HOUSE FILE _____

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON SODERBERG)

A BILL FOR

An Act relating to indemnification provisions in construction contracts.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  NEW SECTION.  537A.5  Indemnity agreements —— construction contracts.
   1.  As used in this section:
   a.  “Construction contract” means a public, private, foreign, or domestic contract or agreement relating to the construction, alteration, repair, or maintenance of any real property in this state and includes agreements for architectural services, demolition, design services, development, engineering services, excavation, or other improvement relating to real property, including buildings, shafts, wells, and structures, whether on ground, aboveground, or underground.
   b.  “Indemnify” or“hold harmless” includes any requirement to name the indemnitee as an additional insured in the indemnitor’s insurance coverage.
   c.  “Lower-tier party” means a party to the contract that acts as a subcontractor, specialty contractor, or supplier.
   d.  “Upper-tier party” means a party to the contract that acts as a general contractor.
   2.  A provision in a construction contract that requires one party to the contract to indemnify, hold harmless, insure, or defend the other party to the contract, including the other party’s officers, employees, or agents, against liability, claims, damages, losses, or expenses, including attorney fees, arising out of bodily injury to persons or damage to property caused by or resulting from, in whole or in part, the negligence, act, or omission of the indemnitee or the officers, employees, or agents of the indemnitee, is void and unenforceable as contrary to public policy.
   3.  A construction contract may contain a provision requiring indemnity, but such a provision shall be enforced only to the extent that the provision requires either of the following:
   a.  One party to the contract to indemnify, hold harmless, or insure the other party to the contract, including the other party’s officers, employees, or agents, against liability, claims, damages, losses, or expenses, including attorney fees, only to the extent that the liability, claims, damages, losses, or expenses are caused by, or arise out of, the acts or omissions of the indemnitor or the officers, employees, or agents of the indemnitor.
   b.  A party to the contract to purchase a project-specific insurance policy, including an owner’s or contractor’s protective insurance, project management protective liability insurance, or builder’s risk insurance.
   4.  This section does not apply to the indemnity of a surety by a principal on any surety bond or to an insurer’s obligation to its insureds.
   5.  If an upper-tier party to a construction contract is named as an additional insured or additionally named insured on a commercial general liability or similar liability policy of insurance of a lower-tier party to a construction contract, the coverage to the upper-tier party shall be limited to the cost of defense and vicarious liability, and the policy shall not extend coverage for the upper-tier party’s own negligence, whether sole or partial.
   6.  If a court action or other binding dispute resolution proceeding is brought or initiated against an upper-tier party for personal injury by an employee of a lower-tier party to a construction contract, and it is ultimately determined that the upper-tier party to the construction contract has no liability to the employee other than vicarious liability, the upper-tier party has a claim of indemnity for all costs, including costs of experts and attorney fees, associated with defending such action against any party in the contractual chain determined to have any liability for the personal injury. Any liability of the employee for the employee’s own personal injury shall be attributed to the employee’s employer for purposes of this subsection. This indemnification obligation shall be joint and several among the parties found liable for the personal injury.
EXPLANATION
   This bill relates to indemnification provisions in construction contracts.
   The bill provides that a provision in a construction contract which requires one party to the contract to indemnify the other party against claims based on acts or omissions of the party being indemnified is void and unenforceable as contrary to public policy. The bill provides that an indemnity provision in a construction contract is enforceable if it requires one party to the contract to indemnify the other party against claims based on acts or omissions of the party providing the indemnification, or if it requires a party to purchase a project-specific insurance policy, including an owner’s or contractor’s protective insurance, project management protective liability insurance, or builder’s risk insurance. The bill does not apply to the indemnity of a surety by a principal on any surety bond or to an insurer’s obligation to its insureds.
   The bill defines a “lower-tier party” to a contract to mean a party to the contract that acts as a subcontractor, specialty contractor, or supplier. The bill defines an “upper-tier party” to a contract to mean a party to the contract that acts as a general contractor. The bill provides that if an upper-tier party to a construction contract is named as an additional insured or additionally named insured on a commercial general liability or similar liability policy of insurance of a lower-tier party to a construction contract, the coverage to the upper-tier party is limited to the cost of defense and vicarious liability, and the policy will not extend coverage for the upper-tier party’s negligence. The bill provides that if a court action or other binding dispute resolution proceeding is brought against an upper-tier party for personal injury by an employee of a lower-tier party to a construction contract, and it is determined that the upper-tier party to the construction contract has no liability to the employee other than vicarious liability, the upper-tier party has a claim of indemnity for all costs associated with defending the action against any party in the contractual chain determined to have any liability for the personal injury. The bill provides that any liability of the employee for the employee’s own personal injury shall be attributed to the employee’s employer for purposes of such an action. The bill provides that such an indemnification obligation will be joint and several among the parties found liable for the personal injury.