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September 2010

Fall 2010 Construction Law Legislative Update ? SB 972

Amendments To California Civil Code § 2782.8

In light of the California Supreme Court's 2008 ruling in Crawford v. Weather Shield Mfg., Inc. coupled with its refusal to consider, de-publish, or reverse the decision issued earlier this year by the California Court of Appeal in UDC-Universal Development, L.P. v. CH2MM Hill, it is evident that the legal landscape is relatively fixed at this point, and that the indemnity and defense obligations owed by architects, engineers and design professionals in the State of California will not be altered in any significant way by the state's appellate courts.  It is further apparent that no meaningful relief is likely to come from the California legislature, as evidenced by the recently passed amendment to California Civil Code § 2782.8, via Senate Bill 972, which is currently awaiting the Governor's approval.

Passed by the Senate on August 30, 2010 and awaiting Governor Schwarzenegger's signature, California Senate Bill ("SB") 972 would amend California Civil Code § 2782.8 governing indemnity provisions within public agency contracts for design professional services.  While the amended code section still deems unenforceable any indemnity agreement requiring a design professional to defend and indemnify a public agency, except in several circumstances, the amended code section would apply not only to public agency contracts for design professional services, but also to solicitation documents and invitations to bid between public agencies and design professionals.

The Bill's Provisions:

Currently, Civil Code § 2782.8 deems any contract provision, amendment, clause, covenant or agreement by a public agency for design services unenforceable, which purports to have an architect, professional engineer or professional land surveyor indemnify, including the cost to defend, the public agency against liability for any claims against the public agency.  The only exception permitted is where the claims against the public agency arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the design professional.  The existing Civil Code section notes that these limitations on indemnity agreements between public agencies and design professionals cannot be waived or modified by contractual act or omission of the parties.

As mentioned earlier, once amended, the new subsection "(b)" of Civil Code § 2782.8 provides that in addition to all contracts, all solicitation documents, proposals and invitations to bid between a public agency and a design professional are bound by SB 972.  This new subsection goes on to provide that SB 972 is incorporated into any contract, solicitation document or invitation to bid, between a public agency and design professional, whether the agreement is silent, expressly incorporates or otherwise expressly references Civil Code § 2782.8.

The new subsection "(e)" makes the SB 972 amendments applicable to services offered pursuant to a design professional contract, or any amendments thereto, entered into as of January 1, 2011.

Finally, the new subsection "(f)" expressly notes that the amendments introduced by SB 972 shall not abrogate the provisions of Public Contract Code § 1104, which provides that a public entity cannot hold a contractor liable for the completeness and accuracy of architectural or engineering plans, save for those plans clearly designated as design build projects.

SB 972's Impact:

The limitations on indemnity agreements between public agencies and design professionals, as set forth in SB 972, even if signed into law by Governor Schwarzenegger, do not substantially alter the landscape of contractual indemnity in the construction law arena.  The amendments also fail to provide design professionals with any new protections in the wake of Crawford and UDC-Universal Development, L.P. which the California Supreme Court recently declined to review.  An architect, professional engineer or professional land surveyor will still have a duty to indemnify a public agency in any action where it is alleged that the design professional's negligence, willful misconduct or recklessness contributed to a claim against the public agency.  So long as there is a valid public agency contract containing an indemnity provision, and so long as the public agency properly tenders the claim, the mandate under Crawford and UDC-Universal Development, L.P. interpreting that duty to include a present and immediate obligation to defend, even in the absence of a negligence finding, still applies.  Yet, since the law does not become effective until January 1, 2011, any measurable impact resulting from SB 972 will not be seen for several years.

For more information on the SB 972, indemnity agreements and other developments in Construction Law, please feel free to contact the attorneys at Gordon & Rees LLP.

 

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