**. .** 



## OFTEXAS

Auemm. **TEXAS** 78711
**dOaN I,.**  **aILL Awl-ORNEY**  **GENERAL** July 29, 1977

Honorable Mack Wallace, Chairman Opinion No. H-1030 Railroad Commission of Texas P. 0. Drawer 12967 Re: Authority of Railroad Austin, Texas 78711 Commission toprohibit contract provisions limiting the liability of an LPG dealer.
Dear Mr. Wallace:
YOU have requested our opinion concerning the authority of the Railroad Commission tomodify, delete, prohibit, or otherwise regulate the terms and conditions of an equipment rental contract between a licensed Liquified Petroleum Gas (LPG)dealer and a lessee customer. You specifically ask about such contract terms which purport to limit the liability of a licensed LPG dealer for negligence. Section 3Aof article 6066d,V.T.C.S., provides:

General. The Railroad Commission of Texas ishereby authorized, empowered, and directed, and it shall be its duty to promulgate and adopt, in accordance with thisAct, adequate rules, regulations, and/or standards pertaining to any and all aspects or phases of the LPG industry (exceptasprovided in Subsection D. of this Section) which will protect or tend toprotect the health, welfare, and safety of the general public. The Commission isgranted jurisdiction to regulate "any and all aspects or phases of the LPG industry" in the interest of public health, welfare, or safety. Thus the Commission may regulate terms and conditions of such rental contracts at least to the extent that they may affect the public health, welfare or safety.

P. 4252Honorable Mack Wallace - Page 2 (H-1030)

Ithas been suggested to us that the court's opinion in Spence &HOwe Construction Co. v. Gulf Oil Corp., 365 S.W.2d 631 (Tex. 1963). ' rndicates that there isno connection between clauses which limit liability and negligent conduct. However, aswe read the decision, the court was merely stating that the connection was insufficient tomandate a general rule of public policy which would preclude the enforceability of such provisions in all instances. While the court noted the lack of any distinction between indemnity clauses in a commercial contract and common insurance policies on behalf of private citizens, the opinion falls short of finding that there is no connection between indemnity clauses and negligent conduct. The courts found such a connection inG., C. & S. F. Ry.v. McGown, 65Tex. 640 (1886),and Bisso v. 'Inland ways Corp 349U.S. 85 (1955). Inc.v. Eiiedge, Furthel,..- 515 S.W.2d 266 (Tex.1974 ~~~Watermore, as inAllright, ), the court in Spence was dealing with a standard of ordinary care.
As stated inRobert R.Walker, Inc.v. Burgdorf, 244 S.W.2d 506, 509 (Tex.1951):

From those who handle
. . .combustible gases . . .the law exacts a duty toprotect thepublic which isproportionate to and commensurate with the damages involved. Thus, LPG dealers are bound to exercise a "high degree of carei to protect thepublic. Farmers Butane Gas Co., Inc.v. Walker, 489 S.W.2d 949 (Tex.Civ. App. -Waco 1973, nowrit). The protection of the public is the clear intent behind article 6066d. Since, in our view, the use of equipment rental contract terms which limit the liability of LPG dealers for negligence or provide for indemnification thereof by their customers could have an adverse affect upon the public safety in light of the standard of care required of LPG dealers, we believe the Railroad Commission has clear authority to regulate or prohibit such terms.
We believe these indemnification clauses are void and unenforceable as amatter of law since LPG dealers are charged with a dutv of safetv on behalf of thepublic and the term relates to-negligence in the performance of this duty to the public. Western Union Telegraph Co.v. Linn, 26 S.W. 490

P. 4253Honorable Mack Wallace L.Fage 3.',(H-1030)

(Tex.1894); G., C. & S. F. Ry. Co;,vCi?Gown, supra; Lone Star Gas Co. v.Vea, 37m2d 89 (

. .,'~hpp. -- East'land1964, writ ref'd n.r.e.): Dittman v. City of~N:w Braunfels, 48 S.W. 99, nowrit): Restatement of Contracts 1114 (Tex.Civ. App.18 S 575, cited in Spence &Howe Construction Co. v. Gulf Oil Corp., supra at 633, and Crowell v. Ho 495 S.W.Zd 887, 889 (Tex.1973) vice Co., 85 S;E.Zd 169 (Ga. Conun.Code, S 2.719; Northwe Inc., 351F.2d 253 (9thCir. versity of California, 383P County ofMissoula, 517P.2d

## E

.
Furthermore, the terms of contracts executed subject to the regulatory authority of the Railroad Commission are not protected from the jurisdiction of the Commission by article 1, section 16. Houston Lig Commission of Texas, 529 S. v. Lo-Vaca Gathering Co., 5 El Paso 1976,writ ref'd n.r.e.); Railroad Commission of Texas n.r.e.); Railroad Commission (Tex.Civ. APP. A, 358U.S. 33 '.2d973 (Tex.Civ #oneStar Gas Co., writ ref'd) on other grounds, 304U.S. 224 (1938). See Letter Advisory - z. 136 (1977).
SUMMARY

The Railroad Commission may act toprohibit the use of indemnity terms within existing and future equipment rental contracts between a licensed LPG dealer and its lessee.

Attorney General of Texas .'d -



# L/$

DAVID M. KENDALL, First Assistant

P. 4254

### HonorableMackWallace-Page4 (R-1030)

C.ROBERTHEATH,Chairman OpinionCommittee klw

p. 4255