BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 972
                                                                  Page  1

          SENATE THIRD READING  
           SB 972 (Wolk)
          As Amended August 24, 2010
          Majority vote 

           SENATE VOTE  :30-3  
           
           JUDICIARY           9-1         JUDICIARY           9-0         
           
           ----------------------------------------------------------------- 
          |Ayes:|Feuer, Tran, Brownley,    |Ayes:|Feuer, Tran, Brownley,    |
          |     |Evans, Hagman, Huffman,   |     |Hagman, Huffman, Jones,   |
          |     |Jones, Monning, Saldana   |     |Knight, Monning, Saldana  |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           -------------------------------------- 
          |Nays:|Knight                    |     |
          |     |                          |     |
           -------------------------------------- 
           SUMMARY  :  Revises the design professional indemnity statute.   
          Specifically,  this bill:  

          1)Declares that the duty to indemnify, including the duty and  
            the cost to defend, is within the existing statutory  
            regulation of contractual indemnity provisions between  
            specified design professionals and public entities with  
            respect to public works of improvement.

          2)Requires that all contracts and all solicitation documents,  
            including requests for proposal, invitations for bid, and  
            other solicitation documents between a public agency and a  
            design professional are deemed to incorporate the foregoing  
            statue by reference.

          3)Provides that the bill applies only prospectively to services  
            offered pursuant to a design professional contract or  
            amendment entered into on or after January 1, 2011.

          4)Declares that the foregoing statute does not abrogate the  
            provisions of section 1104 of the Public Contract Code.

           EXISTING LAW  :

          1)Provides, for all contracts, and amendments to contracts,  
            entered into on or after January 1, 2007, with a public agency  








                                                                  SB 972
                                                                  Page  2

            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.  

          2)Provides that 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.  However,  
            the person indemnified has the right to conduct those  
            defenses, if he or she chooses to do so.  

          3)Interprets, under existing case law, the above-described  
            provisions to provide that, unless otherwise provided, a duty  
            to defend arises out of an indemnity obligation as soon as the  
            litigation commences, and regardless of whether the indemnitor  
            (the person indemnifying) is ultimately found negligent.   
            (Crawford v. Weather Shield (2008) 44 Cal.4th 541; see also  
            UDC-Universal Development, L.P. v. CH2M Hill (2010) 181  
            Cal.App.4th 10.) 

           FISCAL EFFECT  :  None
           
          COMMENTS  :  According to the author, this bill is in response to  
          the 2008 California Supreme Court decision in Crawford v.  
          Weather Shield in which the Court held that Civil Code Section  
          2778 allows indemnity contracts that require defense of lawsuits  
          against others even if the person providing the indemnity and  
          defense has no liability.  Supporters of the bill also generally  
          assert that, although Crawford construed a contract that was not  
          covered by AB 573 (Wolk and Jones) of 2006, the decision has  
          particularly grave implications for design professionals because  
          professional liability insurance, in contrast to general  
          liability insurance typically used by owners, contractors and  
          subcontractors, does not cover contractually assumed liability.   
          Instead, professional liability insurance will cover a design  
          professional's common law liability - i.e., negligent acts,  
          errors, or omissions.









                                                                  SB 972
                                                                  Page  3

          This bill amends Section 2782.8 of the Civil Code (originally  
          added by AB 573 of 2006) to declare that the duty to indemnify,  
          including the duty and the cost to defend, is within the  
          existing statutory regulation of contractual indemnity  
          provisions between specified design professionals and public  
          entities with respect to public works of improvement.  The bill  
          further require that all contracts and all solicitation  
          documents, including requests for proposal, invitations for bid,  
          and other solicitation documents between a public agency and a  
          design professional are deemed to incorporate the foregoing  
          statue by reference.

          The bill expressly applies only prospectively to services  
          offered pursuant to a design professional contract or amendment  
          entered into on or after January 1, 2011, and does not abrogate  
          the provisions of section 1104 of the Public Contract Code.


           Analysis Prepared by  :    Kevin G. Baker / JUD. / (916) 319-2334 


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