By Zbranek H.B. No. 1526
74R5985 DLF-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to indemnity provisions in certain agreements.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 127, Civil Practice and Remedies Code, is
1-5 amended to read as follows:
1-6 CHAPTER 127. CERTAIN INDEMNITY PROVISIONS
1-7 <IN CERTAIN MINERAL AGREEMENTS>
1-8 SUBCHAPTER A. GENERAL PROVISIONS
1-9 Sec. 127.001. Definitions. In this chapter:
1-10 (1) "Agreement pertaining to a well for oil, gas, or
1-11 water or to a mine for a mineral":
1-12 (A) means:
1-13 (i) a written or oral agreement or
1-14 understanding concerning the rendering of well or mine services; or
1-15 (ii) an agreement to perform a part of
1-16 those services or an act collateral to those services, including
1-17 furnishing or renting equipment, incidental transportation, or
1-18 other goods and services furnished in connection with the services;
1-19 but
1-20 (B) does not include a joint operating
1-21 agreement.
1-22 (2) "Agreement pertaining to a refinery, chemical
1-23 plant, or power plant" means a construction contract relating to a
1-24 refinery, chemical plant, or power plant or any structure or
2-1 fixture related to the refinery, chemical plant, or power plant.
2-2 (3) "Construction contract" means a written or oral
2-3 agreement relating to the construction, alteration, demolition, or
2-4 maintenance of a building, other structure, or fixture.
2-5 (4) "Chemical plant" means a facility in which
2-6 chemicals are produced or refined or stored by a refiner or
2-7 producer of chemicals.
2-8 (5) "Design defect" means a condition inherent in the
2-9 design of a structure, including a refinery, chemical plant, or
2-10 power plant, or a fixture, that renders the structure or fixture
2-11 unfit for its intended use. The term includes a condition that
2-12 renders the structure or fixture dangerous for its intended use.
2-13 (6) "Joint operating agreement" means an agreement
2-14 between or among holders of working interests or operating rights
2-15 for the joint exploration, development, operation, or production of
2-16 minerals.
2-17 (7) <(3)> "Mutual indemnity obligation" means an
2-18 indemnity obligation in an agreement pertaining to a well for oil,
2-19 gas, or water or to a mine for a mineral in which the parties agree
2-20 to indemnify each other and each other's contractors and their
2-21 employees against loss, liability, or damages arising in connection
2-22 with bodily injury, death, and damage to property of the respective
2-23 employees, contractors or their employees, and invitees of each
2-24 party arising out of or resulting from the performance of the
2-25 agreement.
2-26 (8) "Power plant" means a facility designed and used
2-27 for the generation of electric power and energy or the transmission
3-1 of electric power and energy.
3-2 (9) "Refinery" means an installation that refines,
3-3 treats, prepares, or processes raw or unrefined petroleum.
3-4 (10) <(4)> "Well or mine service":
3-5 (A) includes:
3-6 (i) drilling, deepening, reworking,
3-7 repairing, improving, testing, treating, perforating, acidizing,
3-8 logging, conditioning, purchasing, gathering, storing, or
3-9 transporting oil, brine water, fresh water, produced water,
3-10 condensate, petroleum products, or other liquid commodities, or
3-11 otherwise rendering services in connection with a well drilled to
3-12 produce or dispose of oil, gas, other minerals or water; and
3-13 (ii) designing, excavating, constructing,
3-14 improving, or otherwise rendering services in connection with a
3-15 mine shaft, drift, or other structure intended for use in exploring
3-16 for or producing a mineral; but
3-17 (B) does not include:
3-18 (i) purchasing, selling, gathering,
3-19 storing, or transporting gas or natural gas liquids by pipeline or
3-20 fixed associated facilities; or
3-21 (ii) construction, maintenance, or repair
3-22 of oil, natural gas liquids, or gas pipelines or fixed associated
3-23 facilities.
3-24 (11) <(5)> "Wild well" means a well from which the
3-25 escape of oil or gas is not intended and cannot be controlled by
3-26 equipment used in normal drilling practice.
3-27 (12) <(6)> "Unilateral indemnity obligation" means an
4-1 indemnity obligation in an agreement pertaining to a well for oil,
4-2 gas, or water or to a mine for a mineral in which one of the
4-3 parties as indemnitor agrees to indemnify the other party as
4-4 indemnitee with respect to claims for personal injury or death to
4-5 the indemnitor's employees or agents or to the employees or agents
4-6 of the indemnitor's contractors but in which the indemnitee does
4-7 not make a reciprocal indemnity to the indemnitor.
4-8 Sec. 127.002. Findings; Certain Agreements Against Public
4-9 Policy. (a) The legislature finds that an inequity is fostered on
4-10 certain contractors by the indemnity provisions in certain
4-11 agreements pertaining to wells for oil, gas, or water or to mines
4-12 for other minerals, in certain agreements pertaining to refineries,
4-13 chemical plants, or power plants, and in certain other construction
4-14 contracts.
4-15 (b) Certain agreements that provide for indemnification of a
4-16 negligent indemnitee are against the public policy of this state.
4-17 (c) The legislature finds that joint operating agreement
4-18 provisions for the sharing of costs or losses arising from joint
4-19 activities, including costs or losses attributable to the negligent
4-20 acts or omissions of any party conducting the joint activity:
4-21 (1) are commonly understood, accepted, and desired by
4-22 the parties to joint operating agreements;
4-23 (2) encourage mineral development;
4-24 (3) are not against the public policy of this state;
4-25 and
4-26 (4) are enforceable unless those costs or losses are
4-27 expressly excluded by written agreement.
5-1 Sec. 127.003. INSURANCE CONTRACT; WORKERS' COMPENSATION.
5-2 This chapter does not affect:
5-3 (1) the validity of an insurance contract; or
5-4 (2) a benefit conferred by Title 5, Labor Code.
5-5 (Sections 127.004-127.010 reserved for expansion
5-6 SUBCHAPTER B. INDEMNITY PROVISIONS
5-7 IN CERTAIN MINERAL AGREEMENTS
5-8 Sec. 127.011. Agreement Void and Unenforceable.
5-9 <(a)> Except as otherwise provided by this subchapter <chapter>, a
5-10 covenant, promise, agreement, or understanding contained in,
5-11 collateral to, or affecting an agreement pertaining to a well for
5-12 oil, gas, or water or to a mine for a mineral is void if it
5-13 purports to indemnify a person against loss or liability for damage
5-14 that:
5-15 (1) is caused by or results from the sole or
5-16 concurrent negligence of the indemnitee, his agent or employee, or
5-17 an individual contractor directly responsible to the indemnitee;
5-18 and
5-19 (2) arises from:
5-20 (A) personal injury or death;
5-21 (B) property injury; or
5-22 (C) any other loss, damage, or expense that
5-23 arises from personal injury, death, or property injury.
5-24 Sec. 127.012 <127.004>. Exclusions. This subchapter
5-25 <chapter> does not apply to loss or liability for damages or an
5-26 expense arising from:
5-27 (1) personal injury, death, or property injury that
6-1 results from radioactivity;
6-2 (2) property injury that results from pollution,
6-3 including cleanup and control of the pollutant;
6-4 (3) property injury that results from reservoir or
6-5 underground damage, including loss of oil, gas, other mineral
6-6 substance, or water or the well bore itself;
6-7 (4) personal injury, death, or property injury that
6-8 results from the performance of services to control a wild well to
6-9 protect the safety of the general public or to prevent depletion of
6-10 vital natural resources; or
6-11 (5) cost of control of a wild well, underground or
6-12 above the surface.
6-13 Sec. 127.013 <127.005>. Insurance Coverage. (a) Except as
6-14 to agreements with respect to the purchase, gathering, storage, or
6-15 transportation of oil, brine water, fresh water, condensate,
6-16 produced water, petroleum products, or other liquid commodities,
6-17 this subchapter <chapter> does not apply to an agreement that
6-18 provides for indemnity if the parties agree in writing that the
6-19 indemnity obligation will be supported by liability insurance
6-20 coverage to be furnished by the indemnitor subject to the
6-21 limitations specified in Subsection (b) or (c).
6-22 (b) With respect to a mutual indemnity obligation, the
6-23 indemnity obligation is limited to the extent of the coverage and
6-24 dollar limits of insurance or qualified self-insurance each party
6-25 as indemnitor has agreed to provide in equal amounts to the other
6-26 party as indemnitee.
6-27 (c) With respect to a unilateral indemnity obligation, the
7-1 amount of insurance required may not exceed $500,000.
7-2 <Sec. 127.006. INSURANCE CONTRACT; WORKERS' COMPENSATION.
7-3 This chapter does not affect:>
7-4 <(1) the validity of an insurance contract; or>
7-5 <(2) a benefit conferred by the workers' compensation
7-6 statutes of this state.>
7-7 Sec. 127.014 <127.007>. Owner of Surface Estate. This
7-8 subchapter <chapter> does not deprive an owner of the surface
7-9 estate of the right to secure indemnity from a lessee, an operator,
7-10 a contractor, or other person conducting operations for the
7-11 exploration or production of minerals of the owner's land.
7-12 (Sections 127.015-127.030 reserved for expansion
7-13 SUBCHAPTER C. INDEMNITY PROVISIONS IN CERTAIN
7-14 CONSTRUCTION CONTRACTS
7-15 Sec. 127.031. PROVISION OF CONSTRUCTION CONTRACT VOID AND
7-16 UNENFORCEABLE. A covenant, promise, agreement, or understanding
7-17 contained in, collateral to, or affecting a construction contract,
7-18 including an agreement pertaining to a refinery, chemical plant, or
7-19 power plant, is void if it purports to indemnify a person against
7-20 loss or liability for damage that:
7-21 (1) is caused by or results from the sole or
7-22 concurrent negligence of the indemnitee, the indemnitee's agent or
7-23 employee, or an individual contractor directly responsible to the
7-24 indemnitee or is caused by a design defect for which the indemnitee
7-25 would otherwise be legally responsible; and
7-26 (2) arises from:
7-27 (A) personal injury or death;
8-1 (B) property injury; or
8-2 (C) any other loss, damage, or expense that
8-3 arises from personal injury, death, or property injury.
8-4 Sec. 127.032. PARTIES RESPONSIBLE. Each party to a
8-5 construction contract, including an agreement pertaining to a
8-6 refinery, chemical plant, or power plant, is responsible for the
8-7 results of the party's own actions and for the actions of those
8-8 persons over whom the party exercises control.
8-9 SECTION 2. This Act takes effect September 1, 1995. The
8-10 change in law made to Chapter 127, Civil Practice and Remedies
8-11 Code, by this Act applies only to an agreement entered into on or
8-12 after the effective date of this Act. An agreement entered into
8-13 before the effective date of this Act is governed by the law in
8-14 effect at the time the agreement was entered into, and that law is
8-15 continued in effect for that purpose.
8-16 SECTION 3. The importance of this legislation and the
8-17 crowded condition of the calendars in both houses create an
8-18 emergency and an imperative public necessity that the
8-19 constitutional rule requiring bills to be read on three several
8-20 days in each house be suspended, and this rule is hereby suspended.