Issue 1, 2018

26 Oregon Trucking Associations, Inc. Oregon Truck Dispatch Law T rucks are responsible for moving a substantial portion of freight around the country and across the borders with Canada and Mexico. As with any shipping method, goods are under a certain amount of risk for damage or theft as they are transported to their final destination. This is why it is vital for those involved in the transport of goods to have a clear understanding of any indemnification clause that’s in place to cover the unexpected. Careful contracting is critical for everyone involved in transportation. Contracts change the risk allocation that would otherwise apply to liability for cargo loss or damage, other property damage, personal injury, and death. If a motor carrier has a 3PL affiliate, such as a broker, the risk allocation becomes more complicated. An axiom for 3PLs is that their contracts with service providers (such as motor carriers) must mirror their contracts with customers. If a 3PL is required by its customer to assume a risk, that risk should be passed on to the service provider. This is especially true with indemnification clauses. Indemnification clauses shift the responsibility to pay damages from one party to another, often without regard to who actually caused the loss. Too often, the indemnification clause in a contract is brushed over without careful review. Even when it is reviewed, the emphasis may be on creating in the service provider contract a mirror of the risk assumed in the customer contract. Motor carriers are protected in most states by anti- indemnification statutes. Although the language and interpretation may vary between states, more than 40 states now have anti-indemnification statutes. Oregon’s states: “… any provision in a motor carrier transportation contract that requires either party or either party’s surety or insurer to indemnify or hold harmless the other party against liability for death, personal injury or property damage caused in whole or in part by the negligence or intentional acts or omissions of the other party is void.” If a motor carrier contracts to assume responsibility for the acts of its customer (the shipper), the motor carrier often has a good legal argument that the indemnification is void and unenforceable. BEWARE The same is not true of 3PLs. The anti- indemnification statutes in most states refer specifically to motor carriers—and NOT to 3PLs. Oregon’s statute refers specifically to motor carrier transportation contracts. 3PLs cannot rely on the statutory language to void onerous indemnification provisions in their customer contracts, though the motor carrier may be able to void the same responsibilities set forth in 3PL/ Carrier agreements. Recently, the 8th Circuit U.S. Court of Appeals, in Chapman v. Hiland Partners GP Holdings, LLC, upheld this inequality by affirming that although a motor carrier may be protected by an anti- indemnification statute, the protection did not extend beyond the actual motor carrier. This has huge implications for 3PLs. In Chapman , the court affirmed the decision of the lower court that a master services agreement indemnification clause did not fall under state anti-indemnification clauses applicable to motor carriers. The indemnification provision was therefore enforceable despite the statutory anti- indemnification clause. Hiland owns and operates a natural gas plant in Watford City, North Dakota. Hiland and Missouri Basin entered into a master service contract in July 2008, wherein Missouri Basin agreed to perform various services for Hiland, including hauling water from the gas plant. As part of the master service contract, Missouri Basin agreed to “indemnify, Mirror, Mirror, You’ve Deceived Me Wrinkles in Drafting Indemnification Clauses By Martha J. Payne, Attorney at Benesch Friedlander Coplan & Arnoff, LLP Indemnification clauses shift the responsibility to pay damages from one party to another, often without regard to who actually caused the loss.