Whether the seller's federal registration, insurance filings and customer contracts come with the company depends on the deal structure. In an asset purchase, plan for your new entity to hold its own insurance filings and contracts, and confirm in writing with counsel and the regulator what, if anything, from the seller's registrations can move. In a stock purchase the registrations stay with the company, but the insurance filings, ownership records and contracts still need to be checked and updated. This guide is for buyers of for-hire fleets who need to know what to verify before the first truck runs under new ownership.
The short answer
- Federal registration has layers: a U.S. Department of Transportation (USDOT) number, operating authority for hauling for hire, and an insurance filing. Registration stays in effect only while the required security stays in place.
- Filings and endorsements are issued in the carrier's exact legal name, so a new entity in an asset purchase cannot rely on the seller's filings. Whether authority or a USDOT number can transfer, and how, is something to confirm, not assume.
- A bond is not insurance for the carrier. The surety expects to be repaid by the carrier and usually its owners.
- Customer and broker contracts often ask for more than the federal minimum, and some can be ended or changed when ownership changes. Read each one.
- A certificate is evidence that a policy existed on the date it was issued. It does not change the policy.
What registrations and licenses does a trucking company usually need?
These items typically apply to a for-hire fleet, depending on what it hauls, whether it crosses state lines and where it is based. Verify each with the issuing agency, because forms, fees and deadlines change.
| Item | What it is | What to verify at closing |
|---|---|---|
| USDOT number | The federal identification for a carrier that operates commercial vehicles under federal safety rules, shown on the vehicles with the carrier's name. Federal rules call for periodic updates | Status, the legal name on the record, and the date of the last update |
| Operating authority, or motor carrier (MC) number | Federal registration to haul for hire. A motor carrier may provide transportation only if registered | Active status, and whether it can be suspended or revoked for noncompliance |
| Insurance filing | Proof the carrier holds the required security, filed in the carrier's exact name | Insurer, effective date and name match |
| Unified Carrier Registration (UCR) | Annual fee paid to the base state, with the amount based on fleet size | Proof of payment for the current year, and the fleet size reported |
| State carrier registration or permit | Examples: Texas for covered intrastate carriers (some operations are exempt) and the California Motor Carrier Permit | The rule in each state where trucks run, and any change-of-ownership filing |
| Driver credentials and testing | Commercial driver's license (CDL), medical certificate, drug and alcohol program and Clearinghouse queries (federal drug and alcohol database checks) | The driver qualification files and testing records |
| Other fleet registrations | Fuel tax, apportioned plates (one plate that registers a truck for several states), heavy vehicle use tax and hazardous materials registration may apply | Ask the seller and a compliance advisor which apply |
States keep their own rules on safety and minimum insurance even though federal law applies. See licenses, permits and registrations when buying a business and buying a business in a licensed trade for the deal-side view.
What moves to you in a trucking deal, and what does not?
The first fork is the deal structure. In a stock or membership interest purchase you buy the same legal entity, with its registrations, policies, contracts, safety record and liabilities, known and unknown. In an asset purchase your new entity takes only what the agreement transfers, and policy rights cannot move without the insurer's consent. See asset purchase versus stock purchase.
For a carrier, four items need special care:
- Name match. Federal rules require the insurance endorsement and any surety bond to be issued in the exact name of the carrier. A lapsed or mismatched filing can end the right to operate, because federal registration stays in effect only while the security does.
- Authority and USDOT number. Whether and how operating authority and a USDOT number can move in a sale depends on current federal registration rules and practice, which have changed in recent years. Do not set the date trucks first run under your entity around an assumption. Ask deal counsel and the regulator in writing whether the seller's authority and number can move, whether your entity must apply and how long it takes.
- Safety record. A carrier rated unsatisfactory may not operate commercial vehicles after a federal deadline, and the regulator can revoke authority if the rating stands. A stock buyer inherits the rating and history. Whether a rating follows an asset buyer is unclear, so ask.
- Related carriers. Federal law lets the regulator act against a new applicant that does not disclose common ownership or control with a carrier that is or was unable to comply. If you already own other carriers, assume the regulator can see the whole group.
State rules show the pattern: the Texas statute calls for a registered carrier to file evidence of insurance when ownership changes, and the California statute suspends a Motor Carrier Permit immediately if coverage is cancelled. How a permit is treated in a sale is a question for the state motor vehicle agency and your counsel, so check each state where your trucks run. See do surety and license bonds transfer and vehicles still titled to the seller.
Which bonds does a trucking company need, and what do they really do?
A carrier can meet the federal financial responsibility requirement three ways: a policy carrying the federal endorsement, a surety bond filed for that purpose (in the carrier's exact name, so a new entity needs its own) or written approval to self-insure, which is narrow and not realistic for most small fleets. Federal rules separately require a freight broker or forwarder to hold a $75,000 surety bond or trust fund, which matters if your holding company also runs a brokerage. Some states and local agencies ask for permit or license bonds, so ask which apply.
A bond is not insurance for the carrier. The carrier is the principal, the bond protects the party that required it, and a surety that pays a claim can recover from the carrier and usually its owners. In general surety practice, a change of ownership usually means the bond is underwritten again with a new indemnity agreement, and a seller's personal indemnity generally survives the sale unless the surety releases it. Ask the surety and deal counsel. See the surety bonds overview.
What do customer, broker and lease contracts ask for?
Required limits vary by customer and lane, so there is no standard number to plan around. Read each insurance exhibit and compare it to your policies. The table lists the terms that tend to matter.
| Term | What it asks | What to check |
|---|---|---|
| Assignment and change of control | Whether the customer must consent to an assignment, or may end the agreement or change terms when ownership changes | Read the assignment and termination clauses in each major shipper and broker agreement and ask deal counsel what consent is needed. A change of control clause can matter even in a stock purchase |
| Additional insured | The customer is added to your policy at your request, usually with an indemnity promise | Whether the endorsement exists, on which policies, and for which parties. See additional insured |
| Waiver of subrogation, primary and noncontributory | Your insurer will not pursue the customer after paying a claim, and your policy pays first without asking the customer's policies to share | That each endorsement is on the policy before a loss. See waiver of subrogation and primary and noncontributory |
| Limits and cargo terms | Auto, cargo, general liability and umbrella amounts, and who bears cargo loss | Compare each to the policy |
| Equipment interchange | The Uniform Intermodal Interchange and Facilities Access Agreement (UIIA) points to an insurance packet and an ACORD 22 certificate form | The current packet, if you pull containers or chassis |
| Owner-operator leases | The lease must state the carrier's insurance obligation, who provides other coverage and any charge-back | Each inherited lease and the settlement practice |
| Yard, terminal or shop lease | Landlord insurance requirements such as additional insured status and minimum limits, and whether the lease can be assigned | Read the insurance clause and the assignment clause, and match them to the property and general liability policies |
A hypothetical example. A carrier's largest shipper, about 40 percent of revenue, sends renewal terms asking for additional insured status, a waiver of subrogation and primary and noncontributory wording within 30 days. The policies carry none of them. The buyer has to learn whether they can be added, how long it takes and what it costs, and the answer reaches debt service and the lender's view of customer concentration. See additional insured, waiver and primary noncontributory explained, how to check your contracts against your policies and certificates for motor carriers and shippers.
What does your lender need, and what does a certificate prove?
For loans backed by the Small Business Administration (SBA), tractors and trailers pledged as collateral need a lender's loss payable clause, covered in SBA lender insurance requirements. Other equipment lenders and factors set their own terms, so read each loan document.
A certificate of insurance is evidence that a policy existed on the date it was issued. It is not the policy, it does not add coverage, and it is not your federal insurance filing, which is a separate filing in the carrier's exact name. Check that the certificate, the policy and the filing show the same legal name. The seller may have issued certificates the current policies do not back up. See certificates the seller issued and what insurance a new trucking company owner needs.
What should you check before and after closing?
- List every registration, permit and filing and the legal name on each, then ask the regulator and counsel what transfers.
- Get the safety rating, inspection and audit history, and the driver and maintenance files.
- Collect every customer, broker and lease insurance exhibit and compare it to the policies, and read the assignment and change of control clauses in your major customer agreements and the yard lease.
- Confirm bonds, who signed the indemnity and what the surety will need.
- Confirm that no truck runs without the required filing in force. A quote is not coverage until the insurer binds it.
Morrow can review the contracts and policies you inherited, flag mismatches and request quotes. New terms depend on carrier underwriting, and the regulators and your attorney decide what the filings must say.
Keep reading
- Just Bought a Trucking Company? What Insurance Do You Need?
- Coverage Gaps New Owners of Trucking Companies Find
- Licenses, Permits and Registrations When Buying a Business
- When Customer Contracts Require Coverage You Do Not Have
- Do Surety and License Bonds Transfer When You Buy a Business?
- All guides for new business owners
Frequently asked questions
What licenses do I need to run a trucking company?
It depends on whether you haul for hire, cross state lines, haul hazardous materials and where you are based. Typically there is a federal USDOT number, operating authority for hauling for hire, an insurance filing, an annual fee to the base state and state registrations. Verify each with the agency.
Does the seller's operating authority transfer to me?
Do not assume either way. Federal rules on transferring authority and USDOT numbers have changed in recent years. Ask your attorney and the regulator whether the authority and number can move, whether your new entity must apply and how long it takes, and keep insurance filings in the correct legal name.
Is a surety bond the same as trucking insurance?
No. A bond protects the party that required it, and the surety expects to be repaid by the carrier and usually its owners. Federal rules let a carrier use a surety bond to show financial responsibility. Ask your broker which method is on file for your fleet.
Why do my customers want to be additional insureds?
An additional insured is added to your policy at your request, usually alongside an indemnity promise. Customers commonly ask for it with waiver of subrogation and primary and noncontributory wording. Check that each endorsement actually exists on your policies.
Does the certificate my broker sends a shipper prove my trucks are covered?
No. A certificate shows a policy existed on the date it was issued. It is not the policy, it does not add coverage, and it is not your federal insurance filing, which is a separate filing in the carrier's exact name. Ask for the endorsements a contract requires, and check that the certificate, the policy and the filing show the same legal name.
References
- 49 U.S.C. 13901, Requirement for registration
- 49 U.S.C. 13905, Effective periods of registration; suspension and revocation
- 49 U.S.C. 13906, Security of motor carriers, brokers and freight forwarders
- 49 U.S.C. 14504a, Unified carrier registration plan and agreement
- 49 U.S.C. 14501, Federal authority over intrastate transportation
- 49 U.S.C. 31144, Safety fitness of owners and operators
- 49 CFR 390.201, USDOT registration
- 49 CFR 365.405, Transfer of operating authority
- 49 CFR 385.13, Unsatisfactory rated motor carriers; prohibition on transportation
- 49 CFR 387.7, Financial responsibility required
- 49 CFR 387.15, Forms
- 49 CFR 387.307, Property broker surety bond or trust fund
- 49 CFR 376.12, Lease requirements
- Texas Department of Motor Vehicles: Motor Carriers
- Texas Transportation Code 643.103 (statute text via public.law)
- California Department of Motor Vehicles: Motor Carrier Services
- California Vehicle Code 34631.5 (statute text via public.law)
- IRMI: Additional insured, Waiver of subrogation and Primary and noncontributory definitions
- Intermodal Association of North America: UIIA
- The Surety and Fidelity Association of America: Contract Surety Bonds
- U.S. Small Business Administration: SOP 50 10 8.1, Lender and Development Company Loan Programs
Just bought a business? Get your insurance reviewed.
Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.
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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.