Issue 1, 2018

28 Oregon Trucking Associations, Inc. Oregon Truck Dispatch engulfed Chapman. He was seriously injured, but survived. Chapman and his wife, Tracy, filed an action against Hiland, alleging negligence and loss of consortium. Hiland filed a third-party complaint against Missouri Basin and B&B, contending they were contractually obligated to indemnify and defend Hiland. Missouri Basin cross- claimed against B&B, seeking a defense and indemnification if it was required to indemnify Hiland. So, which party should ultimately be held responsible for the incident and the injuries to Chapman, if, as the contracts’ indemnification clauses suggest, everyone is exempt (hold or save harmless)? Hiland Missouri Basin Indemnification In the third-party complaint, Hiland sought indemnification from Missouri Basin, based on the indemnification clause in the master service contract between Hiland and Missouri Basin. Missouri Basin argued that the Hiland Missouri Basin master services contract was a motor carrier transportation contract and therefore the indemnification clause was void and unenforceable. Missouri Basin argued that the Hiland Missouri Basin master services contract was a motor carrier contract and therefore the indemnification clause was not enforceable. The court found, however, that nothing in the Hiland Missouri Basin master service contract identified it as a contract covering the transportation of property for hire. There was no reference to a motor carrier or to transportation services. The contract referred to Missouri Basin as a “Contractor” and stated that it will “from time to time... perform certain work or furnish certain services to Hiland.” Other portions of the Hiland Missouri Basin master service contract were generic and could have applied to carpenters, electricians, gate guards, surveyors, or welders. The trial court found, and the appeals court affirmed, that the Hiland Missouri Basin master services contract was not a motor carrier contract and that the anti- indemnification statute therefore did not apply. The indemnification clause in that contract was enforceable. Missouri Basin B&B Indemnification B&B filed a motion for partial summary judgment, contending the B&B master service contract with Missouri Basin did not require it to indemnify Missouri Basin or Hiland for Hiland’s negligence. The district court granted B&B’s motion, dismissing Hiland’s third-party complaint against B&B and Missouri Basin’s cross- claim against B&B. As for Hiland’s third- party complaint, the court concluded as a matter of law that B&B had no legal duty under the B&B master service contract to indemnify Hiland for its own negligence. The court further found that even if the B&B master service contract could be construed to require B&B to indemnify Hiland for its own negligence, the contract was void and unenforceable under the state anti-indemnification statute. With regard to Missouri Basin’s cross-claim, the court concluded as a matter of law that B&B had no legal obligation to indemnify Missouri Basin for any indemnification obligations Missouri Basin might have to Hiland. This case illustrates three basics of drafting contracts for 3PLs. 1. Customer agreements should be specifically drafted as transportation agreements. Using a general contract carries risks beyond those usually anticipated. There is no guarantee that even a contract that is specifically identified as a transportation agreement will protect a 3PL from an indemnification clause in its contract with a shipper. In the absence of specific identification as a transportation agreement, however, you should anticipate that courts will find that the agreement is not a transportation contract and therefore is not protected by anti-indemnification laws applicable to motor carriers. 2. Mirroring onerous provisions from a Customer contract into a 3PL/carrier contract is not enough. The motor carrier may be protected, as in the Hiland case, when the 3PL is not. 3. 3PLs should never agree to indemnify anyone for someone else’s acts. A 3PL should not indemnify a shipper for the shipper’s own acts. Nor should a 3PL indemnify anyone for the acts of a motor carrier or other service provider, or for the acts of a shipper. Careful drafting of contracts is essential. It is worth the time and expense to have a transportation attorney review your contracts, so you can avoid unpleasant surprises.  Martha Payne is an attorney in Benesch’s Transportation & Logistics Practice Group. She has extensive experience in drafting and negotiating domestic and international transportation, logistics, and supply chain management contracts. She advises shippers, carriers, and 3PLs of all sizes regarding cargo liability, risk management, contracting, and collection issues. Prior to joining Benesch, Martha had more than 30 years experience in the transportation industry, including terminal operations, accounting, pricing, collections, cargo claims management, and finally Senior Attorney for Consolidated Freightways. In the position of Senior Attorney, she was responsible for all transportation related legal issues, including contracts, cargo claims, regulatory matters, and litigation management. Indemnification Clauses, cont.