Two states adopt, advance rules to forbid indemnity clauses

By Keith Goble, Land Line state legislative editor | Tuesday, April 10, 2012

Truck drivers in Minnesota soon will have the law on their side when it comes to an unfair clause in motor carrier contracts. A nearly identical Alabama bill is halfway through that statehouse.

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

Effective immediately, Minnesota joins 31 other states, including each of its neighbors, to outlaw the provisions in contracts that provide for shippers to be indemnified for losses caused by their own negligence and make them “void and unenforceable.”

OOIDA Member Joyce Brenny, owner of Brenny Specialized Transportation in St. Joseph, MN, testified at the statehouse in support of banning the clauses from contracts. Brenny, who also serves as chairwoman for the Minnesota Trucking Association, said she is relieved that the state has acted in the best interest of truck drivers.

“Hopefully this will create a more level playing field,” Brenny told Land Line. “In the past, customers have told us they will go somewhere else if we won’t sign a hold harmless agreement. With the more states we get on board these customers are not going to have someplace else to go. It will be an industry-wide norm.”

Affected contracts are defined as “a contract, agreement, or understanding” 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.

In Alabama, House lawmakers voted 69-12 to advance a nearly identical effort.

Supporters say the contract clauses are bad for the trucking industry, and they create a safety issue because the shipper’s incentive to perform its duties in a prudent and reasonably safe manner is eliminated.

Joe Rajkovacz, OOIDA’s director of regulatory affairs, said indemnification amounts to somebody else using a trucker’s insurance to cover their negligence. He said the growing number of states to enact protections is the best way to protect truckers.

“Shippers and receivers can’t be allowed to shift their insurance costs to truckers simply by using bullying tactics when contracting for service or holding truckers hostage when delivering their freight. This is a true example of ‘leveling the playing field.’ ”

The bill – HB339 – is awaiting consideration in the Senate Judiciary Committee.

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