BILL NUMBER: SB 972	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Wolk

                        FEBRUARY 8, 2010

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



	LEGISLATIVE COUNSEL'S DIGEST


   SB 972, as introduced, Wolk. Indemnity.
   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.
   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 indemnity against liability,
expressly, or in other equivalent terms, the person indemnified is
entitled to recover upon becoming liable  ;   .
 
   2. 
    (b)    Upon an indemnity against claims,
 or  demands,  or  damages, or
costs, expressly, or in other equivalent terms, the person
indemnified is not entitled to recover without payment thereof
 ;   .  
   3. 
    (c)    An indemnity 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 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
 such   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.
 
   5. 
    (e)    If, after request, the person
indemnifying neglects to defend the person indemnified, a recovery
against the latter suffered  by him  in good faith,
is conclusive in his  or her  favor against the former
 ;   .  
   6. 
    (f)    If the person indemnifying, whether
 he is  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  ;   .  
   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.