SENATE BILL REPORT

SB 5694

BYSenators von Reichbauer, Moore, Matson, Smitherman, Johnson, Rasmussen and Bender

Regulating allowable provisions in construction contracts.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 16, 1989; February 28, 1989

Majority Report:  That Substitute Senate Bill No. 5694 be substituted therefor, and the substitute bill do pass.

      Signed by von Reichbauer, Chairman; Johnson, Vice Chairman; McMullen, Matson, Moore, Rasmussen, Sellar, Smitherman.

Senate Staff:Bev Tweddle (786-7403)

                  February 28, 1989

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, FEBRUARY 28, 1989

BACKGROUND:

A project owner may require a contractor to include the owner as an insured party in the contractor's liability insurance policy as a condition to entering into a contract.  If there are also subcontractors needed for the project, the general contractor may require the subcontractors to include the general contractor as an insured party in their liability insurance policy.

Additionally, present law allows a contractor to give up protection from litigation provided under the industrial insurance law.

SUMMARY:

Any contract provision by a project owner requiring a contractor to include the owner or any other contractor in the liability insurance policy of another is void and not enforceable.

A contractor may not give up his right to protection from litigation provided under the industrial insurance law.

A project owner may obtain liability insurance for a general contractor, subcontractor or specialty contractor.

EFFECT OF PROPOSED SUBSTITUTE:

Original language of the code is restored as it relates to waiver under industrial insurance law.  Surety insurers are exempt from this revision to the existing code.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested February 20, 1989

Senate Committee - Testified: Joe Devish, Madsen Electric (pro); Jim Bush, Department of Transportation (con); Larry Stevens, NECA, MCA (pro); Bob Cochren, Cochren Electric (pro); Ron Leaders, Architects/Engineers Legislative Council (con); Delbert Johnson, AG (con); Chris Clark, W.G. Construction Co., Inc. (pro); Duke Schaub, AGC (pro); Doug Bohlke, CBIC (pro)