State 5G Streamlining Bills are Stripping Localities’ Basic Contractual Rights to Indemnification

February 2019

Some state 5G streamlining bills are targeting and eroding localities’ basic contractual rights to indemnification. If 5G is safe, why are the companies who are going to profit from it afraid of indemnifying local communities for potential harms?

Telecommunications companies want to roll out 5G-ready infrastructure termed “small cells” across the country — whether communities want it or not. They want communities’ tax dollars to subsidize this rollout. And now, they want to make sure that when the lawsuits start, they aren’t the ones who pay for the fallout.

Has your state passed a 5G streamlining bill yet?21 states have. In several other states, bills failed or are currently pending.

Telecommunications companies have been lobbying to get language that helps their bottom line into these state bills. And although they have more than enough money to do this on their own, they are now also soliciting your help to build out the 5G-ready infrastructure even faster.

Some provisions in these bills that deserve greater attention are those addressing what localities can require from wireless providers in terms of indemnification and insurance. Of the state laws that have passed so far, 11 contain provisions on indemnification, and some of these also touch on insurance. Several of these provisions significantly affect localities’ ability to impose indemnification and insurance requirements on wireless providers and, in many cases, the original versions of the bills were even worse.

What is Indemnification and Why Does It Matter in the 5G Context?

Indemnification refers to compensating a party for losses incurred as a result of a specific incident. Including an indemnification provision in an agreement is a way for a party to protect itself in a contractual relationship. When two parties enter into an agreement, one party can require the other to “indemnify” it against things like third party lawsuits over damages related to specified incidents.

Indemnification is important in the 5G context, because it is a way for localities — who have seen their rights to decide how wireless providers can use property in their communities stripped away by the FCC — to avoid becoming the target of lawsuits if or when 5G small cells cause personal injuries and reduce property values. A city might want to use a strong indemnification agreement to shield itself from liability for harms related to the 5G rollout, so that the company profiting from this technology pays for its consequences — not the city. Localities may also want to protect themselves by requiring wireless providers to carry insurance that covers claims related to 5G small cells and names the locality and its agents as insured parties.

Of course, cities can only use these indemnification and insurance requirements to protect themselves if they are allowed to do so — and some state streamlining bills have eroded away these basic contractual rights.

What Do State 5G Bills Say About Indemnification?

Some state small cell laws, like those in Ohio and Kansas, require operators to indemnify municipalities — however, they expressly limit this indemnification to cases of “negligence” by the operator (and its agents etc.) “while installing, repairing, or maintaining facilities” in a public right-of-way.

For example, Kansas’ law states, in part, at 66-2019(d)(2)(H) (emphasis added):

“Wireless services providers and wireless infrastructure providers shall indemnify and hold the authority and its officers and employees harmless against any and all claims, lawsuits, judgments, costs, liens, losses, expenses, fees to include reasonable attorney fees and costs of defense, proceedings, actions, demands, causes of action, liability and suits of any kind and nature, including personal or bodily injury or death, property damage or other harm for which recovery of damages is sought, to the extent that it is found by a court of competent jurisdiction to be caused by the negligence of the wireless services provider or wireless infrastructure provider, any agent, officer, director, representative, employee, affiliate or subcontractor of the provider, or their respective officers, agents, employees, directors or representatives, while installing, repairing or maintaining facilities in a public right-of-way….”

Language like this comes up again and again in state small cell bills, although not always in the ones that passed, and it is problematic for localities for numerous reasons.

Negligence. First, this language obviously limits municipalities’ ability to require indemnification to instances where the provider was negligent. (States like Kansas go even farther to say that a court of competent jurisdiction has to find negligence.) Negligence is a complicated legal topic but is generally defined as a “failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances.” One of the first things law students learn is that negligence requires proof of all four elements: The defendant owed the victim a duty, the defendant breached that duty, the plaintiff suffered a foreseeable injury, and the defendant’s breach caused the injury. Negligence thus presents a much higher legal hurdle than, for instance, strict liability.

Indemnity with negligence provisions like these are good news for providers attempting to escape liability for the 5G rollout, but not so good for localities. For example, in a state with such a provision in its law, a city might have as strong an indemnification agreement with a wireless provider as it can legally have, but if the case at hand is not one where a specific act or omission of negligence can be proven, that indemnification provision would not apply. That is, if the wireless provider has not indemnified a locality against type of harm X from small cells, and that locality is then sued for contributing to harm X, the locality faces liability for harm X, while the wireless provider who built the small cell does not. If the locality then lost the lawsuit, the locality — not the provider — would have to pay damages. Add to this the cost of litigation on uncertain facts, and the indemnity provision becomes essentially illusory.

In other words, your tax dollars clean up the wireless provider’s mess — and wireless providers profit.

Some state bills do not use any limiting legal terms; Oklahoma simply uses the phrases “resulting from” (the installation, construction, repair, replacement, operation or maintenance of wireless facilities) “to the extent caused by” (the wireless provider, their agents etc). Such bills leave the door open wider for a broader array of legal theories.

While Installing, Repairing, or Maintaining. Some states, like Missouri, do not say anything about when the wireless provider’s negligence has to occur. Others, however, do not end the sentence there — the only negligence that is included is that which occurs “while installing, repairing or maintaining facilities” in a public right-of-way. These words and only these three words — installing, repairing, and maintaining — appear in Kansas’, Ohio’s, Texas’ (sole negligence), and Hawaii’s (“negligence” not used) laws.

Some other states have more inclusive lists, including other categories such as “operating.” Oklahoma has one of the longer lists; they include losses resulting from “installation, construction, repair, replacement, operation or maintenance” of facilities.

The differences in the plain language of two such lists are important. If claims are limited to what the provider does “while installing, repairing, or maintaining facilities” in a public right-of-way, many harms might fall through the cracks. For example, what about harms that did not occur during those specific timeframes? What if they occurred over a longer period time while the provider was merely “operating” the facility? If an employee is installing something and drops something negligently to the ground where it injures a passerby, that would likely be included in the shorter list because it occurred “while installing.” But many health and environmental harms might only fit in a category like “operating.” For example, even if a plaintiff managed to prove that his illness or her drop in property value was caused by the wireless facility, if the harm did not occur during the “installation, repair, or maintenance” of the facility, the provider might argue that the provider has no obligation to indemnify the locality for this particular loss.

Thus, a law which requires wireless providers to indemnify localities, but only for harms that result from negligence “while installing, repairing or maintaining facilities” in a public right-of-way, could end up costing localities for losses that do not occur during those three activities.

What Do State 5G Bills Say About Insurance?

The Self-Insurance Loophole. Several state laws allow localities to require wireless providers to carry insurance, as long as these requirements are reasonable and nondiscriminatory. In Michigan, for example, localities may require wireless providers to obtain insurance naming the locality “and its officers, agents, and employees as additional insureds against any claims….”

However, in Michigan, providers are permitted to meet all or part of these requirements by self-insuring, and “to the extent it self-insures, a wireless provider is not required to name additional insureds under this section.” Illinois has an essentially identical provision. Similarly, Missouri’s law states that localities “shall not require a self-insured wireless provider to obtain insurance naming the [locality] or its officers and employees as additional insured.”

This loophole is significant for wireless providers, because most insurance companies exclude coverage of harm caused by electromagnetic fields. Thus, in all likelihood a wireless provider required to obtain insurance and name the locality as additional insureds would have no realistic option other than self-insurance in the first place — and of course the telecommunications industry can afford it. But if self-insurance is providers’ only option and self-insurance is what they get, thanks to these new state laws, they do not need to name the locality and its agents etc. as additional insureds. And, given the insurance industry position on electromagnetic coverage, this scenario likely leaves the local government with no way to insure itself against this risk.

In essence, although these provisions purport to allow localities to take the protective measure of requiring wireless providers to obtain insurance that would help protect localities against lawsuits, a closer look reveals this protection may be no more than a mirage.

Some Bills That Failed Were Even Worse. Bills in Maine and Maryland, and the original version of the bill in Illinois, would not have allowed localities to require wireless providers to name them as additional insureds at all — regardless of whether they had an insurance plan or self-insured.

What’s the Bottom Line?

The language in these state 5G bills begs the question: If 5G is safe, why are the companies who are going to profit from it adverse to indemnifying local communities for the resulting harms? Why are these companies interested in limiting the ability of localities to shield themselves from liability by requiring the beneficiary industry to provide that shield?

Louise Walter Winnard and Michael J. Watza contributed to this article.