BEFORE THE DEPARTMENT OF PUBLIC SERVICE REGULATION

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 38.3.402, 38.3.703, 38.3.705, 38.3.706, 38.3.707, 38.3.708; and the repeal of ARM 38.3.712 relating to the regulation of motor carriers

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NOTICE OF AMENDMENT AND REPEAL

 

TO:  All Concerned Persons

 

1.  On August 25, 2011 the Department of Public Service Regulation published MAR Notice No. 38-3-211 regarding the public hearing on the proposed amendment and repeal of the above-stated rules at page 1632 of the 2011 Montana Administrative Register, Issue Number 16.

 

2.  On September 21, 2011, a public hearing was held at which time members of the public made oral and written comments and submitted documents.  Additional comments were received during the comment period.

 

3.  The department has thoroughly considered the comments and testimony received.  A summary of the comments received and the department's responses are as follows:

 

COMMENT 1:  The commission received comments from City Cab (Wilson LLC) and Yellow Cab, both of Billings, Montana.  City Cab comments note that an increase in insurance coverage will necessitate an increase in passenger fares to the public.  City Cab estimates that the proposed insurance coverage increase will result in an approximate 1 to 5 percent increase in carriers' overhead.  City Cab is concerned about the impact to the riding public and about the possibility of a lessening of ridership due to increased fares.  City Cab is not specifically against the proposed increase in insurance coverage, but suggests that it be transitioned to be effective over time.

 

RESPONSE 1:  The commission considered City Cab's concerns about its ability to pass on increased operating expenses.  Title 69, Chapter 12 affords regulated carriers the opportunity to prove a need for increased rates. 

 

COMMENT 2:  City Cab asked "Why are taxis being held to same [sic] insurance requirements as vehicles that travel primarily Interstate and at a higher rate of average speed where serious injury or death is more likely?"

 

RESPONSE 2:  Taxis are not restricted to operating on city streets at low speeds and may travel extensively on interstate highways or state highways within the geographical areas permitted by a motor carrier's certificate of public convenience and necessity.  Moreover, the commission is charged with ensuring that regulated motor carriers maintain sufficient insurance to assure that they can pay a judgment against the carrier arising out of the death or injury to any passenger or death or injury to any other person caused by the carrier.  § 69-12-402, MCA.  The commission firmly believes that the current liability insurance coverage minimums are inadequate.

 

COMMENT 3:  City Cab commented bus capacity is up to 57 passengers divided by $5 million is $87,719.30 per passenger.

 

RESPONSE 3:  Bus capacities up to 57 passengers would typically be operated in charter service or interstate commerce and would not be regulated by the commission.  Therefore, the commission does not consider a 57-passenger bus a valid object of comparison when determining insurance rates for Montana carriers regulated by the commission. 

 

COMMENT 4:  City Cab commented, "Our taxi service averages 1.25 passengers per trip.  Using the $100,000 per passenger logic our insurance limits should be $125,000.  Using the DOT standard it would be $109,649.  Not what is being proposed?  [attachment from U.S. Department of Transportation, FMCSA, Overview of Federal Requirements August 2010].  Where it also states financial responsibility requirements do NOT apply to a motor vehicle providing taxicab service and having a seating capacity of less than 7 passengers."

 

RESPONSE 4:  Transportation Services noted the Department focused on $100,000 per person seating capacity and further offered that the U.S. DOT requires $87,719.30 per passenger if a 57-passenger vehicle is insured for $5,000,000.  However, Transportation Services ignores the fact that the U.S. DOT requires an insurance level of $1.5 million for vehicles with a capacity of 9 to 15 which is very much in line with the Commission's proposed insurance level of $100,000 per person seating capacity.  Further, the U.S. DOT Transportation Services noted that the U.S. DOT levels do not apply to vehicles with a seating capacity of less than 7.  Although the U.S. DOT does not require insurance for vehicles with a capacity less than 7 or for taxicabs, § 69-12-402, MCA does require the Commission to set appropriate insurance levels to protect the travelling public.

 

COMMENT 5:  City Cab asked if there are there any records of fatal or serious injury in the state of Montana that the Taxicab service has not fulfilled its fiduciary responsibility?  The accident-rates [sic] according to the National Safety Council are declining see attached 2 (National Safety Council Injury Facts Annual Report September 15, 2011).

 

RESPONSE 5:  Transportation Services inquired whether there are records of fatal or serious injuries in the state of Montana where the taxicab service has not fulfilled their fiduciary responsibility but was unsuccessful in finding data that specific.  The Commission firmly contends that the current liability insurance coverage minimums are inadequate; e.g., $100,000 for 7 passengers or less.  Under current ambulance, physician, and hospital cost circumstances; it does not take a major injury to incur $100,000 in costs.

 

COMMENT 6:  City Cab asked, "Why are we being held to standards that are 20 times more stringent than a normal driver see Montana Code Annotated 2009 61‑6‑103 states $25,000.00 per person or $50,000.00 for two or more."

 

RESPONSE 6:  Section 6-6-103, MCA is the liability requirement for personal automobile requirements.  Regulated motor carriers serve the travelling public and the public places a trust in the commission to ensure that for-hire motor carriers are adequately insured to protect the public.  See 69-12-402, MCA, described above.

 

COMMENT 7:  City Cab asked, "How is this following Montana Code Annotated 69‑12‑202 Encouragement of common carrier motor transportation?"

 

RESPONSE 7:  As with many of the commission's duties, a balance is required.  For example, the commission must provide utility shareholders with a reasonable opportunity to realize an appropriate return on their investment, but must also assure ratepayers that rates must be just and reasonable.  Here, § 69-12-202, MCA requires the commission to encourage a system of common carrier motor transportation within the state for the convenience of the shipping public, yet § 69‑12‑402, MCA to set appropriate insurance levels to protect the travelling public.  A balancing effort is required and the commission finds that the proposed increase in minimum liability insurance coverage is necessary.

 

COMMENT 8:  The commission is in receipt of correspondence from Taylor-Leavitt Insurance Agency, the current agent of record for the owners of City Cab's insurance business needs.  Taylor-Leavett states that an increase from $100,000 to $300,000 Combined Single Limit coverage would result in a premium increase of approximately $11,500 per year (from $43,614/year to $55,125/year).  Such an increase would cause "significant heartache with [City Cab's] clientele."

 

RESPONSE 8:  The commission must assume that the yearly premium costs cited include more than City Cab's taxi fleet (City Cab also has a number of vans with which it provides service, some unregulated).  The commission bases this on a recent taxicab rate case and queries to other insurance providers.  One regulated cab company in Montana experiences about $800/month (has 2 cabs) in liability coverage expenses.  Another experiences liability insurance coverage costs ($1million coverage) for about $3400/cab.  The commission realizes that there will be an increase in operating costs with an increase in minimum liability insurance coverage requirements.  Nevertheless, the commission finds that the current minimums are inadequate to protect the travelling public.

 

COMMENT 9:  Yellow Cab is primarily concerned with availability of liability insurance coverage for passenger operations in the state of Montana.  Yellow Cab expressed a concern that coverage may not be available in Montana.  In a post-hearing letter, Yellow Cab indicated that while it agreed that minimum liability coverage of $100,000 was not enough, Yellow Cab had difficulty finding insurers that will provide insurance in Montana.  Moreover, Yellow Cab's current insurance carrier has indicated that they would not provide liability insurance coverage in the magnitude of $5,000,000.

 

RESPONSE 9:  The commission has contacted several insurance carriers/brokers currently providing liability insurance coverage for passenger motor carriers in Montana.  The number of companies providing liability coverage to Montana taxi operations is relatively short, but there are companies that do provide such coverage.  Moreover, the commission does recognize that the cost of the coverage is not an insignificant operating expense for the carrier.  While the commission recognizes that insurance coverage is such a significant expense, it nevertheless must provide sufficiently high minimum coverage requirements to protect the travelling public.

            The commission determines that it is reasonably necessary to increase the amount of casualty (liability) insurance in order to adequately protect motor carrier passengers in the event of an accident.  Further, it is reasonably necessary to remove antiquated forms from the commission's administrative rules.  The proposed amendments increasing the minimum amounts for liability insurance coverage are warranted except for those subsections that will remain unchanged as noted in Paragraph 6 below.

 

4.  The department has amended the following rules as proposed:  ARM 38.3.402, 38.3.703, 38.3.705, 38.3.707, and 38.3.708.

 

5.  The department has repealed the following rule as proposed: ARM 38.3.712.

 

6.  The department has amended the following rule as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:

 

38.3.706  ENDORSEMENTS  (1) through (2)(b)(iv) remain as proposed.

(v)  $5,000,000 for 16 passengers or more.;

(vi)  $100,000 for transportation of nonhazardous freight in a vehicle designed, equipped, and primarily intended for transportation of seven passengers or less or a vehicle of manufacturer's GVW rating of 10,000 pounds or less designed, equipped, and primarily intended for transportation of cargo;

(vii)  $500,000 for transportation of nonhazardous freight for all other vehicles.

            (3) remains as proposed.

 

7.  The amendments and repeal of the department are effective January 1, 2012.

 

 

 

 

 

 

 

/s/  JIM PAINE                                               /s/  TRAVIS KAVULLA                               

Jim Paine                                                      Travis Kavulla

Alternate Rule Reviewer                              Chairman

                                                                        Public Service Regulation

           

Certified to the Secretary of State October 31, 2011