California Supreme Court holds that a subcontractor's duty to defend under an indemnity clause exists even though the subcontractor is not at fault for issue in which the duty to defend arose.
"Type 1" indemnity clauses in commercial construction contracts now banned in California
Posted by: Jonathan Bowne
January 07, 2013
As we had previously noted, in 2011 California legislatures passed and Governor Brown approved SB 474, which outlawed ?Type 1? indemnity provisions in commercial contracts. SB 474 provided that its terms would become effective on January 1, 2013. Now that this date has arrived, the ?Type 1? indemnity clause ban is effective. Accordingly, the following restrictions are now law:
- General contractors can no longer contractually bind subcontractors to be legally and/or financially responsible for the active negligence or willful misconduct of others; including the GC, construction managers, other subcontractors or their other agents, or for defects in design furnished by those persons.
- Public agencies can no longer contractually bind contractors or subcontractors to be legally and/or financially responsible for the active negligence or willful misconduct of others; including the GC, construction managers, or other subcontractors or supplier of goods or services, or relieve the public agency from, liability for the active negligence of the public agency.
- Owners of privately owned real property* can no longer contractually bind contractors, subcontractors, or suppliers of goods or services to be legally or financially responsible for the active negligence of the owner, including that of its employees.
*Applies only when the owner is not acting as a contractor, construction manager, or supplier of materials or equipment to the work,
*Does NOT apply to a homeowner performing improvement projects on his or her own single family dwelling.
Click here, to see our article on the subject, which includes more detailed information about the law and it?s terms.
In the case entitled Crawford v. Weather Shield (2008) 08 CDOS 9261, the California Supreme Court stated: "We consider whether, by their particular terms, the provisions of a pre-2006 residential construction subcontract obliged the subcontractor to defend its indemnitee-the developer-builder of the project-in lawsuits brought against both parties, insofar as the plaintiffs' complaints alleged construction defects arising from the subcontractor's negligence, even though (1) a jury ultimately found that the subcontractor was not negligent, and (2) the parties have accepted an interpretation of the subcontract that gave the builder no right of indemnity unless the subcontractor was negligent. We conclude that the answer is yes." As a result of the decision, subcontractors should review indemnity clauses and attempt to delete or modify any automatic duty to defend.