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F I S C A L   I M P A C T   R E P O R T

 

 

 

SPONSOR:

Ruiz

 

DATE TYPED:

3/10/03

 

HB

433 /a HBIC /a HJC

 

SHORT TITLE:

Void Certain Indemnification Agreements

 

SB

 

 

 

ANALYST:

Maloy

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

FY03

FY04

 

 

 

 

 

NFI

 

 

 

 

 

 

 

 

 

SOURCES OF INFORMATION

 

Responses Received From

Office of the Attorney General

State Highway and Transportation Department

Construction Industries Division, Regulation and Licensing Department

 

SUMMARY

 

            Synopsis of HJC Amendment

           

The House Judiciary Committee amended HB 433 to eliminate duplicative / unnecessary wording.  “Alteration, repair and maintenance” are all combined in the first word of the list, “construction”.  As such, this is a non-substantive amendment.

 

            Synopsis of HBIC Amendment

 

The House Business and Industries Committee amended HB 433 to “clean-up” language, and to broaden the language relating to the sureties effected (replacing “a construction contract” bond with “any surety bond”). 

 

            Synopsis of Original Bill

 

House Bill 433 changes liability insurance laws governing construction contracts.  Specifically, the bill provides that agreements to indemnify one party against damages, losses and expenses arising out of bodily injury or property claims resulting from the negligence of the indemnitee (the party that is to benefit from the liability coverage) shall be void.

 

HB 433 provides that these indemnification terms shall be enforceable when the claim is the result of negligence on the party of the indemnitor (the party carrying the liability coverage).    

 

Finally, HB 433 requires project-specific insurance.  

 

     Significant Issues

 

This bill prohibits a party that is negligent and the cause of the damage from benefiting from an indemnification clause. 

 

The intent is to encourage greater care on the part of the indemnitee.  Further, it will protect responsible, well-insured contractors from being penalized for the lack diligence and care of others.

 

Also, requiring project-specific insurance policies will better ensure that a worker will not become injured on the job only to find that his injuries, and the cost of care, are not adequately covered by the appropriate, responsible party (providing the injury is not the result of the worker’s own negligence).  When workers are not adequately covered, the result is a hit to taxpayers. 

 

FISCAL IMPLICATIONS

 

HB 433 has no direct fiscal impact on the state.  However, this bill should have a secondary effect of lowering insurance and workers’ compensation premiums.  This may lower over-head costs of doing business in New Mexico and stimulate economic development.

 

SJM/sb