Chair lays out HB3306 and recognizes Senate Sponsor, Chairman Schwertner, to explain the bill.
Current insurance code provisions in construction contracts are deemed invalid if they require one party to indemnify another for claims due to the indemnified party's negligence.
Exceptions currently exist for residential developments and public work projects.
HB3306 aims to extend these exceptions to construction contracts related to electric infrastructure construction maintenance or vegetation management for electric or transmission utilities.
The bill intends to make parties accountable for their own actions, reducing lawsuits and insurance costs, ultimately benefiting rate payers.
No questions were posed by members, leading to opening public testimony.
Public testimony begins with Fred Wilshusen and Scott Seamster, with Fred indicating he is against the bill.
Scott Seamster, associate general counsel for Texas New Mexico Power, spoke in support of HB3306.
HB3306 would allow utilities, electric cooperatives, and municipal utilities to make arrangements where a contractor fully indemnifies the utility for the contractor's work.
The proposed amendments to HB3306 pertain to simpler engagements than those originally addressed by the statute.
Consolidated insurance programs are not suitable for TNMP, as the work involves setting up wires, poles, and substations rather than constructing large buildings.
Seamster noted the challenge with current statutes requiring TNMP to cover costs when injuries occur to third parties, which ultimately affects ratepayers.
The bill would enable contractors to assume full indemnity agreements, maintaining the current level of insurance since contractors are already insured for the full risk.
Seamster was open to questions, but none were asked by the members.
▶️Senator Campbell to Panel, HB3306 - Clarification on Disagreement
Fred Wilshusen raised concerns about subcontractors being held 100% liable for damages in situations where they are 0% at fault.
The concept of broad form indemnity was discussed, and it was noted that many states prohibit these practices.
Texas has had a prohibition against broad form indemnity since February 2011.
There was a reference to previous experience of dealing with this system for twenty-five years.
Scott Seamster highlighted that dealings involve sophisticated parties who already agree to such terms in multiple states.
The question of potential advantage over small contractors in small towns was addressed, with an assurance that the dealings are with sophisticated businesses.
▶️Senator King to Panel, HB3306 - Clarification of Bill's Impact on Indemnity Agreements
The bill mainly applies to electrical construction, specifically transmission projects.
Discussion centered around liability and indemnity agreements related to subcontractors.
Fred Wilshusen explained that under current law, if a subcontractor causes damage (e.g., starting a fire), the project manager (e.g., Oncor) may tender the indemnity to the subcontractors who would be responsible for defense if at fault.
Current legislation could leave subcontractors financially responsible beyond their insurance if at fault, with no change in accountability for non-fault scenarios unless recruited by the main contractor.
The proposed bill could require subcontractors to defend against claims even if they're remotely or not connected to the incident.
Disagreement on project management: the current practice does not utilize multiple subcontractors but hires one party for tasks like vegetation management.
Plaintiffs typically sue all parties involved; the insurance won't cover indemnity if the main party is alleged to be negligent until adjudicated otherwise.
The bill would shift negotiation power, allowing hiring parties to ensure subcontractors assume liability, keeping costs predictable and minimal for end customers.
Historical context: injury to employees of their own contractor was exempt from broad form indemnity.
Debate over the ethics of who should bear liability: private vs. public construction projects.
Senator Nichols highlighted that parties with deeper pockets are often targeted in lawsuits and discussed the economic implications for project managers.
The panel concluded without further questions, and the next witness, Jennifer Fagan, was called to testify.
