BILL NUMBER: SB 972	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 23, 2010
	AMENDED IN SENATE  MAY 12, 2010
	AMENDED IN SENATE  APRIL 5, 2010

INTRODUCED BY   Senator Wolk

                        FEBRUARY 8, 2010

   An act to  add Section 2782.85 to   amend
Sections 2778 and 2782.8 of  the Civil Code, relating to
indemnity.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 972, as amended, Wolk. Indemnity: design professionals.
   Existing law  contains specified rules that are to be applied
in the interpretation of a contract for indemnity. Pursuant to these
rules, the person that is required to provide indemnification is
bound, upon the request of the person that is required to be
indemnified, to defend actions or proceedings brought against the
person that is required to be indemnified prior to a finding of
liability. Existing   law   further  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, with a public
agency, as defined, 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.  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. 
 This bill would provide that the obligations of a design
professional to indemnify a public agency for damages determined to
be caused by negligence, recklessness, or willful misconduct to be
proportionate to the actual liability of the design professional.
This bill would provide that if a public agency includes indemnity
language in a contract for the services of a design professional,
those provisions shall only be enforceable if the language of the
contract is in conformance with 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.    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: 
   1. 
   (a)    Upon  an   a finding
of  indemnity against liability, expressly, or in other
equivalent terms, the person  that is to be  indemnified is
entitled to recover upon becoming liable  ;   .
 
   2. 
    (b)    Upon  an   a
finding of  indemnity against claims,  or 
demands,  or  damages, or costs, expressly, or in
other equivalent terms, the person  that   is to be
 indemnified is not entitled to recover  ,  without
payment  thereof;   of the underlying claims,
demands, damages, or costs.  
   3. 
    (c)    An indemnity  action or proceeding
 against claims,  or  demands, or liability,
expressly, or in other equivalent terms, embraces the costs of
defense against  such   the  claims,
demands, or liability incurred in good faith, and in the exercise of
a reasonable discretion  ;   .  
   4. 
    (d)    The person  that is responsible for
 indemnifying is bound, on request of the person  that 
 is to be  indemnified, to defend actions or proceedings
brought against the  latter   person that is to
be indemnified  in respect to the matters embraced by the
indemnity  contract  , but the person  that is to be
 indemnified has the right to conduct  such 
 those  defenses, if he  or she  chooses to do so
 ;   . This subdivision does not apply to
contracts for design professional services, as defined in Section
2782.8   .  
   5. 
    (e)    If, after  a   
request  for indemnification  , the person  responsible
for  indemnifying neglects to defend the person  that is to
be  indemnified, a recovery against the  latter
  person that is to be indemnified  
suffered by him in good faith  , is conclusive  in
his favor  against the  former;  person
that is responsible for indemnification.  
   6. 
    (f)    If the person  indemnifying
  that is responsible for indemnification  ,
whether  he is  a principal or a surety in the
agreement, has not  received   reasonable notice of
the action or proceeding against the person  that is to be 
indemnified, or is not allowed to control its defense, judgment
against the  latter   person that is to be
indemnified  is only presumptive evidence against the 
former;   person that is responsible for
indemnification.  
   7. 
    (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 2782.8 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 cost  and duty  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   are caused by
 the negligence, recklessness, or willful misconduct of the
design professional. 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) 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.

   (c) A design professional that enters into a contract, which is
subject to this section, that contains an indemnity provision has no
duty to provide a defense for a claim against a public agency for
damages unless the damages are determined to be caused by the
negligence, recklessness, or willful misconduct of the design
professional.  
   (d) If there is an adjudication that the design professional
engaged in negligent, reckless, or willful misconduct, the design
professional's duty to indemnify the public agency for damages or
liabilities, including the cost of providing a defense, caused by the
negligence, recklessness, or willful misconduct of the design
professional shall be proportionate to the actual liability of the
design professional. 
    (e)     If a public agency elects to
include an indemnity provision in a request for proposal, an
invitation to bid, or other solicitation document as part of the
procurement of the services of a design professional, the indemnity
language of the contract shall only be enforceable if the language is
in compliance with this section.  
   (c) 
    (f)   (1)   This section shall only
apply to a professional service contract, or any amendment thereto,
entered into on or after January 1, 2007. 
   (2) The amendments made to this section by the bill amending this
subdivision shall only apply to a professional service contract, or
any amendment thereto, entered into on or after January 1, 2011.
 
  SECTION 1.    Section 2782.85 is added to the
Civil Code, to read:
   2782.85.  (a) Notwithstanding subdivision (d) of Section 2778, for
all contracts, and amendments to contracts, entered into on or after
January 1, 2011, with a public agency 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
for 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.
   (3) "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.
   (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 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 shall not be collected from any other design
professional.
   (d) Notwithstanding any other 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 public agency, private entity, or design professional shall
have the right to seek equitable indemnity for any claim governed by
this section.
   (f) 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) 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.
   (h) This section shall not apply to claims that are the subject of
subdivisions (c) to (h), inclusive, of Section 2782.