Traditionally, motor carriers and shippers used contracts to set forth their respective obligations, which included shifting the risk of liability from one party to the other. Shippers have notoriously had more leverage in this situation, placing motor carriers in the precarious position of contractually assuming all the risk of liability, including liability for the shipper’s own negligence. In the last ten years, states have taken notice of such inequitable contracts and by 2016, 42 states had passed some form of an anti-indemnification statute, restricting the anti-indemnification clauses in shipper/motor carrier contracts.
The purpose of these statutes is twofold: to protect individuals and entities from assuming all liability for accidents in shipping contracts and to protect motor carriers from bearing the liability of a shipper’s own negligence. There are four categories of anti-indemnification statutes:
|Category of Anti-Indemnification Statute
|States Enacted in
|Statutes that prohibit motor carriers and shippers from contracting to indemnify the shipper against the shipper’s negligence-based and intentional-based liability.
|Statutes that prohibit unspecified third parties, such as a shipper, broker, etc., from requiring the motor carrier to indemnify the third parties for any negligence-based or intentional-based liability.
|Statutes that use boilerplate promisor and promisee language to prohibit indemnification for negligence-based or intentional-act based liability in any provision that affects a motor carrier agreement or contract.
|Statutes that use boiler plate promisor and promisee language to prohibit any non-motor carrier from requiring motor carriers to indemnify the non-motor carrier for its negligence-based and intentional-based liability.
There are five (5) states (Alabama, Arizona, North Dakota, Texas and Washington) with unique anti-indemnification statutes that do not fit in the four above categories. In 2016, there were only five (5) states (Delaware, Mississippi, New Hampshire, Rhode Island and Vermont) without transportation anti-indemnification laws.
These statutes generally prohibit indemnification provisions that shift risk between parties irrespective of fault; they do not prohibit provisions that shift risk to a negligent party. Additionally, if an indemnification provision is found in violation of an anti-indemnity statute, the provision will be held unenforceable. There is little case law regarding challenges to states’ anti-indemnification statutes at this time. However, there is a possibility that such statutes are preempted under federal law 49 U.S.C. 14501, which prohibits states from enacting or enforcing a law, regulation, or other provision related to price, route or service of any motor carrier with respect to transportation of property.
At this time, given the lacking information on state challenges, to avoid being left with no protection at all should a provision be found to violate a state’s anti-indemnification statute, parties should consider securing additional insurance coverage when entering such transportation contracts.
For more information regarding this article, please contact Miranda Russell at 410.230.1092 or firstname.lastname@example.org.