Indemnification Clauses in Freight Contracts: Canadian Developments

1. Indemnification Clauses in Freight Contracts: Canadian Developments International Road Union 9th Symposium of Lawyers Geneva, Switzerland February 24, 2012

2. The Canadian Trucking Industry Rise of Indemnification Clauses in USA Indemnification Trends in Canada Carrier Options Legal Backdrop: Canadian Conditions of Carriage Efforts Towards Reform Outline Canadian Trucking Alliance

3. The Canadian Trucking Industry • Dominant mode of freight transport – domestic, cross-border • Significant source of jobs, contribution to GDP • No economic regulation, low barriers to entry = significant competition on price and service • Split legal jurisdiction, federal & provincial – provinces enforce • Cross-border must also comply with US federal & state regulation, NAFTA • CTA federation represents ~ 4,500 carriers & industry suppliers Canadian Trucking Alliance

4. Rise of Indemnification Clauses USA • USA far more litigious than Canada; claims against carriers don’t always yield desired compensation, victims seek other parties to sue, i.e., shippers & 3PL’s • As liability on shippers/3PL’s increase, seek protection from carriers through indemnification clauses in freight contracts; “any and all” claims, including own negligence • Carriers accept liability/responsibility for own actions; but object to assuming that of another party; financial risk, insurance costs • Significant and successful industry lobby to introduce carrier legal protections; now anti-indemnification laws/regulations in 30 US states Canadian Trucking Alliance

5. Indemnification Trends in Canada • Major shippers often have plants and/or distribution centres on both sides of Canada – US border • Not surprisingly, indemnification clauses have begun to creep into Canadian freight contracts • Carriers have been aware for a number of years; issue brought to fore at CTA by insurance industry 2010 • So far no evidence of catastrophic harm to carriers or industry as a whole • But recognition that US-style legal protections may be warranted Canadian Trucking Alliance

6. Carrier Options • Just say “no”; immediate economic consequences, potential loss of lucrative freight contract/client • Another carrier will sign and carry the freight; so still an issue from industry standpoint • Seek to have terms amended; uneven power relationships • Assume other parties’ liability and increase insurance coverage • Pursue through courts if claim arises • Take your chances… Canadian Trucking Alliance

7. Legal Backdrop:Canadian Conditions of Carriage • Federal Conditions of Carriage regulations under Motor Vehicle Transport Act – short and to the point! • For extra-provincial carriers, conditions of carriage and limits of liability “are those set out in the laws of the province in which the transport originates” • Places extra and intra-provincial carriers on equal footing • But unlike state-level legislation/regulation in US, nothing in any province would prevent existence of an indemnification clause Canadian Trucking Alliance

8. Efforts Towards Reform • Very early in process; recognition of problem, background legal analysis, development of options • Federal Minister of Transport, all provincial ministers briefed • Amend federal Conditions of Carriage? Would cover large segment of industry, but leave intra carriers vulnerable • Amendments to provincial law/regulation would solve problem for all carriers • Pushback? Evident in US, logical to anticipate in Canada Canadian Trucking Alliance

9. Questions? Ron Lennox Vice President Canadian Trucking Alliance lennox@cantruck.ca Canadian Trucking Alliance