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Legislation is being proposed to ensure fairness in indemnity agreements.

Posted by: Jonathan Bowne
August 01, 2011
Topic: Subcontract Liablity

California State Senator Noreen Evans is sponsoring Senate Bill 474 which seeks to treat private owners and developers in the same way that current law treats public entities by preventing them from requiring others to indemnify them against their active negligence. Generally speaking, active negligence includes negligent acts and omissions of a person as opposed to negligence imposed that person for failing to act, such as failing to inspect a work site for safety violations.

The bill would also add a new section to the Civil Code which would require prime contractors and construction managers to apportion defense and indemnity costs among those actually responsible for a claim.

Subcontractors have increasingly been finding so-called Type I indemnity agreements in their contracts. These agreements generally require the subcontractor to indemnify and defend other parties against claims and lawsuits which touch on their scope of work in any way, whether or not the subcontractor is actually responsible. General contractors are facing similar demands from owners.

These provisions are raising costs for insurance and exposing contractors to risks they cannot measure or control. Where the claim is not insurable, the contractor can be subjected to unfair pressure to settle even doubtful claims. The bill and all amendments are available online the following website: http://www.leginfo.ca.gov/bilinfo.html. To date it has passed the Senate and is being debated in the Assembly.

William Last testified in favor of the proposed new law before the Assembly Judiciary Committee. He has also been working with several trade associations that have working to get SB 474 into law.