Bill Text: CA SB885 | 2015-2016 | Regular Session | Amended
Bill Title: Contracts: design professionals: indemnity.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Failed) 2016-11-30 - From Assembly without further action. [SB885 Detail]
Download: California-2015-SB885-Amended.html
BILL NUMBER: SB 885 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 16, 2016
AMENDED IN SENATE MAY 10, 2016
AMENDED IN SENATE APRIL 18, 2016
INTRODUCED BY Senator Wolk
JANUARY 19, 2016
An act to amend Section Sections
2782 and 2782.8 of the Civil Code, relating to contracts.
LEGISLATIVE COUNSEL'S DIGEST
SB 885, as amended, Wolk. Construction contracts:
Contracts: design professionals: indemnity.
Existing law makes specified provisions in construction contracts
void and unenforceable, including provisions that purport to
indemnify the promisee against liability for damages for death or
bodily injury to persons, injury to property, or any other loss
arising from the sole negligence or willful misconduct of the
promisee or the promisee's agents who are directly responsible to the
promisee, or for defects in design furnished by those persons.
This bill would specify, with certain exceptions, for
construction contracts and amendments to them
entered into on or after January 1, 2017, that a design professional,
as defined, only has the duty to defend himself or herself from
claims or lawsuits that arise out of, or pertain or relate to,
negligence, recklessness, or willful misconduct of the design
professional. The bill would prohibit these provisions from being
construed to affect any duty of a design professional to pay
a reasonable allocated share of defense fees and costs with respect
to claims and lawsuits alleging negligence, recklessness, or willful
misconduct of the design professional, as specified.
defend any claims brought against him or her on an ongoing basis
during their pendency or the design professional's obligation to
reimburse reasonable defense costs incurred by other persons or
entities, limited to the design professional's degree of fault, as
determined by a court, arbitration, or negotiated
settlement. The bill would provide that contracts and solicitation
documents are deemed to incorporate its provisions by reference and
would define claim to include a demand for money or services,
lawsuit, or demand for arbitration. The bill would prohibit
waiver of these provisions and would provide that any clause,
covenant, or agreement contained in, collateral to, or affecting a
contract that requires a design professional to defend claims or
lawsuits against other persons or entities is void and unenforceable.
The bill would provide legislative findings and declarations in
support of these provisions.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Errors and omissions insurance for design professionals does
not provide coverage for the defense of claims against other persons
and other entities involved in construction projects.
(b) Requiring design professionals to defend claims against other
persons or other entities involved in construction projects when
insurance coverage is not available is unfair and contrary to sound
public policy.
(c) It is sound public policy for all persons and entities in
projects to defend themselves against claims of negligence or error.
(d) It is the intent of the Legislature in enacting this act to
prohibit indemnity agreements that require design professionals to
defend claims made against other persons or other entities involved
in construction projects.
SEC. 2. Section 2782 of the Civil Code is amended to read:
2782. (a) Except as provided in Sections 2782.1, 2782.2, 2782.5,
and 2782.6, provisions, clauses, covenants, or agreements contained
in, collateral to, or affecting any construction contract and that
purport to indemnify the promisee against liability for damages for
death or bodily injury to persons, injury to property, or any other
loss, damage or expense arising from the sole negligence or willful
misconduct of the promisee or the promisee's agents, servants, or
independent contractors who are directly responsible to the promisee,
or for defects in design furnished by those persons, are against
public policy and are void and unenforceable; provided, however, that
this section shall not affect the validity of any insurance
contract, workers' compensation, or agreement issued by an admitted
insurer as defined by the Insurance Code.
(b) (1) Except as provided in Sections 2782.1, 2782.2, and 2782.5,
provisions, clauses, covenants, or agreements contained in,
collateral to, or affecting any construction contract with a public
agency entered into before January 1, 2013, that purport to impose on
the contractor, or relieve the public agency from, liability for the
active negligence of the public agency are void and unenforceable.
(2) Except as provided in Sections 2782.1, 2782.2, and 2782.5,
provisions, clauses, covenants, or agreements contained in,
collateral to, or affecting any construction contract with a public
agency entered into on or after January 1, 2013, that purport to
impose on any contractor, subcontractor, or supplier of goods or
services, or relieve the public agency from, liability for the active
negligence of the public agency are void and unenforceable.
(c) (1) Except as provided in subdivision (d) and Sections 2782.1,
2782.2, and 2782.5, provisions, clauses, covenants, or agreements
contained in, collateral to, or affecting any construction contract
entered into on or after January 1, 2013, with the owner of privately
owned real property to be improved and as to which the owner is not
acting as a contractor or supplier of materials or equipment to the
work, that purport to impose on any contractor, subcontractor, or
supplier of goods or services, or relieve the owner from, liability
are unenforceable to the extent of the active negligence of the
owner, including that of its employees.
(2) For purposes of this subdivision, an owner of privately owned
real property to be improved includes the owner of any interest
therein, other than a mortgage or other interest that is held solely
as security for performance of an obligation.
(3) This subdivision shall not apply to a homeowner performing a
home improvement project on his or her own single family dwelling.
(d) For all construction contracts, and amendments thereto,
entered into after January 1, 2009, for residential construction, as
used in Title 7 (commencing with Section 895) of Part 2 of Division
2, all provisions, clauses, covenants, and agreements contained in,
collateral to, or affecting any construction contract, and amendments
thereto, that purport to insure or indemnify, including the cost to
defend, the builder, as defined in Section 911, or the general
contractor or contractor not affiliated with the builder, as
described in subdivision (b) of Section 911, by a subcontractor
against liability for claims of construction defects are
unenforceable to the extent the claims arise out of, pertain to, or
relate to the negligence of the builder or contractor or the builder'
s or contractor's other agents, other servants, or other independent
contractors who are directly responsible to the builder, or for
defects in design furnished by those persons, or to the extent the
claims do not arise out of, pertain to, or relate to the scope of
work in the written agreement between the parties. This section shall
not be waived or modified by contractual agreement, act, or omission
of the parties. Contractual provisions, clauses, covenants, or
agreements not expressly prohibited herein are reserved to the
agreement of the parties. Nothing in this subdivision shall prevent
any party from exercising its rights under subdivision (a) of Section
910. This subdivision shall not affect the obligations of an
insurance carrier under the holding of Presley Homes, Inc. v.
American States Insurance Company (2001) 90 Cal.App.4th 571. Nor
shall this subdivision affect the obligations of a builder or
subcontractor pursuant to Title 7 (commencing with Section 895) of
Part 2 of Division 2.
(e) Subdivision (d) does not prohibit a subcontractor and builder
or general contractor from mutually agreeing to the timing or
immediacy of the defense and provisions for reimbursement of defense
fees and costs, so long as that agreement does not waive or modify
the provisions of subdivision (d) subject, however, to paragraphs (1)
and (2). A subcontractor shall owe no defense or indemnity
obligation to a builder or general contractor for a construction
defect claim unless and until the builder or general contractor
provides a written tender of the claim, or portion thereof, to the
subcontractor which includes all of the information provided to the
builder or general contractor by the claimant or claimants,
including, but not limited to, information provided pursuant to
subdivision (a) of Section 910, relating to claims caused by that
subcontractor's scope of work. This written tender shall have the
same force and effect as a notice of commencement of a legal
proceeding. If a builder or general contractor tenders a claim for
construction defects, or a portion thereof, to a subcontractor in the
manner specified by this provision, the subcontractor shall elect to
perform either of the following, the performance of which shall be
deemed to satisfy the subcontractor's defense obligation to the
builder or general contractor:
(1) Defend the claim with counsel of its choice, and the
subcontractor shall maintain control of the defense for any claim or
portion of claim to which the defense obligation applies. If a
subcontractor elects to defend under this paragraph, the
subcontractor shall provide written notice of the election to the
builder or general contractor within a reasonable time period
following receipt of the written tender, and in no event later than
90 days following that receipt. Consistent with subdivision (d), the
defense by the subcontractor shall be a complete defense of the
builder or general contractor of all claims or portions thereof to
the extent alleged to be caused by the subcontractor, including any
vicarious liability claims against the builder or general contractor
resulting from the subcontractor's scope of work, but not including
claims resulting from the scope of work, actions, or omissions of the
builder, general contractor, or any other party. Any vicarious
liability imposed upon a builder or general contractor for claims
caused by the subcontractor electing to defend under this paragraph
shall be directly enforceable against the subcontractor by the
builder, general contractor, or claimant.
(2) Pay, within 30 days of receipt of an invoice from the builder
or general contractor, no more than a reasonable allocated share of
the builder's or general contractor's defense fees and costs, on an
ongoing basis during the pendency of the claim, subject to
reallocation consistent with subdivision (d), and including any
amounts reallocated upon final resolution of the claim, either by
settlement or judgment. The builder or general contractor shall
allocate a share to itself to the extent a claim or claims are
alleged to be caused by its work, actions, or omissions, and a share
to each subcontractor to the extent a claim or claims are alleged to
be caused by the subcontractor's work, actions, or omissions,
regardless of whether the builder or general contractor actually
tenders the claim to any particular subcontractor, and regardless of
whether that subcontractor is participating in the defense. Any
amounts not collected from any particular subcontractor may not be
collected from any other subcontractor.
(f) Notwithstanding any other provision of law, if a subcontractor
fails to timely and adequately perform its obligations under
paragraph (1) of subdivision (e), the builder or general contractor
shall have the right to pursue a claim against the subcontractor for
any resulting compensatory damages, consequential damages, and
reasonable attorney's fees. If a subcontractor fails to timely
perform its obligations under paragraph (2) of subdivision (e), the
builder or general contractor shall have the right to pursue a claim
against the subcontractor for any resulting compensatory and
consequential damages, as well as for interest on defense and
indemnity costs, from the date incurred, at the rate set forth in
subdivision (g) of Section 3260, and for the builder's or general
contractor's reasonable attorney's fees incurred to recover these
amounts. The builder or general contractor shall bear the burden of
proof to establish both the subcontractor's failure to perform under
either paragraph (1) or (2) of subdivision (e) and any resulting
damages. If, upon request by a subcontractor, a builder or general
contractor does not reallocate defense fees to subcontractors within
30 days following final resolution of the claim as described above,
the subcontractor shall have the right to pursue a claim against the
builder or general contractor for any resulting compensatory and
consequential damages, as well as for interest on the fees, from the
date of final resolution of the claim, at the rate set forth in
subdivision (g) of Section 3260, and the subcontractor's reasonable
attorney's fees incurred in connection therewith. The subcontractor
shall bear the burden of proof to establish both the failure to
reallocate the fees and any resulting damages. Nothing in this
section shall prohibit the parties from mutually agreeing to
reasonable contractual provisions for damages if any party fails to
elect for or perform its obligations as stated in this section.
(g) A builder, general contractor, or subcontractor shall have the
right to seek equitable indemnity for any claim governed by this
section.
(h) Nothing in this section limits, restricts, or prohibits the
right of a builder, general contractor, or subcontractor to seek
equitable indemnity against any supplier, design professional, or
product manufacturer.
(i) As used in this section, "construction defect" means a
violation of the standards set forth in Sections 896 and 897.
(j) (1) Commencing with contracts all
contracts, and amendments thereto, entered into on or after
January 1, 2017, a design professional, as defined in paragraph (2)
of subdivision (c) of Section 2782.8, shall only have the duty to
defend himself or herself from claims that arise out of, pertain to,
or relate to the negligence, recklessness, or willful misconduct of
the design professional. All provisions, clauses, covenants, and
agreements contained in, collateral to, or affecting any such
contract that purport to require a design professional to defend
claims against another party shall be unenforceable.
(2) Paragraph (1) does not prohibit a design professional from
mutually agreeing with another party to the timing or immediacy of a
defense and provisions for reimbursement of defense fees and costs,
if so long as that subsequent
agreement after a claim is made does not waive or
modify the provisions of paragraph (1).
(3) Paragraph (1) shall not be construed to affect any
affect:
(A) Any duty of a design
professional to pay a reasonable allocated share of the
defense fees and costs with respect to claims and lawsuits alleging
negligence, recklessness, or willful misconduct of the design
professional defend any claims brought against him or
her on an ongoing basis during their pendency,
including any amounts reallocated upon final resolution of a claim or
lawsuit, either by settlement or judgment. pendency.
(B) The design professional's obligation to reimburse reasonable
defense costs incurred by other persons or entities, limited to the
design professional's degree of fault, as determined by a court,
arbitration, or negotiated settlement.
(4) All contracts and all solicitation documents, including
requests for proposal, invitations for bid, and other solicitation
documents, are deemed to incorporate by reference the provisions of
this subdivision.
(5) For purposes of this subdivision, "claim" means a claim,
demand for money or services, lawsuit, or demand for arbitration.
(4)
(6) The provisions of this subdivision shall not apply
to either of the following:
(A) A claim, lawsuit, or arbitration demand where a
project-specific general liability policy insures all project
participants for general liability exposures on a primary basis and
also covers all design professionals for their legal liability
arising out of their professional services on a primary basis.
(B) A design professional who is a party to a written design-build
joint venture agreement.
(5)
(7) The provisions of this subdivision shall not be
waived or modified by contract. Contract provisions in violation of
this subdivision are void and unenforceable. The duty of a design
professional to defend is limited as provided in this subdivision.
SEC. 3. Section 2782.8 of the Civil
Code is amended to read:
2782.8. (a) For all contracts, and amendments thereto, entered
into on or after January 1, 2007, with a public agency for design
professional services, all provisions, clauses, covenants, and
agreements contained in, collateral to, or affecting any such
contract, and amendments thereto, that purport to indemnify,
including the duty and the cost to defend, indemnify
the public agency by a design professional against liability
for claims against the public agency, are unenforceable, except for
claims that arise out of, pertain to, or relate to the negligence,
recklessness, or willful misconduct of the design professional. The
duty to indemnify, including the duty and the cost to
defend, indemnify is limited as provided in this
section. This section shall not be waived or modified by contractual
agreement, act, or omission of the parties. Contractual provisions,
clauses, covenants, or agreements not expressly prohibited herein are
reserved to the agreement of the parties.
(b) All contracts and all solicitation documents, including
requests for proposal, invitations for bid, and other solicitation
documents, between a public agency and a design professional, are
deemed to incorporate by reference the provisions of this section.
(c) For purposes of this section, the following definitions apply:
(1) "Public agency" includes any county, city, city and county,
district, school district, public authority, municipal corporation,
or other political subdivision, joint powers authority, or public
corporation in the state. Public agency does not include the State of
California.
(2) "Design professional" includes all of the following:
(A) An individual licensed as an architect pursuant to Chapter 3
(commencing with Section 5500) of Division 3 of the Business and
Professions Code, and a business entity offering architectural
services in accordance with that chapter.
(B) An individual licensed as a landscape architect pursuant to
Chapter 3.5 (commencing with Section 5615) of Division 3 of the
Business and Professions Code, and a business entity offering
landscape architectural services in accordance with that chapter.
(C) An individual registered as a professional engineer pursuant
to Chapter 7 (commencing with Section 6700) of Division 3 of the
Business and Professions Code, and a business entity offering
professional engineering services in accordance with that chapter.
(D) An individual licensed as a professional land surveyor
pursuant to Chapter 15 (commencing with Section 8700) of Division 3
of the Business and Professions Code, and a business entity offering
professional land surveying services in accordance with that chapter.
(d) This section shall only apply to a professional service
contract, or any amendment thereto, entered into on or after January
1, 2007.
(e) The amendments made to this section by the act adding this
subdivision shall apply to services offered pursuant to a design
professional contract, or any amendment thereto, entered into on or
after January 1, 2011.
(f) Nothing in this section shall abrogate the provisions of
Section 1104 of the Public Contract Code.
