Los Angeles County Judge Carl J. West Grants Summary Adjudication to General Contractor; New Civil Code Section 2782(d) Has New Rules For Construction Projects After January 1, 2009.
In SSR Marlowe, LLC v. Taisei Construction Corp., Case No. BC363862 (L.A. County Superior Court June 4, 2009), Los Angeles County Superior Court Judge Carl J. West granted summary judgment in favor of a general contractor and against a stucco installation subcontractor based on an indemnity/duty to defend clause in the parties’ subcontract agreement. Contractor was sued by developer, and then tendered defense to subcontractor based on a clause that provided “Subcontractor shall indemnify and hold harmless Owner and [contractor] and all of their agents and employees from and against all claims, damages, losses and expenses including attorney’s fees arising out of, or resulting from, the performance of this Agreement, provided that such claim, damage, loss, or expense, … is caused in whole or in part by any negligent act or omission of the Subcontractor or anyone directly or indirectly employed by him or anyone for whose acts he may be liable …”
In ruling for contractor, Judge West found that the California Supreme Court’s decision in Crawford v. Weather Shield Mfg., Inc., 44 Cal.4th 541 (2008) was dispositive. There, a very similarly-worded indemnity/hold harmless clause was found to impose a duty of defense upon a window subcontractor with respect to the general contractor. The Supreme Court stated that Civil Code section 2778(4) placed in every indemnity contract, unless otherwise provided, a duty to assume the indemnitee’s defense if tendered against all claims embraced by the indemnity. (This duty to defend arose even if the subcontractor/indemnitor was eventually found not to be negligent.) Even through Crawford had an additional provision by which a duty to defend was promised, Judge West found that such language is not essential under section 2778(3)—an express disclaimer of a duty to defend is necessary in the parties’ governing contract (something missing in the facts before him).
Crawford obviously provides some major drafting tips for attorneys representing owners, developers, and contractors/construction professionals at all tiers of the process.
One should also keep in mind that Civil Code section 2782(d) was recently amended effective January 1, 2009 for residential construction agreements. It provides that a subcontractor may be obligated to provide a defense to a developer or general contractor if the claim is tendered to the sub as required by the subdivision. (Recently amended section 2782(c) generally limits subcontractor indemnity obligations to claims arising from the subcontractor’s work.) Then, the sub may elect to satisfy its defense obligation to the developer or general contractor by (1) either defending the claim with counsel of the subcontractor’s choice, or (2) paying a “reasonable allocated share” of the defense fees/costs incurred by the developer or general contractor (subject to readjustment at the end of a case), as long as payment is made within 30 days of receiving an invoice from the developer or general contractor. This fairly recent legislative enactment, in tandem with Crawford, needs to be considered by transactional attorneys when drafting construction contracts, both before and after January 1, 2009.