How California’s Construction Industry has dealt with the New Indemnity Law
October 22, 2014 —
Mark S. Himmelstein, Esq. - Newmeyer & DillionIt has been almost two years since the California legislature enacted changes to the state’s indemnity law affecting commercial construction contracts. Although we do not yet have any court opinions analyzing the new statutes, the attorneys at
Newmeyer & Dillion now have real world experience in negotiating such indemnity provisions. It is time to evaluate how the construction community has reacted to the changes. In this article, we examine the practical applications of the new law to various construction agreements.
Enacted on January 1, 2013, the new legislation was the latest in a series of efforts by subcontractors and their insurers to eliminate “Type I” indemnity clauses. Under a Type I provision, a subcontractor has a duty to indemnify the developer or general contractor for the negligence of the developer or general contractor or other subcontractors, in addition to the negligence of the subcontractor itself. In 2006, the law was changed to preclude Type I provisions regarding “For Sale” residential construction defect claims. At that time, there was no such restriction enacted for commercial construction contracts. However, since then, commercial subcontractors have been seeking similar legislation. Their efforts culminated in the 2013 revisions regarding commercial contracts.
Commercial Subcontracts
Pursuant to the new indemnity statute — Civil Code section 2782.05 — we have revised our clients’ commercial subcontracts to:
(a) Eliminate the requirement that the subcontractor indemnify the general contractor for the general contractor’s “active negligence;” and
(b) Include the subcontractor’s options for defending claims for which they have an indemnity obligation.
Many subcontractors have responded: “Hey, wait a minute, the new legislation eliminated Type I indemnity so you (general contractor) cannot still require any indemnification for the general contractor’s negligence”. Well, that might be the rumor in subcontractor circles, but the new statute does not eliminate indemnity for the general contractor’s passive fault. In addition, the Civil Code lists 13 instances where the new indemnity restrictions do not apply.
Residential Subcontracts
The legislature did not make anyone’s job easier by drafting a different indemnity provision for commercial subcontracts than for residential subcontracts. In fact, the residential and commercial statutes are different in several critical respects. First, the restrictions on indemnity in the residential statute apply only to construction defect claims in newly constructed “For Sale” houses. The statute does not preclude Type I indemnity provisions for any other claims arising out of residential subcontracts. In contrast, the indemnity restrictions in the commercial statute apply to all claims arising out of commercial subcontracts. In addition, the commercial statute allows indemnity for the general contractor’s passive fault. Since some subcontractors on “residential” projects perform off-site “commercial” work as well, we have amended even residential subcontracts to address the subcontractors’ various indemnity obligations for different parts of their work (e.g., residential work versus commercial work).
Owner-Contractor Agreements
The January 1, 2013 new indemnity provisions apply not only to subcontracts, but also to owner-contractor agreements. Civil Code section 2782(c)(1) precludes indemnity for an owner’s active negligence. Interestingly, the exclusions contained in Civil Code section 2782.05 for subcontracts do not apply, and the statute does not provide contractors with the option of defending claims set forth in the sections concerning subcontracts. Therefore, we have revised the indemnity provisions in owner-contractor agreements to exclude indemnity for the owner’s active negligence.
Design Professional Agreements
The 2007 revisions with respect to “For Sale” residential contracts (discussed above), and the 2013 revisions for commercial contracts do not apply to design professionals. The new indemnity statute concerning commercial subcontracts specifically excludes design professionals from the “anti-indemnity” benefits provided to subcontractors. Therefore, Type I indemnity provisions are fair game and can still be included in design professional contracts.
Conclusion
In sum, Civil Code sections 2782 et seq. now contain an increasingly complex framework for indemnity rules in construction contracts. For example, there is one set of rules for “For Sale” residential construction defect claims (no indemnity for the developer’s active or passive negligence), another for any other claims arising out of residential construction (Type I indemnity is permitted), another for commercial subcontracts (no indemnity for the general contractor’s active negligence, but indemnity for the general contractor’s passive negligence unless any of the exceptions apply, in which case Type I indemnity is permitted), and yet another for commercial owner contractor agreements (no indemnity for the owner’s active negligence, but indemnity for the owner’s passive negligence with no exceptions).
California’s indemnity laws are complex, and rumors as to the impact of the new legislation have made it even more difficult to negotiate these provisions. It is imperative that indemnity clauses in construction contracts clearly delineate the obligations for the specific type or types of work contemplated by the contract. The legislature’s attempt to simplify indemnity obligations has actually made such provisions lengthier and more cumbersome. As experienced construction attorneys, our task is to draft indemnity provisions that comply with the laws, address potential claims, and are understandable.
Mr. Himmelstein is a partner in the Newport Beach office of Newmeyer & Dillion and practices in the areas of construction, real estate, business and insurance litigation. He also specializes in drafting and negotiating construction and real estate contracts. Mark can be reached at mark.himmelstein@ndlf.com.
Read the court decisionRead the full story...Reprinted courtesy of
Idaho Business Review Names VF Law Attorney Brittaney Bones Women of the Year Honoree
July 31, 2023 —
VF LawMeridian, Idaho: June 23, 2023 –
VF Law, a full-service law firm with offices across the Pacific Northwest and the Southwest, is pleased to announce that associate
Brittaney Bones has been recognized as an honoree for the 2023 Idaho Business Review Women of the Year Awards. The distinguished recognition celebrates 50 female leaders across Idaho who have made their mark while continuing to pave the path of leaders for the future.
When reviewing the applications, the judges considered excellence in leadership and a willingness to advance mentorship opportunities among the other considerations. In her work with the Community Associations Institute (CAI) Idaho, Bones currently serves as Vice Chair for the Legislative Action Committee. She monitors state legislation coming out of Boise. Accordingly, Bones seeks to educate lawmakers specifically on how pending legislation will affect the lives of people living and working throughout the Gem State. She also mentors students at the College of Idaho and has donated her time to the Rock Bottom Foundation, which provides meals to the unhoused.
Bones’s other accolades include an International Law Writing Award from Davis Wright Tremaine (DWT) for her 2020 article “Potential Solutions to Concerns over the Treatment of U.S. Investment in China: The Need for a U.S.-China Bilateral Investment Treaty.” She frequently speaks at CAI events, helping to prepare her fellow legal professionals for challenges in the field—and those yet to come.
About VF Law
VF Law is a full-service, multi-state law firm. At VF, we believe that experience and knowledge are crucial; that’s why every attorney on our staff maintains a high level of expertise to ensure client success. VF possesses unmatched experience in providing HOA guidance, planning for healthy buildings from the ground up, helping small businesses and corporations run smoothly, handling real estate transactions and disputes, creating wills and trusts, and more. Visit www.vf-law.com.
Read the court decisionRead the full story...Reprinted courtesy of
Amazon Feels the Heat From Hoverboard Fire Claims
January 20, 2020 —
William L. Doerler - The Subrogation StrategistIn State Farm Fire & Cas. Co. v. Amazon.com, Inc., No. 3:18CV166-M-P, 2019 U.S. Dist. LEXIS 189053 (Oct. 31, 2019), the United States District Court for the Northern District of Mississippi considered a Motion for Judgment on the Pleadings filed by defendant Amazon.com, Inc. (Amazon). Amazon argued that, because it was a “service provider” who cannot be held liable under Mississippi’s Product Liability Act (MPLA), Miss. Code § 11.1.63, the negligence and negligent failure to warn claims filed against it by plaintiff State Farm Fire & Casualty Company (State Farm) failed as a matter of law. The court, looking beyond the MPLA, held that State Farm’s complaint stated a claim against Amazon.
In State Farm, Taylor and Laurel Boone (the Boones), State Farm’s subrogors, purchased two hoverboards from third parties in transactions facilitated by Amazon. They purchased the first hoverboard on October 31, 2015 and the second on November 10, 2015. The Boones started using the hoverboards on or about December 25, 2015. On March 16, 2016, the hoverboards caught fire and the fire spread to destroy the Boones’ home. As alleged in the amended complaint, the hoverboards were “manufactured by unknown manufacturers from China.” State Farm, as the Boones’ subrogee, filed suit asserting negligence and negligent failure to warn claims against Amazon.
Amazon filed a Motion for Judgment on the Pleadings, arguing that State Farm’s claims against it were governed by the MPLA and, as a service provider, it was not liable under the MPLA. In response, State Farm argued that Amazon was liable because it acted as a “marketplace” and that, rather than MPLA claims, Amazon is subject to common law negligence and failure to warn claims. The District Court agreed with State Farm.
Read the court decisionRead the full story...Reprinted courtesy of
William L. Doerler, White and Williams LLPMr. Doerler may be contacted at
doerlerw@whiteandwilliams.com
U.S. Home Prices Rose More Than Estimated in February
May 07, 2015 —
Kathleen M. Howley – BloombergU.S. house prices rose more than economists estimated in February as the strongest labor market in seven years gives Americans the confidence to bid on property.
Prices climbed 0.7 percent on a seasonally adjusted basis from January, the Federal Housing Finance Agency said in a report Wednesday. The average economist estimate was for a 0.5 percent increase, according to data compiled by Bloomberg.
Housing demand is climbing as consumer confidence hovers close to an eight-year high. Sales of existing homes rose in March by the most in four years, the National Association of Realtors reported today. The number of U.S. households jumped by almost 2 million in 2014, according to data compiled by Bloomberg.
Read the court decisionRead the full story...Reprinted courtesy of
Kathleen M. Howley, BloombergMs. Howley may be contacted at
kmhowley@bloomberg.net
Is a Violation of a COVID-19 Order the Basis For Civil Liability?
April 20, 2020 —
Robert Devine, James Burger & Douglas Weck - White and WilliamsThinking about ignoring your state or local COVID-19 shutdown orders? Think again. Social-distance measures may create a new source of liability for businesses operating during the COVID-19 pandemic. Infection-based litigation is normally limited to businesses operating in the healthcare sector. But, social-distancing measures to stop the spread of infection may expand that litigation to other sectors.
State and local governments across the country are taking extraordinary measures to combat the spread of COVID-19, a novel coronavirus that can cause life-threatening respiratory illness. Those measures encourage and even mandate “social distance” between people to limit physical transmission of the virus.
Hard-hit states like New York, New Jersey, Pennsylvania and California have been aggressive in their responses, shuttering businesses, confining people to their homes, and requiring people to stay six feet apart. Common mandates include: quarantines, business and school closures, stay-home orders, curfews, travel restrictions, occupancy limits and physical-distance mandates, among other things.
Reprinted courtesy of White and Williams attorneys
Robert Devine,
James Burger and
Douglas Weck
Mr. Devine may be contacted at deviner@whiteandwilliams.com
Mr. Burger may be contacted at burgerj@whiteandwilliams.com
Mr. Weck may be contacted at weckd@whiteandwilliams.com
Read the court decisionRead the full story...Reprinted courtesy of
Brazil’s Former President Turns Himself In to Police
July 22, 2019 —
Mario Sergio Lima - BloombergBrazil’s former President Michel Temer handed himself in to police following a court ruling that’s unlikely to cause upheaval in domestic politics.
Temer turned himself in on Thursday afternoon, after federal court judges ordered his detention on charges of corruption, embezzlement, money laundering and conspiracy. The former head of state was initially arrested on March 21 but released four days later. Temer’s lawyers did not immediately respond to a request for comment. The 78-year old’s party, the MDB, issued a note condemning the “unreasonable” decision.
Read the court decisionRead the full story...Reprinted courtesy of
Mario Sergio Lima, Bloomberg
Paris ‘Locks of Love’ Overload Bridges, Threatening Structures
June 11, 2014 —
Helene Fouquet and Mark Deen - BloombergLe Pont des Arts, the landmark Paris footbridge that links the Louvre museum to the Saint Germain neighborhood, is buckling under the weight of “love locks.”
The Paris mayor’s office closed the bridge last night to replace a grate after thousands of locks weighed down its structure. Its railings are crumbling, threatening pedestrians on the bridge and cruise boats that ply under it on the Seine River. The bridge was reopened today after it was checked for safety, with two fire-department boats standing by to avert any potential incident.
Although the origins of the trend are unclear, it has become a tradition for lovers to attach a lock to the railing on the sides of bridges in Paris to seal their love. Each lock weighs about 54 to 90 grams. The mayor of Paris’s 6th arrondissement, where the bridge is located, says the locks on the Pont des Arts weigh as much 10 tons, or 22,000 pounds. The grate that collapsed yesterday weighed about 200 kilos and the bridge has about 50 of them.
Ms. Fouquet may be contacted at hfouquet1@bloomberg.net; Mr. Deen may be contacted at markdeen@bloomberg.net
Read the court decisionRead the full story...Reprinted courtesy of
Helene Fouquet and Mark Deen, Bloomberg
Time is of the Essence, Even When the Contract Doesn’t Say So
January 11, 2021 —
Christopher G. Hill - Construction Law MusingsWelcome to 2021! As often happens here at Construction Law Musings, the year starts with a few posts on notable construction law cases that dropped in the past year or so. Not only does this review hopefully help you keep up, but helps me keep up with the latest developments (one of the reasons why I keep blogging).
The first of these cases is Appalachian Power Co. v. Wagman Heavy Civil, Inc. out of the Western District of Virginia federal court. In this case, Wagman Heavy Civil, Inc. (“Wagman”) and the Virginia Department of Transportation (“VDOT”) contracted for the design and construction of a highway interchange project (the “Project”). Wagman and the Appalachian Power Company (“APCO”) entered into a written contract (the “Written Contract”) for APCO to remove and relocate its utility structures (the “Work”) in order to facilitate construction for the Project.
Read the court decisionRead the full story...Reprinted courtesy of
The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
