By: Duncan S.B. No. 361

(In the Senate - Filed January 18, 2011; February 2, 2011, read first time and referred to Committee on State Affairs; March 8, 2011, reported favorably by the following vote: Yeas 8, Nays 1; March 8, 2011, sent to printer.)

A BILL TO BE ENTITLED

AN ACT

relating to indemnification provisions in construction contracts.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subsection (a), Section 130.002, Civil Practice and Remedies Code, is amended to read as follows:

(a) A covenant or promise in, in connection with, or collateral to a construction contract is void and unenforceable if the covenant or promise provides for a person [contractor] who is to perform the work that is the subject of the construction contract to indemnify or hold harmless a registered architect, licensed engineer or an agent, servant, or employee of a registered architect or licensed engineer from liability for damage that:

(1) is caused by or results from:

(A) defects in plans, designs, or specifications prepared, approved, or used by the architect or engineer; or

(B) negligence of the architect or engineer in the rendition or conduct of professional duties called for or arising out of the construction contract and the plans, designs, or specifications that are a part of the construction contract; and

(2) arises from:

(A) personal injury or death;

(B) property injury; or

(C) any other expense that arises from personal injury, death, or property injury.

SECTION 2. The Civil Practice and Remedies Code is amended by adding Title 10 to read as follows:

TITLE 10. ADDITIONAL MISCELLANEOUS PROVISIONS

CHAPTER 502. INDEMNITY PROVISIONS IN CONSTRUCTION CONTRACTS

Sec. 502.001. DEFINITIONS. In this chapter:

(1) "Claim" includes a loss or liability for a claim, damage, expense, or governmentally imposed fine, penalty, administrative action, or other action.

(2) "Construction contract" means a contract, subcontract, or agreement, or a performance bond assuring the performance of any of the foregoing, entered into or made by an owner, architect, engineer, contractor, construction manager, subcontractor, supplier, or material or equipment lessor for the design, construction, alteration, renovation, remodeling, repair, or maintenance of, or for the furnishing of material or equipment for, a building, structure, appurtenance, or other improvement to or on public or private real property, including moving, demolition, and excavation connected with the real property. The term includes an agreement to which an architect, engineer, or contractor and an owner's lender are parties regarding an assignment of the construction contract or other modifications thereto.

(3) "Indemnitor" means a party to a construction contract that is required to provide indemnification or additional insured status to another party to the construction contract or to a third party.

Sec. 502.002. PERMISSIBLE CONTRACT PROVISION. Parties may agree in a construction contract upon an indemnity or additional insured provision that is not prohibited by this chapter.

Sec. 502.003. AGREEMENT VOID AND UNENFORCEABLE. Except as provided by Section 502.004, a provision in a construction contract, or in an agreement collateral to or affecting a construction contract, is void and unenforceable as against public policy to the extent that it requires an indemnitor to indemnify, hold harmless, or defend another party to the construction contract or a third party against a claim caused by the negligence or fault, the breach or violation of a statute, ordinance, governmental regulation, standard, or rule, or the breach of contract of the indemnitee, its agent or employee, or any third party under the control or supervision of the indemnitee, other than the indemnitor or its agent, employee, or subcontractor of any tier.

Sec. 502.004. EXCEPTION FOR EMPLOYEE CLAIM. Section 502.003 does not apply to a provision in a construction contract that requires a person to indemnify, hold harmless, or defend another party to the construction contract or a third party against a claim for the bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier.

Sec. 502.005. UNENFORCEABLE ADDITIONAL INSURANCE PROVISION. A provision in a construction contract that requires the purchase of additional insured coverage, or any coverage endorsement or provision within an insurance policy providing additional insured coverage, is void and unenforceable to the extent that it requires or provides coverage the scope of which is prohibited under this chapter for an agreement to indemnify, hold harmless, or defend.

Sec. 502.006. EXCLUSIONS. This chapter does not affect:

(1) an insurance policy, including a policy issued under an owner-controlled or owner-sponsored consolidated insurance program or a contractor-controlled or contractor-sponsored consolidated insurance program, except as provided by Section 502.005;

(2) a cause of action for breach of contract or warranty that exists independently of an indemnity obligation;

(3) a provision in a construction contract that requires the indemnitor to purchase or maintain insurance covering the acts or omissions of the indemnitor;

(4) indemnity provisions contained in loan and financing documents, other than construction contracts to which the contractor and owner's lender are parties as provided under Section 502.001(2);

(5) general agreements of indemnity required by sureties as a condition of execution of bonds for construction contracts;

(6) the benefits and protections under the workers' compensation laws of this state;

(7) the benefits or protections under the governmental immunity laws of this state;

(8) agreements subject to Chapter 127; or

(9) a license agreement between a railroad company and a person that permits the person to enter the railroad company's property as an accommodation to the person for work under a construction contract that does not primarily benefit the railroad company.

Sec. 502.007. OTHER INSURANCE. This chapter does not otherwise affect a construction contract provision that requires a party to the contract to purchase:

(1) owners and contractors protective liability insurance;

(2) railroad protective liability insurance;

(3) contractors all-risk insurance; or

(4) builders all-risk or named perils property insurance.

Sec. 502.008. PROHIBITION OF WAIVER. The provisions of this chapter may not be waived by contract or otherwise. Any purported waiver is void and unenforceable.

Sec. 502.009. APPLICABILITY OF TEXAS LAW. Under this chapter, the law of this state, exclusive of this state's choice-of-law rules that would apply the laws of another jurisdiction, shall apply to every construction contract agreement affecting improvements to real property within this state.

SECTION 3. Section 2252.902, Government Code, is repealed.

SECTION 4. The changes in law made by this Act apply only to an original construction contract with an owner of an improvement or contemplated improvement that is entered into on or after the effective date of this Act. If an original construction contract with an owner of an improvement or contemplated improvement is entered into on or after the effective date of this Act, the changes in law made by this Act apply to a related subcontract, purchase order contract, personal property lease agreement, and insurance policy. If an original construction contract with an owner of an improvement or contemplated improvement is entered into before the effective date of this Act, that original construction contract and a related subcontract, purchase order contract, personal property lease agreement, and insurance policy are governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 5. This Act takes effect September 1, 2011.

* * * * *