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The Senate Committee on State Affairs met on March 8, 2021 to take up several bills. This report covers the following bills: SB 156, SB 157, SB 45, and SB 219.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

SB 156 (Perry) Relating to the transfer of certain probate proceedings to the county in which the executor or administrator of a decedent’s estate resides.

  • Refile from last session
  • Birdwell – Does it allow for convenience of next of kin?
    • Perry – Can petition the court when it makes sense, not a mandate
    • Request local and uncontested

Jerry Jones, Self

  • Have concerns with issues like this
  • Not sure we need this
  • Hughes – If you have ideas of how to solve your concerns please let us know

Guy Herman, Probate Court Judge

  • Don’t think travel hearings are issues anymore
  • Saved money for people across the state thanks to zoom hearings
  • Thinks they are solving the problem through technology
  • Perry – Still have proper notice to creditors
  • Perry – Refuse to acquiesce to pandemic conditions; thinks it is a slippery slope if we continue to find reasons people don’t need to have a conversation with each other
  • Campbell – It’s still a petition it doesn’t have to be done
    • Perry – basically a public notice in the paper
    • Thinks it’s a good bill
  • Zaffirini – would allow for petition only if no one lived in the county?
    • Perry – yes

SB 156 left Pending

SB 157 (Perry) – Relating to eminent domain reporting requirements for certain entities

  • Refile from last session, don’t need to file the report if there is not a change

SB 157 left Pending

SB 45 (Zaffirini) Relating to the prohibition against sexual harassment in the workplace.

  • Refile from last session
  • Establishes that sexual harassment by any employer is unlawful regardless of number of employees
  • Does not hold workplaces responsible for sexual harassment by 3rd party contractors
  • numerous witnesses wanted to testify in favor, but submitted written testimony instead due to pandemic

Holt Lackey, Employee & Civil Rights Attorney – For

  • Sexual harassment at small employers is currently beyond scope of law, employees working at these businesses deserve same protections; lack of accountability incentivizes harassment
  • Highlights prevalence of sexual harassment in the workplace, SB 45 is a noble attempt to protect workers of small businesses

SB 45 left pending

SB 219 (Hughes) Relating to civil liability and responsibility for the consequences of defects in the plans, specifications, or related documents for the construction or repair of an improvement to real property.

  • SB 219 is about who bears responsibility for issues in building design
  • Two approaches: contractor is responsible for soundness of complete design, or contractor is not responsible if building to designs and specifications of owner
  • 36 states follow the second approach, only one follows the first
  • SB 219 states contractor is not responsible for design defects that someone else created; contractor is still responsible for building defects
  • Contractor is still responsible if they were part of the design process, or if they know or become aware of defects and do not speak up
  • Bill is not agreed to, will work on solutions that retain fundamental fairness principle; will ask that SB 219 be left pending

William Westcott, ABC of Texas, AGC Texas Building Branch – For

  • Making sure party who prepares plans is responsible for defects; 49 of 50 states follow the opposite view of Texas
  • In order to fix regulatory issue is through this statute, ensures party who prepares is liable; contractor is being unfairly burdened currently by plan defects and must overcome defects liability through contract language
  • Lucio – So the legislative intent is to make sure that everyone understands the role of the contractor & that the contractor be free from liability if he follows design plans of the engineer or architect; who signs off on plans?
    • In most instances it is the owner or owner’s representatives
  • Lucio – Once that is done, the contractor is no longer liable under SB 219?
    • Yes, to the extent that the contractor follows the plans, no to the extent they do not
  • Lucio – But the party that accepts construction as is and signs off, at that point liability is lifted from the contractor?
    • Not under SB 219
  • Lucio – What is the p
    • If contractor follows plans as drawn or written, then they are not responsible for defects in how specs were drawn or written; e.g. a bridge is under-designed and collapses, contractor would not be liable for the defects in design
  • Lucio – Someone at the end of the construction period will sing off that all duties have been fulfilled; at what point can the contractor feel that they are no longer liable for the construction?
    • Certification would be a piece of evidence in the case
  • Lucio – So still have an open door to the courthouse?
    • Yes
  • Lucio – I like the legislation, don’t feel that contractor should be liable if they fulfil the design as asked, but want to make sure the bill does this
  • Schwertner – Contractor definition in SB 219, is it a general definition?
    •  Very common definition of a contractor; there are questions over if this addresses subcontractors & will be working on this in substitute
  • Schwertner – General contractors are the go-between among owner, engineers, subcontractors, etc.; ridding contractor of liability of the design in the sense they have an overall obligation to the project
    • Party that prepares the plan is the one who should remain responsible; design-build is not under SB 219
    • Also a contractor must say something if they see something
    • Currently, owner shoves all risk onto contractor and contractor can’t do much
  • Hughes – Can you explain the economic loss rule?
    • In other states, if I had a problem with plans, I could make claims against architects or engineers; contractor cannot make direct claims against architect or engineer because they are not in privity of contract; this is way fix is necessary

Peyton McKnight, American Council of Engineering Companies of Texas – Against

  • Against bill as drafted, this shifts risk from contractors to owners; owners will not accept risk entirely, will be asking for perfect plans from designers and there is no such thing; will be asking for heightened standards of care
  • There is language in this bill that speaks to standard of care, but was drafted incorrectly; working with Sen. Hughes’ office on this to get us to neutral

Jeff Brannen, Balford Beatty Construction – For

  • Contractor’s job is to build, not draw plans; professionals who specialize in drawing or writing plans should be held responsible for their actions
  • Contractors can be held liable even when following plans or raising the issue with owners; can do job perfectly and can still be sued
  • Lucio – At what point do you think you should be relieved of any burden of liability based on your work and duties?
    • If we built the building in accordance with drawings and specs, I don’t think we should have liability
    • There is responsibility under SB 219 to point out problems, if we saw something obvious and failed to do that, should have liability
    • When owner checks off box it doesn’t relieve contractors from liability unless it was actually built to specifications
  • Lucio – There has to be some kind of inspection that ascertains that you did build to specs, correct?
    • There are inspections all along the way
  • Lucio – And with these can you certify at the end that all duties were fulfilled by the builder?
    • Yes
  • Hughes – If this bill passes, contractor is still responsible for their own negligence, correct?
    • Yes

Hope Wells, San Antonio Water System – Against

  • Opposing bill as filed
  • Opportunity to negotiate risk with contractors is critical to protection of ratepayer dollars; current law allows negotiation for risk and contractors are compensated for risk accepted
  • Contractors are best able to inspect, apply expertise in building, and determine if plans are adequate
  • Shifting responsibility for design defects to project increases risk for more change orders, which could delay projects and drive costs
  • Would appreciate opportunity to work further on language
  • Critical infrastructure language doesn’t capture all; doesn’t contain water & wastewater infrastructure not behind a fence
  • Would also like to clarify definition of “person” with respect to critical infrastructure
  • Should strike nonwaiver language to allow for contractual negotiation of risk
  • Schwertner – I thought this only affected real property, what is your understanding of what is covered?
    • SB 219 discusses improvements, repairs; understanding from attorneys is that this would apply to pipeline projects
  • Schwertner – SB 219 includes real property several times
    • Can report back to your office on this; also concerned about critical infrastructure language
  • Lucio – Asking Sen. Hughes, are water and wastewater part of the legislative intent?
    • Hughes – Used definition of critical infrastructure in filed version, intending to correct in committee substitute
  • Birdwell – Do you expect a CS today?
    • Hughes – No, just wanting a discussion today

Jason Martin, J.E. Dunn Construction Company – For

  • In the public arena there is little to no freedom of contract, in private sector contractors are held liable for plans issued by owner, which makes no sense; unachievable to obtain guarantee from owner and architect to guard against this
  • Party who prepared design should be responsible for the design; TX stands alone in inexplicable decision of holding contractors liable for decisions not made by them
  • Supports similar concepts for all construction

Hector Rivero, Texas Chemical Council – Against

  • Chemistry is a critical infrastructure sector, contracts are very complicated, contractors have high level of expertise with plenty of leverage in contracting
  • TX has historically protected freedom to contract, SB 219 would significantly restrict ability of two sophisticated parties to negotiate allocation of risk, would create competitive disadvantage with other states
  • Appreciates work done on exception for critical infrastructure, concerns remain that some are not covered under drone statute
  • Would also like to work on exception for sophisticated contracts and clarification for construction involved in design of the project

Chris Lambert, L&O Electric, Central Texas Subcontractors Association, Texas Construction Association – For

  • Without this bill, if I see a defect and engineer fails to correct, I am liable, but if I fix it, I’m engineering without a license; SB 219 would fix issue where I am punished no matter which option is taken
  • Most insurance companies will not provide coverage since constructor cannot carry insurance for another’s design; issues occur more often than assumed
  • Subcontractors are the bottom of the chain, obligated not just to general contractor, but also to contracts signed by the general contractor

Tim Chovanec, Benbrook Water Authority – Against

  • BWA could support limitations of contractor liability for unknown defects with modifications
  • Other portion alters standard of care owed by private engineers doing public work, could impact critical infrastructure
  • Fixes exist, urge consideration of those
  • Powell – Can you state the proposed changes?
    • 1) make change to definition of contractors to clarify it does not include architects, engineers, and developers, 2) adopt Homeland Security Act’s definition of critical infrastructure, and 3) incorporate definition of standard of care for engineers from Local Gov Code Chap. 271
    • Using this standard of care definition would eliminate a lot of public system concerns
  • Powell – If SB 219 was in effect, how would that have impacted lawsuit on defective tanks?
    • Were able to redo all contracts after the defective tanks were built to ensure experienced professionals did work and contractors carefully read bid specifications

Fred Wilshusen, Texas Construction Association – For

  • Contractors are not licensed to correct plans & specification defects, can’t get insurance to protect you as a contractor, no recourse if design professionals refuse to correct issue; further issues if in-house engineers or architects are used, owners will not look to themselves
  • Contractors has every incentive to raise issues with plans & specs, even after SB 219 is passed
  • SB 219 does not change responsibility of contractor for poor construction

Will Allensworth, Texas Society of Architects – Against

  • Opposed to bill as filed, wanting to work to strike balance and preserve freedom of contract
  • Nonwaiver provision is major issue with the bill
  • TX law does not require contractors and subcontractors to warrant sufficiency of plans & specs, litigation merely set default rule that parties are free to contract around
  • Freedom of contract should be respected
  • Schwertner – Regarding economic loss rule, does SB 219 affect this principle?
    • It can in a way, economic loss rule is protective of freedom of contract, SB 219 as drafted does undercut supports for freedom of contract and economic loss rule

Todd Staples, Texas Oil & Gas Association – Against

  • Because of complexities of contracts, member companies work to assign risk; exemption is not broad enough to cover everything we do
  • Statutorily mandating that a professional has no liability eliminates ability to freely contract
  • Other states have not put this into statute, statute would prevent waiver
  • Hughes – Contractors and owners do not negotiate from an equal footing, do they?
    • There are very large, sophisticated firms who are able to identify roles and responsibilities
    • SB 219 would eliminate ability of many to have a conversation
  • Hughes – Doesn’t take away contractor liability, but does take away liability for factors that contractors have no involvement in
    • Due to complexity this is a fact question that needs to be determined
  • Hughes – Should contractor be held liable for someone else’s decision? Contractors are still on the hook even if facts determine contractor is not liable
    • SB 219 would exclude parties from assigning the risk up from
  • Hughes – Would not allow someone who has more bargaining power through an adhesion contract to make someone accept liability, you are correct
    • Concerned about removing ability to assign risk and responsibility
  • Hughes – If contractor has responsibility of plans up front, SB 219 would not touch that at all
    • Premise is to have conversations up front and not remove parties
  • Hughes – Under the bill, if a contractor develops the plans, they are liable

Matthew Ryan, Texas Society of Architects – Against

  • Here to work cooperatively on alternative language that gets job done without impairing freedom of contract
  • Biggest concern is that SB 219 runs against freedom of contract and private ordering
  • Would like to ensure changes are only targeted at not leaving contractors with responsibility that isn’t theirs
  • Even if Texas shifts the default rule, still want to leave parties with ability to negotiate risk; many instances where owner is asking contractor to guide process, fast moving contracts, etc.
  • Hughes – Nothing in this bill prevents an agreement whereby a contractor is involved in a design and thus liable?
    • Would agree to a certain extent, there is a question remaining
    • Court previously determined contractors would be in best position to certify
  • Hughes – If parties agree that contractors have a role in the design, there is no question that a contractor would be liable
    • Agrees, design-build is growing, but still have more typical and alternative processes; parties should be able to negotiate how much they would rely on a contractor
  • Hughes – Nothing in this bill would say that parties cannot negotiate that contractors would take part in design process; if that happens contractor is on the hook
    • Would agree to the extent that this is a design-build delivery system
    • Nonwaiver provision does not allow contractor to go through process for taking responsibility for designs being complete

Sean McChristian, Construction Attorney, Self – For

  • Understand concerns surrounding freedom of contract, but contract governing projects can be extensive and always see conflicts in rights attributions; courts then must decide which provisions control
  • Texas law right now tips scale against contractors, need assistance to restore scales to be balanced and puts responsibility on those able to manage risk

SB 219 left pending