CaliforniaAs of January 1, 2013, "Type I" indemnity agreements will no longer be enforceable in most construction contracts. On October 9, 2011, California Governor Edmund G. Brown, Jr. signed into law Senate Bill 474, which relates to indemnity provisions in commercial construction contracts. The new law, which will apply to contracts entered into on and after January 1, 2013, expands the class of indemnity provisions that are unenforceable under California law. It also imposes stricter limitations on the ability of developers and general contractors to require their subcontractors to cover litigation defense costs.

Under current California law, higher tier construction participants (generally owners, developers and general contractors) typically use what is referred to as a "Type I" indemnity provision in contracts to shift liability to lower tier construction participants (generally subcontractors). Under a "Type I" indemnity provision, the subcontractor agrees to indemnify the owner, developer or general contractor, even against liability caused in whole or in part by that party's own active negligence. On private construction projects, "Type I" indemnity provisions are currently enforceable as long as the alleged liability does not arise from the indemnified party's "sole negligence or willful misconduct." Although some legislative changes have been made to alleviate the effect of "Type I" indemnity provisions in the context of residential construction, SB 474 expands these protections to commercial projects. Under the new law, such "Type I" indemnity provisions will not longer be enforceable.

Under SB 474, the prohibition of indemnity for one's own active negligence specifically extends to the costs to defend litigation claims. Thus owners, developers and general contractors may no longer be able to broadly force subcontractors to pay for the costs of defending against claims in litigation.

The effect of SB 474 on defense obligations between construction participants, however, remains to be seen. The new law may conflict with a string of cases in California known as the Crawford line of cases, which require a contractor to provide an immediate defense upon tender. Since SB 474 addresses not only indemnity obligations, but also the costs of defense, it can be argued, on one hand, that the defense obligation does not arise until a determination is made as to whether the higher tier construction participant was "actively negligent." On the other hand, SB 474 does not specifically discuss the Crawford line of cases, so it is unclear whether the legislature meant this new law to abrogate Crawford and its immediate defense obligation.

Sage R. KnauftKatie A. StricklinFeel free contact the authors with any questions: Sage R. Knauft at This email address is being protected from spambots. You need JavaScript enabled to view it.  or Katie A. Stricklin at This email address is being protected from spambots. You need JavaScript enabled to view it. - or any WFBM attorney with whom you are working.