05/12/2007 01:00 PM Senate STATE AFFAIRS

      CSHB 151(JUD) - INDEMNITY CLAUSE IN PUBLIC CONTRACTS                                                                  
                                                                                                                                
CHAIR MCGUIRE announced the consideration  of HB 151. [Before the                                                               
committee was CSHB 151(JUD).]                                                                                                   
                                                                                                                                
1:13:21 PM                                                                                                                    
TREVOR  FULTON,  Staff,  to  Representative  Craig  Johnson  bill                                                               
sponsor, introduced  the bill  to the  committee. The  bill would                                                               
require uniform  indemnification and hold harmless  provisions in                                                               
professional services  contracts for  all public  agencies within                                                               
the  State  of  Alaska.  The  bill  would  close  a  loophole  in                                                               
contracts that has caused considerable  problems for companies in                                                               
the  design profession.  The loophole  allows public  agencies to                                                               
write  provisions  allowing  them   to  pass  responsibility  for                                                               
negligence  onto  the  consultant company  they  are  contracting                                                               
with. The bill language mirrors  Department of Transportation and                                                               
Public Facilities (DOTPF) contract language  that has been in use                                                               
for  years. He  said  the  majority of  public  agencies use  the                                                               
language contained in  the bill, but this would  make it standard                                                               
statewide.                                                                                                                      
                                                                                                                                
SENATOR STEVENS asked why the bill should be passed.                                                                            
                                                                                                                                
MR.  FULTON replied  that  the bill  would  ensure fair  business                                                               
practices between the public and private sector.                                                                                
                                                                                                                                
1:16:25 PM                                                                                                                    
DALE  NELSON,   Chair,  Legislative  Liaison   Committee,  Alaska                                                               
Professional Design  Council, Anchorage, said the  purpose of the                                                               
bill is  to standardize indemnification requirements  through all                                                               
public  agencies in  Alaska, making  each  party responsible  for                                                               
their own liabilities, errors, and omissions.                                                                                   
                                                                                                                                
1:19:37 PM                                                                                                                    
BRAD THOMPSON, Director, Division  of Risk Management, Department                                                               
of  Administration, Juneau,  testified  the reason  to pass  this                                                               
bill  is  because  professional design  engineers  or  architects                                                               
obtaining   an  errors   and  omissions   (EO)  policy   have  no                                                               
contractual liability protection within  an insurance policy. DOT                                                               
contracts, from  which the language  in the bill was  drawn, have                                                               
always contained  comparative fault  allocation in  the indemnity                                                               
language. Some  public entities go  beyond the  comparative fault                                                               
allocation in  their contracts which creates  an uninsurable risk                                                               
for the  independent design professional. This  legislation would                                                               
obligate all  public agencies as  defined in  the bill, to  use a                                                               
comparative  fault  allocation  within their  indemnity  language                                                               
when they contract with an independent professional.                                                                            
                                                                                                                                
SENATOR STEVENS asked what happens if the bill does not pass.                                                                   
                                                                                                                                
MR.  THOMPSON  answered  there  are  public  agencies  that  have                                                               
entered  stronger indemnity  terms in  contracts. An  independent                                                               
professional  signing  such a  document  to  obtain the  work  is                                                               
obligating  themselves beyond  their  insurability.  There is  no                                                               
effect on the State of Alaska.                                                                                                  
                                                                                                                                
1:22:21 PM                                                                                                                    
SENATOR FRENCH said  there is an impressive number  of letters of                                                               
support. He asked who opposes the bill.                                                                                         
                                                                                                                                
MR. FULTON answered that there  was little opposition as the bill                                                               
made  its  way  through  house  committee  reviews  and  the  few                                                               
disagreements that surfaced were resolved.                                                                                      
                                                                                                                                
SENATOR FRENCH asked if there was opposition from labor groups.                                                                 
                                                                                                                                
MR. FULTON answered there was none that he knew of.                                                                             
                                                                                                                                
1:24:16 PM                                                                                                                    
CHAIR MCGUIRE closed public testimony on HB 151.                                                                                
                                                                                                                                
1:25:36 PM                                                                                                                    
SENATOR  GREEN  moved  to  report  HB  151  from  committee  with                                                               
individual  recommendations and  accompanying  zero fiscal  note.                                                               
Hearing no objections, CSHB 151(JUD)  moved from the Senate State                                                               
Affairs committee.