South Dakota outlaws indemnity clauses

By Keith Goble, Land Line state legislative editor | Friday, March 09, 2012

A new law in South Dakota is intended to level the playing field for truck drivers doing business in the state.

Gov. Dennis Daugaard signed into law a bill to do away with certain indemnification clauses in trucking contracts. The clauses are set up to protect shippers or hold them harmless from anything that happens with a shipment.

Previously HB1073, the new law takes effect July 1, 2012.

South Dakota is the most recent of 31 states to outlaw the provisions in contracts. Lawmakers in states that include Alabama and Minnesota continue to consider similar protections.

Supporters say that indemnification clauses require freight carriers to take on liability for the negligence of shippers. As a result, truckers are responsible for trailer packing, even though shippers actually do the packing.

Sen. Mark Johnston, R-Sioux Falls, said the contract clauses are not only bad for the trucking industry but the public as a whole.

“These indemnification clauses should be prohibited as a matter of public policy because they have an adverse effect on transportation safety,” Johnston told lawmakers during a hearing on the bill. “Shifting liability to the trucker eliminates the shipper’s incentive to perform its duties in a prudent and reasonably safe manner.”

The new law outlaws provisions in motor carrier contracts that provide for shippers to be indemnified for losses caused by their own negligence and make them “void and unenforceable.”

Affected contracts are defined as “a contract or agreement” between a motor carrier and a shipper covering the transportation of property for hire by the motor carrier, entry on property to load, unload or transport property, including the storage of property.

The protection does not apply to intermodal chassis, containers, or other intermodal equipment.

OOIDA Director of Regulatory Affairs Joe Rajkovacz said this type of rule is good for all truck drivers coping with unreasonable demands from those who contract for transportation.

To view other legislative activities of interest for South Dakota, click here.

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