New California Laws Significantly Modify Indemnity Obligations in Construction Contracts

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	Morris Polich & Purdy LLP Construction & Design ALERT Dear Will, Effective as of January 1, 2013, new California laws further restrict the scope of indemnity provisions in construction contracts, necessitating that contracts be carefully reviewed. These significant modifications are a result of a growing national effort by contractors and subcontractors to limit their indemnity and defense obligations for work performed on both public and private works projects. One of these new laws voids indemnity provisions in construction contracts that require or "purport to insure or indemnify, including the cost to defend, a general contractor, construction manager, or other subcontractor, by a subcontractor against liability for claims… to the extent the claims arise out of, pertain to, or relate to the[ir] active negligence or willful misconduct." (Civil Code Section 2782.05). In plain English, these new laws prohibit indemnity provisions that attempt to shift liability or defense obligations for the active negligence of the party to be indemnified. Subject to very limited exceptions, California's construction contract anti-indemnity statute (Civil Code section 2782) has for many years made broad form indemnity provisions unenforceable by prohibiting a party from requiring indemnity against its own sole negligence or willful misconduct. (Civil Code section 2782(a).) A recent expansion of this law makes clear that indemnity for active negligence is also generally unenforceable for both public and private contracts entered into on or after January 1, 2013. These new revisions expressly extend this prohibition to "any contractor, subcontractor or supplier of goods and services." (Civil Code section 2782 (b)(2) and (c)(1).) In other words, a public agency or prime contractor on a public works project cannot require a subcontractor or supplier to indemnify against liability for the active negligence of the public agency and/or the general contractor. In addition, the prime contractor cannot be required to indemnify an owner of a public works project for the active negligence of the owner. (Civil Code section 2782(b)(1).) The same is true in the private contract context - the owner cannot impose on any contractor, subcontractor or supplier an indemnification obligation as a result of the active negligence of the owner. (Civil Code section 2782(c)(1).) As a result, the indemnity provision in your current contract may not be enforceable and owners, contractors, subcontractors, suppliers, and material vendors should reassess and modify their current contracts, particularly the indemnity provision(s), in order to bring those contracts in line with the new provisions of Civil Code sections 2782 and 2782.05. Click HERE to view Civil Code section 2782. You may also click HERE to view Civil Code section 2782.05. If you have any questions or would like to discuss the impact of these new laws in greater detail, please feel free to contact me, or alternatively, Raina L. Richter (213.417.5312 or rrichter@mpplaw.com). Sincerely, D. Creighton Sebra Attorney at Law 213.417.5380 csebra@mpplaw.com Morris Polich & Purdy LLP 1055 West Seventh Street Twenty-Fourth Floor Los Angeles, CA 90017 Tel: 213.891.9100 www.mpplaw.com
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