Sign at your own Risk
By Henry E. Seaton

August 2001
Reprinted from

Q In previous articles you have advised carriers to avoid broadly worded indemnity clauses and non-standard insurance requirements in shipper-drafted contracts. As a carrier, we find it difficult to negotiate around these provisions, particularly in contracts with large shippers. How large a risk do we run when we accept these provisions?

A Unfortunately, depending on how well you are capitalized, you can be accepting risk that could wipe you out. One recent case illustrates this point well. In Ralston Purina Company v. Condor Transport Inc. a Georgia state court case, a shipper sued a carrier under a contract provision that required the carrier to provide insurance to protect the carrier and the shipper from claims under workers’ compensation acts and from any other damage arising out of personal injury sustained by the carrier’s employee.

Condor’s driver was paid workers’ compensation benefits when dog food, loaded by the shipper, fell on his head as he opened the trailer doors. The driver sued the shipper for negligence and the shipper paid him $375,000 to settle the suit. Condor had no additional coverage when the shipper sued it for breach of contract.

Although the shipper appears to have been largely at fault, Condor could not convince a jury that the driver’s injuries were the result of the shipper’s sole negligence. The shipper-drafted contract language was given full force and effect, and the carrier was directed to indemnify the shipper to the shipper’s full settlement with the claimant plus $90,000 in attorney’s fees.

Although the motor carrier had property damage and bodily injury coverage as required by federal regulations, workers’ compensation and commercial general liability insurance, it had no coverage for this loss. Its two different insurers, who were joined as party defendants, escaped without owing a dime.

The Condor case demonstrates the problems that a carrier can encounter when it agrees to provide insurance or indemnity for any loss or damage for which it is not otherwise legally liable. All too frequently, carriers unwittingly sign agreements to accept additional liabilities for which they have no protection.
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