Kevin Anderson

The Oregon legislature likely will adopt an anti-indemnification law applicable to "motor carrier transportation contracts."  Anti-indemnification laws have been adopted in 26 states to date and are being considered in seven other states, with more to come.

Indemnity provisions in motor carrier transportation contracts (e.g., Shipper-Carrier, Broker-Carrier, Equipment Leases, etc.) have become commonplace in recent years. Shippers routinely demand that motor carriers and brokers hold harmless and indemnify them for any losses, damages, claims and the like arising in any way out of the service provided regardless of fault. Since shippers routinely require brokers to indemnify them, brokers, in turn, generally require their carriers to indemnify them. This means that the motor carrier, often an owner-operator or small fleet carrier with no negotiating power, must assume potential liabilities even if it did not cause the loss. Indemnity and hold harmless provisions allow the indemnitee (the one getting the benefit, most commonly the shipper) to transfer the risk of liability for losses, damages and claims to another even if it was at fault in causing the loss, damage or claim.

Anti-indemnification laws seek to correct this inequity by making such provisions void and requiring each party to be liable to the extent it was at fault in causing the loss. Thus, if passed in its present form, Oregon's law generally would declare void any provision in a motor carrier transportation contract that requires a party (the indemnitor)  to indemnify the other party (the indemnitee) for a liability caused in whole or in part by the negligence or intentional acts or omissions of that other party (the indemnitee). However, (a) the law would not void indemnification provisions that require the indemnitor to indemnify the indemnitee for losses that arise out of the indemnitor's fault or the fault of its agents, representative or subcontractors, and (b) would not void indemnity provisions in interchange agreements relating to intermodal chassis, intermodal containers or other intermodal equipment.

Since these laws are new, they have not yet been interpreted by the courts. Further, there is no uniformity in the laws being enacted by the states. The interpretation of the laws certainly will be an issue in the future. For example, under the proposed law, indemnity provisions remain valid if the indemnitor or its agents, representative or subcontractors are at fault. This exception is vague. Does the continued validity of the provision require that the indemnitor be solely (100%) at fault? Or will the provision continue to be valid if the indemnitor is only partially at fault? Will the indemnity provision remain valid even if the indemnitor is only 1% at fault and the indemnitee is 99% at fault? This seems to be what the exception states but, if that is the case, then it appears that the proposed law would only partially cure the existing problem.

It is important to note that the new law, if passed, will only apply to motor carrier transportation contracts entered into on or after the effective date of the 2011 Act, which  will be when the Governor signs the bill into law. 

We have prepared many motor carrier transportation contracts which contain indemnification provisions. Although those contracts will remain valid and unaffected by the new law, any contract executed after the effective date of the new law will need to comply with the new law. All parties to motor carrier transportation contracts need to review their contracts (a) to determine if the contracts need to be updated, (b) to determine which state law applies to the contracts, (c) to determine if the applicable state's statutes contain an anti-indemnification law, and (d) to determine the impact of the applicable state's anti-indemnification law has on the contract.

Kevin Anderson - Email Kevin  

Every carrier needs a Rules Tariff. If you do not have a Rules Tariff, you need to prepare one. We can help you prepare a Rules Tariff. Please contact John or Kevin to discuss our flat fee program for preparing your Rules Tariff.  

John Anderson

Question: Does the federal commercial zone exemption for Portland include Vancouver? And does the exemption encompass household goods?

Answer:  The answer to both questions is yes, which should resolve a dispute between state regulators and HHG carriers operating within the federal Portland commercial zone without  HHG authority.  The answer also extends to other carriers operating within the zone.

49 USC 13506(b)(1) exempts from economic regulation "transportation provided entirely in a municipality, in contiguous municipalities, or in a zone that is adjacent to, and commercially a part of, the municipality or municipalities, except when the transportation is under common control, management, or arrangement for a continuous carriage or shipment to or from a place outside the municipality, municipalities, or zone."  Several comments are necessary:

1. The exemption is not absolute, but can be eliminated, contracted or expanded as deemed necessary by the Surface Transportation Board ("STB"); 

2. The exemption extends to economic regulation only, not safety regulation;

3. The exemption applies only to interstate commerce, not to intrastate commerce;

4. For the transportation to be covered by the exemption, it must not be part of a continuous movement to or from a point outside the zone.

49 CFR Part 372, Subpart B, establishes specific commercial zones for 19 cities and a zone for other cities based on a population-mileage formula. Portland is covered by the population-mileage formula. With a population of over 500,000, the formula sets Portland's commercial zone at 15 miles.

That the Portland commercial zone includes Vancouver was decided years ago by the Interstate Commerce Commission in Commercial Zones and Terminal Areas, 46 M.C.C. 665, 698 (1946). More recently, in Maudlin, Oregon PUC Commissioner v Southwest Delivery Co, Inc., 1985 Fed. Car. Cases 37,198 (1985), the ICC noted that Southwest Delivery's Vancouver terminal was located within the Portland commercial zone in finding that Southwest was not operating in a circuitous fashion.  (The issue in Southwest Delivery was whether the carrier was operating in bad faith or as a subterfuge in order to convert Oregon intrastate into interstate traffic to avoid Oregon intrastate regulation.)

Further, the transportation of household goods is encompassed within the federal commercial zone exemption. When the ICC expanded the commercial zone population-mileage formula in 1977 it rejected the argument that specialized carriers (such as household goods carriers, auto transporters, and liquid and dry bulk commodities carriers) should be excluded from the commercial zone exemption. Commercial Zones and Terminal Areas, 128 M.C.C. 422; aff'd sub nom., Short Haul Survival Committee v U.S., 572 F2d 240 (9^th Cir. 1978).  

Thus, transportation of HHG and other commodities within the Portland commercial zone includes Vancouver and other points in Washington that are within the 15 mile zone.  However, the exemption is limited and includes only those shipments that are actually transported across the Oregon-Washington state line that are not part of a continuous movement from or to a point outside the zone. Oregon to Oregon and Washington to Washington shipments are not covered by the exemption since they would either be intrastate local cartage moves or interstate shipments that are part of a continuous movement. 

John Anderson -  Email John