BILL ANALYSIS C.S.H.B. 2443 By: Hilbert 4-20-95 Committee Report (Substituted) BACKGROUND Currently, on construction projects, owners are requiring general contractors to assume liability for the owner's negligence. Therefore, in case of an accident for which the owner is responsible, the general contractor will be responsible for the damages. Similarly, general contractors pass this liability to subcontractors. Currently, a subcontractor can be held liable for accidents even though the subcontractor was totally uninvolved in the accident and may not have been on the construction site for several months before the accident occurred. The net effect of this system of "pass the buck" liability is that it requires those who did not cause an accident and, who may be least able to afford it, to be liable for another's mistake. Further, it makes the subcontractor the "insurer" for the entire project and puts that person's company and insurance carrier at risk for actions of others. PURPOSE H.B. 2443 provides that each party that improves real property shall be liable for its negligence and prohibits transfer of this liability by contract or other means. The bill will not prohibit a party from making a written agreement that provides for it being liable for its own negligence. SECTION BY SECTION ANALYSIS SECTION 1. Amends Title 6, Civil Practices and Remedies Code, by adding Chapter 145. CHAPTER 145. LIABILITY ON CONTRACTS TO IMPROVE REAL PROPERTY. Section 145.001. TRANSFER OF LIABILITY PROHIBITED. A contractor who has entered into a contract with a subcontractor to make improvements to real property may not transfer through the contract: (1) liability for damages arising from its own negligence; or (2) duty to defend against a claim or action. Section 145.002. APPLICABILITY. This chapter does not affect the applicability, validity, and enforceability of: (1) Chapter 33, Civil Practices and Remedies Code (Comparative Responsibility); (2) Insurance contracts; (3) Workers' compensation benefits and protection; or (4) any right of contribution. SECTION 2. Effective Date - September 1, 1995. Applies only to liability for an act of negligence under a contract entered into on or after the effective date of the Act. SECTION 3. Emergency Clause. 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. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute deletes the original Sect. 145.001 "PARTY LIABLE FOR ITS OWN NEGLIGENCE" and renumbers remaining sections accordingly. In Sect. 145.002, the substitute adds Chapter 33, Civil Practices and Remedies Code (Comparative Responsibility), to the list of items this chapter does not affect. Renumbers remaining subsection accordingly. In Sect. 145.003, the substitute deletes the term "statutory" from the original subsection (3) regarding right of contribution. SUMMARY OF COMMITTEE ACTION H.B. 2443 was considered by the Civil Practices Committee in a public hearing on March 22, 1995. The following people testified in support of the bill: Jim Reynolds, representing the Mechanical Contractors Association-Austin; Larry G. Scrivner, representing himself; Richard Bruns, representing the American Subcontractors Association and the Texas Terrazzo Contractors Association; James N. Letsos, III, representing himself and Mechanical Contractors Association; Raymond Risk, representing the American Subcontractors Association, Associated Builders and Contractors, and the Construction Association Roundtable; Stephanie Stromberg, representing the Independent Electrical Contractors; and Steve Stagner, representing the Consulting Engineers Council of Texas. No one testified against or neutrally on the bill. The bill was referred to a subcommittee consisting of Representatives Hilbert (chair), Tillery, and Zbranek. After being recalled from subcommittee, H.B. 2443 considered in a public hearing on April 12, 1995. The committee considered a complete substitute for the bill. The substitute was adopted without objection. The bill was reported favorably as substituted, with the recommendation that it do pass and be printed, by a record vote of five ayes, zero nays, zero pnv and four absent.