New California Legislation limits Duty to Defend for Design Professionals
California SB 496 is good news for design professionals!
XL Catlin's Design Professional team was instrumental in helping pass legislation to mitigate the open-ended contractual defense obligation in California. This legislation follows the watershed 2010 Court of Appeals case, UDC-Universal Development v. CH2M Hill, which held that an engineer who agrees to contractually defend its client from a third party lawsuit owes an immediate defense obligation--even if the engineer was ultimately found not to be negligent. Aside from representing a significant risk for design professionals, this open-ended defense obligation is uninsurable under professional liability policies. Because California cases are often cited in other jurisdictions, this bill will affect design firms across the country.
As a result of several years' effort spearheaded by ACEC California--on April 28, 2017, California Governor Jerry Brown signed into law Senate Bill (SB) 496, providing more equity for design professional contracts (both public and private) entered into on or after January 1, 2018.
While SB 496 offers some much needed relief by limiting the obligation to defend a third party to the design professional's proportionate percentage of fault, it does not necessarily prohibit the uninsured defense obligation. Whether or not you work in California, read about what you can do going forward, to reduce your risk.