California Law and Indemnity Shifts
The California Legislature and Governor Brown recently approved California Senate Bill 474, which general provides that in all construction contacts for private commercial project entered on or after January 1, 2013 any indemnity obligations (including cost to defend) arising out of the active negligence or willful misconduct of the indemnified party are void and unenforceable.
The new law affects risk allocations in construction projects and may lead to insurance related litigation. California developers and general contractors typically use what is referred to as a “Type 1” indemnity proviso in construction contracts. “Type 1” indemnity allows one party (usually owners, developers, and general contractors) to require the other party (typically subcontractors) to indemnify them for their own active negligence or fault.
Senate Bill 474:
- Does not apply to design professionals.
- Includes contracts for renovations and utility, water, sewer, oil and gas lines under construction contracts.
- Cannot be avoided by the…
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