BILL NUMBER: SB 474	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 21, 2011
	AMENDED IN SENATE  MAY 24, 2011
	AMENDED IN SENATE  MAY 2, 2011
	AMENDED IN SENATE  MARCH 25, 2011

INTRODUCED BY   Senator Evans

                        FEBRUARY 17, 2011

   An act to amend  Section 2782   Sections 2782
and 2783  of, and to add Section 2782.05 to, the Civil Code,
relating to indemnity.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 474, as amended, Evans. Commercial construction contracts:
indemnity.
   Existing law provides that provisions in construction contracts
 , as defined, that purport to indemnify the promisee
against liability for damages for death or bodily injury to persons,
injury to property, or any other loss arising from the sole
negligence or willful misconduct of the promisee or the promisee's
agents who are directly responsible to the promisee, or for defects
in design furnished by those persons, are against public policy and
are void and unenforceable. Existing law provides that provisions
in construction contracts with a public agency that purport to
impose on the contractor, or relieve the public agency from,
liability for the active negligence of the public agency are void and
unenforceable.  Existing law excepts from these provisions
agreements to indemnify with professional engineers  and
geologists , among others. Existing law prescribes different
requirements and prohibitions for residential construction contracts
entered on and after January 1, 2009.
   This bill would provide, for construction contracts  and
amendments  executed on and after January 1, 2013, that are not
for residential construction or  executed by a public entity,
as defined, that any provision in a contract purporting to
indemnify, hold harmless, or defend another person against actual or
claimed liability, damage, or expense arising, in whole or in part,
from the negligence, willful misconduct, defective design, violation
of law, or other fault of that person or that person's agents,
employees, independent contractors, subcontractors, or
representatives is against public policy and is void and
unenforceable   with a public agency, that purport to
insure or indemnify, including the cost to defend, a general
contractor, construction manager, or other subcontractor, by a
subcontractor against actual or claimed liability for claims of loss,
damage, or expense are unenforceable to the extent the claims relate
to the negligence or misconduct of that general contractor,
construction manager, or other subcontractor, or their other agents,
as specified, or for defects in design furnished by those persons, or
to the extent the claims do not arise out of the scope of work of
the subcontractor in the written agreement between the parties 
. The bill would require that California law be applied to these
contracts regardless of any choice-of-law rules that might otherwise
apply. The bill would except certain contractual provisions and types
of insurance from  its   these  provisions
 , including an agreement between a subcontractor and general
contractor or construction manager as to the timing   or
immediacy of the defense and provisions for reimbursement of defense
fees and costs, as specified  . The bill would provide that
waiver of these provisions is contrary to public policy, void, and
unenforceable. 
   This bill would provide, for construction contracts entered into
on and after January 1, 2013, with a public agency, that purport to
impose on any contractor, subcontractor, or supplier of goods or
services, or relieve the public agency from, liability for the active
negligence of the public agency, including that of its employees,
agents, and other independent contractors, are void and
unenforceable. The bill also would provide, for construction
contracts entered into on and after January 1, 2013, with the owner
of privately held real property to be improved and as to which the
owner is not acting as a contractor, construction manager, or
supplier of materials or equipment to the work, that purport to
impose on any contractor, subcontractor, or supplier of goods or
services, or relieve the owner from, liability for the active
negligence of the owner, including that of its employees, agents, and
other independent contractors, are void and unenforceable. 

   This bill would expand the definition of "construction contract"
for purposes of these provisions, to include agreements for
renovations, and would include agreements respecting, among other
things, water, sewer, oil, and gas lines. 
   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.  The Legislature finds and declares all of the
following:
   (a) It is in the best interests of this state and its citizens and
consumers to ensure that every construction business in the state is
financially responsible under the tort liability system for losses
that it, as a business, may cause.
   (b) The duty of a business to be responsible for its own
negligence should be nondelegable, except through contracts for
insurance.
   (c) Developers and construction businesses in recent years have
begun to use contract provisions to shift the financial
responsibility for their negligence to others, thereby circumventing
one of the fundamental foundations of tort law.
   (d) If all businesses, large and small, are responsible for their
own actions, then construction companies will be able to obtain
adequate insurance, the quality of construction will be improved, and
workplace safety will be enhanced.
   (e) Construction businesses must be able to obtain liability
insurance in order to meet their responsibilities.
   (f) The provisions of this act will promote competition and safety
in the construction industry, thereby benefiting California
consumers.
   (g) The intent of this act is to create an economic climate that
will promote safety in construction and ensure fairness among
businesses.
  SEC. 2.  Section 2782 of the Civil Code is amended to read:
   2782.  (a)  (1)    Except as
provided in Sections 2782.1, 2782.2, 2782.5, and 2782.6, provisions,
clauses, covenants, or agreements contained in, collateral to, or
affecting any construction contract and that purport to indemnify the
promisee against liability for damages for death or bodily injury to
persons, injury to property, or any other loss, damage or expense
arising from the sole negligence or willful misconduct of the
promisee or the promisee's agents, servants, or independent
contractors who are directly responsible to the promisee, or for
defects in design furnished by those persons, are against public
policy and are void and unenforceable; provided, however, that this
section shall not affect the validity of any insurance contract,
workers' compensation, or agreement issued by an admitted insurer as
defined by the Insurance Code. 
   (2) (A) Except as provided in subparagraph (B), this subdivision
shall apply only to contracts executed before January 1, 2013. On and
after January 1, 2013, Section 2782.05 shall apply to all
construction contracts executed on and after January 1, 2013, that
are not for residential construction or otherwise excepted by the
provisions of that section.  
   (B) Notwithstanding subparagraph (A), this subdivision shall
continue to apply to contracts executed by a public entity on and
after January 1, 2013, and Section 2782.05 shall not apply. For
purposes of this subparagraph, "public entity" means the state,
including every state agency, office, department, division, bureau,
board, or commission, a city, county, city and county, including a
charter city or a charter county, a charter school, district, special
district, public authority, political subdivision, public
corporation, and nonprofit transit corporation wholly owned by a
public agency and formed to carry out the purposes of the public
agency. This definition, and the exception provided by this
subparagraph, shall be construed broadly and shall include the
Regents of the University of California, the Trustees of the
California State University, and the Board of Governors of the
California Community Colleges. 
   (b)  (1)    Except as provided in Sections
2782.1, 2782.2, and 2782.5, provisions, clauses, covenants, or
agreements contained in, collateral to, or affecting any construction
contract with a public agency  entered into before January 1,
2013,  that purport to impose on the contractor, or relieve the
public agency from, liability for the active negligence of the public
agency are void and unenforceable. 
   (2) Except as provided in Sections 2782.1, 2782.2, and 2782.5,
provisions, clauses, covenants, or agreements contained in,
collateral to, or affecting any construction contract with a public
agency entered into on or after January 1, 2013, that purport to
impose on any contractor, subcontractor, or supplier of goods or
services, or relieve the public agency from, liability for the active
negligence of the public agency, including that of its employees,
agents, and other independent contractors, are void and
unenforceable.  
   (c) Except as provided in subdivision (d) and Sections 2781.1,
2782.2, and 2782.5, provisions, clauses, covenants, or agreements
contained in, collateral to, or affecting any construction contract
entered into on or after January 1, 2013, with the owner of privately
held real property to be improved and as to which the owner is not
acting as a contractor, construction manager, or supplier of
materials or equipment to the work, that purport to impose on any
contractor, subcontractor, or supplier of goods or services, or
relieve the owner from, liability for the active negligence of the
owner, including that of its employees, agents, and other independent
contractors, are void and unenforceable.  
   (c) 
    (d)  For all construction contracts, and amendments
thereto, entered into after January 1, 2009, for residential
construction, as used in Title 7 (commencing with Section 895) of
Part 2 of Division 2, all provisions, clauses, covenants, and
agreements contained in, collateral to, or affecting any construction
contract, and amendments thereto, that purport to insure or
indemnify, including the cost to defend, the builder, as defined in
Section 911, or the general contractor or contractor not affiliated
with the builder, as described in subdivision (b) of Section 911, by
a subcontractor against liability for claims of construction defects
are unenforceable to the extent the claims arise out of, pertain to,
or relate to the negligence of the builder or contractor or the
builder's or contractor's other agents, other servants, or other
independent contractors who are directly responsible to the builder,
or for defects in design furnished by those persons, or to the extent
the claims do not arise out of, pertain to, or relate to the scope
of work in the written agreement between the parties. 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. Nothing in this subdivision shall prevent
any party from exercising its rights under subdivision (a) of Section
910. This subdivision shall not affect the obligations of an
insurance carrier under the holding of Presley Homes, Inc. v.
American States Insurance Company (2001) 90 Cal.App.4th 571. Nor
shall this subdivision affect the obligations of a builder or
subcontractor pursuant to Title 7 (commencing with Section 895) of
Part 2 of Division 2. 
   (d) 
    (e)  Subdivision  (c)   (d) 
does not prohibit a subcontractor and builder or general contractor
from mutually agreeing to the timing or immediacy of the defense and
provisions for reimbursement of defense fees and costs, so long as
that agreement does not waive or modify the provisions of subdivision
 (c)   (d)  subject, however, to
paragraphs (1) and (2). A subcontractor shall owe no defense or
indemnity obligation to a builder or general contractor for a
construction defect claim unless and until the builder or general
contractor provides a written tender of the claim, or portion
thereof, to the subcontractor which includes all of the information
provided to the builder or general contractor by the claimant or
claimants, including, but not limited to, information provided
pursuant to subdivision (a) of Section 910, relating to claims caused
by that subcontractor's scope of work. This written tender shall
have the same force and effect as a notice of commencement of a legal
proceeding. If a builder or general contractor tenders a claim for
construction defects, or a portion thereof, to a subcontractor in the
manner specified by this provision, the subcontractor shall elect to
perform either of the following, the performance of which shall be
deemed to satisfy the subcontractor's defense obligation to the
builder or general contractor:
   (1) Defend the claim with counsel of its choice, and the
subcontractor shall maintain control of the defense for any claim or
portion of claim to which the defense obligation applies. If a
subcontractor elects to defend under this paragraph, the
subcontractor shall provide written notice of the election to the
builder or general contractor within a reasonable time period
following receipt of the written tender, and in no event later than
90 days following that receipt. Consistent with subdivision 
(c)   (d)  , the defense by the subcontractor shall
be a complete defense of the builder or general contractor of all
claims or portions thereof to the extent alleged to be caused by the
subcontractor, including any vicarious liability claims against the
builder or general contractor resulting from the subcontractor's
scope of work, but not including claims resulting from the scope of
work, actions, or omissions of the builder, general contractor, or
any other party. Any vicarious liability imposed upon a builder or
general contractor for claims caused by the subcontractor electing to
defend under this paragraph shall be directly enforceable against
the subcontractor by the builder, general contractor, or claimant.
   (2) Pay, within 30 days of receipt of an invoice from the builder
or general contractor, no more than a reasonable allocated share of
the builder's or general contractor's defense fees and costs, on an
ongoing basis during the pendency of the claim, subject to
reallocation consistent with subdivision  (c)  
(d)  , and including any amounts reallocated upon final
resolution of the claim, either by settlement or judgment. The
builder or general contractor 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 subcontractor to the
extent a claim or claims are alleged to be caused by the
subcontractor's work, actions, or omissions, regardless of whether
the builder or general contractor actually tenders the claim to any
particular subcontractor, and regardless of whether that
subcontractor is participating in the defense. Any amounts not
collected from any particular subcontractor may not be collected from
any other subcontractor. 
   (e) 
    (f)  Notwithstanding any other provision of law, if a
subcontractor fails to timely and adequately perform its obligations
under paragraph (1) of subdivision  (d)   (e)
 , the builder or general contractor shall have the right to
pursue a claim against the subcontractor for any resulting
compensatory damages, consequential damages, and reasonable attorney'
s fees. If a subcontractor fails to timely perform its obligations
under paragraph (2) of subdivision  (d)   (e)
 , the builder or general contractor shall have the right to
pursue a claim against the subcontractor for any resulting
compensatory and consequential 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 builder's or
general contractor's reasonable attorney's fees incurred to recover
these amounts. The builder or general contractor shall bear the
burden of proof to establish both the subcontractor's failure to
perform under either paragraph (1) or (2) of subdivision  (d)
  (e)  and any resulting damages. If, upon request
by a subcontractor, a builder or general contractor does not
reallocate defense fees to subcontractors within 30 days following
final resolution of the claim as described above, the subcontractor
shall have the right to pursue a claim against the builder or general
contractor for any resulting compensatory and consequential 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 subcontractor's reasonable attorney's fees
incurred in connection therewith. The subcontractor shall bear the
burden of proof to establish both the failure to reallocate the fees
and any resulting damages. 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. 
   (f) 
    (g)  A builder, general contractor, or subcontractor
shall have the right to seek equitable indemnity for any claim
governed by this section. 
   (g) 
    (h)  Nothing in this section limits, restricts, or
prohibits the right of a builder, general contractor, or
subcontractor to seek equitable indemnity against any supplier,
design professional, or product manufacturer. 
   (h) 
    (i)  As used in this section, "construction defect"
means a violation of the standards set forth in Sections 896 and 897.

  SEC. 3.  Section 2782.05 is added to the Civil Code, to read:
   2782.05.  (a)  Provisions   Except as
provided in subdivision (b), provisions  , clauses, covenants,
 or   and  agreements contained in,
collateral to, or affecting  a contract or agreement, except
as provided in subdivision (c), whether executed in this state or
without, for the design, construction, alteration, renovation,
repair, or maintenance of a building, structure, highway, road,
bridge, water line, sewer line, oil line, gas line, appurtenance, or
other improvement to public or private real property located in the
state, including any erection, moving, lifting, demolition, or
excavation that requires a promisor to indemnify, release, hold
harmless, insure, or defend another person against actual or claimed
liability, damage, or expense arising from the negligence, willful
misconduct, defective design, violation of law, or other fault of
that person or that person's agents, employees, independent
contractors, subcontractors, or representatives are against public
policy and are void and unenforceable.   any
construction contract and amendments thereto entered into on or after
January 1, 2013, that purport to insure or indemnify, including the
cost to defend, a general contractor, construction manager, or other
subcontractor, by a subcontractor against actual or claimed liability
for claims of loss, damage, or expense are unenforceable to the
extent the claims arise out of, pertain to, or relate to the
negligence or misconduct of that general contractor, construction
manager, or other subcontractor, or their other agents, other
servants, or other independent contractors who are responsible to the
general contractor, construction manager, or other subcontractor, or
for defects in design furnished by those persons, or to the extent
the claims do not arise out of the scope of work of the subcontractor
in the written agreement between the parties. 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. This subdivision shall not affect the
obligations of an insurance carrier under the holding of Presley
Homes, Inc. v.   American States Insurance Company (2001) 90
Cal.App.4th 571, nor the rights of an insurance carrier under the
holding of Buss v. Superior Court (1997) 16 Cal.4th 35. 

   (b) A provision in a contract described in subdivision (a) that
requires the purchase of additional insured coverage, or any coverage
endorsement or provision within an insurance policy providing
additional insured coverage, primary or noncontributing coverage or
waivers, is void and unenforceable to the extent that it requires or
provides coverage the scope of which is prohibited under this section
for an agreement to indemnify, hold harmless, or defend. 

   (c) 
    (b)  This section does not apply to:
   (1) Contracts for residential construction, as used in Title 7
(commencing with Section 895) of Part 2 of Division 2.
   (2) Contracts  executed by a public entity, as defined in
subparagraph (B) of paragraph (2) of subdivision (a)  
with a public agency and governed by subdivision (b)  of Section
2782. 
   (3) Contracts with the owner of private property and governed by
subdivision (c) of Section 2782.  
   (3) 
    (4)  Any wrap-up insurance policy or program, except as
provided by this section. 
   (4) 
    (5)  A cause of action for breach of contract or
warranty that exists independently of an indemnity obligation.

   (5) 
    (6)  A provision in a construction contract that
requires the promisor to purchase or maintain insurance covering the
acts or omissions of the promisor. 
   (6) 
    (7)  Indemnity provisions contained in loan and
financing documents, other than construction contracts to which the
contractor and a contracting project owner's lender are parties.

   (7) 
    (8)  General agreements of indemnity required by
sureties as a condition of execution of bonds for construction
contracts. 
   (8) 
    (9)  The benefits and protections provided by the
workers' compensation laws. 
   (9) 
    (10)  The benefits or protections provided by the
governmental immunity laws. 
   (d) This section does not apply to a construction contract
provision that requires a promisor to purchase:  
   (11) Provisions that require the purchase of any of the following:
 
   (1) 
    (A)  Owners and contractors protective liability
insurance. 
   (2) 
    (B)  Railroad protective liability insurance. 
   (3) 
    (C)  Contractors all-risk insurance. 
   (4) 
    (D)  Builders all-risk or named perils property
insurance. 
   (e) This section applies only to liability under a construction
contract entered into on or after January 1, 2013.  

   (f) 
    (c)  Notwithstanding any choice-of-law rules that would
apply the laws of another jurisdiction, the law of California shall
apply to every contract to which this section applies. 
   (g) 
    (d)  Any waiver of the provisions of this section is
contrary to public policy and is void and unenforceable. 
   (e) Subdivision (a) does not prohibit a subcontractor and a
general contractor or construction manager from mutually agreeing to
the timing or immediacy of the defense and provisions for
reimbursement of defense fees and costs, so long as that agreement
does not waive or modify the provisions of subdivision (a) subject,
however, to paragraphs (1) and (2). A subcontractor shall owe no
defense or indemnity obligation to a general contractor or
construction manager for a claim unless and until the general
contractor or construction manager provides a written tender of the
claim, or portion thereof, to the subcontractor that includes all of
the information provided by the claimant or claimants relating to
claims caused by that subcontractor's scope of work. If a general
contractor or construction manager tenders a claim, or portion
thereof, to a subcontractor in the manner specified by this
subdivision, the subcontractor shall elect to perform either of the
following, the performance of which shall be deemed to satisfy the
subcontractor's defense obligation to the general contractor or
construction manager:  
   (1) Defend the claim with counsel of its choice, and the
subcontractor shall maintain control of the defense for any claim or
portion of claim to which the defense obligation applies. If a
subcontractor elects to defend under this paragraph, the
subcontractor shall provide written notice of the election to the
general contractor or construction manager within a reasonable time
period following receipt of the written tender, and in no event later
than 30 days following that receipt. Consistent with subdivision
(a), the defense by the subcontractor shall be a complete defense of
the general contractor or construction manager of all claims or
portions thereof to the extent alleged to be caused by the
subcontractor, including any vicarious liability claims against the
general contractor or construction manager resulting from the
subcontractor's scope of work, but not including claims resulting
from the scope of work, actions, or omissions of the general
contractor or construction manager, or any other party. Any vicarious
liability imposed upon a general contractor or construction manager
for claims caused by the subcontractor electing to defend under this
paragraph shall be directly enforceable against the subcontractor by
the owner, general contractor, construction manager, or claimant.
 
   (2) Pay, within 30 days of receipt of an invoice from the general
contractor or construction manager, no more than a reasonable
allocated share of the general contractor's or construction manager's
defense fees and costs, on an ongoing basis during the pendency of
the claim, subject to reallocation consistent with subdivision (a),
and including any amounts reallocated upon final resolution of the
claim, either by settlement or judgment. The general contractor or
construction manager 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 subcontractor to the extent a claim or
claims are alleged to be caused by the subcontractor's work,
actions, or omissions, regardless of whether the general contractor
or construction manager actually tenders the claim to any particular
subcontractor, and regardless of whether that subcontractor is
participating in the defense. Any amounts not collected from any
particular subcontractor may not be collected from any other
subcontractor.  
   (f) Notwithstanding any other provision of law, if a subcontractor
fails to timely and adequately perform its obligations under
paragraph (1) of subdivision (e), the general contractor or
construction manager shall have the right to pursue a claim against
the subcontractor for any resulting compensatory damages. If a
subcontractor fails to timely perform its obligations under paragraph
(2) of subdivision (e), the general contractor or construction
manager shall have the right to pursue a claim against the
subcontractor for any resulting compensatory damages and for interest
on defense and indemnity costs, from the date incurred, at the rate
set forth in subdivision (g) of Section 3260. The general contractor
or construction manager shall bear the burden of proof to establish
both the subcontractor's failure to perform under either paragraph
(1) or (2) of subdivision (e) and any resulting damages. If, upon
request by a subcontractor, a general contractor or construction
manager does not reallocate defense fees to subcontractors within 30
days following final resolution of the claim, the subcontractor shall
have the right to pursue a claim against the general contractor or
construction manager for any resulting compensatory damages with
interest, from the date of final resolution of the claim, at the rate
set forth in subdivision (g) of Section 3260. The subcontractor
shall bear the burden of proof to establish both the failure to
reallocate the fees and any resulting damages. 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. In
any action under this subdivision, the court shall award reasonable
attorney's fees and costs to the prevailing party, if any.  

   (g) For purposes of this section, "construction manager" means a
person who directs, schedules, or coordinates the work of contractors
for a work of improvement, but does not itself perform the work.
 
   (h) For purposes of this section, "general contractor," in
relation to a given subcontractor, means a person who has entered
into a construction contract and who has entered into a subcontract
with that subcontractor under which the subcontractor agrees to
perform a portion of that scope of work. Where a subcontractor has
itself subcontracted a portion of its work, that subcontractor, along
with its general contractor, shall be considered a general
contractor as to its subcontractors.  
   (i) For purposes of this section, "subcontractor" means a person
who has entered into a construction contract either with a contractor
to perform a portion of that contractor's work under a construction
contract or with any person to perform a construction contract
subject to the direction or control of a general contractor or
construction manager.  
   (j) A general contractor, construction manager, or subcontractor
shall have the right to seek equitable indemnity for any claim
governed by this section.  
                                      (k) Nothing in this section
limits, restricts, or prohibits the right of a general contractor,
construction manager, or subcontractor to seek equitable indemnity
against any supplier, design professional, or product manufacturer.

   SEC. 4.    Section 2783 of the   Civil Code
  is amended to read: 
   2783.  As used in Sections 2782 and 2782.5, "construction contract"
is defined as any agreement or understanding, written or oral,
respecting the construction, surveying, design, specifications,
alteration, repair, improvement,  renovation,  maintenance,
removal of or demolition of any building, highway, road, parking
facility, bridge,  water line, sewer line, oil line, gas line,
 railroad, airport, pier or dock, excavation or other structure,
 appurtenance,  development or other improvement to real or
personal property, or an agreement to perform any portion thereof or
any act collateral thereto, or to perform any service reasonably
related thereto, including, but not limited to, the erection of all
structures or performance of work in connection therewith, the rental
of all equipment, all incidental transportation,  moving,
lifting,  crane and rigging service and other goods and services
furnished in connection therewith.