(a) Except as provided by Subsection (b), the state is liable for indemnification under this chapter only if the damages are based on an act or omission by the person in the course and scope of the person's office, employment, or contractual performance for or service on behalf of the agency, institution, or department and if:
(1) the damages arise out of a cause of action for negligence, except a wilful or wrongful act or an act of gross negligence; or
(2) the damages arise out of a cause of action for deprivation of a right, privilege, or immunity secured by the constitution or laws of this state or the United States, except when the court in its judgment or the jury in its verdict finds that the person acted in bad faith, with conscious indifference or reckless disregard; or
(3) indemnification is in the interest of the state as determined by the attorney general or his designee.
(b) The state is liable for indemnification under this chapter if:
(1) the person is liable for the damages solely because the person signed an industrial solid waste or hazardous waste manifest or other record required by Section 361.036, Health and Safety Code;
(2) the person signed the manifest or record in the course and scope of the person's office, employment, or contractual performance or service on behalf of the agency, institution, or department; and
(3) the person or company who signed the manifest did not increase or aggravate circumstances of contamination by grossly negligent acts or wilful misconduct.