Starting a party bus business? If your bus will cross state lines, you’re very likely going to require a Federal Authority from the Federal Motor Carrier Safety Administration (often called “FMCSA”). In order to receive an “active” federal authority, your bus business will be required to meet the insurance requirements.
Your insurance requirements will depend on the number of passengers your vehicle(s) can travel with. Keep in mind, that the minimum levels of insurance are determined by the highest seating capacity of a vehicle within a fleet operating within the business. In other words, you can have five 14 passenger vehicles, which on their own would require $1.5 million in liability, albeit also own just one 16 passenger vehicle, and your requirements will be based on the 16 passenger vehicle, which is $5 million in liability. What this means is you want to be very deliberate and informed when purchasing vehicles and buses for your party bus business.
If you vehicle is designed to transport 16 or more passengers, including the driver, you’re expected to have at least $5 million in commercial auto insurance. However,
If you vehicle is designed to transport 15 or fewer passengers, including the driver, you’re expected to have at least $1.5 million in commercial auto insurance, which is a big difference.
There are a few notable exceptions that may apply to you, including:
These insurance requirements DO NOT apply to:
- A motor vehicle transporting only school children and school personnel to and from school;
- A motor vehicle providing taxicab service and having a seating capacity of less than 7 passengers and not operated on a regular route or between specified points;
- A motor vehicle carrying less than 16 people in a single daily round trip commuting to and from work;
- A motor vehicle operated by a motor carrier under contract providing transportation of pre- primary, primary, and secondary students for extracurricular trips organized sponsored, and paid by a school district.
The Federal Rules tell us what is and what isn’t a business that requires authority to operate in PART 365 – Interstate Operating Authority Rules
A for-hire passenger carrier is a person or company that provides transportation of passengers for compensation. You can be a for-hire passenger carrier regardless of whether:
- You are compensated directly or indirectly for the transportation service provided;
- The compensation is paid or not paid by the passengers; or
- You have a non-profit status. If you are operating a vehicle in interstate commerce as a for-hire motor carrier of passengers, you must obtain interstate operating authority unless you operate within a commercial zone.
Information about commercial zone exemptions and other types of exemptions can be found at 49 CFR Part 372. If you are transporting only school children and teachers to or from school, you are not required to obtain interstate operating authority. An active operating authority registration must be granted by FMCSA before you can transport passengers for hire in interstate commerce.
Even if you have an intrastate authority, simply crossing a state line when you’re required to have a federal authority to do so can result in massive fines (think in terms of thousands of dollars), plus there’s a strong chance your bus will be placed “out of service,” meaning all the passengers will have to get out and find alternative transportation. This could also cost thousands of dollars and likely result in poor reviews and very angry clients.
To be sure, there are times when crossing a state line is allowed. For example, some cities are in multiple states and the federal government makes exceptions for some economic city zones. Another, if you’re not actually “for-hire” at the time of crossing. This could be for a repair or some other travel that doesn’t include “for-hire” and/or a use that requires a federal authority.