ZEM C.S.H.B. 961 75(R)BILL ANALYSIS CIVIL PRACTICES C.S.H.B. 961 By: Holzheauser, et al. 4-21-97 Committee Report (Substituted) BACKGROUND Currently, the construction industry has a large number of agreements in construction contracts that prevent owners and companies from being held responsible for their own actions. Owners on construction projects require general contractors to assume liability for the owner's negligence to the extent that general contractors are held liable for damages resulting from accidents caused by owners. When general contractors pass this liability on to subcontractors, the subcontractor is then held liable for damages even though the subcontractor might have been only minimally involved in the accident. PURPOSE H.B. 961, as substituted, provides that a company can indemnify others for the company's own actions; prohibits indemnification for a company's sole or gross negligence, willful misconduct, or fines assessed by governmental entities; permits indemnification by a company for the death or bodily injury of that company's employee, limited by general liability insurance; provides that additional insured endorsements in liability insurance policies are restricted to the liability assumed by a company under the construction contract; and prevents waiver of its provisions by contract. 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 Title 6, Civil Practice and Remedies Code by adding Chapter 145 as follows: CHAPTER 145. INDEMNITY PROVISIONS IN CERTAIN AGREEMENTS RELATING TO REAL PROPERTY Sec. 145.001 Defines "Loss," "Real property," "Real property services," "Real property services contract," and "Real property services indemnity agreement." Sec. 145.002 Provides the scope of the chapter's applicability. Sec. 145.003 Provides that a real property services indemnification agreement is void and unenforceable to the extent that it indemnifies a person, that person's agent or employee or a person who is directly responsible to that person, for sole negligence, gross negligence, willful misconduct, or for fines or penalties assessed by a governmental entity. Sec. 145.004 (a) Provides that a real property services agreement may indemnify a person for: (1) a loss that arises from the acts or omissions of a person's or that person's agent or contractor or employee; or (2) subject to Secs. 145.003 and 145.005, a loss associated with bodily injury or death of that person's employee, agent, or contractor, arising from acts or omissions of the person to be indemnified. (b) Specifies that Sec. 145.004(a)(1) liability may not exceed the percentage of responsibility for the harm caused by the person; defines "percentage of responsibility." (c) Provides that this section does not require a person to assume a liability or obligation described by Subsection (a). Sec. 145.005 (a) Provides that the indemnity of Sec. 145.004(a)(2) is limited to the coverage and dollar limits of insurance that the person providing the indemnity has agreed to provide under the real property services agreement or to $500,000 if no coverage or dollar limits are specified in the contract. (b) Provides that additional insured endorsements to liability insurance policies may not require coverage for liability other than the liability assumed under the real property services contract or indemnity agreement. (c) Provides that additional insured endorsements are void if they impose obligations greater than the indemnity obligations authorized in this chapter. (d) Provides that requirements to provide insurance coverage in real property services contracts or indemnity agreements are void to the extent that the required insurance coverage exceeds the limitations of this chapter. Sec. 145.006 Specifies that except as outlined in Sec. 145.005, the Chapter does not affect the applicability, validity, or enforceability of insurance contracts. Sec. 145.007 Limits application of the chapter; excludes indemnity provisions in mineral agreement governed by Chapter 127, construction contracts governed by Chapter 130, and indemnity provisions contained in financial or surety bond agreements unless they are directly related to real property services. Sec. 145.008 Provides that Chapter provisions may not be waived. SECTION 2. Effective date: September 1, 1997. SECTION 3. Applies prospectively; savings clause. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The committee substitute makes the following changes: 1. Clarifies that the services referred to in Sec. 145.002 are "real property services." 2. Includes losses related to or arising out of an act or omission or losses associated with bodily injury or death of "any person directly or indirectly employed" by a person or the person's contractor or agent obligated to make the indemnification within the circumstances in which indemnification is permissible under Sec. 145.002 (a)(1) and (a)(2). 3. Limits liability for indemnity under a real property services indemnity agreement for losses associated with bodily injury or death to either the coverage and dollar limits of insurance that the person has agreed to provide or $500,000 if no coverage and dollar limits are specified in Sec. 145.005(a) rather than limiting losses to the lesser of the coverage and dollar limits of insurance or the amount of liability insurance available for purchase as was specified in the original bill. 4. Clarifies that Sec. 145.005(b) - (d) apply to real property services contracts as well as indemnity agreements. 5. Adds a new Sec. 145.007 to exclude from application of the chapter indemnity provisions in mineral agreements under Chapter 127, construction contracts governed by Chapter 130, and indemnity provisions contained in financial or surety bond agreements unless they are directly related to real property services. 6. Clarifies that the effective date applies to real property services contracts as well as indemnity agreements.