SB24INTRODUCED
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IVHP66-1
By Senator Albritton
RFD: Judiciary
First Read: 07-Mar-23
PFD: 23-Feb-23
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5 IVHP66-1 01/03/2023 CMH (L) CMH 2023-477
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SYNOPSIS:
Under existing law, indemnification agreements
in contracts for the professional services of a design
professional or for the construction of a road or
bridge are prohibited from requiring a party to the
contract to indemnify, hold harmless, or defend another
party to the contract for any damages arising from the
negligent conduct of the party to be indemnified.
This bill would regulate indemnification
agreements between parties to a construction contract
to prohibit a party to a construction contract from
being required to indemnify, hold harmless, or defend
another party to the construction contract for
liability caused by the sole negligence, or by the
wantonness, recklessness, or intentional misconduct, of
the party to be indemnified.
This bill would also prohibit indemnification
agreements in a construction contract from requiring a
party to the contract to indemnify, hold harmless, or
defend another party to the contract for that party's
own negligence unless the certain requirements are met,
including an agreement on the extent of the monetary
limitation of the indemnification. The bill would limit
the indemnitor's indemnification obligation to the
agreed upon monetary limitation and would require the
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indemnitor to obtain insurance for that amount.
A BILL
TO BE ENTITLED
AN ACT
Relating to construction contracts; to provide
regulations for indemnification agreements in certain
construction contracts.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. As used in this act, the following terms
have the following meanings:
(1) CONSTRUCTION CONTRACT. A contract, subcontract,
sub-subcontract, purchase order, or other agreement for or in
connection with the planning, management, construction,
alteration, supply, repair, reconstruction, replacement,
rehabilitation, demolition, or improvement of real property as
part of any private or public construction project in the
State of Alabama.
(2) CONTRACTOR. Any individual, firm, corporation,
partnership, or other legal entity that enters into a
construction contract with an owner to improve real property
or perform construction services for the owner.
(3) INDEMNITEE. The party or parties that the
indemnitor is obligated to indemnify, hold harmless, or
defend.
(4) INDEMNITOR. The party or parties obligated to
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indemnify, hold harmless, or defend the indemnitee or another
party.
(5) PARTY. A contractor, subcontractor, or owner
involved in or contributing to the construction of a private
or public construction project pursuant to the terms of a
construction contract. The term does not include a public
awarding authority, as defined under Section 39-2-1, Code of
Alabama 1975.
(6) SUBCONTRACTOR. Any individual, firm, corporation,
partnership, or other legal entity that contracts to furnish
labor or materials to a contractor or other subcontractor
pursuant to a construction contract.
Section 2. (a) A provision, clause, or agreement in a
construction contract shall not require a party to the
construction contract to indemnify, hold harmless, or defend
another party to the construction contract for liability for
damages or losses for bodily injury or property damage, or
losses to a third party, or arising from a third-party claim,
that arise out of, result from, or are caused by the sole
negligence or by the wantonness, recklessness, or intentional
misconduct of the indemnitee or its officers, employees, or
agents.
(b)(1) Subject to the limitations of subsection (a), a
party to a construction contract may agree to indemnify,
defend, or hold harmless another party to the construction
contract for liability for damages or losses for bodily injury
or property damage that arise out of, result from, or are
caused by any negligent act or omission of the indemnitee, or
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its officers or employees or agents, arising from the
construction contract or its performance, only when all of the
following conditions are satisfied:
a. The indemnification agreement is part of the
construction contract.
b. The indemnification agreement contains a monetary
limitation on the extent of the indemnification between the
indemnitor and the indemnitee.
c. The indemnitor agrees to obtain commercially
available insurance to cover the extent of the indemnification
obligations in an amount sufficient to satisfy the monetary
limitation.
(2) A provision, clause, or agreement to indemnify,
hold harmless, or defend another party to the construction
contract, as provided under subdivision (1), shall be
enforceable only to the amount of applicable insurance
required in the construction contract.
(c) A provision, clause, or agreement in violation of
this act shall not cause an entire construction contract to be
invalid or unenforceable. On petition to a court of competent
jurisdiction, any such provision, clause, or agreement in
violation of this act shall be modified by the court to be
consistent with this act. Nothing in this act shall affect the
validity or enforceability of the remaining provisions,
clauses, or agreements in the construction contract.
Section 3. (a) Any provision of law to the contrary
notwithstanding, this act shall not be interpreted or
construed to affect the following:
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(1) The obligation of a party to maintain specific
insurance policies and provide coverage to or include another
party as an additional insured on those policies.
(2) The indemnity obligation of a principal to its
surety on a construction surety bond or to the indemnity
obligation of an insurer to its insured.
(3) The state's doctrine of joint and several
liability.
(4) The state workers' compensation laws.
(5) The provisions of a construction contract for the
professional services of a design professional for which
Section 41-9A-3, Code of Alabama 1975, applies.
(6) The provisions of a road or bridge construction
contract for which Chapter 9 of Title 39, Code of Alabama
1975, applies.
(b) This act shall only apply to indemnity obligations
between parties to a construction contract, as defined in
Section 1, and has no effect on third-party tort claims or
indemnity obligations owed to a public awarding authority, as
defined under Section 39-2-1, Code of Alabama 1975.
Section 4. This act shall be effective for any
construction contract executed or awarded on or after the
effective date of this act.
Section 5. This act shall be effective January 1, 2024,
following its passage and approval by the Governor, or its
otherwise becoming law.
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