SB 0224 - Fiscal Note

Fiscal Note - SB 0224 - Prohibits certain indemnification contracts on public and private construction works

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0642-01

BILL NO.: SB 224

SUBJECT: Business and commerce, contracts and contractors, public buildings.

TYPE: Original

DATE: January 25, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All State Funds	$0	$0	$0

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

The Office of Administration, Department of Insurance, Office of the Attorney General, and the Office of the State Courts Administrator assume the proposed legislation would have no fiscal impact on their agencies.

The Department of Transportation (DHT) assumes it may have to purchase additional insurance to protect itself in a limited number of contracts. The proposal could also increase DHT's litigation costs since DHT may be brought into more lawsuits due to the lack of indemnification. DHT may anticipate some increased costs; but, they do not consider them to be significant.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	0	0	0
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	0	0	0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This proposal declares that indemnification clauses in construction contracts are void as against public policy. The act specifies that a contracting party's promise to indemnify against the negligence or wrong doing of another is unenforceable. This act does not apply to promises to indemnify against the party's own negligence or wrong doing or that of its subcontractors and suppliers. In addition, this act does not apply to contracts between or amongst state agencies or political subdivisions, certain contracts involving public property; construction bonds; and insurance contracts. Contracts in existence are not affected.

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

Department of Insurance

Office of the Attorney General

Department of Transportation

Office of the State Courts Administrator

Jeanne Jarrett, CPA

Director

January 25, 1999