FMCSA insurance requirements for private carriers

What counts as a private carrier

FMCSA describes private carriers as carriers that transport their own cargo, and lists them among the businesses that do not need operating authority, the MC number trucking companies apply for. Think of a contractor moving its own excavator between job sites, a landscaper hauling its own stone or a distributor delivering products it owns.

A for-hire carrier is the opposite. FMCSA defines a motor carrier of property as one that transports regulated commodities for the general public in exchange for payment. Registration is based on self-classification, so it is up to you to describe your operation accurately when you register.

Federal insurance rules for private carriers at a glance

The federal minimums sit in 49 CFR Part 387. Under 387.3, they apply to for-hire carriers hauling property in interstate or foreign commerce, and to any motor carrier, for-hire or private, hauling hazardous materials, substances or wastes in interstate, foreign or intrastate commerce. Vehicles under 10,001 pounds gross vehicle weight rating are exempt unless they carry the most dangerous materials, and non-bulk hazmat moved within one state is exempt except highway route controlled quantities of radioactive material.

Private passenger operations are outside the rules too: the passenger subpart, 387.27, applies only to for-hire carriers of passengers.

Private hazmat carriers: proof on file, not a filing

Because private carriers don’t hold operating authority, they don’t file insurance with FMCSA the way for-hire carriers do. Instead, 49 CFR 387.7(d) requires proof kept at your principal place of business: an MCS-90 endorsement from your insurer, an MCS-82 surety bond or an FMCSA order allowing you to self-insure. Under 387.7(e), that proof is public information you must produce on reasonable request. Carriers based outside North America must also file it with FMCSA.

The coverage has to stay in force continuously. Under 387.7(b), either you or the insurer can cancel only by giving the other 35 days’ written notice. Section 387.11 also limits which insurers qualify: generally one authorized in each state you operate in, or one authorized in your home state that designates an agent for legal papers in the others. Eligible surplus lines insurers can also qualify.

Alkeme notes that private carriers of non-hazardous goods generally don’t need the MCS-90 at all, while private hazmat carriers do. If you add hazmat work, even occasionally, have the endorsement added before the first load.

You still need a USDOT number and state compliance

Falling outside the federal insurance minimum is not an exemption from FMCSA. The agency says companies operating commercial vehicles that haul cargo in interstate commerce must register and have a USDOT number, and intrastate hazmat carriers hauling loads that need a safety permit must register too. FMCSA separates safety registration (the USDOT number) from operating authority (the MC number); a private carrier usually needs the first but not the second.

State law fills the insurance gap. An FMCSA-commissioned study, report FMCSA-PSV-07-001, confirmed there is no federal financial responsibility requirement for private carriers of non-hazardous property and noted they may be subject to state insurance requirements. Its state survey found wide variation: some states, including Colorado, Michigan, Tennessee and Virginia, applied $750,000 to private property carriers, while many had no specific rule. That survey is from the mid-2000s, so confirm your state’s current rule with its DMV or transportation agency.

The same study explains why the federal rule was never extended. Congress asked FMCSA, in Section 4120 of SAFETEA-LU, to assess applying the for-hire minimums to private carriers, and the study estimated that costs exceeded benefits in 26 of 27 scenarios.

When a private carrier falls under for-hire rules

Private status depends on what you haul and for whom, not on the truck. These changes usually bring federal requirements into play:

• Hauling someone else’s goods across state lines for pay, including backhauls to fill an empty truck: you are for-hire and need operating authority, and FMCSA requires proof of liability coverage on file before granting it — $750,000 for trucks of 10,001 pounds or more.
• Adding hazardous materials: Part 387 applies to private carriers too, including bulk loads that never leave your state.
• Hauling only exempt commodities for pay: FMCSA says no operating authority is needed, but 387.3 still applies the $750,000 minimum to for-hire interstate property carriage.
• Carrying passengers for pay: for-hire passenger carriers face $1,500,000 for vehicles seating 15 or fewer and $5,000,000 for 16 or more, as Alkeme summarizes.

How to insure a private fleet without overpaying

Without a federal number to hit, your limit is set by your state, your lender and your contracts. FreightWaves notes that state insurance laws, lenders, brokers and shippers may still require coverage even when FMCSA authority rules don’t apply.

• Get your state’s current minimum for your vehicle weight class from the DMV or transportation agency, in writing.
• Read customer, landlord and general contractor contracts for auto liability limits and endorsements before you pick a limit.
• Price the total limit two ways: a higher auto limit, or a lower one with an umbrella above it.
• Describe your operation accurately. Insurers price private and for-hire trucking differently, and a misdescribed operation can cause trouble at claim time.
• If you haul hazmat even occasionally, confirm the MCS-90 is on the policy and keep a copy at your main office.
• Compare several insurers. A broker such as Florin can compare commercial auto quotes for a private fleet.