Last week with optimism we reported that the California State Assembly passed Senate Bill 496 (“SB-496”) which sought to lessen the burden of indemnity provisions and the dreaded immediate duty to defend in public and private contracts involving design professionals. We are pleased to announce that on Friday April 28, 2017, Governor Jerry Brown signed the bill into law!
SB-496 modifies Civil Code section 2782.8, adding protections to private contracts entered into by design professionals after January 1, 2018. Importantly, SB-496 limits the “duty to defend” to the comparative fault of the professional in private and public contracts. Civil Code section 2782.8 previously applied to public contracts entered into by design professionals with public agencies, excluding state agencies as defined in the statute. SB-496 places private contracts and public contracts with non-state agencies on equal footing.
The practical implications of SB-496 are extremely beneficial to design professionals, especially those working primarily in the private sector. For all private contracts entered into by a design professional prior to January 1, 2018 (meaning those contracts without the protections of SB-496) that contain a provision requiring the professional to indemnify and/or defend their client, the design professional could have to pay for all of their client’s attorneys’ fees and costs by virtue of being sued, even if the professional was ultimately found negligent free by the trier of fact. For private and applicable public contracts entered into after January 1, 2018, with the added protections of SB-496, if the design professional is found to be 25% at fault, then the law provides that they would only be liable for 25% of the attorneys’ fees and costs of a party seeking contractual indemnity and defense reimbursement. If found 0% at fault, the professional would not be responsible for any of their client’s attorneys’ fees or costs.
This is a significant step forward in making contracts between design professionals and owners in California both fair and insurable. This will allow for more equitable risk sharing on contracts concerning the built environment in 2018 and beyond.
Contact us to discuss further:
Justin D. Witzmann | [email protected]
Ryan P. Harley | [email protected]
Nothing contained in this article should be considered legal advice. Anyone who reads this article should consult with an attorney before acting on anything contained in this or any other article on legal matters, as facts and circumstances will vary from case to case.