Texas' New Construction Anti-Indemnification Bill Comes into Effect; Houston Business Lawyer J. Edward Allen Examines Law's Impact

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HB 2093, also known as the Construction Anti-indemnification Bill in Texas, became effective January 1, 2012. Houston business law attorney J. Edward Allen examines the effects of the new law and the impact it will have on the construction industry as certain indemnity provisions in construction contracts are now void and unenforceable.

... too often general contractors were taking advantage of subcontractors by requiring oppressive indemnification clauses in construction contracts.

Texas enacted a new construction anti-indemnification law on June 17, 2011. The bill is codified in Chapter 151 of the Insurance Code. The new law makes certain clauses in construction contracts void and unenforceable. The legislation only applies to original construction contracts and consolidated insurance programs entered into on or after January 1, 2012.

J. Edward Allen, a business law attorney in Houston, weighs in on the new law and the changes it will make to construction contracts in Texas. "The new construction anti-indemnification law was enacted because the legislature found that too often general contractors were taking advantage of subcontractors by requiring oppressive indemnification clauses in construction contracts," stated J. Edward Allen.

Section 102 of Chapter 151 of the Insurance Code prohibits clauses in construction contracts that require a subcontractor to hold harmless, defend or indemnify a general contractor against claims that arise from the negligence of the general contractor.

Additionally, the new law prevents contractors from requiring a subcontractor to purchase additional coverage for claims arising from the general contractor's sole or concurrent negligence under section 515.104 of the Insurance Code.

According to Houston contract lawyer J. Edward Allen, "Prior to 2011, a general contractor in Texas was permitted to require his subcontractors to indemnify him against legal claims for his own negligent acts, as long as the agreement was unambiguously stated in the contract. This meant the subcontractor would be responsible for claims arising from the general contractor's negligence, even if the subcontractor was in no way responsible for the damage or injury."

The new law essentially prevents owners and general contractors from requiring subcontractors to:

  •     indemnify against the general contractor’s or owner’s negligence; or
  •     provide additional insurance coverage for the owner or general contractor's negligence.

"However, it is important to note the exception to the new law. Indemnification clauses for the sole or concurrent negligence of the general contractor are still enforceable if the claim arises from an on-site bodily injury or the death of an employee of the subcontractor. The new construction anti-indemnification law does not apply in these situations. This exception is particularly important because these claims make up a large portion of the claims typically covered by such indemnification clauses in construction contracts," said Allen, a construction attorney in Houston.

There are also a variety of exclusions to the anti-indemnification law, as set forth in section 151.105 of the Insurance Code. For example, the law does not apply to construction contracts regarding single family, townhome, duplex or residential projects. It also does not apply to a municipality's public works projects. Also not covered are insurance policies issued under an owner-controlled or contractor-controlled insurance policy, indemnity provisions in loan or financial agreements, or joint defense agreements that were entered into after a claim was made.

J. Edward Allen, of Wilhite & Lea, P.C., is a Houston civil litigation attorney who represents individuals and businesses in all areas of construction law and contract matters in Spring, Northwest Houston, Tomball, Klein, Humble, The Woodlands and Conroe. He is a graduate of of South Texas College of Law and was recently named "Appellate Lawyer of the Week" by Texas Lawyer.

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