California Design Professionals’ Indemnity Obligations Limited Under 2018 Contracts

Ryan W. Young | Lewis Brisbois Bisgaard & Smith LLP | June 22, 2018

The California Legislature has narrowed the scope of enforceable indemnity agreements applicable to licensed architects, engineers, and land surveyors through its amendment of Civil Code § 2782.8. This represents an important development in the allocation of risk in the construction community, since Section 2782.8 previously limited indemnity clauses only as to design professional service contracts with local public agencies entered into on or after January 1, 2007.

Under amended Section 2782.8, all contracts with non-state agencies for design professional services entered into on or after January 1, 2018, that require licensed architects, engineers, and land surveyors to indemnify their client are now unenforceable, except to the extent the claims against the client arise out of the design professional’s negligence, recklessness or willful misconduct.

Section 2782.8, as amended, also caps a design professional’s liability for the cost to defend their client to the design professional’s proportionate percentage of fault. The design professional, however, is required to meet and confer with other parties to an action regarding unpaid defense costs, where one or more of the defendants has dissolved or become bankrupt.

This limitation of the duty and cost to defend, however, does not apply to (1) any contract for design professional services where a project-specific general liability policy insures all project participants for general liability on a primary basis and also covers all design professionals for their liability arising out of their services on a primary basis; and (2) a design professional who is a party to a written design-build joint venture agreement.

All design professional service contracts with non-state agencies entered into on or after January 1, 2018, are now deemed to incorporate by reference the provisions of this section and the provisions cannot be waived.

Civil Code § 2782.8 is silent, however, as to the trigger date for the above-referenced duty to defend. Consequently, parties to this kind of contract should address the timing of the defense obligation in the contract, because California law requires an immediate defense upon a proper request, unless the parties state otherwise.