Bill Text: HI SB2463 | 2014 | Regular Session | Amended
Bill Title: Procurement Contracts; Liability; Duty to Defend; Public Works; Design Professionals;
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Engrossed - Dead) 2014-04-04 - The committee(s) on JUD recommend(s) that the measure be deferred. [SB2463 Detail]
Download: Hawaii-2014-SB2463-Amended.html
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THE SENATE |
S.B. NO. |
2463 |
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TWENTY-SEVENTH LEGISLATURE, 2014 |
S.D. 2 |
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STATE OF HAWAII |
H.D. 1 |
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A BILL FOR AN ACT
RELATING TO PROCUREMENT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that contracts for public works of less than $10,000,000 often include a duty to defend clause, requiring the contractor to defend governmental entities against liability regardless of the contractor's negligence or fault. The current law prohibits this requirement only for contracts of $1,000,000 or less.
Design for public works projects is unique among services procured by the government. Public agencies have a strong involvement in budgeting and scoping services and working in collaboration with the design contractor. Public works often involve large risks due to site circumstances, public environmental concerns, and high public usage. Highways and public buildings have necessarily long service lives relative to other procurement items, thereby increasing contractor risk beyond that for other government contracts.
Design professionals licensed under chapter 464, Hawaii Revised Statutes, are able to obtain professional liability insurance that covers the contractor for indemnifying the government. However, the insurance industry does not provide reasonable coverage for the government's defense costs if the design professional is not liable. Further, the legislature finds that the current law's limitation on duty to defend clauses only for contracts of $1,000,000 or more disadvantages teams of local small design professional firms that may band together to pursue larger projects, or small local design professional firms that may serve as subcontractors on larger projects against larger multi-state or multinational firms that can self-insure. Thus, the legislature finds that design professional contractors should not be burdened with the duty to defend a governmental body against liability without regard to the contractor's negligence or fault for contracts of less than $10,000,000. Upon determination of negligence or fault, the contractor may still be required to indemnify and hold harmless the governmental body from claims arising out of or resulting from the negligent, reckless, or wrongful acts, errors, or omissions of the contractor.
The legislature further finds that, while some state and county agencies recognize the negative implications and have removed the duty to defend clause from contracts for public works, inconsistencies between agencies and departments still exist. A duty to defend clause is detrimental in the long term because such clauses negatively affect competition for contracts and innovation.
The purpose of this Act is to raise the threshold amount from $1,000,000 to $10,000,000 for contracts between any governmental body and a licensed design professional in which the governmental body may require the design professional to defend the governmental body or its officers, employees, or agents from any liability, damage, loss, claim, action, or proceeding arising out of the contractor's performance under the contract.
SECTION 2. Section 103D-713, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) No contract of less than [$1,000,000]
$10,000,000 that is entered into on or after July 1, [2007,] 2014,
by any governmental body, and is exclusively for services that may only
lawfully be provided by a person licensed under chapter 464, may require the
contractor to defend the governmental body, or its officers, employees, or
agents, from any liability, damage, loss, or claim, action, or proceeding
arising out of the contractor's performance under the contract."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on December 21, 2112.
Report Title:
Procurement Contracts; Liability; Duty to Defend; Public Works; Design Professionals;
Description:
Prohibits the inclusion in any public works contract less than $10,000,000 between any governmental body and a licensed design professional of a requirement that the contractor defend the governmental body from claims arising out of the contractor's performance under the contract unless the contractor is at fault. Effective December 21, 2112. (SB2463 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
