Tuesday, February 15, 2011

A trucking term worth knowing

The word “indemnification” can be difficult to pronounce, and can also be difficult to grasp the meaning of. If you look up indemnification in the dictionary, you’re likely to find the explanation “to protect against damage, loss, or injury; insure.”

As far as truck drivers are concerned, it could be explained as wholly unfair. Here’s why: Indemnification clauses in motor carrier transportation contracts are set up to protect shippers or hold them harmless from anything that happens with a shipment.

Slightly more than half of all states have rules in place to forbid these clauses. Lawmakers in about 10 more states are actively pursuing the same protection for motor carriers.

Arizona is one of the states trying to level the playing field for trucking companies and professional drivers.

Joe Rajkovacz, OOIDA’s director of regulatory affairs, said this kind of legislation is critical for fairness in the trucking industry.

“Indemnification amounts to somebody else using your insurance to cover their negligence,” Rajkovacz said. “Shippers are riding on the back of a trucker’s insurance policy to protect themselves from their own negligence.”

The Arizona Trucking Association is leading the charge in the state to do away with indemnification clauses. Karen Rasmussen, president and CEO of the state trucking group, said the bill – HB2359 – addresses a common misconception in the trucking industry.

“People think their insurance will cover them for the shipper’s negligence. They don’t realize they’re signing their business away,” Rasmussen told Land Line.

She pointed out that insurers have urged motor carriers not to sign contracts with the clauses included “because insurance companies cannot adequately rate, nor cover, the risks a carrier assumes for shipper negligence.”

This issue must be addressed in all states. It is too important for truckers to simply sit back and accept as part of the cost of doing business.

For a map showing which states have or have not adopted anti-indemnification measures, click here.