the public is unprotected.PPA Comments at 2. Prime's argument to the contrary is without merit.
For the foregoing reasons, we hereby reaffirm our decision in Redfield. Exclusionary clauses based on vehicle and driver lists, found in individual insurance policies issued to motor carriers, do not relieve an insurer, which has filed a Form ''E'' certification with the Commission, from providing coverage in the event of an accident.
Therfore, It Is Ordered That:
1. A Declaratory Order is hereby issued.
2. Exclusionary clauses, including those based on vehicle and driver lists, found in individual insurance policies issued to motor carriers, do not relieve an insurer, which has filed a Form ''E'' certification with the Commission, from providing coverage in the event of an accident.
3. This order shall be served on all commentators and on all motor carrier insurers actively providing coverage in Pennsylvania.
4. This order shall be published in the Pennsylvania Bulletin.
5. This order is final upon entry.
______
1 These provisions provide:
§ 32.11. Passenger carrier insurance.
(a) A common carrier or contract carrier of passengers may not engage in intrastate commerce and a certificate or permit will not be issued, or remain in force, except as provided in § 32.15 (relating to applications to self-insure) until there has been filed with and approved by the Commission a certificate of insurance by an insurer authorized to do business in this Commonwealth, to provide for the payment of valid accident claims against the insured for bodily injury to or the death of a person, or the loss of or damage to property of others resulting from the operation, maintenance or use of a motor vehicle in the insured authorized service.
(b) The liability insurance maintained by a common or contract carrier of passengers on each motor vehicle capable of transporting fewer than 16 passengers shall be in an amount not less than $35,000 to cover liability for bodily injury, death or property damage incurred in an accident arising from authorized service. The $35,000 minimum coverage is split coverage in the amounts of $15,000 bodily injury per person, $30,000 bodily injury per accident and $5,000 property damage per accident. This coverage shall include first party medical benefits in the amount of $25,000 and first party wage loss benefits in the amount of $10,000 for passengers and pedestrians. Except as to the required amount of coverage, these benefits shall conform to 75 Pa.C.S. §§ 1701--1799.7 (relating to Motor Vehicle Financial Responsibility Law). First party coverage of the driver of certificated vehicles shall meet the requirements of 75 Pa.C.S. § 1711 (relating to required benefits).
(c) The liability insurance maintained by a common or contract carrier of passengers on each motor vehicle capable of transporting 16 to 28 passengers shall be in an amount not less than $1 million to cover liability for bodily injury, death or property damage incurred in an accident arising from authorized service. Except as to the required amount of liability coverage, this coverage shall meet the requirements of 75 Pa.C.S. §§ 1701--1799.7.
(d) The liability insurance maintained by a common or contract carrier of passengers on each motor vehicle capable of transporting more than 28 passengers shall be in an amount not less than $5 million to cover liability for bodily injury, death or property damage incurred in an accident arising from authorized service. Except as to the required amount of liability coverage, this coverage shall meet the requirements of 75 Pa.C.S. §§ 1701--1799.7.
(e) The limits in subsections (b)--(d) do not include the insurance of cargo.
§ 32.12. Property carrier insurance.
(a) No common carrier or contract carrier of property may engage in intrastate commerce and no certificate will be issued, or remain in force, except as provided in § 32.15 (relating to applications to self-insure), until there has been filed with and approved by the Commission, a certificate of insurance by an insurer authorized to do business in this Commonwealth, to provide for the payment of valid accident claims against the insured for bodily injury to or the death of persons, or the loss or damage to property of others resulting from the operation, maintenance or use of a motor vehicle in the insured authorized service. The liability of the insurance company on each motor vehicle operated in common or contract carrier service shall be in amounts not less than $300,000 per accident.
(b) The limitations in subsection (a) do not include insurance to cover damage to cargo.
(c) Insurance coverage of motor carriers of property shall meet the requirements of 75 Pa.C.S. §§ 1701--1798 (relating to Motor Vehicle Financial Responsibility Law).2 This provision provides:
§ 32.2. Insurance forms and procedures.
(a) Forms for certificates of insurance and others. Endorsements for policies of insurance and surety bonds, certificates of insurance, applications to qualify as a self-insurer, or for approval of other securities or agreements, and notices of cancellation shall be in the form prescribed and approved by the Commission.3 The PPA commented that the ''Form E filed by the insurer on behalf of the motor carrier trumps the insurance policy between those parties when it comes to the responsibility to the public of the insurer to meet the obligations set forth in our standards. Otherwise, the Form Es are worthless and the public is unprotected.''
4 For example, the Commission requires passenger carriers maintain $35,000 split coverage for bodily injury, death, or property damage. Coverage would only be required to the extent of these limits.
5 This would appear to refute Prime's comment that an insurer would be saddled with claims arising from the insured's wrongful conduct.
6 In extreme situations, the only remedy may be cancellation of the insurance policy by filing a Form ''K'' with the Commission. The Form ''K'' constitutes formal notice to the Commission that the insurance policy is cancelled, effective 30 days from the date the notice is actually received by the Commission. 52 Pa. Code § 32.2(e).
7 We note that our decision is consistent with interstate insurance requirements for all carrier types.
JAMES J. MCNULTY,
Secretary
[Pa.B. Doc. No. 05-1157. Filed for public inspection June 10, 2005, 9:00 a.m.]
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