BILL NUMBER: SB 972	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 5, 2010

INTRODUCED BY   Senator Wolk

                        FEBRUARY 8, 2010

   An act to amend Section 2778 of  , and to add Section 2782.85
to,  the Civil Code, relating to indemnity.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 972, as amended, Wolk. Indemnity  : design professionals
 .
   Under existing law, specified rules are to be applied in the
interpretation of a contract of indemnity, unless a contrary
intention appears. Pursuant to these rules, the person indemnifying
is bound, on request of the person indemnified, to defend actions or
proceedings brought against the latter in respect to the matters
embraced by the indemnity, but the person indemnified has the right
to conduct those defenses, if he or she chooses to do so. 
   This bill would expand that rule to provide that the person
indemnifying has no obligation to defend actions or proceedings prior
to a preliminary or final determination of liability, nor in any
amount that exceeds the finally determined indemnification percentage
of liability based upon the comparative fault of the indemnitor.
 
   Existing law provides, for all contracts, and amendments to
contracts, 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
these contracts, that purport to indemnify, including the cost to
defend, 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. 

   This bill would provide, for all contracts, and amendments to
contracts, entered into on or after January 1, 2011, for design
professional services, all provisions, clauses, covenants, and
agreements contained in, collateral to, or affecting these contracts
or amendments to contracts that purport to require an immediate
defense under an indemnity agreement are unenforceable, except as
provided. The bill would provide that a design professional is not
required to defend or indemnify the indemnified party unless and
until the indemnified party provides a written tender of the claim to
the design professional, at which point the design professional may
choose to either defend the claim with counsel of its choosing or pay
a reasonable allocated share of the indemnified party's defense fees
and costs. The bill would allow the indemnified party to recover
damages from the design professional if it fails to timely and
adequately perform these duties. The bill would provide that a design
professional shall not be required to pay defense or indemnity costs
in an amount in excess of the finally determined percentage of
liability based upon the comparative fault of the design
professional. 
   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.  Section 2778 of the Civil Code is amended to read:
   2778.  In the interpretation of a contract of indemnity, the
following rules are to be applied, unless a contrary intention
appears:
   (a) Upon an indemnity against liability, expressly, or in other
equivalent terms, the person indemnified is entitled to recover upon
becoming liable.
   (b) Upon an indemnity against claims, demands, damages, or costs,
expressly, or in other equivalent terms, the person indemnified is
not entitled to recover without payment thereof.
   (c) An indemnity against claims, demands, or liability, expressly,
or in other equivalent terms, embraces the costs of defense against
the claims, demands, or liability incurred in good faith, and in the
exercise of a reasonable discretion.
   (d) The person indemnifying is bound, on request of the person
indemnified, to defend actions or proceedings brought against the
latter in respect to the matters embraced by the indemnity, but the
person indemnified has the right to conduct those defenses, if he or
she chooses to do so.  The person indemnifying has no
obligation to defend actions or proceedings prior to a preliminary or
final determination of liability, nor in any amount that exceeds the
finally determined indemnification percentage of liability based
upon the comparative fault of the indemnitor.   This
subdivision does not apply to contracts for design professional
services as defined in Sections 2782.8   and 2782.85. 
   (e) If, after request, the person indemnifying neglects to defend
the person indemnified, a recovery against the latter suffered in
good faith, is conclusive in his or her favor against the former.
   (f) If the person indemnifying, whether a principal or a surety in
the agreement, has not reasonable notice of the action or proceeding
against the person indemnified, or is not allowed to control its
defense, judgment against the latter is only presumptive evidence
against the former.
   (g) A stipulation that a judgment against the person indemnified
shall be conclusive upon the person indemnifying, is inapplicable if
he or she had a good defense upon the merits, which by want of
ordinary care he or she failed to establish in the action.
   SEC. 2.    Section 2782.85 is added to the  
Civil Code   , to read:  
   2782.85.  (a) For all contracts, and amendments to contracts,
entered into on or after January 1, 2011, for design professional
services, all provisions, clauses, covenants, and agreements
contained in, collateral to, or affecting these contracts or
amendments to contracts that purport to require an immediate defense
under an indemnity agreement are unenforceable, except for the
defense obligations set forth in subdivisions (c), (d), and (e). 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 by this section are
reserved to the agreement of the parties.
   (b) For purposes of this section, the following definitions apply:

   (1) "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.

   (2) "Design professional services" includes all contractual
services offered or performed by a design professional.
   (c) A design professional shall owe no defense or indemnity
obligation to the indemnified party for a claim of liability unless
and until the indemnified party provides a written tender of the
claim or a portion of the claim to the design professional. That
written tender shall include all of the information provided to the
indemnified party by a claimant or claimants relating to claims
caused by the design professional's services, and shall have the same
force and effect as a notice of commencement of a legal proceeding.
If an indemnified party tenders a claim subject to this section to a
design professional in the manner specified in this subdivision, the
design professional shall elect to perform either of the following,
the performance of which shall be deemed to satisfy the design
professional's defense obligation to the indemnified party:
   (1) Defend the claim with counsel chosen by the design
professional. If a design professional elects to defend the claim
pursuant to this paragraph, the design professional shall maintain
control of the defense for any claim or portion of the claim to which
the defense obligation applies. The design professional shall
provide written notice of its election to the indemnified party
within 90 days after receipt of the written tender. The defense by
the design professional shall be a complete defense of the
indemnified party of all claims or portions of claims alleged to have
been caused by the design professional.
   (2) Pay, within 30 days after its receipt of an invoice from the
indemnified party, no more than a reasonable allocated share of the
indemnified party's defense fees and costs, on an ongoing basis
during the pendency of the claim, subject to reallocation consistent
with this section, and including any amounts reallocated upon final
resolution of the claim, either by settlement or judgment. The
indemnified party 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 design professional to the extent a
claim or claims are alleged to have been caused by the design
professional's work, actions, or omissions, and shall allocate a
share to all other parties or entities, whether or not a contractual
party, who the indemnified party believes are potentially liable for
the claim or claims, regardless of whether the indemnified party
tenders the claim to any particular design professional, and
regardless of whether that professional is participating in the
defense. Any amounts not collected from any particular design
professional may not be collected from any other design professional.

   (d) Notwithstanding any other provision of law, if a design
professional fails to timely and adequately perform its obligations
under paragraph (1) or (2) of subdivision (c), the indemnified party
shall have the right to pursue a claim against the design
professional for any resulting 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 indemnified
party's reasonable attorney's fees incurred to recover these amounts.
The indemnified party shall bear the burden of proof to establish
both the design professional's failure to meet the requirements of
paragraph (1) or (2) of subdivision (c) and any resulting damages.
   (e) A design professional shall not be required to pay defense or
indemnity costs in an amount in excess of the finally determined
percentage of liability based upon the comparative fault of the
design professional. If, upon request by a design professional, the
indemnified party does not reallocate defense fees to design
professionals within 30 days following final resolution of the claim,
then the design professional may pursue a claim against the
indemnified party for any resulting 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 design
professional shall bear the burden of proof to establish both the
failure to reallocate the fees and any resulting damages.
   (f) A public agency, private entity, or design professional shall
have the right to seek equitable indemnity for any claim governed by
this section.
   (g) 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.
   (h) Nothing in this section limits, restricts, or prohibits the
right of the indemnified party or the design professional to seek
equitable indemnification against any entity other than the
indemnified party or design professional.
   (i) This section shall not apply to claims which are the subject
of subdivision (c) to (h), inclusive, of Section 2782.