ALERT: New Anti Indemnity And Wrap Up Law for Texas
On June 17, 2011, Governor Rick Perry signed into law a bill (HB 2093) that both imposes a new completed operations coverage requirement for wrap-up insurance programs and revises Texas's anti-indemnity statute. Specifically, affected construction projects insured by a wrap-up insurance program must include a minimum of 3 years of completed operations coverage on general liability policies. This portion of the law was a disappointment to some in that the required 3 years of coverage falls substantially short of Texas's 10-year statute of repose.
With respect to indemnification restrictions, any provision of a construction contract executed after January 1, 2012, that requires one party to indemnify another for a claim caused by the negligence or fault of the indemnitee, or any party under the control of the indemnitee, will be void and unenforceable. (Texas currently allows broad form indemnification -- up to and including one's sole negligence -- in most private construction contracts as long as the risk transfer is clear and unequivocal.) An exception preserves the right to seek indemnification for injury to an employee of the indemnitor or those acting on its behalf. This exception preserves the ability to transfer liability for third-party-over actions. Texas is the only state with such an exception, which provides significant protection for upstream parties.
The limitations on indemnity also apply to additional insured requirements, which means upstream parties cannot require additional insured coverage that exceeds the allowable scope of indemnity.
Talk to your attorney about how this will affect the liability of your business. Cravens Warren does offer preliminary contract reviews (Insurance & Indemnification Portions) to assist clients navigate liability issues as they relate to insurance. Contact us today for more information.