SB 0903 - Fiscal Note

Fiscal Note - SB 0903 - Prohib. Indemn. & Hold Harmless Clauses In Construc. Contr.

L.R. NO.  3353-01
BILL NO.  Perfected SB 903
SUBJECT:  Contractors:  Contracts
TYPE:     Original
DATE:     April 16, 1996



                              FISCAL SUMMARY
                    ESTIMATED NET EFFECT ON STATE FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999

State Road Fund          (Unknown)           (Unknown)         (Unknown)

Total Estimated
Net Effect on All
State Funds              (Unknown)           (Unknown)         (Unknown)


                   ESTIMATED NET EFFECT ON FEDERAL FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999

None

Total Estimated
Net Effect on All
Federal Funds                   $0                  $0                $0


                    ESTIMATED NET EFFECT ON LOCAL FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999

Local Government                $0                  $0                $0


                              FISCAL ANALYSIS

ASSUMPTION

Officials of the Office of the Attorney General, the Department of Insurance
and the Office of Administration (OA) - Design and Construction and
Facilities Management assumed in response to a similar proposal that there
would be no fiscal impact to their agencies.

Officials from the Department of Highway and Transportation (DH&T) assumed in
response to a similar proposal that their department would have to purchase
additional insurance to protect itself, in lieu of relying on indemnification
and hold harmless clauses.  DH&T could require its contractors and
subcontractors to do the same.  This proposal could cause DH&T to bear
additional litigation costs and legal liability for risks which it is
properly and contractually assigning to the contracting and engineering firms
which design and construct our roads, bridge and highway structures.  Another
alternative would be that DH&T design and/or build more of its own public
works projects with its own staff, since the private engineering and
construction firms would no longer have the total legal responsibility to
stand behind their work.  DH&T officials could not determine the total cost
of this litigation because it would be dependent on whether or how the
department insures itself for the risks it could no longer receive
indemnification for.

Oversight assumes that costs in any given fiscal year would be dependent upon
the increase in contract litigation suits and additional insurance costs.


FISCAL IMPACT - State Government           FY 1997   FY 1998   FY 1999
                                          (10 Mo.)

STATE ROAD FUND

Cost-Department of Highways and Transportation
  Contract litigation/insurance          (Unknown) (Unknown) (Unknown)


FISCAL IMPACT - Local Government           FY 1997   FY 1998   FY 1999
                                          (10 Mo.)

                                                 0         0         0

DESCRIPTION

This proposal would repeal section 431.180, RSMo. Supp. 1995, Contracts and
Contractual Relations.  The proposed language voids indemnity and hold
harmless clauses in all public and private construction, moving, demolition
and excavation contracts.  A comparative negligence standard was detailed.

This proposal would not apply to construction bonds, insurance contracts or
contractual provisions which named another person as an insured, additional
insured or additional named insured.  This proposal would apply only to
contracts entered into after August 28, 1996.

This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.


SOURCES OF INFORMATION

Office of Administration - Design and Construction
Office of Administration - Facilities Management
Department of Insurance
Office of the Attorney General
Department of Highways and Transportation