Shipper Contracts: Be Aware

There is a lot to think about when signing a contract with a new shipper including expenses, routes, equipment and more. One of the common oversights during the onboarding process is performing a proper analysis of the contract. Too often truckers are simply signing the contract without any sort of pushback. Shippers are drafting their contracts to place as much liability on their motor carrier partners as possible. Below are just a few examples:

• Waiver of Subrogation: Subrogation is the legal right held by insurance carriers to pursue a third party that caused a loss to their insured/client. A common scenario would be a third-party yard incident where a driver gets injured. It is possible the injury was caused by negligence by the shipper. The waiver of subrogation takes away your insurance company’s ability to recoup any payments made in this scenario.
• All-Risk/Waive Exclusions on Cargo Policy: There is no such thing as “All-Risk” Insurance. With every insurance policy comes exclusions, both related to commodities and/or causation of the loss. Contracts are still being drafted requiring a motor carrier to have a cargo policy which has no exclusions or is covered against any/all perils. It is crucial to fully understand your insurance policy when assessing new contracts.
• Language which may Affect Carmack: The Carmack Amendment was created with the purpose of achieving uniformity over rules that govern interstate shipments. It covers liabilities, obligations and rights of carriers and shippers regarding a cargo loss. The Carmack Amendment limits the motor carrier’s liability to the actual loss to the damaged property. Contract language can waive rights or responsibilities defined under Carmack. If waived, parties are left to the terms of the contract and state laws when determining who is responsible for cargo loss and damage.
• Additional Insured Request: It is common for shippers to request being added as an Additional Insured to the motor carrier’s auto policy. Many insurance companies will add blanket additional insured status to the policy; however, they may also require the Additional Insured request to be included in the contract. Without this language, it is possible that the endorsement is never truly processed leading to a potential issue with your shipper in a claim scenario.
• Anti-Indemnification: Many states have written anti-indemnification statutes to protect a motor carrier from having to indemnify a shipper for accidents, injuries or damages caused by negligent or wrongful acts of the shipper. It is important to understand the anti-indemnification language in the state in which the contract is drafted as they differ from state to state.

It should be a common practice for your team to review all contracts with your transportation attorney prior to execution. Many of the above points can be negotiated if you simply take the time to bring your concerns to the table. For additional questions, please do not hesitate to contact a member of the AssuredPartners Transportation Team.