TDCAA Community
Indemnification by the County

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October 08, 2012, 10:30
ealbarado
Indemnification by the County
Is the county able to indemnify anyone? I have reviewed Sec. 157.903, Sec. 271.904, Sec. 303.037, & Sec. 501.066 in regards to indemnification in the Local Government Code and I do not see anything stating that the county cannot indemnify another party. I am being told that at a TDCAA conference a couple a years ago, the speaker said that a county cannot indemnify anyone for any reason.

Our county is entering an agreement with the local hospital district ("District") in regards to treatment being providing to indigent inmates in the county jail. The jail contracts out with an independent nurse practitioner who visits the jail & provides weekly medical visits to indigent inmates. The District in turn reimburses the County $50 per indigent inmate that is seen by the independent nurse practitioner.

The Indemnification clause in the agreement reads as follows:
County agrees to indemnify and hold District harmless from and against all claims, actions and proceedings (i) arising out of or in connection with any breach or nonperformance of any representation, covenant or agreement by County hereunder, or (ii) made by any inmate alleging entitlement to health care services or that health care services were denied or improperly rendered by the foregoing agreement to indemnify and hold harmless:


Can someone please point me in the right direction as to whether the County can or cannot indemnify another party?
October 08, 2012, 11:18
Scott Brumley
The speed bump for indemnification generally isn't statutory; it's constitutional. Article 11, section 7 of the constitution essentially forbids counties from taking on debt unless the provision's procedures are satisfied. That means any future encumberance of county money must be (1) available from current revenues, or (2) taken from an interest and sinking fund dedicated to the anticipated expenditure. Some counties have successfully navigated around this restriction by providing in the relevant instrument that a sufficient tax rate will be set to service the anticipated encumbrance. Of course, the problem with indemnification obligations is they tend to be highly speculative, both as to fruition potential and -- more importantly -- as to the ultimate amount owed. The latter prospect makes setting a constitutionally-compliant interest and sinking fund, or current tax rate, a difficult calculation indeed.
October 22, 2012, 10:49
Ray
And it would appear that the indemnity represents a risk shifting provision since it would require the County to assume the risk of the District's negligence. You do not indicate that the indemnity provision is bold-faced or in all caps so the provision might not be enforceable anyway. Of course the district cannot indemnify you a cause you should actually be in favor of given you are paying the District for a service they are uniquely capapable of performing. So what Scott said and whole lot more.