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
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|Ayes:|Feuer, Tran, Brownley, |Ayes:|Feuer, Tran, Brownley, |
| |Evans, Hagman, Huffman, | |Hagman, Huffman, Jones, |
| |Jones, Monning, Saldana | |Knight, Monning, Saldana |
| | | | |
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|Nays:|Knight | |
| | | |
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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.
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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
FN: 0006785