Federal Register /-Vol. 49, No. 128 / Monday, July 2, 1984 / Rules and Regulations

DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

49 CFR Part 387

[BMCS Docket No. MC-94-2; Amdt. No. 83-8]

Minimum Levels of FinancialResponsibility for Motor Carriers ofProperty; Extension of ReducedLevels

AGENCY: Federal HighwayAdministration (FHWA), DOT.ACTION: Final rule.

SUMMARY: This emergency regulationamends the existing regulationsconcerning the nummum levels offinancial responsibility for motorcarriers of property by extending theeffective date for reduced liability limitsfrom July 1, 1984 to January 1, 1985 asallowed by statute. This action is basedon a review of comments received anddata available which indicate that thecurrent levels are sufficient to protectthe public for an additional six monthperiod. This six month extension willhelp maintain stability in both theinsurance and motor carrier industriesand allow the insurance industryadequate time to ensure that their motorcarrier clients have sufficient financialresponsibility coverage by the effectivedate of the mandated higher levels.EFFECTIVE DATE: July 1,1984.FOR FURTHER INFORMATION CONTACT:.Mr. Neill L. Thomas, Bureau of MotorCarrier Safety, (202] 426-9767" or Mrs.Kathleen S. Markman, Office of theChief Counsel, (202) 426-0346, FederalHighway Administration, 400 SeventhStreet, SW., Washington, D.C. 0590.Office hours are from 7:45 a.m. to 4:152p.m. ET, Monday through Friday.SUPPLEMENTARY INFORMATION: OnJanuary 6, 1983, the President signed intolaw the Surface TransportationAssistance Act of 1982 (Pub. L. 97-424,96 Stat. 2097) (STAA of 1982). Section406(a) of the STAA of 1982 amendsSection 30 of the Motor Carrier Act of1980 (Pub. L. 96-296, 94 Stat. 820) (MCA)by allowing the Secretary to extend the"phase-m period" for the reducedminimum levels of financialresponsibility from 2 years to 3 years.

Section 30 of the MCA sets forthminimum levels of financialresponsibility which must be maintainedby motor carriers of property. The MCAalso gave the Secretary the authority toreduce those levels, by regulation, for upto a 2-year "phase-m period" providedthe reduced levels would not adverselyaffect public safety and would prevent a

serious disruption in transportationservice.

In the final rule implementing theprovisions of Section 30 of the MCA (46FR 30982, June 11, 1981) as set forth in 49CFR Part 387 the Secretary exercisedhis authority by reducing the minimumlevels to the lowest levels allowed bythe MCA for the full 2-year "phase-inperiod." This decision was based oncomments to the docket (MC-94)received during the rulemaking processas well as on the findings contained inthe regulatory evaluation/regulatoryflexibility analysis prepared on thesubject.

Further, in a Report to Congressrequired by Section 30 of the MCA, theSecretary recommended an amendmentto the MCA which would allow theminimum levels of financialresponsibility established by theSecretary to-remam in force after June30,1983, and permit the Secretarythereafter to initiate rulemaking relativeto requiring different levels of financialresponsibility as the needs of publicsafety dictate. Such action would haveallowed the Secretary to obtain current,valid, substantive information. Fromthis, reasonable decisions could havebeen made that would have provided,adequate protection for the public.

-Further, such action would not haveadversely affected either the motorcarrier or insurance industries. Futurelimits would have been based on apublic record compiled according torulemaking procedures.

The amendment contained in Section406 of the STAA of 1982 partiallyresponds to the Secretary'srecommendation in the Report toCongress. While the amendment doesnot fully grant the Secretarydiscretionary authority to establishappropriate levels of-financialresponsibility, it does extend theallowable "phase-rn period" from 2years to 3V years.

In a notice of proposed rulemaking(NPRM) issued on April 11, 1983 (48 FR15499), the FHWA requested publiccomment on a proposal to amend theregulations by revising the Schedule ofLimits table located in 49 CFR 387.9 and387.15 to reflect the additional 18-month"phase-m period" permitted by Section406 of the STAA of 1982. A substantialamount of data was submitted from boththe commenters who supported theextension as well as from those whoopposed it. Due to the time constraintson that rulemaking, there was notsufficient, time to analyze fully the dataprior to the July 1, 1983 effective date.The FHWA determined that more timewas needed for the review of the issueswhich revolved around the possible 18-

month extension of the "phase-inperiod," and that a 12-month extensionof the reduced levels was sufficient timefor the DOT and other governmentaloffices to review the issues at hand.Based on the information offered inresponse to the NPRM, it wasdetermined that a 12-month extensionwould not adversely affect public safety,and would prevent a serious disruptionin both the insurance and motor carrierindustries. Further, it was determinedthat the absence of a final ruleextending the "phase-in.period" beyondJuly 1, 1983 would possibly inflictunnecessary turmoil on both industries.Subsequently, on June 28,1983 (48 FR29698), the "phase-in period" wasextended until July 1, 1984.

Since the decision to extend the"phase-in period" for 12 months, theFHWA has received no new informationthat would alter the decision to extendthat period a full 18 months. Also, wehave determined that there are no levelsof financial responsibility higher thanthese reduced levels that would Increasepublic safety while not seriouslydisrupting essential transportationservice. For these reasons and the factthat the market conditions existing Inthe insurance industry are basically thesame as they were a year ago, theFHWA is extending the "phase-inperiod" for the reduced levels offinancial responsibility for an additional6 months until January 1, 1985. Thisaction will also allow the insuranceindustry adequate time to ensure thattheirmotor carrier clients havesufficient financial responsibilitycoverage and the required endorsementsin place by the effective date of themandated higher levels.

Summary of CommentsApproximately 46 comments were

received in response to the NPRM ofApril 11, 1983 from a variety ofrespondents as shown below:

1. Motor carriers;2. Associations representing motor

carriers;3. Insurance companies, agencies and

brokers; and4. Associations representing insurance

companies and agents.

Comments Opposed to Proposal

A total of 11 commenters opposed theproposed extension of the "phase-inperiod" The most extensive commentsreceived from this group were those ofthe American Trucking Associations,Inc. (ATA), whose position wassupported in the comments of the SteelCarriers Conference and the CommonCarrier Conference-Irregular Route.

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Federal Register / Vol. 49, No. 128 / Monday, July 2. 1984 / Rules and- Regulations

Both Conferences-are members of theATA.

The-ATA submitted a copy of'"TheATA'!sComments on the Report of theSecretary ofTransportation to theUnited States Congress Pursuant toSection 30 PublicLaw-96-296 MotorCarrier-Act of 1980" (DOT Report toCongress), and requested. that thisdocument be considered as part of itscomments in this rulemaking.

Much of the documentation containedin the'ATA's comments revolves aroundthe legislative authority given theSecretary of Transportation to reducethe levels provided such reduction wiltnot adversely affect public safety andwill, prevent a serious disruption intransportation service. The ATAcontends that the DOT has not satisfiedthese. two criteria in its considerationand'analysis of the proposed rule.

Throughout their comments.,the ATAquotes selected statements made inDOT's "Report to Co-ngress" to supporttheir position for higher limits andasserts that the FHWA's belief that thecurrent limits are sufficient to satisfy theliability claims arising.from the majorityof accidents reported is "a myopic viewwhich distorts the readily apparentintent of Congress to protect the publicfrom major loss accidents and not justfrom the 'malority' of minor losses."They offer documentation in theircomments-which reflect an increase incosts associated with motor vehicleaccidents. The rising costs includeclaiis for medical expenses andproperty damage, and increases in juryawards. The ATA also gave examples ofthe increasing frequency of accidentsifivolVing extraordinary costs. Infocusing on "worst case" accidents, theydescribe 5 accidents which have

,occurred over the past 8 years whichresulted in claims higher than the

nmmum levels required by the currentregulation.

The ATA stated their belief that theintent of Congress to provide public.protection through financialresponsibility requirements "includesadequate protection throughreimbursement for loss once an accidenttakes place," and asserts that theexisting "phase-in" levels are notadequate protection.

The comments of Agway, Inc. alsoreflect the belief that the higher limitswilLoffer better protection of the public.In their comments, Agway states "Giventoday's costs and environment in legalmatters, Agway does not believe thatthe present minimum limits aresuff'cient to provide adequate protectionto shippers and/or the public."

Other justification for increasing theliability'limits required, based on safety

for the public, were presented. Forexample. PPG Industries oppose theproposal to extend the "phase-in period"because "The Motor Carrier Act of 193Wsignificantly relaxed entry standardswhich in turn have created seriousproblems for the users of motor carriertransportation. The number of camerentering the field has increaseddramatically as a result of the easing ofthese standards. At the same time. theInterstate Commerce Commissionmakes no provision for a new carrier toestablish evidence of financial fitness."The PPG Industries believes "Theincrease in liability insurance coverageprovides an additional incentive for themotor carriers to focus on the safetyaspects of highway transportation. Thiswill tend to improve safety performanceas unsafe carriers will incur higherpremiums than the carriers with goodsafety records."

The comments of Truck Transport.Inc. express similar concerns. Theyexpress doubt that the higher levels willcause a serious disruption in _transportation. Further, they contend "Ifthere is a disruption, it will result fromincreasing numbers of inadequatelyfinanced carriers entering the regulatedindustry and incapable of obtaininginsurance protection at the minimumlevels believed by Congress to beacceptable."

Several of the commenters whoopposed the proposal took exception tothe FHWA's justification for the .extension of the "phase-m period"based on economic conditions.

In its NPRM the FHWA stated that"the proposed extension would preventa serious disruption in thetransportation industry, since thecommercial motor carrier industry iscurrently undergoing a period offinancial difficulty and constriction. Theextension of the 'phase-m period' willhelp stabilize the overhead of motorcarriers through the economic recoveryperiod."

The Common Carrier Conference-Irregular Route responded to thisjustification by stating "while costsaving of any kind is embraced in thecurrent depressed state of the truckingindustry, we seriously question whetherthe proposed lower insurance level is atrue saving-m the public interesL"

The Steel Carriers Conference offereda similar opinion, "It is not necessarilytrue that increased insurance levels willput an economic burden on motorcarriers. If a [motor] carrier has nomajor accidents resulting in losses inexcess of the current limits, then theincreased premiums entailed inincreased coverage will be a slighteconomic burden. However if it does

have a major accident resultingmclaims in excess of currently requiredcoverage, then this could result in aheavy-if not disastrous-economic.burden on the carrier." They go on toexplain their opinion that a motorcarrier who "cannot afford the coverageproposed to be m effect on July 1. 1983 isnot a responsible motor carner" andthat any such carrier involved in artaccident and held liable for a judgmentin excess of the current limits wouldplace a burden on the public.

Another commenter. the Husky OilCo., agreed that the higher limits larein,no way excessive when viewedin lightof the risk involved:"'

The ATA is of the opinion thatincreased insurance premium costs arepassed on to the consumer and wouldtherefore not impose economic hardship,on motor carriers. They continue; "If atrucking company goes bankrupt and itsaccident costs are not paid by insurancethose costs will be spread among thegeneral public through increased costsof truck service, merchandise, andgeneral insurance protection purchasedby the motoring public."

The ATA also states, "DOT's concemrnlike the trucking mdustry's should bewith the continued successful andbusinesslike operation of small andminority carriers and not just ease ofentry. It is the uppper limits whichwould represent that legitimatefarsighted concern and not the lowerlimits. Upper limits should adequatelycushion small and minority motorcarriers from the bankrupting potentialof extraordinarily costly accidents inwhich they could become involved:'

Another consideration given mi thecomments of those opposed to theproposal responded to the FHIWA'sconcern for any undue economicburdenwhich may be placed on the insuranceindustry as a result of increased levels.The Steel Carriers Conference stated.'While it is true that the FHWAproposal might reduce the directeconomic burden on motor carriers tosome extent, it is difficult to see howincreased insurance coverage vouldincrease the economic burden oninsurance companies .increasedcoverage invariably results in increasedpremiums. The insurance industry iswell able to protect itself and project itspotential losses and adjustits premiums.upwards accordingly."

Another group of commients, whichprimarily focus on the proposal as itaffects transporters of hazardousmaterals, were received fromntheUational Tank Truck Carriers. Inc.(NTTC), the Hazardous MaterialsAdvisory Council (-MAC). and the _.L

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DuPont Co. This group unammously andadamantly opposes the proposedextension.

The NTrC, a national tradeassociation which represents over 200motor carriers of commodities in bulk,state that "obvious and blatant factsexist which mandate more responsibleaction on the part of the Administratorwhich would result m the imposition ofmimmum levels of financialresponsibility in coverage amounts ashigh or higher than those set byCongress in Section 30 of the MCA of80."

They proceed to list the facts theywant to have considered. These includetheir belief that "no evidence exists inthe docket or elsewhere that increasinginsurance and/or bonding levels fortank truck carriers of all hazardousmaterials would work a hardship on theinsurance industry." Other pointsoffered to illustrate their desire toincrease the levels of liability requiredfor bulk transporters of hazardousmaterials include their objection to thediscretion used by the FHWA in itsdetermination of hazardous commoditydefinitions for the regulations inquestion.

The NTTC and the HMAC, like theATA, point out the "worst case"accidents which have occurred whereintotal liability of the carrier was far mexcess of the current limits. They statethat the DOT statistics do not accuratelyreflect the frequency or severity ofaccidents, particularly those involvinghazardous commodities. To supporttheir position the NTTC included a listof accidents involving hazardousmaterials which have occurred over thepast 8 years which, they state, resultedm claims "far in excess of the DOT'scurrent limits." The NTTC did notinclude the actual costs of theseaccidents.

Finally, the NTTC accuses the FHWAof giving a cost edge to the irresponsibleoperator. They state, "The regulationsand the proposal do nothing more thancreate and foster competitive inequitiesin the tank truck sector of the truckingindustry." In conclusion, they ask thatthe FHWA "utilize that regulatoryvehicle to increase the present levels ofmandatory evidence of financialresponsibility to at least $5 millioninsurance and/or bonding for the bulktransportation of all hazardousmaterials (as defined by theDepartment) for public liability, propertydamage and environmental restorationto be effective 1 October 1983; and thatthe Schedule of Limits be amended toincrease applicable limits to $8 millionby 1 January 1985." This request is,

however, beyond the scope of thisrulemaking action.

Supportive CommentsThe majority of comments received in

response to the docket favored theproposal to extend the "phase-inperiod." Of the 34 comments received insupport of the proposal, 21 weresubmitted by insurance companies,agencies or associations. Among thisgroup there was total agreement that thepublic's safety would not be jeopardizedby the extension of the "phase-in" limitsfor an additional period of time.

The American Insurance Association(AIA) provided extensivedocumentation to support their belief-that the current limits are sufficient toprovide "protection" to the public. Intheir comments, the AIA presented dataprovided them by the Insurance ServiceOffice (ISO) which is the statisticalagent representing 75% of the totalcommercial automobile market. The ISOdata reflect commercial automobilelosses (which include public autos,garage vehicles and trucks) incurredfrom January 1, 1977 through September30, 1981; and reveals 1,908,861 paidlosses. Eight hundred thirty-nine of thattotal were settled for amounts between$250,000 and $500,000. Only 157 losseswere settled for $500,000 or more. Thetotal of all losses of over $250,000 forthis 4 year period represented far lessthan 1% of the total (four-onehundredths of one percent were settledfor more than $250,000 and one-onehundredth of one percent were settledfor more than $500,000).

Many other comments offered by theinsurance industry, based on theirexperience as underwriters and/orproviders of insurance, reflect the beliefthat the current limits are sufficient.Those offering their expertise throughcomments to the docket include the lawfirm of Le Boeuf, Lamb, Leiby andMacRae on behalf of Lloyds of London,The Southern Farm Bureau CasualtyInsurance Co., the Continental WesternInsurance Co., The National Associationof Casualty and Surety Agents, and theNational Association of IndependentInsurers, to name a few.

Other documentation was presentedto substantiate the sufficiency of the

-current limits by the Auto DriveawayCo. (ADC). The ADC, which they say,transported approximately 125,000vehicles (including heavy vehicles)during the 3 year period from 1980through 1982, offered their claimsexperience for that period. The datapresented the highest, lowest andaverage amount paid out per singleincident for each of the 3 years as wellas the total amount for each year. The

total amount paid by ADC, for all threeyears combined, totaled less than$500,000. The ADC commented, "Thesefigures indicate that the reasonablelevels of payment are well within theceilings currently in effect. Ourpersonnel have found that claimantshave increasing tendency to seek thehighest payment amount available fromexisting insurance. As levels of requiredliability coverage have been raised, wehave seen a corresponding increase inthe amount requested In damages.Following an intelligent review,adequate yet reasonable sums havebeen found to meet the actual needs bfthe claimant and parties involved, Anincrease in the required ceilling ofinsurance levels will serve only toincrease motor carrier's premium costsand at the same time, the motor carrier'slitigation costs required to reduceclaimant's initial requests forunreasonable damages."

A majority of the comments receivedin favor of the proposal also indicatedthe belief that the proposed extensionwill be beneficial to both the truckingand insurance industries. This beliefwas offered by the insurance industry aswell as by many small motor carriers,The Alliance of American Insurers,whose companies write approximately13 percent of the commercial automobilemarket nationwide, and the NationalAssociation of Casualty and SuretyAgents (NACSA), who represents theleading domestic commercial property/casualty insurance agencies andbrokerage firms, were among themajority of commenters m its group. TheNACSA points out in their commentsthe results of a survey they conductedinvolving 131 of its members. Theresponses, they say, "indicate that thelarger truck operators, who have alreadydemonstrated a need to purchase higherlevels of insurance to cover theirliability exposures, are able to and dopurchase the higher levels of Insurancecoverage; regardless of the Act's currentSection 30 minimum financialresponsibility requirements."

Conversely, the NACSA continues"the survey results show that increasingthe minimum levels for small to mediumoperators would not enhance motorvehicle safety as was intendedoriginally by the Act; rather, it wouldonly add to the heavy financial burdensof an economically strained Industry."

Similarly, the AIA asserts "Whilemany of the large, established carriersmay be able to offset these increasedcosts through additional revenues, thenew carrier may not have this luxury.Some mandatory costs, such as fuel,

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licenses andttaxes, cannot bedecreased."

The Freman'fEund InsuranceCompanies submitted comments im.supportof those submitted by the AIA.In.their comments, .they contend that"failing to extend. the currentmimnumlimit will be detrimental to publin safety-in the long ran. Increased insurancecosts will cut into the operatibnai costsofmotor carriers, taking revenue awayfrom safety programs, dhvertrafning;and vehiclemaintenance ' This., theystate will impact mostseverely on, smalland minority firms..

Based on.current rates found in theISO Commercial Rating Manual, the-AIA took a representative high, average,and low rate territory and computed the,cost of increased minimum limits. Theyfound, "A for-hire motor-vehiclecurrently carrying a $1 million-combinedsingle limit policy (CSL) that becomessubject to a $5 million CSL will besubjected to an additiona29]percentpremium increase." Thiswas aminimumestimate.

Comments received fcom the motorcarrier industry in support of theproposal also contend that there will bean adverse economic impact if the highlimits-wereto take effect. The PrivateTruck Council, ofAmerica-.nc- stated "it,is~the uie-wof the' Council that to requiredramatibc.across thp-boardimcreases inthemiminum financinLresponsibility-as;ofJuly 1,,1983; wouldprave to becounter-productive attels time"'

Likewise, the comments received fromthe LP GasAssociation, theNationaOil,Jobbers Council, the ICI Americas Inc.,.and several explosives haulers allcontend that the extension is necepsaryto stabilize overhead costs during thepresent economic climate.

Another problem expressed in manyof the comments from the insurance*industry concerns the belief that, asNACSA states,,"Themandatory natureof the'Motor Carrier Actputs unduepressure onthe insurance markets." TheNACSA survey'results indicated' "doubtthat insurance underwriters will havethe capacity to underwrite the higherlevels of insurance atan-affordableprice by July 1, 1983:" They continue,"even if additional capacity can befound through the use of excess andsurplus lines markets,-it is unlikely that'the higher levels will be affordable tothe small- to medium-sized truckoperators. The result may be that manyoperators will go out of business, notbecause of unsafe operating conditions,but because of the high price ofcompliance under Section 30."

The legistative history of Section 30indicates "a congressional belief thatincreased financial responsibility will

lead to mproved'safety performance asunsafe carriers will incur higherpremiums than safe carers, or wilt beunable to obtain coverage" The AIAcontends that this rationale is notsubstantiated by the facts. They state"Indiidual msurzas can refuse tovoluntarily provide coverage based onobjectively poor acccidenthlstory,financial instability or failure to meetprescribed safety standards. However.all motor carriers have access toinsurance through a residualmarketmechanism (commonly referred to asassigned risk plans]; It must beemphasized that anyone. regardless ofaccident history or financial stability,must be-provided insurance protectionfor the limits and coverages required bylaw."

The AIA noted that theadoption ofthe $5 million would be an incentive forgrowth in the residual market sinceinsurers wouldbe tempted to avoid thevoluntary market with sucir high limits.Some smaller insurers, they say, may beunwilling or unable to provide suchprotection. The AIA submits "failure tomaintain the current limits maydestabilize the market and result inadverse growtLi mthe residual market."

The IndependentInsurance Agents ofAmerica,,Inc., offered their agreementwiththe HW_%As rationale in the NPRMthat higher requirements could producesignificant market dislocations in thisline of insurance. They continue "Thelack of underwriting capacity wouldpredictably create an availability/affordability problem."

A final concern expressed in many ofthe comments from the insuranceindustry revolves around the need formore time for the insurance mdustry toalleviate the confusion brought about bydiffering limits for differentcommodities.

The American Agricultural InsuranceCo. states, "we strongly feel that theadditional * * 'phase-m period' willallow theindustry the necessary periodof time in which to implementreinsurance, advise and instruct bothagents and underwriters; and work withclientele regarding their compliancewith this Act with respect to theinsurance provisions" Likewise, theSouthern Farm Bureau CasualtyInsurance Co. supports the extensionbecause numerous revisions "have notpermitted our companies theopportunity to establish set proceduresand guidelines for responding to therequirements of the Act. Any change inthe limits or other regulations effective

-July 1,1983 would only furthercomplicate and impact our ability torespond to our policy holder's needs."

The firmo'Le Boeuf, Lamb, Leiby andMacRae who commented on-behalf'ofLloyd's ofLond'on state "Consistentmunimum financial reponsibility levelsdunng' an extended phase-in period willalso permit insurers to obtain a moreaccurate understanding of themarket'sdevelopment."

Assessment of ComMentsIn light of the foregoing. iti s evident

that there are very diverse viewsconcerning what can reasonably beconsidered "protection of the public."For those who oppose the extension, itappears that the public can beadequately protected only if motorcarrers are insured to levels adequateto cover "worst case'acmdents. This, ofcourse, would'be an ideal situation foranumber of reasons, such as providingadequate awards to injured parties aswell as protecting the assets of themotor carner involved in such an event

On the other hand, those commenterswho favor the extension appear toconsider the minimum levels currently ineffect reasonable protection since thoselimits cover liability claims in the vastmajority of cases.

The FHWA agrees with those uropposition that "worst case" accidentscan and do occur, leaving a trail ofdestruction andsufferingin their wakeiis also'understood, as pointed out in

their comments, that these catastrophicaccidents result in liability claims whichcan be above even the highest mimmumlevels mentioned in Section 30.

The FHWA feels confident that theCongress was fuly avare of thecatastrophic accidents which haveoccurred over the past decade or sowhen they passed theMCA of 1 20. TheCongress. in passing the MCA of 193a,called for mnimum levels of financialresponsibility to enhance safety andadequately protect the public. TheCongress also gave the Secretary theauthority to lower those minimum levelsfor a specified period of time if thereduction would prevent a seriousdisruption in service and-would notadversely affect public safety. It cantherefore be reasonably deduced thatthe Congress' intent for reasonableprotection did not include thosedamages incurred as a result of anextremely limited number of "worstcase" accidents. It is reasonable toassume tlus is still true since theCongress saw fit to give the Secretarythe authority to extend the "phase-mperiod" from 2 years to 3 years in theSTAA of 1982.

Several of the commenters whooppose the proposal argued that theinformation provided the Congress in

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the Secretary's Report to Congress wasincomplete and misleading msofar asthe accident data were concerned. It isimportant to note, however, that thequality of the data used was directlyaddressed in the Report as was theconsideration of the rising incidence ofaccidents resulting m $1 millionsettlements. It was clearly stated in theReport that the data available to theFHWA were the best to be found todate. New data provided during tiusrulemaking indicate that the FHWAdata in the report were accurate.

Information concerning 32,600 motorcarrier accidents, on the average, isreported to the BMCS annually. Thisinformation contains the number offatalities, injuries, and value of propertydamage in each accident. Aggregatingthese elements and applying estimatedsocietal costs per fatality and/or injurypermit an estimate of potential accidentcost.

Using this approach to estimateaverage claim costs showed that of theaccidents reported during 1982 only six(two one-hundredths of one percent) of32,393 (a risk of 185 in a million] hadaggregate societal costs in excess of$500,000. A total of only three accidentswere reported in 1982 wherein propertydamage was equal to or greater than $1million. In these three acccidents theaverage societal costs amounted to $1.4million. The seriousness of suchaccidents and related insurance claims,catastrophic or not with respect to thefinancial solvency of the motor carrier,would likely depend on the size andprofitability of the motor carrier if theclaim costs exceeded the policy's limitsof liability.

The BMCS data provide estimatesvery similar to those offered by theinsurance industry.

Furthermore, using the AlA's estimateof average insurance premum increase,the total increase would have to bepassed on to consumers or absorbed bythe motor carrier industry which is nowonly coming out of the adverseeconomic effects of the recent recession.

With all things considered (i.e.,protection of the public, the stability ofthe motor carrier industry, the ability of'the insurance industry to provide thecoverage and the particular needs ofsmall and minority motor carriers) thequestion which begs to be answered is

what minimum levels of financialresponsibility are sufficient? We stressthe word "nummum" as it has appearedsince the inception of the MCA of 1980.

The FHWA firmly believes, based onits data and the data provided by theinsurance industry, that with only twoone-hundredths of one percent of allcommercial vehicle accidents resultingin settlements of more than $500,000, thecurrent minimums are sufficient. This isnot to say that the FHWA does notstrongly endorse and encourage motorcarriers to maintain levels of liabilitycoverage sufficient to cover their assetsand fully protect their concerns. What isat issue here is the absolute minimumwhich must be maintained before amotor carrier subject to these rules mayoperate its.vehicles on the publichighway system.

Final Determination

The current "phase-in period" forreduced levels of financial responsibilityis hereby extended until January 1, 1985.The FHWAbelieves that this 6 monthextension will not.adversely affect thepublic safety and will prevent a seriousdisruption in both the insurance andmotor carrier industries. Further, theabsence of a final rule extending the"phase-m period" beyond July 1,1984may inflict unnecessary turmoil on bothindustries. For these reasons and due totime constraints, the Federal HighwayAdministrator has determined that thisdocument responds to an emergencysituation and it is impracticable for theagency to follow the procedures ofExecutive Order 12291. Therefore, goodcause exists for publication as a finalrule without a 30-day delay in effectivedate.

This amendment does not alter thecontractual language or meaning of theendorsement form (MCS-90) or theSurety Bond (MCS-82], but only the"Schedule of Limits" as it appears in 49CFR 387.9 and 387.15 on theendorsement form. Therefore, thoseendorsement forms currently in forcemay remain in effect.

The final regulatory evaluation/regulatory flexibility analysis has beenprepared and is available for review inthe publicdocket. A copy may beobtained by contacting Mr. Neill L.Thomas at the address provided above

under the heading "For FurtherInformation Contact."

The need, objectives, and legal basisfor the proposed action have beenexplained previously in this document.Any impact on small entities would bepositive in that administratlv andeconomic burdens would be relieved forsmall businesses that utilize vehiclessubjbct to the minimum levels offinancial responsibility requirements. Bybeing relieved of increased insurancepremiums, these small businesses willbe able to redirect resources towardincreased productivity. Also, smallinsurance agents and brokers couldcontinue to write the coverage. This rulewould not impose any additionalreporting, recordkeeping or compliancerequirements for small entities. Thereare no other Federal rules that conflictwith this proposal.

List of Subjects in 49 CFR Part 387Hazardous materials transportation,

Insurance, Motor carriers, Surety bonds,(Catalog of Federal Domestic AssistanceProgram Number 20.217 Motor Carrier Safety)

Issued on: June 28,1984.Kenneth L. Pierson,Director, Bureau of Motor Carrier Safety,Federal HighwayAdministratlon.

In consideration of the foregoing andunder the authority of section 400 of theSurface Transportation Assistance Actof 1982, Pub. L. 97-424, 96 Stat. 2158 and49 CFR 1.48, the FHWA is amending title49, Code of Federal Regulations, SubtitleB, Chapter I, by revising Part 387,Subpart A as set forth below.

PART 387-MINIMUM LEVELS OFFINANCIAL RESPONSIBILITY FORMOTOR CARRIERS

Subpart A-Motor Carriers of Property

§ 387.9 [Amended]1. The Schedule of Limits table in

§ 387.9 is amended by replacing theheading "July 1, 1984" with "January 1,1985."

§ 387.15 (Amended]2. The Schedule of Limits table In

Illustration I of § 387.15 is amended byreplacing the heading "July 1, 1984" with"January 1, 1985."[FR Doc. 84-17708 Filed 6-29-84: 1020 qmj

BILLING CODE 4910-22-M

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