49 U.S.C. § 13906 — Security of motor carriers, motor private carriers, brokers, and freight forwarders

submitted 31 years ago by Pub. L. 104-88 to r/title-49-TRANSPORTATION · 2,589 words · no verdicts yet

in plain englishAI-generated · not legal advice

This law makes motor carriers, brokers, and freight forwarders prove they can pay claims. Carriers need liability insurance or bonds, and brokers and freight forwarders need at least $75,000 in security. The Secretary can suspend registrations, require cancellation notices, and fine surety providers who violate these rules.

(a) Motor Carrier Requirements. Before the Secretary can register a motor carrier, the carrier must file a bond, insurance policy, or other approved security. The amount must meet levels set by sections 31138 and 31139 and by state law. This security must be able to pay court judgments against the carrier for injury or death to a person, or for property loss or damage, caused by negligent operation of its vehicles. The carrier's registration stays valid only as long as it keeps this security in place. Within 120 days after the Unified Carrier Registration Act of 2005 became law, any registered provider of transportation or service (except a motor private carrier) had to file this security too. Motor carriers must also follow the agency rules in sections 13303 and 13304, and the Secretary may require them to file the same kind of security described above to protect the public; this agency rule applies to foreign carriers only for transportation entirely between places outside the United States. Finally, the Secretary may require a carrier to file security that pays a shipper or consignee for damage to their property while it was in the carrier's possession; a carrier that pays such a claim on behalf of a connecting carrier takes over the shipper's rights against that connecting carrier's security, up to the amount it paid. (b) Broker Financial Security Requirements. The Secretary may register a person as a broker only if they file a surety bond, trust fund proof, or other financial security (or a mix) that the Secretary decides is enough to guarantee they can pay their debts. The Secretary may allow a group bond or shared trust fund instead. A trust fund or other security counts only if its assets are readily available to pay claims -- the broker can't rely on personal guarantees or on collecting money owed to it. This security must pay a claim against a broker for failing to pay freight charges when: the broker agrees to pay; the broker ignores a proper claim notice and the surety decides the claim is valid; or the claim goes unresolved after a reasonable try and turns into a court judgment. When a surety provider gets a claim, it must respond within 30 days, and if it denies the claim, it must explain why in writing. In a lawsuit against a surety over such a claim, the side that wins gets its reasonable costs and attorney's fees. Every broker must keep at least $75,000 in financial security, no matter how many branch offices or sales agents it has. If that security is canceled, the holder must tell the Secretary electronically at least 30 days before the cancellation takes effect, and the Secretary must immediately post that notice online. The Secretary must immediately suspend a broker's registration if its available security drops below $75,000. If a broker becomes financially insolvent, its surety provider must notify the Secretary of the cancellation, publicly advertise for claims for 60 days, and then within 30 days after that period ends pay all uncontested claims -- or, if claims exceed the available security, pay each claim its proportional share. The Secretary or the U.S. Attorney General may sue in federal court to enforce these rules, and courts may order injunctions. After notice and a hearing, the Secretary can fine a surety provider up to $10,000 for violating these rules, and can bar that surety from providing broker security for three years. Finally, a surety may never shrink the required security amount by subtracting its attorney's fees or administrative costs. (c) Freight Forwarder Financial Security Requirements. These rules largely mirror the broker rules in (b). A freight forwarder registrant must file a surety bond, trust fund proof, or other approved financial security, possibly as a group bond; any surety bond must come from a bonding company approved by the Secretary of the Treasury; and a trust fund only counts if its assets are readily available to pay claims without personal guarantees or collecting receivables. This security must pay claims for unpaid freight charges under the same three conditions as for brokers (consent, an unanswered claim found valid, or an unresolved claim reduced to judgment), with the same 30-day response requirement, written denial reasons, and costs-and-fees rule for lawsuits against sureties. Freight forwarders must separately carry insurance: liability insurance to pay court judgments for injury, death, or property damage caused by negligent operation of motor vehicles while the forwarder provides transfer, collection, or delivery service, and the Secretary may also require cargo insurance to pay for loss or damage to property the forwarder handles. Each freight forwarder must keep at least $75,000 in financial security regardless of its number of offices or agents. The same cancellation-notice, suspension, insolvency-claims-payment, penalty ($10,000 fine and 3-year bar), and no-fee-deduction rules that apply to brokers apply to freight forwarders too. (d) Type of Insurance. The Secretary decides the type and amount of security a carrier files. A motor carrier may instead prove it qualifies as a self-insurer, and the Secretary must write regulations setting the standard for that approval. Carriers already approved to self-insure as of January 1, 1996, keep that approval unless the Secretary revokes it for good cause, after notice and a hearing. (e) Notice of Cancellation of Insurance. The Secretary must require carriers and brokers to submit notice of insurance cancellations far enough ahead of time that the Secretary can revoke or suspend the carrier's or broker's registration promptly once the cancellation takes effect. (f) Form of Endorsement. The Secretary must also set the required form of endorsement attached to insurance policies and surety bonds, so that the policy or bond covers the full security amount this section requires.

the actual law source: uscode.house.gov ↗public domain

(a)Motor Carrier Requirements.—

(1)Liability insurance requirement.—

The Secretary may register a motor carrier under section 13902 only if the registrant files with the Secretary a bond, insurance policy, or other type of security approved by the Secretary, in an amount not less than such amount as the Secretary prescribes pursuant to, or as is required by, sections 31138 and 31139, and the laws of the State or States in which the registrant is operating, to the extent applicable. The security must be sufficient to pay, not more than the amount of the security, for each final judgment against the registrant for bodily injury to, or death of, an individual resulting from the negligent operation, maintenance, or use of motor vehicles, or for loss or damage to property (except property referred to in paragraph (3) 1 of this subsection), or both. A registration remains in effect only as long as the registrant continues to satisfy the security requirements of this paragraph.

(2)Security requirement.—

Not later than 120 days after the date of enactment of the Unified Carrier Registration Act of 2005, any person, other than a motor private carrier, registered with the Secretary to provide transportation or service as a motor carrier under section 13905(b) shall file with the Secretary a bond, insurance policy, or other type of security approved by the Secretary, in an amount not less than required by sections 31138 and 31139.

(3)Agency requirement.—

A motor carrier shall comply with the requirements of sections 13303 and 13304. To protect the public, the Secretary may require any such motor carrier to file the type of security that a motor carrier is required to file under paragraph (1) of this subsection. This paragraph only applies to a foreign motor private carrier and foreign motor carrier operating in the United States to the extent that such carrier is providing transportation between places in a foreign country or between a place in one foreign country and a place in another foreign country.

(4)Transportation insurance.—

The Secretary may require a registered motor carrier to file with the Secretary a type of security sufficient to pay a shipper or consignee for damage to property of the shipper or consignee placed in the possession of the motor carrier as the result of transportation provided under this part. A carrier required by law to pay a shipper or consignee for loss, damage, or default for which a connecting motor carrier is responsible is subrogated, to the extent of the amount paid, to the rights of the shipper or consignee under any such security.

(b)Broker Financial Security Requirements.—

(1)Requirements.—

(A)In general.—

The Secretary may register a person as a broker under section 13904 only if the person files with the Secretary a surety bond, proof of trust fund, or other financial security, or a combination thereof, in a form and amount, and from a provider, determined by the Secretary to be adequate to ensure financial responsibility.

(B)Use of a group surety bond, trust fund, or other surety.—

In implementing the standards established by subparagraph (A), the Secretary may authorize the use of a group surety bond, trust fund, or other financial security, or a combination thereof, that meets the requirements of this subsection.

(C)Proof of trust or other financial security.—

For purposes of subparagraph (A), a trust fund or other financial security may be acceptable to the Secretary only if the trust fund or other financial security consists of assets readily available to pay claims without resort to personal guarantees or collection of pledged accounts receivable.

(2)Scope of financial responsibility.—

(A)Payment of claims.—

A surety bond, trust fund, or other financial security obtained under paragraph (1) shall be available to pay any claim against a broker arising from its failure to pay freight charges under its contracts, agreements, or arrangements for transportation subject to jurisdiction under chapter 135 if—

(i)

subject to the review by the surety provider, the broker consents to the payment;

(ii)

in any case in which the broker does not respond to adequate notice to address the validity of the claim, the surety provider determines that the claim is valid; or

(iii)

the claim is not resolved within a reasonable period of time following a reasonable attempt by the claimant to resolve the claim under clauses (i) and (ii), and the claim is reduced to a judgment against the broker.

(B)Response of surety providers to claims.—

If a surety provider receives notice of a claim described in subparagraph (A), the surety provider shall—

(i)

respond to the claim on or before the 30th day following the date on which the notice was received; and

(ii)

in the case of a denial, set forth in writing for the claimant the grounds for the denial.

(C)Costs and attorney’s fees.—

In any action against a surety provider to recover on a claim described in subparagraph (A), the prevailing party shall be entitled to recover its reasonable costs and attorney’s fees.

(3)Minimum financial security.—

Each broker subject to the requirements of this section shall provide financial security of $75,000 for purposes of this subsection, regardless of the number of branch offices or sales agents of the broker.

(4)Cancellation notice.—

If a financial security required under this subsection is canceled—

(A)

the holder of the financial security shall provide electronic notification to the Secretary of the cancellation not later than 30 days before the effective date of the cancellation; and

(B)

the Secretary shall immediately post such notification on the public Internet Website of the Department of Transportation.

(5)Suspension.—

The Secretary shall immediately suspend the registration of a broker issued under this chapter if the available financial security of that person falls below the amount required under this subsection.

(6)Payment of claims in cases of financial failure or insolvency.—

If a broker registered under this chapter experiences financial failure or insolvency, the surety provider of the broker shall—

(A)

submit a notice to cancel the financial security to the Administrator in accordance with paragraph (4);

(B)

publicly advertise for claims for 60 days beginning on the date of publication by the Secretary of the notice to cancel the financial security; and

(C)

pay, not later than 30 days after the expiration of the 60-day period for submission of claims—

(i)

all uncontested claims received during such period; or

(ii)

a pro rata share of such claims if the total amount of such claims exceeds the financial security available.

(7)Penalties.—

(A)Civil actions.—

Either the Secretary or the Attorney General of the United States may bring a civil action in an appropriate district court of the United States to enforce the requirements of this subsection or a regulation prescribed or order issued under this subsection. The court may award appropriate relief, including injunctive relief.

(B)Civil penalties.—

If the Secretary determines, after notice and opportunity for a hearing, that a surety provider of a broker registered under this chapter has violated the requirements of this subsection or a regulation prescribed under this subsection, the surety provider shall be liable to the United States for a civil penalty in an amount not to exceed $10,000.

(C)Eligibility.—

If the Secretary determines, after notice and opportunity for a hearing, that a surety provider of a broker registered under this chapter has violated the requirements of this subsection or a regulation prescribed under this subsection, the surety provider shall be ineligible to provider 2 broker financial security for 3 years.

(8)Deduction of costs prohibited.—

The amount of the financial security required under this subsection may not be reduced by deducting attorney’s fees or administrative costs.

(c)Freight Forwarder Financial Security Requirements.—

(1)Requirements.—

(A)In general.—

The Secretary may register a person as a freight forwarder under section 13903 only if the person files with the Secretary a surety bond, proof of trust fund, other financial security, or a combination of such instruments, in a form and amount, and from a provider, determined by the Secretary to be adequate to ensure financial responsibility.

(B)Use of a group surety bond, trust fund, or other financial security.—

In implementing the standards established under subparagraph (A), the Secretary may authorize the use of a group surety bond, trust fund, other financial security, or a combination of such instruments, that meets the requirements of this subsection.

(C)Surety bonds.—

A surety bond obtained under this section may only be obtained from a bonding company that has been approved by the Secretary of the Treasury.

(D)Proof of trust or other financial security.—

For purposes of subparagraph (A), a trust fund or other financial security may not be accepted by the Secretary unless the trust fund or other financial security consists of assets readily available to pay claims without resort to personal guarantees or collection of pledged accounts receivable.

(2)Scope of financial responsibility.—

(A)Payment of claims.—

A surety bond, trust fund, or other financial security obtained under paragraph (1) shall be available to pay any claim against a freight forwarder arising from its failure to pay freight charges under its contracts, agreements, or arrangements for transportation subject to jurisdiction under chapter 135 if—

(i)

subject to the review by the surety provider, the freight forwarder consents to the payment;

(ii)

in the case 3 the freight forwarder does not respond to adequate notice to address the validity of the claim, the surety provider determines the claim is valid; or

(iii)

the claim—

(I)

is not resolved within a reasonable period of time following a reasonable attempt by the claimant to resolve the claim under clauses (i) and (ii); and

(II)

is reduced to a judgment against the freight forwarder.

(B)Response of surety providers to claims.—

If a surety provider receives notice of a claim described in subparagraph (A), the surety provider shall—

(i)

respond to the claim on or before the 30th day following receipt of the notice; and

(ii)

in the case of a denial, set forth in writing for the claimant the grounds for the denial.

(C)Costs and attorney’s fees.—

In any action against a surety provider to recover on a claim described in subparagraph (A), the prevailing party shall be entitled to recover its reasonable costs and attorney’s fees.

(3)Freight forwarder insurance.—

(A)In general.—

The Secretary may register a person as a freight forwarder under section 13903 only if the person files with the Secretary a surety bond, insurance policy, or other type of financial security that meets standards prescribed by the Secretary.

(B)Liability insurance.—

A financial security filed by a freight forwarder under subparagraph (A) shall be sufficient to pay an amount, not to exceed the amount of the financial security, for each final judgment against the freight forwarder for bodily injury to, or death of, an individual, or loss of, or damage to, property (other than property referred to in subparagraph (C)), resulting from the negligent operation, maintenance, or use of motor vehicles by, or under the direction and control of, the freight forwarder while providing transfer, collection, or delivery service under this part.

(C)Cargo insurance.—

The Secretary may require a registered freight forwarder to file with the Secretary a surety bond, insurance policy, or other type of financial security approved by the Secretary, that will pay an amount, not to exceed the amount of the financial security, for loss of, or damage to, property for which the freight forwarder provides service.

(4)Minimum financial security.—

Each freight forwarder subject to the requirements of this section shall provide financial security of $75,000, regardless of the number of branch offices or sales agents of the freight forwarder.

(5)Cancellation notice.—

If a financial security required under this subsection is canceled—

(A)

the holder of the financial security shall provide electronic notification to the Secretary of the cancellation not later than 30 days before the effective date of the cancellation; and

(B)

the Secretary shall immediately post such notification on the public Internet web site of the Department of Transportation.

(6)Suspension.—

The Secretary shall immediately suspend the registration of a freight forwarder issued under this chapter if its available financial security falls below the amount required under this subsection.

(7)Payment of claims in cases of financial failure or insolvency.—

If a freight forwarder registered under this chapter experiences financial failure or insolvency, the surety provider of the freight forwarder shall—

(A)

submit a notice to cancel the financial security to the Administrator in accordance with paragraph (5);

(B)

publicly advertise for claims for 60 days beginning on the date of publication by the Secretary of the notice to cancel the financial security; and

(C)

pay, not later than 30 days after the expiration of the 60-day period for submission of claims—

(i)

all uncontested claims received during such period; or

(ii)

a pro rata share of such claims if the total amount of such claims exceeds the financial security available.

(8)Penalties.—

(A)Civil actions.—

Either the Secretary or the Attorney General may bring a civil action in an appropriate district court of the United States to enforce the requirements of this subsection or a regulation prescribed or order issued under this subsection. The court may award appropriate relief, including injunctive relief.

(B)Civil penalties.—

If the Secretary determines, after notice and opportunity for a hearing, that a surety provider of a freight forwarder registered under this chapter has violated the requirements of this subsection or a regulation prescribed under this subsection, the surety provider shall be liable to the United States for a civil penalty in an amount not to exceed $10,000.

(C)Eligibility.—

If the Secretary determines, after notice and opportunity for a hearing, that a surety provider of a freight forwarder registered under this chapter has violated the requirements of this subsection or a regulation prescribed under this subsection, the surety provider shall be ineligible to provide freight forwarder financial security for 3 years

(9)Deduction of costs prohibited.—

The amount of the financial security required under this subsection may not be reduced by deducting attorney’s fees or administrative costs.

(d)Type of Insurance.—

The Secretary may determine the type and amount of security filed under this section. A motor carrier may submit proof of qualifications as a self-insurer to satisfy the security requirements of this section. The Secretary shall adopt regulations governing the standards for approval as a self-insurer. Motor carriers which have been granted authority to self-insure as of January 1, 1996, shall retain that authority unless, for good cause shown and after notice and an opportunity for a hearing, the Secretary finds that the authority must be revoked.

(e)Notice of Cancellation of Insurance.—

The Secretary shall issue regulations requiring the submission to the Secretary of notices of insurance cancellation sufficiently in advance of actual cancellation so as to enable the Secretary to promptly revoke or suspend the registration of any carrier or broker after the effective date of the cancellation.

(f)Form of Endorsement.—

The Secretary shall also prescribe the appropriate form of endorsement to be appended to policies of insurance and surety bonds which will subject the insurance policy or surety bond to the full security limits of the coverage required under this section.

Source credit: (Added Pub. L. 104–88, title I, § 103, Dec. 29, 1995, 109 Stat. 885; amended Pub. L. 104–287, § 5(34), Oct. 11, 1996, 110 Stat. 3392; Pub. L. 109–59, title IV, § 4303(b), (d)(1), Aug. 10, 2005, 119 Stat. 1762, 1763; Pub. L. 112–141, div. C, title II, § 32918(a), July 6, 2012, 126 Stat. 822; Pub. L. 114–94, div. A, title V, § 5201, Dec. 4, 2015, 129 Stat. 1534.)

history & why it existsrecord from the source credit

1995Enacted · Pub. L. 104-88 · 109 Stat. 885
1996Amended · Pub. L. 104-287 · 110 Stat. 3392
2005Amended · Pub. L. 109-59 · 119 Stat. 1762, 1763
2012Amended · Pub. L. 112-141 · 126 Stat. 822
2015Amended · Pub. L. 114-94 · 129 Stat. 1534

A history note hasn’t been published yet. The record shows enactment by Pub. L. 104-88 on 1995-12-29.

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