CALIFORNIA CONSTRUCTION INDEMNITY AGREEMENTS CLARIFIED

The California Supreme Court recently decided the case of Crawford v. Weather Shield Mfg., Inc., clarifying California law concerning indemnities in construction contracts. An indemnity provision generally requires one party to protect another party from claims, lawsuits or losses related to the contract or work on the project. Indemnity provisions usually encompass two distinct duties:

1.   a duty to defend claims and lawsuits, and;
2.   a duty to pay any ultimate judgment or settlement.

 In Crawford, the Court held that the contractual indemnity at issue required the subcontractor providing the indemnity to provide an “up-front” defense of the general contractor as soon as a claim encompassed by the indemnity provision was made. The Court further held that the subcontractor’s duty to defend applied even though the subcontractor was ultimately found not to have been negligent in causing the plaintiff’s damages.

Q: Does the Crawford case apply to residential or commercial contracts?

A: The Crawford case applies to residential construction indemnity agreements entered into before January 1, 2006. Residential construction indemnity agreements entered into after that date are now governed (and limited) by statute. The case also applies to the interpretation of all commercialconstruction indemnity agreements. Such commercial construction indemnity agreements have not been the subject of recent statutory changes.

Q: What should I do, if anything?

A: Given both: (1) the changes to California’s indemnity statutes over the last few years; and (2) the implications of the Crawford case, all parties to construction contracts should revisit the indemnity provisions in their standard contract forms.

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