LEGAL ISSUES


New Limits on Design Professionals’ Duty to Defend and Indemnify


By Mary Salamone and Dan Bulfer, Atkinson, Andelson, Loya, Ruud & Romo


available to public agencies for public works of improvement. Contractors using the design-build


I


delivery method have been able to limit their liability for design errors and omissions through favorable indemnity laws in California, which generally provided for an immediate duty to defend unless a different intent was stated expressly in a design profes- sional’s contract. Under this framework, the design professional could have been required to defend another party (such as the owner or a design-builder) against claims arising from design errors and omissions, even if the design profes- sional was ultimately cleared of any professional negligence. Tis has now changed for contracts


entered into on or after January 1, 2018.


On April 28, 2017, Governor


Jerry Brown signed Senate Bill 496 (SB 496) into law, which will impact claims against design professionals for both public and private works of improvement. Under the bill, a design professional’s obligation to indemnify and defend will be limited to a propor- tionate percentage of attorney’s fees and costs if the design professional is found at fault. For the purposes of the new law, a


“design professional” includes licensed architects, landscape architects, registered professional engineers, and licensed professional land surveyors.


Background Under the California Supreme


Court’s decision in Crawford v. Weather Shield (2008) 44 Cal.4th 541 and


16 May/June 2018 Mary Salamone Dan Bulfer


the Court of Appeal’s application of Crawford in UDC-Universal Devel- opment, L.P. v. CH2M Hill (2010) 181 Cal.App.4th 10, a design profes- sional who contracted to defend and indemnify its client for negligence was responsible for providing a defense to the client regardless of whether the design professional was found liable for the underlying claims. Tese court rulings provided contractors and public agencies alike with a mechanism to shift and mitigate risk arising from design errors and omissions, which undoubtedly enhanced the attrac- tiveness of the design-build delivery method to both owners and general contractors. With respect to public works


of improvement, existing law also provided that if a public agency’s contract with a design profes- sional imposed duties of defense or indemnity, those duties were only enforceable as to claims arising out of the negligence, recklessness, or willful misconduct of the design professional. However, this rule had not been applied to private works of improvement, allowing contractors and owners to shift their risk associated with design errors and omissions without restriction on those projects.


Changes Made by SB 496 SB 496 changes the law in several


n recent years, the State of California has made substantial progress in making design-build


notable respects. Most importantly, SB 496 limits a design professional’s obligation to defend and indemnify another party on any work of improvement, public or private, to the design professional’s proportionate percentage of fault. Terefore, if the design professional is found to be 20 percent at fault, it will only be respon- sible for 20 percent of a contractor’s defense costs and damages. Tis means a design professional can only be required to reimburse a contractor for defense costs and damages attributable to the design professional’s negligence. By contrast, prior law allowed a


general contractor to shift all of its legal expenses and exposure to a design professional for claims arising from design errors and omissions, without regard to fault. Tis new limitation cannot be waived by contract or by the conduct of the parties. Te statute does not apply when a


project-specific general liability policy insures all project participants on a primary basis and covers all design professionals for professional negli- gence on a primary basis. Also, the statute does not apply to design profes- sionals who are parties to a written design-build joint venture agreement. Te other “exception” to this rule is


remarkably toothless. In the event that the design professional is not found to be fully at fault, and another party to litigation is unable to pay its share of defense costs due to bankruptcy or dissolution, the design professional must “meet and confer” with other parties regarding the unpaid defense costs. Te statute does not provide any


guidance regarding the content of the meet and confer effort or the conse- quences of failing to meet and confer. Indeed, the statute does not appear to impose any other obligation on the


Continued on page 17 California Constructor


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