Important Update for Design Professionals

Upcoming Senate Bill 885

Following the infamous rulings in Crawford v. Weather Shield and UDC-Universal Development v. CH2M Hill, anybody associated with the construction industry knows that almost every construction contract contains an indemnity provision that requires an immediate duty to defend, regardless of ultimate liability.

Senate Bill 885 proposes to abrogate the holdings in Crawford and UDC as to design professionals only. SB 885 would specify, for construction contracts entered into on or after January 1, 2017, that a design professional only has the duty to defend claims related to negligence, recklessness, or willful misconduct of the design professional.

Accordingly, under the bill, a design professional would not have a duty to defend claims against any other person or entity, except that person or entity’s reasonable defense costs arising out of the design professional’s degree of fault, as determined by a court or arbitrator. Notably, the bill would prohibit waiver of these provisions and would provide that any clause in a contract that requires a design professional to immediately defend claims against other persons or entities is void and unenforceable.

In other words, regardless of the indemnity and duty to defend provisions in a contract, design professionals would not owe defense fees absent a finding of actual liability. Even after such a finding, a design professional will only be obligated to reimburse reasonable defense costs based on proportionate liability. This would be a dramatic departure from current practices where the duty to defend often arises immediately, regardless of fault.

Not surprisingly, there is significant opposition to SB 885 from public agencies because public agencies may no longer have the ability to contract with design professionals for upfront legal defense costs against claims related to a project’s design work. Essentially, public agencies argue that a ‘reimbursement only’ process forces public entities to defend the scope of work of design professionals, while also bearing the financial burden.

SB 885 is currently in the originating house and is not set for hearing. As this bill is non-fiscal and faces significant opposition, it is likely that the Senate Judiciary Committee will not hear SB 885 until May 2016.

Article authored by Cruz Rocha, [email protected], March 2016
Supervising Attorney, Chad Tapp, [email protected].