Brian J Riker
April 5, 2020
Downsizing, reduction in force or just plain survival mode. What ever you call it, most fleets are facing several hard choices to make due to the COVID-19 crisis around the world. With many transporters seeing 70-90% reductions in volume due to lower than usual traffic volumes (plant closures, reduced auction hours, dealers closed) income generation and cash preservation have become priority number one.
It is tempting to simply park surplus trucks to save cash. Many fleets in many industries are doing this so that they can keep paying their staff, realizing it will be difficult to rehire trained operators once the economy returns, and it will return. While I agree this can save some fixed costs it must be done properly.
Properly licensed motor carriers have some form of operating authority, whether issued by a state agency or the US DOT. As such there are minimum insurance requirements, even for parked or out of service equipment. I will speak to the Federal regulations since this article is being published by the national association and most fleets (except private carriers) do have active federal motor carrier authority as part of their normal operations.
Any motor carrier with a US DOT and MC number (operating authority), are required to have on file with the Federal Motor Carrier Safety Administration proof of active insurance. This is done by your insurance agent filing form MCS-90 which binds your insurance carrier to cover ANY vehicle owned or operated by your company. This required language makes the insurance company liable for covering public liability for these vehicles, even if you didn’t tell them it was on the road or someone was using your DOT number without the insurance company being aware of it.
Because the specific vehicle does not need to be declared to be covered by the MCS-90 most insurance companies will not allow motor carriers to simply park and take out of service a vehicle that is not being used. They will still require you to make insurance premium payments on surplus vehicles until you have proof they were sold, transferred or otherwise permanently taken out of service due to being wrecked, destroyed or dismantled.
Before simply taking your license plates off a truck and parking it out back be sure to check with your insurance agent to make sure you will see a premium reduction immediately. Given commercial insurance is usually pre-paid you may not see any savings until the next policy renewal period, which by that time hopefully we are all back to normal.
Other insurance considerations include financed vehicles. Most banks will still require insurance on financed vehicles to protect their interest, and if you fail to provide coverage they will place it on the vehicle themselves at a much higher cost than if you provided it, and could even call the loan due in full making you pay the truck off or face repossession.
Vehicles parked in your lot without insurance may not be covered by your other liability policies either, making you fully responsible for any loss from fire, theft or vandalism. Losses that usually would have been covered by the motor vehicle policy on that specific vehicle.
Lastly, state motor vehicle agencies require insurance on commercial vehicles to maintain registration credentials. Failure to have proper insurance without surrendering your plates is criminal and can lead to severe penalties. Additionally, many states do not make refunds for unused portions of commercial vehicle registrations, meaning if you surrender a plate you will not get a refund and when it is time to place that vehicle back in service you will pay a new full year fee, maybe even additional processing fees, to get a new plate for the vehicle.
So, in conclusion, while we all need to tighten our belts and cut costs where possible parking surplus trucks and taking the insurance off them may not be a practical solution.
Disclaimer: Any information or suggestions that are provided on this website are intended to lend technical knowledge and support to our members. Laws, regulations and best practices change, and the observations and suggestions made today may not apply to laws, regulations or best practices as they may be in the future. Any recommendations made by Independent Auto Transporters Alliance staff are offered in strictly an advisory capacity and are not to be construed as legal advice. Recipients seeking legal advice should consult with legal counsel. Recipients seeking accounting advice should consult with an account. Independent Auto Transporters Alliance (IATA) PO BOX 119 East Syracuse, NY 13057