BILL ANALYSIS



H.B. 1038
By: Bailey
3-21-95
Committee Report (Amended)


BACKGROUND

     Indemnification provisions are "exculpatory" clauses,
relieving one party of liability exposure by shifting that risk to
another party. As such, these provisions place undue burden on one
party.

     Currently, municipalities have the authority to insert
indemnification clauses into construction contracts. So, not only
do the contractors take responsibility for their negligence, but
they are forced to hold the cities harmless for the cities' sole
negligence.

     Often, contractors' insurance companies refuse to bond
contracts that contain indemnification clauses. As a result, needed
infrastructure projects are not built and construction companies
are planning layoffs. This clause also disproportionately hurts
minority- and women-owned construction companies.

PURPOSE

     House Bill 1038 prevents municipalities from inserting
indemnification clauses into construction contracts.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency or institution.

SECTION BY SECTION ANALYSIS

     SECTION 1. Amends Subchapter A, Chapter 252, Local Government
Code.  INDEMNIFICATION PROVISIONS IN MUNICIPAL CONSTRUCTION
CONTRACTS.  Sec. 252.004. This section states that a construction
contract with a municipality may not contain an indemnification
clause. A provision in violation of this section is void.

     SECTION 2. This Act applies only to a contract entered into on
or after the effective date of this Act.

     SECTION 3. Emergency clause.

EXPLANATION OF AMENDMENTS

Amendment #1, as amended, provides some technical changes. The
changes specify that a construction contract in which a
municipality is a party, may not contain a provision requiring a
contractor to indemnify and/or defend the municipality for damages
arising from any negligence of the municipality.

SUMMARY OF COMMITTEE ACTION

House Bill 1038 was considered in a public hearing on March 21,
1995.  Testifying in support of the bill were Richard W. Lewis,
representing himself; Don Conrad, representing Houston Contractors
Association; and Dawn Agee, representing Jerdon Construction
Company, Incorporated. Testifying against the bill was Cynthia
Hill, representing the City of Austin and the Texas Municipal
League.  The Business and Industry Committee considered one (1)
amendment to the bill.  An amendment to amendment #1 was offered. 
Without objection, amendment #1 as amended was adopted.  A motion
to report House Bill 1038, as amended to the full house with the
recommendation that it do pass and be printed carried with a
favorable record vote of eight (8) ayes, zero (0) nays, zero (0)
present-not-voting and one (1) absent.