BILL ANALYSIS S.B. 341 By: Armbrister (Lewis, Ron) 5-1-95 Committee Report (Unamended) BACKGROUND Most engineering design work associated with major construction projects for public and private entities is performed under negotiated contracts. Recently, engineering firms have been asked increasingly to agree to contractual provisions under which the engineer would be required to indemnify the owner against the owner's own negligent actions. This type of contract is uninsurable for engineers. Insurance companies will respond only to claims or losses which are a direct result of the insured's negligent acts, errors, or omissions. All professional liability policies sold today exclude liability assumed under a contract, if the contract language indemnifies a party for liabilities that are not a result of the insured's professional acts, errors, or omissions. Engineering firms view this policy as especially unfair due to the fact that engineers are prohibited from seeking contractual indemnification from other parties by Section 130.002 of the Civil Practices and Remedies Code. Under this statute, a contractor is not allowed to require a contractor to indemnify the engineer against the engineer's own negligence. In summary, an engineer is not permitted to pass his liability off onto another party (i.e. the contractor), but the engineer may be required contractually to accept the liability of the owner. PURPOSE The purpose of this bill is to prohibit owners from requesting or requiring engineers (or architects) to accept the responsibility for negligence that should belong solely to the owner. The goal is to make void and unenforceable any contract that requires an engineer to indemnify an owner or owner's agent against the owner's or agent's negligence, error, or omission. 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 SECTION 1. Amends Sections 130.001, 130.002. and 130.004, Civil Practice and Remedies Code, to provide that a provision in a construction agreement requiring an engineer or architect to hold harmless the owner or agent against liability for any type of damage incurred by the action or inaction of the owner or agent is void end unenforceable, except as provided for in Section 130.002 (c), which states that an agreement is enforceable if it allows an owner to be held harmless for liability that is the result of injury to the architect or engineer or the employees of the engineer or architect. This chapter does not apply to owners of an interest in real property or employees of such owners, except as provided for by Sections 130.002 (b) and (c). SECTION 2. Amends the caption of Chapter 130 to read: INDEMNIFICATION IN CERTAIN CONSTRUCTION CONTACTS SECTION 3. Provides that the bill applies only to construction contracts entered into after the effective date. SECTION 4. Emergency Clause - Effective immediately. SUMMARY OF COMMITTEE ACTION S.B. 341 was considered by the Committee on Civil Practices in a public hearing on April 26, 1995. The bill was reported favorably without amendment with the recommendation that it do pass and be printed, by a record vote of five ayes, zero nays, zero pnv and four absent.