{"id":892093,"date":"2017-05-04T12:20:01","date_gmt":"2017-05-04T18:20:01","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=892093"},"modified":"2017-05-04T12:20:01","modified_gmt":"2017-05-04T18:20:01","slug":"law-limits-defense-costs-liability-design-professionals","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/law-limits-defense-costs-liability-design-professionals\/","title":{"rendered":"Law Limits Defense Costs Liability for Design Professionals"},"content":{"rendered":"<p>Judy Greenwald | <a href=\"http:\/\/www.businessinsurance.com\/article\/20170503\/NEWS06\/912313251\/California-limits-architects-engineers-defense-costs-liability?utm_campaign=BI20170503BreakingNewsAlert&amp;utm_medium=email&amp;utm_source=ActiveCampaign\" target=\"_blank\">Business Insurance<\/a> | May 3, 2017<\/p>\n<p>A measure signed into law last week by California Governor Jerry Brown will significantly reduce defense costs for design professionals, including architects and engineers, and could smooth claims handling, say experts.<\/p>\n<p>Senate Bill 496 provides that architects and engineers would be liable to pay only a proportionate percentage of attorney\u2019s fees and costs if they are found at fault in connection with private contracts as of January 1, 2018.<\/p>\n<p>Currently, as a result of a 2010 California appeals court ruling, a design professional who agrees to defend and indemnify its client for negligence is responsible for that defense, regardless of whether he or she is found liable for the underlying claims involving private contracts. This already applied to public contracts with nonstate agencies.<\/p>\n<p>\u201cBecause of the terms and conditions on the indemnity contract you could still be forced to pay 100% of someone else\u2019s attorney\u2019s fees,\u201d said Howard J. Franco Jr., an attorney with Collins Collins Muir &amp; Stewart L.L.P. in Carlsbad, California, who represents design professionals.<\/p>\n<p>\u201cThat exposure was uninsurable, and as a result, several design firms went out of business,\u201d he said.<\/p>\n<p>\u201cFor the last couple of years, attempts have been made in the California legislature to provide some relief to design professionals in view of this obligation,\u201d Mr. Franco said.<\/p>\n<p>\u201cAs a result, Senate Bill 496 creates a requirement that there be a determination of the proportional liability of the design professionals first, before there\u2019s any payment or reimbursement of attorney\u2019s fees and costs under an indemnity agreement,\u201d he said.<\/p>\n<p>That is significant \u201cbecause it makes their obligations for any alleged errors and omissions tied to their actual fault, rather than having it simply arise out of the fact that they happened to work on a project,\u201d Mr. Franco said.<\/p>\n<p>\u201cThis legislation goes a long way towards solving a problem,\u201d said Theodore D. Levin, a partner with Morris, Polich &amp; Purdy L.L.P. in Los Angeles.<\/p>\n<p>James Schwartz, who heads Beazley\u2019s U.S. architect and engineers team, said while defense costs are not insurable, the law as it now stands \u201ccauses difficulty in effectively managing claims, because there is also a kind of friction in terms of what\u2019s covered and what\u2019s not covered, and it can make resolution of the overall claim more difficult.\u201d<\/p>\n<p>The new law \u201cshould remove a good part of that obstacle, and hopefully make the overall claim easier to resolve,\u201d said Mr. Schwartz, who is Boston based.<\/p>\n<p>\u201cIn the long run, it\u2019ll be advantageous to the insured\u201d in reducing claims\u2019 frequency and severity, \u201cwhich ultimately can result in more favorable insurance terms,\u201d Mr. Schwartz said.<\/p>\n<p>, say experts.<\/p>\n<p>Senate Bill 496 provides that architects and engineers would be liable to pay only a proportionate percentage of attorney\u2019s fees and costs if they are found at fault in connection with private contracts as of January 1, 2018.<\/p>\n<p>Currently, as a result of a 2010 California appeals court ruling, a design professional who agrees to defend and indemnify its client for negligence is responsible for that defense, regardless of whether he or she is found liable for the underlying claims involving private contracts. This already applied to public contracts with nonstate agencies.<\/p>\n<p>\u201cBecause of the terms and conditions on the indemnity contract you could still be forced to pay 100% of someone else\u2019s attorney\u2019s fees,\u201d said Howard J. Franco Jr., an attorney with Collins Collins Muir &amp; Stewart L.L.P. in Carlsbad, California, who represents design professionals.<\/p>\n<p>\u201cThat exposure was uninsurable, and as a result, several design firms went out of business,\u201d he said.<\/p>\n<p>\u201cFor the last couple of years, attempts have been made in the California legislature to provide some relief to design professionals in view of this obligation,\u201d Mr. Franco said.<\/p>\n<p>\u201cAs a result, Senate Bill 496 creates a requirement that there be a determination of the proportional liability of the design professionals first, before there\u2019s any payment or reimbursement of attorney\u2019s fees and costs under an indemnity agreement,\u201d he said.<\/p>\n<p>That is significant \u201cbecause it makes their obligations for any alleged errors and omissions tied to their actual fault, rather than having it simply arise out of the fact that they happened to work on a project,\u201d Mr. Franco said.<\/p>\n<p>\u201cThis legislation goes a long way towards solving a problem,\u201d said Theodore D. Levin, a partner with Morris, Polich &amp; Purdy L.L.P. in Los Angeles.<\/p>\n<p>James Schwartz, who heads Beazley\u2019s U.S. architect and engineers team, said while defense costs are not insurable, the law as it now stands \u201ccauses difficulty in effectively managing claims, because there is also a kind of friction in terms of what\u2019s covered and what\u2019s not covered, and it can make resolution of the overall claim more difficult.\u201d<\/p>\n<p>The new law \u201cshould remove a good part of that obstacle, and hopefully make the overall claim easier to resolve,\u201d said Mr. Schwartz, who is Boston based.<\/p>\n<p>\u201cIn the long run, it\u2019ll be advantageous to the insured\u201d in reducing claims\u2019 frequency and severity, \u201cwhich ultimately can result in more favorable insurance terms,\u201d Mr. Schwartz said.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Judy Greenwald | Business Insurance | May 3, 2017 A measure signed into law last week by California Governor Jerry Brown will significantly reduce defense costs for design professionals, including architects and engineers, and could smooth claims handling, say experts. Senate Bill 496 provides that architects and engineers would be liable to pay only a&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/law-limits-defense-costs-liability-design-professionals\/\">Continue reading <span class=\"screen-reader-text\">Law Limits Defense Costs Liability for Design Professionals<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9009],"tags":[9895,88,9947,284],"class_list":["post-892093","post","type-post","status-publish","format-standard","hentry","category-design-professionals","tag-advise-consult","tag-california","tag-defense-costs","tag-design-professionals","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Law Limits Defense Costs Liability for Design Professionals - Advise &amp; 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