Legislature(2009 - 2010)CAPITOL 17

03/11/2010 01:00 PM House TRANSPORTATION

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Postponed to 1:20 pm Today --
Moved Out of Committee
Moved CSHB 366(TRA) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
        HB 366-MOTOR CARRIER INDEMNIFICATION AGREEMENTS                                                                     
1:53:53 PM                                                                                                                    
CHAIR P. WILSON  announced that the next order  of business would                                                               
be  HOUSE  BILL NO.  366,  "An  Act relating  to  indemnification                                                               
agreements   that   relate   to  motor   carrier   transportation                                                               
1:54:12 PM                                                                                                                    
REPRESENTATIVE JOHNSON as prime sponsor  of the bill presented HB
366.  He provided a brief history  of the genesis of HB 366.  The                                                               
need for  this bill  came from within  the trucking  and shipping                                                               
industry.   He characterized the indemnification  contained in HB
366  as  similar  to  indemnification  language  the  legislature                                                               
considered last  year that applied  to government  and university                                                               
agencies.   He related that  some large  transportation companies                                                               
are  forcing  small  transportation companies  to  take  complete                                                               
responsibility and  liability for transporting goods.   This bill                                                               
basically says,  "You are responsible  for yourself and  your own                                                               
mistakes and  you cannot hold  someone else responsible  for your                                                               
mistakes and enter that into a contract."                                                                                       
REPRESENTATIVE  JOHNSON paraphrased  from  the sponsor  statement                                                               
which read as follows:                                                                                                          
      The purpose of this legislation is to promote safety                                                                      
     in the carriage of goods by motor carrier.                                                                                 
     A motor carrier must  generally comply with the Federal                                                                    
     Motor   Carrier   Safety   Regulations  while   it   is                                                                    
     transporting goods,  and is also subject  to additional                                                                    
     common  law or  statutory  duties or  responsibilities.                                                                    
     Likewise,  shippers or  other  parties frequently  have                                                                    
     legal duties and responsibilities  to fulfill when they                                                                    
     provide  goods   for  transportation.  More   and  more                                                                    
     frequently,  however,  shippers  are  pressuring  motor                                                                    
     carriers to  provide transportation under  contracts in                                                                    
     which  the   motor  carrier  contractually   agrees  to                                                                    
     indemnify  and  hold  harmless   the  shipper  for  the                                                                    
     shipper's  own failure  to meet  its  legal duties  and                                                                    
     The  effect  of  these indemnification  clauses  is  to                                                                    
     eliminate  the incentive  for the  shipper to  meet its                                                                    
     responsibilities   and   duties   in  a   prudent   and                                                                    
     reasonable manner. In essence,  such a clause makes the                                                                    
     motor carrier  the shipper's  insurer. Such  a shifting                                                                    
     of  liability through  contract completely  contradicts                                                                    
     sound  public policy.  One of  the primary  reasons for                                                                    
     assigning legal liability is  to persuade the offending                                                                    
     party  to regulate  its  behavior.  However, where  the                                                                    
     shipper is at fault  but is nevertheless indemnified by                                                                    
     the motor  carrier, there is nothing  the motor carrier                                                                    
     can  do  to change  its  own  behavior to  make  things                                                                    
     safer. That ability lies solely with the shipper.                                                                          
     A similar  problem with respect to  public construction                                                                    
     contracts   has   already   been   addressed   by   the                                                                    
     legislature in AS 45.45.900.                                                                                               
     This legislation voids  contractual provisions in motor                                                                    
     carrier  transportation  contracts   that  indemnify  a                                                                    
     shipper for the shipper's  own negligent or intentional                                                                    
     acts or  omissions which lead  to claims.  It maintains                                                                    
     the incentive for a shipper that  is a party to a motor                                                                    
     carrier  transportation contract  to perform  its legal                                                                    
     obligations  and duties  in  a  prudent and  reasonably                                                                    
     safe   manner.  This   legislation   now  includes   an                                                                    
     indemnification  clause for  the shippers  and excludes                                                                    
     the parties  to the Uniform Intermodal  Interchange and                                                                    
     Facilities Access Agreements.                                                                                              
1:55:09 PM                                                                                                                    
JEANNE OSTNES, Staff, Representative  Craig Johnson, Alaska State                                                               
Legislature,  on  behalf  of the  prime  sponsor,  Representative                                                               
Craig Johnson,  stated the  shippers agreed to  the bill  with an                                                               
amendment that was handed out in committee today.                                                                               
1:55:51 PM                                                                                                                    
REPRESENTATIVE JOHNSON made a motion to adopt Amendment 1,                                                                      
labeled 26-LS1434\R.2, Bannister, 3/10/10, which read as                                                                        
     Page 1, line 5:                                                                                                            
          Delete "by motor carrier"                                                                                           
     Page 1, line 7, following "that":                                                                                          
          Insert "(1)"                                                                                                          
     Page 1, line 10, following "person":                                                                                       
          Insert "; or                                                                                                          
               (2)  the shipping person will indemnify,                                                                         
     defend, or  hold the motor  carrier harmless,  or agree                                                                    
     to  a provision  that has  the effect  of indemnifying,                                                                    
     defending, or  holding a  motor carrier  harmless, from                                                                    
     claims  or liability  for  the negligence,  intentional                                                                    
     acts, or intentional omissions of the motor carrier"                                                                       
     Page 2, line 2, following "carrier":                                                                                       
          Insert "if the agent, employee, servant, or                                                                           
     independent contractor provides  services in connection                                                                    
     with  the particular  transportation services  contract                                                                    
     to which (a) of this section is being applied"                                                                             
     Page 2, line 8, following "person":                                                                                        
          Insert "if the agent, employee, servant, or                                                                           
     independent contractor provides  services in connection                                                                    
     with  the particular  transportation services  contract                                                                    
     to which (a) is being applied"                                                                                             
     Page 2, line 17, following "person":                                                                                       
          Insert "or a motor carrier"                                                                                           
     Page 2, line 18:                                                                                                           
          Delete "has the meaning"                                                                                              
         Insert "and "motor carrier" have the meanings"                                                                         
REPRESENTATIVE GRUENBERG objected for the purpose of discussion.                                                                
1:56:15 PM                                                                                                                    
MS.  OSTNES characterized  Amendment 1  as a  "win-win situation"                                                               
which  represents   an  agreement  between  shipping   and  motor                                                               
carriers  that  will indemnify  and  hold  harmless actions  that                                                               
happen during  transportation.  In  response to Chair  P. Wilson,                                                               
she related  a scenario in  which a person transports  china that                                                               
was appropriately  packed by  the shipper  and was  broken during                                                               
transport.  The  question arises who is the  responsible party to                                                               
pay the  damages and whether  it would be the  shipper/packer who                                                               
may not  have improperly packed the  item or if the  truck rolled                                                               
over due  to the driver.   Since the shipper and  trucker is held                                                               
harmless under  the bill, deciding the  responsible party depends                                                               
on what actually happened.                                                                                                      
1:57:41 PM                                                                                                                    
CHAIR P. WILSON asked whether the  matter would be decided by the                                                               
courts.    She commented  that  the  person in  possession  would                                                               
likely be held responsible.                                                                                                     
MS. OSTNES  answered no.  She  stated that the party  who created                                                               
the problem is responsible for the damage.                                                                                      
MS. OSTNES  restated that  Amendment 1 is  a "win  win" situation                                                               
since  both  parties'  actions are  evaluated  to  determine  the                                                               
responsible party.                                                                                                              
1:58:56 PM                                                                                                                    
AVES THOMPSON,  Executive Director, Alaska  Trucking Association,                                                               
related another  scenario for  members to  illustrate responsible                                                               
parties.    In  his  scenario,  a motor  carrier  has  agreed  to                                                               
transport fuel.  If the fuel  truck pulled in to the loading dock                                                               
and the  shipper's employee  turned the  wrong valve  and spilled                                                               
the fuel, the shipper would  be held responsible for any damages.                                                               
He  pointed out  the issue  the  bill addresses  is because  some                                                               
contracts are being written to  indemnify the shipper and require                                                               
the carrier to pay for the  damages.  He described an instance in                                                               
which a piece  of equipment is shipped, but must  be offloaded by                                                               
forklift.  He related that  the carrier pulled into the shipper's                                                               
yard  and  the shipper  used  his/her  employee and  forklift  to                                                               
transfer the equipment  and the load broke free  and was damaged.                                                               
Currently,  some  contracts  are  written  that  the  carrier  is                                                               
responsible  if the  freight breaks  free,  regardless of  fault.                                                               
This bill would  place the responsibility on the  employee who is                                                               
negligent, whether the negligent  employee is the motor carrier's                                                               
employee or the shipper's employee.                                                                                             
2:00:41 PM                                                                                                                    
REPRESENTATIVE  JOHANSEN   related  a   scenario  in   which  the                                                               
warehouseman takes the  pallet off the truck and  the pallet tips                                                               
and breaks  the pallet  contents.  The  warehouseman may  say the                                                               
load was  not secure, but the  trucker may insist the  load was a                                                               
secure  load.   He  asked  who would  make  the determination  of                                                               
MR.  THOMPSON  offered  his  belief  that  the  matter  would  be                                                               
adjudicated and  the respective insurance companies  would review                                                               
the  situation.   He related  that HB  366 would  not change  the                                                               
system of  assigning responsibility,  acknowledging that  often a                                                               
mishap  is  not  solely  due  to the  negligence  of  one  party.                                                               
However, one  party cannot contractually  demand the  other party                                                               
must assume  liability for issues  that arise outside  of his/her                                                               
2:02:54 PM                                                                                                                    
REPRESENTATIVE GRUENBERG referred  to page 2, line 12  of HB 366.                                                               
He  suggested that  language could  be added  to include  storage                                                               
since  a third  party  could  also be  involved.   Third  parties                                                               
should  not be  allowed to  escape from  negligence if  the third                                                               
party did not properly pack the item, he stated.                                                                                
REPRESENTATIVE JOHNSON offered  his support for Amendment  1.  He                                                               
offered his  belief that the intent  of the bill and  Amendment 1                                                               
is "to do what is fair."   He related instances in which trucking                                                               
companies  are  often required  to  sign  contracts in  order  to                                                               
obtain  work.    These  contracts shift  the  responsibility  for                                                               
liability  solely to  the truckers,  which could  also result  in                                                               
increased  insurance and  shipping costs.   The  purpose of  this                                                               
bill is  to protect  both the transporter  and the  shipper since                                                               
neither  should be  held liable  for damage  that he/she  did not                                                               
cause to  happen.  The result  of Amendment 1 is  that when goods                                                               
are  damaged, the  person who  caused  the damage  would be  held                                                               
liable for the damage.                                                                                                          
2:07:25 PM                                                                                                                    
CHAIR P.  WILSON related  her understanding  that Amendment  1 is                                                               
the result of an agreement  between the trucking industry and the                                                               
REPRESENTATIVE JOHNSON  answered that the language  is an attempt                                                               
to share the joint and several liability.                                                                                       
2:07:56 PM                                                                                                                    
REPRESENTATIVE GRUENBERG removed his objection.                                                                                 
There being no further objection, Amendment 1 was adopted.                                                                      
2:08:17 PM                                                                                                                    
REPRESENTATIVE GRUENBERG made  a motion to adopt  Amendment 2, to                                                               
add language  on page 2,  line 12,  after, "the" to  add "packing                                                               
and storage."   Thus, subparagraph  (C) would read,  "providing a                                                               
service,  including   the  packing   and  storage   of  property,                                                               
incidental to (A) or (B) of this paragraph."                                                                                    
CHAIR P. WILSON objected for the purpose of discussion.                                                                         
REPRESENTATIVE JOHNSON  said he  did not think  he had  a problem                                                               
with the  intent of Amendment  2, but he asked  for clarification                                                               
on  third parties.    He related  a scenario  in  which a  person                                                               
shipping antlers  took the  antlers to a  packing store,  but the                                                               
packing store  subsequently contracted  with yet  another company                                                               
to pack the antlers.                                                                                                            
CHAIR P. WILSON related her  understanding that HB 366 relates to                                                               
transportation services and not to packaging services.                                                                          
REPRESENTATIVE GRUENBERG  clarified that the process  would begin                                                               
at the time  the goods are loaded until the  goods are delivered.                                                               
He  stated that  packing  is  an integral  part  of the  shipping                                                               
process.   The  purpose of  Amendment 2  is to  ensure that  each                                                               
party is  only responsible  for his/her  own negligence,  but not                                                               
for anyone else's negligence.   In this context, "including means                                                               
including, but not  limited to."  He related that  if a situation                                                               
arose  in which  an intermediate  packer was  involved, that  the                                                               
third party  would also  be held responsible.   He  reported that                                                               
this responsibility  is called comparative negligence  and can be                                                               
apportioned so  each party is  held responsible, and may  be held                                                               
responsible  for  a portion  of  the  damage.   He  characterized                                                               
Amendment  2 as  a "clear  and simple  amendment" to  ensure that                                                               
each party is responsible for only his/her own negligence.                                                                      
2:11:26 PM                                                                                                                    
MS.  OSTNES  referred  again  to  page 2,  line  12  and  to  the                                                               
placement of  the ","  after "service."   Thus, packing  could be                                                               
considered part of the service.                                                                                                 
REPRESENTATIVE GRUENBERG agreed.                                                                                                
2:12:01 PM                                                                                                                    
REPRESENTATIVE JOHNSON  stated that he  did not currently  have a                                                               
problem with  Amendment 2.   He asked to  work with the  maker of                                                               
the  amendment  in   the  next  committee  of   referral  if  any                                                               
additional issue arises.                                                                                                        
REPRESENTATIVE GRUENBERG  committed to  work with the  sponsor if                                                               
an issue was discovered.                                                                                                        
2:12:37 PM                                                                                                                    
CHAIR WILSON removed her objection.                                                                                             
There being no further objection, Amendment 2 was adopted.                                                                      
2:12:57 PM                                                                                                                    
CHUCK  ONSTOTT,  General  Manager; Midnight  Sun  Transportation,                                                               
President, Alaska  Trucking Association,  stated that he  had not                                                               
yet reviewed  the amendments  being discussed,  but the  from the                                                               
discussions, he thought  that is what is needed.   He said, "In a                                                               
nutshell the  legislation is to  help protect the  small trucking                                                               
companies  from the  larger businesses  that are  not willing  to                                                               
take on their responsibilities."                                                                                                
2:14:20 PM                                                                                                                    
JAMES DOYLE, Owner, Weaver Brothers  Trucking, stated that he has                                                               
been in business  50 years.  He offered  his wholehearted support                                                               
for the  bill.  He  stated that he  personally has been  asked to                                                               
sign agreements to  take on other people's  responsibilities.  He                                                               
must have insurance,  but did not believe that he  should have to                                                               
supply  insurance  for his  company  as  well as  someone  else's                                                               
2:15:26 PM                                                                                                                    
MR.  DOYLE  recalled an  instance  in  which a  trucking  company                                                               
delivered fuel to  a gas station.  Several days  later a customer                                                               
came in filled  up a small gas can and  static electricity caused                                                               
a fire, which  caused damage to the vehicle and  the person.  The                                                               
trucking  company  had signed  one  of  the previously  mentioned                                                               
agreements and was  held liable for the damages in  the amount of                                                               
$1 million.   This  bill will  "make things  right" so  that each                                                               
party takes care of their own  liability.  He urged the committee                                                               
to vote yes.                                                                                                                    
2:16:48 PM                                                                                                                    
CHAIR P.  WILSON, after first  determining no one else  wished to                                                               
testify, closed public testimony on HB 366.                                                                                     
2:17:02 PM                                                                                                                    
REPRESENTATIVE JOHANSEN recalled the  original bill as introduced                                                               
and the issues.  He asked if the issues had been resolved.                                                                      
MS. OSTNES  stated that HB  366 was  initiated at the  request of                                                               
the motor  carriers.   She related that  within the  last several                                                               
days the  shippers discussed  the bill.   She surmised  that some                                                               
large  oil  companies are  interested  in  the bill  and  British                                                               
Petroleum  reviewed  the  language.     In  further  response  to                                                               
Representative  Johansen, she  agreed  that  the truckers  worked                                                               
with the shippers and the issues have been resolved in the bill.                                                                
2:19:14 PM                                                                                                                    
REPRESENTATIVE  JOHNSON  thought  the attorneys  would  not  have                                                               
problems  with the  bill since  they will  always try  to protect                                                               
their clients.                                                                                                                  
2:19:51 PM                                                                                                                    
REPRESENTATIVE T. WILSON moved to  report HB 366, as amended, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying fiscal  notes.  There  being no objection,  the CSHB
366(TRA)  was reported  from  the  House Transportation  Standing                                                               
2:20:14 PM                                                                                                                    
The committee took a brief at-ease from 2:20 p.m. to 2:26 p.m.                                                                  

Document Name Date/Time Subjects
HB267 sponsor stmt TRA.pdf HTRA 3/11/2010 1:00:00 PM
HTRA 3/16/2010 1:00:00 PM
HB 267
hb 267 backup TRA.pdf HTRA 3/11/2010 1:00:00 PM
HTRA 3/16/2010 1:00:00 PM
HB 267
HB366 Backup TRA.pdf HTRA 3/11/2010 1:00:00 PM
HB 366
HB366 Sectional TRA.pdf HTRA 3/11/2010 1:00:00 PM
HB 366
HB366 Sponsor strmt TRA.pdf HTRA 3/11/2010 1:00:00 PM
HB 366
HB354 Sponsor Statement.pdf HTRA 3/11/2010 1:00:00 PM
HB 354
HB354 Sponsor Statement TRA.pdf HTRA 3/11/2010 1:00:00 PM
HB 354
HB354 Sponsor Statement TRA.pdf HTRA 3/11/2010 1:00:00 PM
HB 354