MCL 479.21, which is located in Michigan’s Motor Carrier Act, is less well known than its older cousin. MCL 691.991. Like MCL 691.991, it applies to indemnity agreements, but in the context of the transportation industry. This article seeks to shed light on the indemnity provisions of 479.21 by comparing and contrasting them to the provisions of MCL 691.991, and how it addresses various issues.
Are We Overlooking The Implications of this Statute?
Contractual indemnification provisions are present in a variety of practice areas, so it is important for practitioners to become very well familiar with their application. In the transportation area in particular, however, we practitioners have yet to fully realize the implications of the anti-indemnity provisions of MCL 479.21, which was adopted in 2013, well after the more familiary MCL 691.991. Since most insurance practitioners are intimately familiar with MCL 691.991, which prevents indemnitees from seeking indemnification for their sole negligence in the construction context, it is worth exploring how that statute differs from the less-utilized MCL 479.21 which applies to certain enumerated commercial vehicle contracts. Given MCL 479.21’s more recent enactment, understanding the impact it will have on indemnification agreements may prove difficult since there is little (if any) case law applying it, and a comparison to MCL 691.991 is the best path to understanding its younger cousin.
Although it was adopted more than five years ago, MCL 479.21 has no published case law discussing or applying it to a contractual provision. While an explanation for the lack of published case law may be that commercial carriers are extremely well-versed in the law and have yet to create a question for the courts to consider, this explanation is unlikely. A more likely explanation is that we as practitioners have yet to utilize this provision in our practice, leaving our clients exposed to potential and unnecessary risk transfer. In order to properly understand and counsel our clients as to MCL 479.21, it is necessary to make a comparative analysis of it and MCL 691.991. The Michigan Motor Carrier Act’s purpose is to regulate and supervise commercial vehicles, and MCL 479.21, the anti-indemnity provision, provides in pertinent part:
(1) A provision, clause, covenant, or agreement contained in, collateral to, or affecting a motor carrier transportation contract that purports to indemnify, defend, or hold harmless, or has the effect of indemnifying, defending, or holding harmless, the promisee from or against any liability for loss or damage resulting from the negligence or intentional acts or omissions of the promisee is against the public policy of this state and is void and unenforceable.
In other words, any indemnity provision within a motor carrier transportation contract that could transfer any and all risk away from the at-fault party is void as against public policy.
By comparison, this is the language found in MCL 691.991:
(1) In a contract for the design, construction, alteration, repair, or maintenance of a building, a structure, an appurtenance, an appliance, a highway, road, bridge, water line, sewer line, or other infrastructure, or any other improvement to real property, including moving, demolition, and excavating connected therewith, a provision purporting to indemnify the promisee against liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the promisee or indemnitee, his agents or employees, is against public policy and is void and unenforceable.
There are two key differences between MCL 479.21(1) and MCL 691.991(1).
First, MCL 479.21(1) does not contain the word “sole” as a modifier of the word “negligence.” The word “sole” signifies a possessive meaning; the negligence or intentional act must belong to the promisee and not another party. Without the presence of the word “sole”’ in MCL 479.21(1), there is a real possibility of a different statutory interpretation than that applied when MCL 691.991(1) is at issue. The phrase “…loss or damage resulting from the negligence or intentional acts or omissions of the promisee…” refers only to the promisee. Despite the slightly different phrasing, MCL 479.21(1) could reasonably be interpreted to have the same meaning as 691.991 as the statute only refers to the promisee’s negligence.
In other words, the promisee is able to seek indemnification for other parties’ negligence, but not its own, or “sole,” negligence. It can also be deduced that the Legislature’s policy concerns behind each statute are the same. The State of Michigan does not want to allow parties to contract away their share of liability for their own negligent or intentional acts. However, the failure to qualify the negligence as “sole” may lead courts to disregard the case law interpreting the meaning of the word “sole” in MCL 691.991(1). Thus, MCL 479.21 is not likely to create the confusion that has arisen with the construction indemnity statute, in which a person could receive indemnity as long as the indemnitee was not the only person at fault.
Broader Exclusions in MCL 479.21
Second, MCL 479.21(1) is more broadly worded than its construction counterpart. In MCL 691.991(1), there must be an indemnification provision that purports to indemnify the promisee for its ‘sole negligence’ to be void as against public policy. However, in MCL 479.21(1), the indemnification provision does not have to be contained in the agreement, it can be collateral to or affecting a contract that purports to indemnify the promisee for its negligent or ‘intentional’ acts. Note also that MCL 479.21(1) specifically includes intentional acts, while MCL 691.991(1) only refers to negligence, bringing in a broader array of the types of claims that cannot be indemnified.
Intermodal Contracts are Excluded from MCL 479.21
Another important aspect for a practitioner to keep in mind is whether the contract at issue actually qualifies as a “motor carrier transportation contract.” MCL 479.21 contains certain exemptions. Subsection (2) exempts “uniform intermodal interchange and facilities access agreement administered by the intermodal association of North America or other agreements providing for the interchange, use, or possession of intermodal chassis or other intermodal equipment.”
“Intermodal” means that two or more methods of transportation are used, such as trucking and rail. Essentially, this means that if the contract does not solely concern motor carrier transportation, then the sole negligence provision does not apply to the contract. This could limit the effectiveness of the statute as many transportation companies utilize intermodal interchange strategies, especially given a globalized economy.
MCL 479.21(3) provides certain statutory definitions of terms which should not be ignored in assessing whether this statute is applicable. A “motor carrier transportation contract” means a contract, agreement, or understanding for either “the transportation of property for compensation or hire by a motor carrier” or “entrance on property by a motor carrier for the purpose of loading, unloading, or transporting property for compensation or hire.” It also qualifies if a service incidental to the aforementioned activities is part of the contract, such as the storage of property.
Definition of “Promisee”
The statute also defines “promisee” as a party who is not a motor carrier, or a party to the contract who is a motor carrier but is not transporting property for compensation or hire. The definition of “promisee” includes agents, employees, servants, and even independent contractors who are directly responsible to the promisee. The inclusion of independent contractors is an important distinction as it prevents a party from arguing that the negligent actions of an independent contractor are not those of the party. Transportation companies commonly utilize owner-operators, or semi-truck drivers who independently own and operate their tractors, to accomplish their logistical needs. However, the statute makes it clear that an operator’s independent contractor status does not exempt the motor carrier from the anti-indemnification provision.
MCL 479.21 is largely unknown and untouched by litigators and the courts, but the more developed guidelines set forth in MCL 691.991, and by the cases interpreting it, allow us to better understand commercial vehicle contracts and protect our clients from void indemnity provisions. The statutes are similarly worded and likely share similar legislative intent; therefore, they are likely to be similarly interpreted. However, there are slight differences and unique carve-outs in MCL 479.21 to be mindful of, especially during the course of litigation.
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