The Motor Carrier of Property Permit Act (the “MCPPA”) sets forth insurance requirements for commercial motor carriers in California. There is a dearth of legal authority interpreting the MCPPA, which was adopted in 1996. Although there is case law interpreting analogous provisions under the California Public Utilities Code, the predecessor to the MCPPA, it is unclear whether those cases are still good law. Recently, however, California courts have clarified the interpretation and application of the MCPPA in two respects.
In Allied Premier Ins. v. United Fin. Cas. Co., 15 Cal. 5th 20 (2023), the California Supreme Court held that an uncancelled certificate of insurance that remains on file with the DMV does not cause the corresponding insurance policy to remain in effect indefinitely regardless of its stated expiration date. The court distinguished Transamerica Ins. Co. v. Tab Transportation, Inc., 12 Cal.4th 389 (1995) on the ground that it had interpreted the predecessor statute, not the MCPPA. Id. at 29. The court left open whether an uncancelled certificate of insurance imposed on the insurer something akin to a surety obligation to members of the public and the scope of any such obligation.
Under Allied, it is not clear what an insurer’s obligations are if it does not properly cancel a certificate of insurance, and the policy does not expire by its own terms. This is particularly true when two policies are involved, and one of them lists the vehicle involved in the accident, and the other one does not. Before Allied, at least one unpublished California case held that the policy that lists the vehicle would be primary, and the policy that does not would be excess. See Williamsburg Nat. Ins. Co. v. Progressive Cas. Ins. Co., 2009 WL 2581266, at *10 (Cal. Ct. App. Aug. 21, 2009). Another case, interpreting the predecessor statute, held that an uncancelled certificate of insurance does not operate as a surety -- i.e., it is not merely a backup triggered when no other insurance policy covers the loss. See Condor Ins. Co. v. Williamsburg Nat. Ins. Co., 49 Cal. App. 4th 554, 564 (1996). The Allied court said that these matters could be clarified by “further litigation and/or legislative” action. Allied Premier Ins., 15 Cal. 5th at 35.
In Infinity Select Ins. Co. v. Superior Court, 94 Cal.App.5th 190 (2023), California’s Fifth District Court of Appeal clarified that the responsibility to maintain adequate insurance under the MCPPA rests with the motor carrier, not the insurance company. The Infinity court held that unless an insurer files a certificate of insurance with the DMV certifying that the policy complies with the MCPPA’s financial responsibility requirements, it has no obligation to provide the minimum liability coverage required under the MCPPA.
In Infinity, a motor carrier of property applied for an automobile policy from Infinity. The insurance application requested liability coverage with limits of $25,000 per person and $50,000 per accident, and indicated that Infinity did not need to file a certificate of insurance with the DMV. Infinity issued the policy with the requested coverage limits.
Days later, the insured vehicle caused an accident that killed one person and injured several others (the LeDucs). The LeDucs sued the motor carrier and later made a statutory offer to settle for $750,000. Infinity rejected the offer because its policy provided only $50,000 in per accident liability coverage. The LeDucs obtained a multi-million dollar excess judgment against Infinity’s insureds. The insureds then assigned their rights to the LeDucs, who later sued Infinity for, among other things, the full amount of the excess judgment.
The LeDucs argued that Infinity’s rejection of the $750,000 offer was unreasonable because (1) under the MCPPA, any policy issued to a motor carrier of property must provide at least $750,000 in liability coverage and (2) the Infinity policy was deemed as a matter of law to provide that amount of coverage. Infinity argued that it was not required to provide $750,000 in liability coverage because it had not filed a certificate of insurance with the DMV, certifying that its policy complied with the MCPPA. The trial court agreed with the LeDucs and ruled that Infinity’s policy limit was deemed as a matter of law to be $750,000. Infinity petitioned the Court of Appeal for a peremptory writ.
The Court of Appeal issued the peremptory writ and reversed the trial court’s ruling in a published decision. After conducting an exhaustive analysis of the MCPPA, the Court held that Infinity was permitted to issue a policy with a liability limit below $750,000. The Court reasoned that the MCPPA does not impose any requirements on an insurer that does not certify that its policy complies with the MCPPA’s financial responsibility requirements. In so ruling, the Court also rejected the LeDucs’ argument that Infinity had a duty to advise the motor carrier applicant of the insurance requirements necessary for a motor carrier of property permit.
In sum, under Allied, if an insurer fails to properly cancel a certificate of insurance and the policy remains in effect, it is not entirely clear when and how much coverage an insurer is required to provide pursuant to the MCPPA. One thing, however, is now clear: if an insurance company does not certify to the DMV that its policy complies with the MCPPA’s financial responsibility requirements, it can issue a policy with a liability limit below the amount required by the MCPPA.