Bill Text: HI SB2463 | 2014 | Regular Session | Amended
Bill Title: Procurement Contracts; Liability; Duty to Defend; Public Works; Design Professionals;
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Engrossed - Dead) 2014-04-04 - The committee(s) on JUD recommend(s) that the measure be deferred. [SB2463 Detail]
Download: Hawaii-2014-SB2463-Amended.html
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THE SENATE |
S.B. NO. |
2463 |
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TWENTY-SEVENTH LEGISLATURE, 2014 |
S.D. 2 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO PROCUREMENT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that contracts for public works often include a duty to defend clause, requiring the contractor to defend governmental entities before the contractor's negligence or fault is determined.
Designing and constructing public works projects are unique among services procured by the government. Public agencies have a strong involvement in budgeting and scoping services and working in collaboration with the contractor. Public works often involve large risks due to site circumstances, public environmental concerns, and high public usage. Highways and public buildings have necessarily long service lives relative to other services procured, thereby increasing contractor risk beyond that of other government contracts.
Design professionals licensed under chapter 464, Hawaii Revised Statutes, are able to obtain professional liability insurance that covers the contractor for indemnifying the government. However, the insurance industry does not provide reasonable coverage for another party's defense costs if the design professional is not negligent. Thus, the legislature finds that design professional contractors should not be burdened with the duty to defend a governmental body before the contractor's negligence or fault is determined.
The legislature further finds that requiring a construction contractor licensed under chapter 444, Hawaii Revised Statutes, to defend the public agency beyond the owner's acceptance of the project and a reasonable contractor's warranty period is overly burdensome. Thus, any contractual requirement to defend the governmental body by a construction contractor should be limited to the construction and warranty period up to a maximum of one year after final acceptance. Upon determination of negligence or fault, the contractor may still be required to indemnify and hold harmless the governmental body from claims arising out of or resulting from the negligent, reckless, or wrongful acts, errors, or omissions of the contractor.
The legislature further finds that, while some state and county agencies recognize the negative implications and have removed the duty to defend clause from contracts for public works, inconsistencies between agencies and departments still exist. A duty to defend clause is detrimental in the long term because such clauses negatively affect competition for contracts and innovation.
The purpose of this Act is to standardize differing contract conditions regarding the duty to defend clause by prohibiting defense clauses in contracts entered into by persons licensed under chapter 464, Hawaii Revised Statutes, and to provide certain limits on the duty to defend for persons licensed under chapter 444, Hawaii Revised Statutes.
SECTION 2. Section 103D-713, Hawaii Revised Statutes, is amended to read as follows:
"[[]§103D-713[]]
Defense of a governmental body. (a) [No] Beginning on July 1,
2014, no contract [of less than $1,000,000] that is entered into [on
or after July 1, 2007,] by any governmental body[, and is exclusively
for services that may only lawfully be provided by] with a person licensed
under chapter 464, [may] shall require the contractor to defend
the governmental body, or its officers, employees, or agents, from any
liability, damage, loss, or claim, action, or proceeding arising out of the
contractor's performance under the contract.
(b) Beginning July 1, 2014, the requirement for a person licensed under chapter 444 to defend the governmental body, or its officers, employees, or agents, from any liability, damage, loss, or claim, action, or proceeding arising out of the contractor's performance under, or any subcontractor's performance pursuant to, the contract shall not extend beyond the owner's final acceptance of the project and the contractor's warranty period up to a minimum of one year after final acceptance.
[(b)] (c) [Subsection] Subsections
(a) and (b) notwithstanding, the contract may require the contractor
providing the services to indemnify and hold harmless the governmental body and
its officers, employees, and agents from and against any liability, damage,
loss, cost, and expense, including reasonable attorneys' fees, and all claims,
suits, and demands therefor arising out of or resulting from the negligent,
reckless, intentional, or wrongful acts, errors, or omissions of the
contractor, the contractor's employees, officers, agents, or subcontractors in
the performance of the contract or the contractor's professional services, and
the provisions may remain in full force and effect notwithstanding the
expiration or early termination of the contract.
[(c)] (d) No person licensed
under chapter 464 that has agreed in any contract to defend a governmental
body, including those contracts entered into before or after July 1, 2007,
shall be required to defend the governmental body in a lawsuit filed more than
ten years beyond the [substantial completion] owner's final
acceptance of the project, except that this subsection shall not apply to
any lawsuit that has been filed prior to July 1, 2007.
[(d)] (e) As used in this
section, "person" means any person, partnership, corporation, or
other entity conducting business in the State."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on July 1, 2014.
Report Title:
Procurement Contracts; Liability; Duty to Defend; Public Works; Design Professionals; Licensed Contractors
Description:
Prohibits any contract that is entered into by any governmental body with a person licensed under chapter 464, Hawaii Revised Statutes, from requiring the contractor to defend the governmental body from claims arising out of the contractor's performance under the contract. Provides that the requirement for persons licensed under chapter 444, Hawaii Revised Statutes, to defend a governmental body from claims arising out of the contractor's performance under, or any subcontractor's performance pursuant to, the contract shall not extend beyond the owner's final acceptance of the project and the contractor's warranty period up to a minimum of one year after final acceptance. (SD2)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
