Have you heard? New York became the most recent state to adopt anti-indemnity laws. These are laws that hold trucking companies responsible for damaged goods, regardless of who is at fault.
New York Assemblywoman Donna Lupardo stated that “the way trucking contracts are written; companies are often faced with burdensome liabilities when damage to goods is not their fault.”
Most trucking associations are in favor of anti-indemnification efforts. But what, in the end, does this all mean?
A Historical Perspective
Traditionally, a fleet and shipper used a contract to put their understandings and business agreements into clear and understandable terms. Still, as part of the contract negotiation process, one side inevitably tries to shift the risk of responsibility to the other party.
What one thing almost everyone involved with these negotiations can agree on is that the indemnity provision is a contentious issue. This provision essentially obligates one party to assume responsibility of any damage or claim arising from the contract, regardless of fault.
While some agreements only kick in when damages are caused by the indemnifying party, often these are far-reaching contracts that obligate the motor carrier to bear responsibility even when they may not be at fault.
Here is one example:
- A shipper requires that a motor carrier indemnify them for any and all claims related to injury, death or damage arising out of the performance of the agreement.
This statement is so overly broad that no matter what happens, the motor carrier will be responsible for damages even if it bears no degree of fault for the claim.
Still, some contracts soften this a bit, creating an exception in cases where the shipper is “solely” at fault. Think this is fair? Look at is this way: The shipper only accepts liability if it is the ONLY party at fault. So, if the motor carrier is at fault by even 1 percent, they bear 100 percent of the responsibility.
States Get Involved
Therefore New York state has stepped in. State legislatures around the country have begun to recognize the problems that arise from inequitable arrangements brought on by unfair indemnity agreements.
At the point of this publication, at least 16 states have passed some sort of legislation designed to help level the playing field for all parties involved.
These states include:
- New Mexico
- North Carolina
- North Dakota
- South Carolina
- West Virginia
As you can see from the breadth of states who have passed these measures, this is largely a bi-partisan issue.
And while the language varies widely, some states make it quite clear that indemnity provisions in contracts that allow an indemnified party to escape responsibility for damages resulting from its own negligence are strictly prohibited.
The Last Word
What’s the moral of the story here? Trucking Companies should carefully consider which state’s law they want to apply to their transportation contract. Parties entering a transportation agreement would be wise to utilize a statute that allows them to craft a favorable indemnification term.
Today, one way companies do this is through utilizing a global trade management software. A visionary fleet will take a software investment and utilize it to give themselves a strategic advantage.
Global trade management software allows you to tap into the potential of the digital age and craft contracts that won’t leave you on the wrong end of an agreement. Trucking Companies now offer software packages that allow them to request contracts built on their own terms.
The fact is, this isn’t a problem that’s going away any time. So how does your fleet plan to address indemnification terms that aren’t in your bottom line’s best interest?