Pursuing Federal Government “Set-Aside” Contracts

If you’re looking for new ways to “grow” your small business, you may want to learn more about qualifying to bid on federal government “set-aside” contracts. The Small Business Administration (SBA) says there are two basic types of these set-aside contracts. Both can result in highly lucrative contracts that might otherwise have been awarded to far larger companies

The difference between “sole-source” and general competitive bidding set-aside contracts

This “sole-source” type of set-aside contract is often awarded through a non-competitive bidding process when the government believes that only one single business can meet the contract’s requirements. Companies seeking to bid on these types of contracts must first register with SAM (the System for Award Management). Occasionally, these types of sole-source contracts may be managed so that competitive bids will be accepted.

However, most small businesses try to submit bids after qualifying for one of four main federal government set-aside contract programs that always consider competitive bids. Here’s a closer look at each of them.

The four main types of federal government set-aside contracting programs

  1. Women-owned companies. Each year, the federal government tries to award at least five percent of all federal contracting dollars to Women-Owned Small Businesses (WOSBs).

The goal is to try and help women gain access to more business contracts now since male-run companies were often favored during past decades.

  1. Companies owned chiefly by a disabled military veteran. At present, the SBA states that the federal government seeks to award about three percent of all federal government set-aside contracts to disabled-veteran owned businesses;
  2. 8 (a) business development program entities. These businesses are usually run by socially or economically disadvantaged owners. In some cases, they’re helped by forming joint ventures with more established companies. An SBA specialist may be assigned to help the owners gain a better understanding of how the federal government contracting process is designed to work. Each year, at least five percent of all federal contracting dollars are awarded to owners of these types of businesses;
  3. HubZone certified small businesses. For your company to qualify to bid on this type of set-aside federal government contract, it must be at least 51% owned and controlled by a U.S. citizen, an agricultural cooperative, a Community Development Program, an Indian tribe or a Native Hawaiian organization. The principal place of business for a HubZone company must be located in a qualified HubZone area. In general, these businesses are viewed as “distressed” and are often found in underrepresented rural or urban populations.

If you’d like to find out if your company can be certified to bid on federal government contracts under one of these four competitive set-aside programs, plan on meeting with your Houston business law attorney. You can then discuss the various challenges you may encounter while trying to become a small business contractor with the federal government. You can also ask how you might submit bids to any state government contracting programs.

After speaking with your lawyer, you may also want to pursue a special SBA training program. Even if your business cannot currently qualify for certification under one of the set-aside programs described above, you can still try to obtain specialized training that can help you better manage your employees while expanding your customer base without doing business with any government programs.

Please feel free to contact one of our Murray Lobb attorneys about your current interest in bidding on specific types of government or private enterprise business contracts. In addition to providing you with our best legal advice, we can also help you create the formal paperwork that you may need.

Basic Facts: Special Needs and Pooled Trusts

If you want to give money to a disabled family member receiving government benefits like SSI (Supplemental Security Income) and Medicaid, consider setting up a special needs trust and naming that person in your Will. Careful planning is required since disabled people can lose their eligibility to receive certain benefits if their net worth and assets increase.

Once you’ve created the proper type of trust account, your disabled family member will be in a better position to: (1) start receiving an added monthly stipend or inheritance from a family member; (2) accept a large sum of money after surviving a serious vehicle accident caused by another person’s negligence; or (3) receive funds from another unusual source.

Here’s additional information about creating SNTs – special needs trusts. You may want to set up a third-party or first-party SNT – and possibly even a pooled trust.

Here are some of the unique features offered by third-party SNTs (special needs trusts)

The American Bar Association says that this type of SNT, also referred to as a supplemental needs trust, can be used to help a disabled beneficiary receive a gift or inheritance from a third party such as a relative. However, it should never to be used for any assets or money that already belong to the beneficiary.

Based on the general terms you set forth in the trust, your trustee will then determine the exact way all funds will be used to help your beneficiary (or loved one). While many of these types of trusts are considered testamentary (part of someone’s estate), they can also be used for inter vivos transfers of gifts (those made while the person making the gift is still alive).

Like the third-party SNT described below, this first-party type should be set up so that the recipient’s government benefits remain their primary source of income — and these types of added funds are simply a supplemental source.

What are some of the unique attributes of a first-party SNT (special needs trust)?

While sometimes referred to as self-settled special needs trusts, these are mainly created to receive assets that are the beneficiary’s legal possessions. As is true of most SNTs, you’ll need the help of a highly experienced Houston business law attorney to help you create one since the multiple state and federal laws governing them can periodically change.

What’s most unique about this type of trust is that it must include a provision stating that when the beneficiary dies – depending on the exact amount of assets still contained in the SNT — Medicaid must be repaid for all funds that were ever spent on the beneficiary.

Those who most often benefit most from these types of first-party, special needs trusts usually fall into one of the two following categories.

  • They are under age 65 and want to receive funds worth more than $2000 (or more than the net worth amount currently allowed by law) – while remaining eligible for government benefits — or
  • They have received (or will receive) an unexpected financial windfall – possibly as the result of a personal injury lawsuit following a car accident.

Keep in mind that first-party SNTs can only be established by a parent, grandparent, legal guardian or court for a special needs person.

If you can’t afford a trust administered by a paid trustee – ask about “pooled” trusts

When funds are limited, you can ask your attorney to create what’s often referred to as a “pooled trust.” This type of account containing a disabled person’s money can be added to funds that have been deposited for other special needs individuals.

All of these accounts are then monitored and administered together by a non-profit board or agency. Among other tasks, your attorney may need to create a joinder agreement (or review one offered to you) as you start applying to various types of appropriate pooled trust groups.

Many disabled adults prefer this approach since they can personally help establish their own “pooled trust” with an organization set up to administer such accounts – without the help of other family members.

Whatever else you do, try to avoid simply giving extra funds to a family member so that person can later provide for all the disabled person’s needs. Given human nature, that money may never wind up being spent to benefit the person with special needs.

Please contact one of our Murray Lobb attorneys so we can use our lengthy experience creating special needs and other trusts to protect your disabled loved one’s financial interests — both now and in the future.

General Steps to Take While Preparing to Sell Your Business

Selling your company at the proper time can provide you with greater freedom and added income as you pursue other business or personal goals. Whether you’re a sole proprietor who can move forward alone — or someone who must confer with business partners or a corporate board of directors, there are basic steps you can follow that can help streamline the process.

As you further contemplate this move, give serious thought to timing and be ready to explain why you’re making specific choices to prospective buyers; They’re sure to ask why you’re selling your company now. Also think about whether you should hire a professional business broker, especially if you don’t want to manage the sale on your own and are concerned about locating the best potential buyers.

Each of these key topics are discussed further below.

Are you prepared to tell qualified buyers why you want to sell your business now?

If sales are dropping or you’re currently losing a sizable portion of your customer base, you may want to postpone the sale for six months or a year. During that time, you may be able to rebuild the company and make it more viable.

Of course, business owners often want to sell their companies for many other reasons, including the following ones.

  • They’re eager to retire and simplify their lives – letting go of business activities.
  • They have current disputes with partners, co-owners or corporate board members, so they would just like to move on. Obviously, you’ll need to reference these issues in a very tactful yet honest manner if you have no other reasons for selling.
  • The sole owner (or another party) is facing a serious illness or impending death.
  • You want to keep working — but in a less stressful capacity. Be ready to share this in as upbeat a manner as possible – while being open and honest about the pressures of running the business.
  • You’ve developed a keen interest in a different business field and are eager to get your new venture up and running.

These are just a few of the reasons why people often choose to sell a business. Whatever you decide to tell prospective buyers – be as honest as possible since a failure to disclose current problems is unethical and could damage your reputation in the community.

If your business is losing value, be prepared to tell potential buyers (after carefully qualifying them) how they might reverse that trend. You can also explain why they may still want to simply purchase all your valuable vehicles and equipment.

Decide whether you should sell the business yourself – or hire other professionals

  • Legal advice can prove crucial. You’ll also need help drafting the various legal contracts and documents required to support a sale.
  • You’ll want to work closely with your accountant. All your business and tax records must be fully updated.
  • A business appraiser can prove very helpful. This individual can help you determine a fair asking price for your company.
  • Even a brief consultation with a business broker can benefit you. This person knows how to locate a healthy pool of potential buyers. This process can prove extra challenging if you do not want to run any public advertisements.

Be prepared to locate or create various documents while trying to complete a viable sale

You must be prepared to share all your basic financial statements and records for the past three or four years. It’s also crucial to create a comprehensive list of all your company equipment and fixed assets tied to your business accounts. (Be prepared to spend the necessary fees to repair all valuable vehicles, equipment and other goods involved with the final sale).

It’s also important to create a detailed list of your ongoing sales transactions and the names of the companies that currently provide all your company’s most critical supplies. Copies of all current contracts and leases should also be made available so qualified buyers can review them.

Be prepared to carefully decide which buyers may be the most dependable ones

Many business owners prefer to sell their companies to close family members, trustworthy employees, friends or current customers. You’ll need to choose wisely, especially since this type of sale often takes from six months to two years. 

Of course, never disclose private information about your business to potential buyers until after they’ve each agreed to sign non-disclosure agreements and qualified for financing plans that meet your requirements.  Be prepared to negotiate carefully – or ask your attorney to handle the negotiations on your behalf.

If you’re ready to sell a business – or just want to learn more about all the various legal and practical steps referenced above, please contact one of our Murray Lobb attorneys. We look forward to answering all your questions.

The Basic Steps for Forming a Texas Corporation

Although running a business can be very challenging, it’s often invigorating to reach a point when you may need to incorporate your company. This process is often begun by discussing what can be gained or loss by making this move with your business partners. You should also consider speaking with your Houston business lawyer so you’ll fully understand all the legal implications of making this decision.

The following material reviews the main reasons that many companies choose to incorporate their businesses. It then notes the most common steps that must be taken prior to filing a certificate of incorporation with the Texas Secretary of State’s Office.

Potential advantages that are often acquired by incorporating a business

  • Improved legal liability status. Creating a corporation can provide each individual business partner with added protection against personal liability for the actions of all other executives or employees. It can also offer greater protection for business assets;
  • Critical, everyday activities can be simplified. Upon incorporating, it can become easier to add new owners and investors while still maintaining the same level of control over your company;
  • The company can more easily transact business all around the world. It’s often easier to conduct business in a corporate form in many other countries;
  • It can help you one day take your company public. While your corporate executives and employees may always want to conduct business privately, a time may come when it may be to your financial advantage to take the company public and sell stock.

Those are just a few of the main reasons why many business executives decide to incorporate their current companies or partnerships.

Common steps you must take when you’re ready to incorporate your business

  1. Name the corporation. Try to choose a name that suits your business and helps raise your profile. You and your lawyer will need to conduct a formal search to see if any of the names you’d like to choose are currently available in Texas;
  2. Select a registered agent and office. Be prepared to designate a trustworthy party to serve as your registered agent and name the city where that person will keep his or her office;
  3. Choose which parties will be named as the corporation’s organizers or incorporators. The names and addresses of each of these individuals must be listed within the certificate of formation;
  4. Designate your corporate directors. After the certificate of formation has been filed, the directors take over running your business. These highly knowledgeable executives must also have strong management and interpersonal skills that will help them successfully negotiate all future decisions and transactions;
  5. Draft a brief statement, indicating the corporation’s official business purpose. While this may sound rather straightforward, it’s often wise to run this description by your lawyer to be sure you’ve fully covered all key aspects of your intended business transactions;
  6. Consider obtaining professional help with the completion of your official certificate of incorporation. Like other states, Texas has specific expectations for the precise information that must be included. Since these requirements can change periodically, it’s often wise to ask your lawyer to review the contents of your certificate of incorporation;
  7. Pay the required fees. These should normally be posted on the Texas Secretary of State’s online website. If you prefer, your lawyer can submit your fees and certificate of incorporation for you.

While this list of common steps isn’t intended to be fully comprehensive, it should clearly indicate the basic steps that you and your business partners should take if you decide that it’s time to incorporate your business.

Please feel free to contact the lawyers at Murray Lobb so we can answer any specific questions you may have about this process. We’ve helped many clients incorporate their businesses over the years – and we’re ready to put that experience to work for you.

Six Basic Types of Business Insurance You Might Need

Successful companies of all sizes readily address their insurance needs so they won’t later be caught off guard by either a baseless or valid legal claim. No matter how hard you try to provide flawless products and services to the public, there’s always a chance that a defective product or business transaction may render you liable for legal damages.

Although only certain types of companies must carry workers compensation, disability and unemployment insurance to meet federal guidelines, all businesses can benefit from protecting their company assets by purchasing basic and special types of business insurance.

Fortunately, there are only six basic types of business insurance that you and your business partners must carefully review while trying to protect your company against future legal challenges. All six are set forth below with additional information.

Six common types of business insurance

Before reviewing the following types of insurance, be sure to thoroughly discuss the precise nature of all your business transactions with your insurance agent.

  1. General liability insurance. This will provide you with legal defense support for a variety of alleged wrongs. For example, your company may be sued based on a personal injury claim or the alleged statements of one of your employees. For example, if one of your customers is seriously injured while visiting one of your offices or factories, this policy can help you compensate the injured party for all bodily injuries and medical expenses. In addition, this same type of policy could protect you if a court holds one of your employees liable for business libel or slander — for damages up to the maximum amount of coverage stated in your policy.
  2. Product liability insurance. Even some of the most reliable products on the market will occasionally malfunction and harm a consumer. For this reason, you must secure an ample amount of product liability insurance coverage for this type of claim.
  3. Professional liability insurance. If your company provides any types of services to customers, you must carry this type of policy – often referred to as “E and O” (errors and omissions) coverage. This policy will cover the costs of defending your company in a civil lawsuit that may be based on the alleged grounds of malpractice (often medical or legal). The insurance industry doesn’t view these types of claims as eligible for coverage under either general liability insurance or a homeowner’s insurance policy.
  4. Commercial property insurance. Industrial fires, floods, windy hail storms and other natural disasters can quickly destroy critical manufacturing plants, office buildings and valuable inventory. Always be sure to carry ample coverage under this type of policy — based on recent property value appraisals.
  5. Home-based business insurance. This type of policy is usually offered as a rider to a person’s homeowner’s insurance. It provides limited coverage for such problems as business equipment and inventory damages. This type of policy can also provide funds to cover liability claims brought by injured third parties.
  6. A business owner’s policy. This general type of coverage can let you bundle nearly all (or most) of your insurance needs into one policy. If you pursue this option alone – make sure it adequately protects you regarding all the most unique aspects of your company’s goods and services.

When discussing your insurance needs with your lawyer and insurance agent

Always talk about every reasonable type of harm that your business might suffer. Also, make sure you’ve chosen the best type of partnership or corporate structure to further protect your personal and business assets. Once you fully understand all the risks your company might face, find a highly respected business insurance broker. Always ask trusted business peers for their recommendations for this type of agent.

Finally, speak with your Houston business law attorney about all the specific types of insurance required by the state of Texas for a company like yours. And be sure to address all the federal government’s insurance requirements. Keep in touch with your insurance agent and lawyer throughout each year so they can each readily update you about new legal or policy requirements that may affect your current coverage during the upcoming year.

Please feel free to contact a Murray Lobb lawyer so we can talk with you about the legal aspects of obtaining adequate insurance coverage for all your business needs.

Key Traits New Business Partners Must Readily Offer

Although only 20% of new businesses fail during their first year, roughly half of them cease operations during their first five years. Frequently, the biggest problems develop because the founders failed to choose the best group of partners available to start the company.

Each potential business partner’s personality traits, ethical values, passion and proven skills must be carefully evaluated. Only then can everyone work hard together to define and establish high performance standards while carefully marketing the company’s goods and services to the public.

Here’s a general overview of the partner skills and traits that some business experts believe can provide a new company with a strong chance to succeed for many years to come.

Top skills and traits your partners must have and be willing to share with each other

  1. Trustworthiness, discretion and moral integrity. In addition to partners whose references say they’re definitely trustworthy– you also need people who have an innate need to treat others fairly and want to act as good role models for ethical business behavior;
  2. Keen intelligence and a proven track record of success. Ask all potential partners about their past business successes and failures. Find out if they have truly learned from all past experiences. The crucible of the workplace often provides the best measure of a potential partner’s ability to succeed in a new business venture. Look for highly intelligent partners who can readily respect other people’s creativity — while still bringing their own fresh, original ideas to the table;
  3. Able to maintain a consistently positive, “can do” attitude. Nothing can bring a business to its knees quicker than one or two partners who keep forecasting doom. Be sure each person will remain actively involved in all key company decisions and “go the extra mile” without being asked to do so on many occasions;
  4. Able to display strong, supportive communication skills. All companies need strong communicators who can create proper standards for respectfully interacting with others. These standards must apply to all in-person meetings, phone conversations, the exchange of emails and the use of social media. Each partner must also clearly communicate his or her support for others within the company;
  5. Can offer unique skills that help balance out those offered by the other partners. In addition to someone who can handle complex accounting matters, you’ll also need partners who are strong planners, innovative geniuses, marketing wizards and product (and service) development experts. You’ll also need at least one partner who maintains strong connections to industry experts who can provide your company with timely advice, crucial consultants and other contacts over the years;
  6. Can remain open-minded and is willing to constructively resolve conflicts with others. Always learn all you can about each potential new partner’s openness to the ideas of others and ability to compromise on matters. Also try to evaluate the person’s mature ability to acknowledge personal mistakes – and learn from them. You don’t need any partners who constantly try and prove themselves “right” about everything;
  7. Has the ability to handle different levels of risk and uncertainty. This may be the hardest trait of all to discern – but it’s well worth finding out if someone can remain fully productive – even when unexpected business challenges arise. Always ask about past business difficulties and how the partner candidate personally responded to them. Resilience in the face of change is a key trait of all successful business partners.

Once you’ve selected all your partners, you’ll need to meet with your Houston business lawyer to draw up a partnership agreement that clearly addresses such matters as each person’s roles and responsibilities, how (and when) everyone will be compensated – and how the company must respond when anyone chooses to leave the partnership.

Please contact our Murray Lobb office so we can provide you with the guidance you’ll need when forming any new business. Our firm’s lengthy experience working with professionals in numerous fields allows us to provide you with the help you’ll need.

Most Common Hiring Discrimination Complaints

In a work world where the average tenure with any given employer is declining, many companies must routinely advertise and fill both new and established jobs. Yet as common as this process has become, every employer must periodically stop and re-evaluate how all job applications are being reviewed, skills tests are being administered and interviews are being granted and conducted.

After all, implicit bias (discriminatory hiring) remains a constant threat to maintaining an even playing field for all job applicants. And though most Texas employees are hired on an “at-will” basis, (allowing them to leave when they choose – and be fired without notice or cause), certain federal, state and local laws forbidding hiring discrimination must still be obeyed.

The most critical laws protecting employees against discrimination are set forth below, followed by examples of the types of hiring questions employers should avoid. Finally, the roles played by the TWC (Texas Workforce Commission) and the EEOC (Equal Employment Opportunity Commission) regarding employee complaints are also briefly noted.

Federal, state and local laws provide many anti-discrimination protections to Texas workers

Both federal laws and Texas statutes have been passed providing job applicants and employees with protections against discrimination on the following grounds.

  • Race
  • National origin
  • Color
  • Religion
  • Sex (including various medical conditions directly related to pregnancy)
  • Age (40 and older)
  • Genetic testing information
  • Disability

Federal law also provides specific employment discrimination protection to applicants who may not be actual U. S. citizens.

Federal laws and related regulations designed to protect workers against discrimination

  • Title VII of the Civil Rights Act of 1964 (Title VII). This law was later amended to include The Pregnancy Discrimination Act
  • The Equal Pay Act of 1963 (EPA)
  • The Age Discrimination in Employment Act of 1967
  • Title I of the Americans with Disabilities Act of 1990 (ADA)
  • Sections 102 and 103 of the Civil Rights Act of 1991
  • Sections 501 and 505 of the Rehabilitation Act of 1973
  • GINA – The Genetic Information Nondiscrimination Act of 2008

Many of the legal rights guaranteed to Texas workers under the federal laws referenced above are also protected (and set forth) in Chapter 21 of the Texas Labor Code. Various Texas cities, including both Houston and Austin, have passed additional anti-discrimination laws to protect their residents with unique sexual orientation and gender identity issues. (Additional information about protecting employee rights is set forth on our Texas Governor’s website.)

Here’s some additional, pragmatic information for handling the job application process.

Company interviewers must carefully avoid asking job applicants these types of questions

While the following list is not intended to be comprehensive, it should heighten your awareness of how careful you must be when trying to learn more about applicants who may have certain special needs or limitations that are not directly related to legitimate job requirements.

  • Do you have any disability? (However, if the applicant has a visually obvious disability — or has voluntarily disclosed one – you can normally ask if any special job accommodations are necessary or required);
  • Are you currently taking any medications that might impair your ability to perform the assigned tasks as described?
  • Have you needed to file any workers compensation claims in the past?
  • Are you pregnant – or planning to have a child during the coming year?
  • Have you obtained the results from any genetic tests during the past 10 years that indicate your likelihood of developing cancer (or another debilitating condition)?
  • Have you ever suffered a heart attack or stroke? Do you have any close blood relatives who have suffered from either of these medical problems?
  • Do you currently suffer from depression, bipolar disorder or schizophrenia – or do any immediate family members have these medical conditions?

Under some circumstances, once you’ve hired a new employee, you may be able to inquire about certain disability-related medical conditions. However, you should discuss all the specific conditions that must exist before asking these questions with your employment law attorneys to avoid violating any of the employee’s legal rights.

The TWC and EEOC help current (and prospective) employees with discrimination concerns

When individuals believe that they’ve endured discrimination while applying for work with your company – or while employed by you, they usually contact the Texas Workforce Commission and the EEOC while deciding whether to file a formal complaint.

Should you learn that such a complaint has been filed, be sure to immediately contact our law firm so we can help you prepare a thorough response, detailing all that your company did to fully respect all employee (or job applicant) rights. We can also discuss with you various proactive steps your company can take to try and decrease the chances of having any further complaints filed against you.

Voters To Determine Whether Texas Changes Home Equity Lending Laws

Now that the Texas House and Senate have approved SJR 60 and its companion bill HJR 99, Texans must decide in November whether we should amend our state constitution’s home equity law provisions. Any changes to the state constitution require a voter-approved amendment. The proposed changes may benefit many borrowers and they would remove a prohibition that currently prevents agricultural homestead owners from seeking home equity loans.

Additional Changes Addressed by SJR 60/HJR 99

This joint bill is designed to accomplish several goals. One key objective is to lower the current three percent cap on fees that can be charged to borrowers initiating a home equity loan down to only a two percent cap. To achieve this change, the bill separates out from the cap such fees as property surveys, appraisals, title exam reports and state base premiums. This change is designed to help low-income borrowers and those needing loans in more rural areas.

This means that borrowers seeking home equity loans under $50,000 might currently see those added fees go over the three percent cap. However, if the cap is lowered and the other changes noted above are made, those same borrowers could probably avoid that problem. This proposed amendment would also increase the present loan-to-value ratio up to 80 percent (from its current level of 50%) on home equity lines of credit.

Consumers may also benefit from a new provision allowing them to refinance home equity loans that have already existed for at least one year. They could turn such loans into traditional mortgages if all required conditions are met. Those who wish to make these types of changes would be owed new disclosures clearly outlining the potential benefits that might be lost by making this change. Special time deadlines would also have to be met, making sure that each consumer clearly understands the full impact of converting the loan into a traditional mortgage well before the refinance closing date.

Recent Legislative History Regarding This Joint Bill

Back in 2015, Representative Richard Raymond of Laredo proposed a bill that addressed the three percent fee cap issue by removing specific third-party expenses from the cap. Although that bill failed to pass, it did raise awareness of these important issues.

Meeting Constitutional Change Requirements and Putting Matters to a Vote

The passage of these joint bills required a two-thirds majority vote in both the Texas House and Senate. Now that requirement has been met, it’s time to put this matter on the ballot so voters can make the final decision on November 7, 2017. Should Texas voters approve this amendment, the changes to our state constitution will take effect on January 1, 2018.

Should you have any questions about how you should initiate financing for your home or other purchases, please contact our office and allow us the privilege of helping you. We can also answer any other questions you might have about various contracts and lending practices.

Good News for Owners of a Construction Project? We think so!

On May 8, 2015, the Texas Supreme Court, in a case of first impression, interpreted Chapter 95 of the Chapter 95 of the Texas Civil Practice and Remedies Code, which relates to limitations on a property owner’s liability for injury, death, or property damage to an independent contractor while constructing, repairing, renovating, modifying, or improving the real property.

In the case of Abutahoun v. The Dow Chemical Company, the Supreme court held that Chapter 95 applies to independent contractors’ claims against property owners for damages caused by negligence when those claims arise from the condition or use of an improvement to real property where the independent contractor constructs, repairs, renovates, or modifies the improvement. In so finding, the Court held that Chapter 95 limits property owner liability on claims for personal injury, death, or property damage caused by negligence, including claims concerning a property owner’s own contemporaneous negligent activity.

In this case Dow Chemical contracted with Win–Way Industries to install insulation on a system of pipelines at Dow’s facility in Freeport, Texas. Robert Henderson was a Win–Way employee, and he assisted with the insulation work. Dow’s Freeport facility contained thousands of pipes in a pipeline system that ran throughout the facility. While working for Win–Way on the asbestos-insulated pipeline system Henderson was allegedly exposed to asbestos dust by Dow employees who were installing, sawing, and removing asbestos insulation nearby. He was also allegedly exposed to asbestos dust as a result of his own direct contact with the insulation products.

Eventually, Henderson was diagnosed with mesothelioma, and he and his wife, Tanya, sued Dow and over a dozen other defendants, alleging under various negligence and product liability theories that the defendants were responsible for Henderson’s injuries due to asbestos exposure. The jury returned a verdict in which it found that Dow’s negligence proximately caused Henderson’s injuries, and that Dow was 30% responsible for causing Henderson’s injuries. Based on the jury verdict and several adjustments, the trial court rendered judgment against Dow for $2.64 million plus interest and court costs.

Dow appealed the verdict and argued that Chapter 95 does not distinguish between a property owner’s liability for exposure caused by the activities of contractors and their employees and exposure that the property owner’s own employees’ activities caused. Further, Dow argued that Chapter 95 applied to bar all of the Hendersons’ negligence claims because the Hendersons did not establish that Dow had both control over Robert Henderson’s work and actual knowledge of the dangers of asbestos exposure as Chapter 95 requires. The Hendersons argued that Dow could not “avail itself of the heightened protections afforded by Chapter 95” because their claims against Dow were “based solely upon the negligent activities of Dow employees, and not from injury arising from the condition or use of an improvement of real property of Henderson.

The court of appeals agreed with Dow’s interpretation of the statute. The court of appeals reversed the trial court’s judgment and rendered a take-nothing judgment in favor of Dow, holding that Chapter 95 applied to the Hendersons’ claims against Dow. The Hendersons filed a petition for review to the Supreme Court, which was granted. The Court affirmed the Court of Appeals that the Hendersons take nothing.

The heart of Chapter 95 are sections 95.002 and .003, which establishes Chapter 95’s applicability, and limitations on a property owner’s liability for personal injury, death, or property damage to independent contractors, respectively.

Regarding applicability, section 95.002 states that Chapter 95 “applies only to a claim.” A “claim” is specifically defined as “a claim for damages caused by negligence.” Section 95.002 then explains that Chapter 95 applies only to a claim for damages caused by negligence:

(1) against a property owner, contractor, or subcontractor for personal injury, death, or property damage to an owner, a contractor, or a subcontractor or an employee of a contractor or subcontractor; and
(2) that arises from the condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement.

Section 95.003 establishes the limitations on a property owner’s liability for a claim to which Chapter 95 applies, and states:
A property owner is not liable for personal injury, death, or property damage to a contractor, subcontractor, or an employee of a contractor or subcontractor who constructs, repairs, renovates, or modifies an improvement to real property, including personal injury, death, or property damage arising from the failure to provide a safe workplace unless:

(1) the property owner exercises or retains some control over the manner in which the work is performed, other than the right to order the work to start or stop or to inspect progress or receive reports; and
(2) the property owner had actual knowledge of the danger or condition resulting in the personal injury, death, or property damage and failed to adequately warn.

In short, a property owner is not liable for personal injury or death to a contractor, subcontractor, or employee of a contractor or subcontractor, while constructing, repairing, renovating, modifying, or improving the real property.

However, when a claim does not arise from a condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement, Chapter 95 does not apply. In such a case the independent contractor or subcontractor can recover in common law negligence.

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Charles E. Lobb, Jr. is a founding partner of Murray | Lobb, PLLC. Mr. Lobb focuses his practice in construction law and has authored and spoken at Construction Law Seminars. Should the situation arise he may be contacted at 281-488-0630 or at lobb@murray-lobb.com

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Is Notice to the Address of Record in the Loan Agreement always Sufficient? We'll See…

Many years of past precedent had established that a lenders notice to the debtor’s address of record in the Loan Agreement was almost always sufficient. However, one case from the Texas Supreme Court, and another in which Petition for Review has been filed may change established law.

In July 2015, in a landlord verses tenant case, (“Katy Venture v. Cremona Bistro”) the Texas Supreme Court ruled that because the landlord had used an outdated “registered” address even though it knew of a new “unofficial” mailing address, a fact issue was presented to defeat Landlord’s Motion for Summary Judgment in a bill of review proceeding after default judgment was entered against the Tenant.

Following the “Katy Venture” decision, the Fort Worth Court of Appeals, in a Lender verses Guarantor case, the Court held that the Guarantor raised a genuine issue of material fact to defeat a summary judgment. The Court held that because some summary judgment evidence exists that the Bank knew the Guarantor’s current address but nonetheless utilized an outdated “official” address in its certificate of last known address, a fact issue exists precluding summary judgment. This is true even assuming the Bank conclusively established the Guarantor’s negligence in failing to update his contractually-agreed-to address for notice.

Petition for review has been filed to the Texas Supreme Court. We’ll see in the coming year how the law of adequate notice evolves.

Practice point: Send notices to the borrowers and guarantors “official” address of record, but also send notice to ay other addresses which the bank knows, or with reasonable diligence and investigation should have known, where the borrowers and guarantors receive their mail or reside.