William L. Doerler | The Subrogation Stategist | August 18, 2017
The California legislature recently enacted legislation – SB 496 – limiting a design professional’s indemnification obligations in private contracts related to design services. The term “design professional” refers to licensed architects, landscape architects and professional land surveyors, and registered professional engineers. As revised, Cal. Civ. Code § 2782.8 states that, for all contracts entered into on or after January 1, 2018 for design professional services, all provisions that purport to have the design professional indemnify the indemnitee for claims against the indemnitee – or require the design professional to provide a defense to the indemnitee – are unenforceable except to the extent that the claims against the indemnitee arise out of, or relate to, the negligence, recklessness or willful misconduct of the design professional. In addition, as revised, § 2782.8 limits a design professional’s liability for the cost of defense to the design professional’s percentage of fault.
The revised statute provides two exceptions. Pursuant to these exceptions, the limitations related to the duty and cost to defend do not apply to: 1) design service contracts where a project-specific general liability policy insures all project participants, including the design professional, and 2) a design professional who is a party to a written design-build, joint venture agreement.
Although this change in the law does not go into effect until January 1, 2018, the change serves as a reminder to subrogation professionals that, when faced with indemnification provisions in design or construction-related contracts, they should check local laws to determine the extent to which subrogating insurers can enforce such provisions.