SEAOC battles “duty to defend” clauses
Wednesday, February 10, 2016
By Don Schinske, SEAOC Executive Director
SEAOC volunteers over the next few weeks will be meeting locally with their State Senators to urge them to support SB 885 (Wolk), a new bill to prohibit “duty to defend” clauses in design professional contracts. To aid in our advocacy, we are seeking examples from SEAOC members where such clauses have adversely affected a contract arrangment or entangled the member in a legal matter.
The SEAOC Board of Directors on Jan. 22 voted to support SB 885, which is sponsored by the American Council of Engineering Companies of California (ACEC-CA). By prohibiting “duty to defend’ clauses, SB 885 would help ensure that the liability of engineers and architects is proportional to their actual degree of fault – an important and overdue safeguard for engineering practice and the profession.
The coalition of supporters, which so far includes ACEC-CA, SEAOC, AIA-CC and CalGeo, is compiling stories from members about their own practice experiences with this issue. If you have such a story to tell, please contact Don Schinske at firstname.lastname@example.org. The stories will be conveyed to legislators in a manner that ensures client names or other identifying information is kept confidential.
In the meantime, SEAOC volunters will be joining volunteers from our coalition partners to meet in the districts with the seven members of the Senate Judiciary Committee, where the bill will have it’s first hearing likely sometime in March. Once the bill moves forward, SEAOC will also be asking members to call and write their legislators, and will supply samples letters and talking points. Aiding in this effort is SEAONC’s Professional Practices Committee, which has been engaged with this issue for several years.
The SEAOC office and Legislative Committee will also be scheduling opportunities for SEAOC to lobby in the Capitol and testify in legislative committees, which will be a good chance for members to learn more about the advocacy process.
Under current law an indemnification provision in a contract can make the structural engineer liable for the legal defense costs of the project owner even if the structural engineer is found to have no legal fault. Worse, such defense costs are not covered by professional liability insurance. This problem has been made clear by court cases such as UDC-Universal Development, L.P. v. CH2M Hill (2010) 181 Cal.App.4th 10, 24, where CH2M Hill was found to be liable for about $500,000 of the client’s defense costs even though they were found not to be liable for the problem. Such costs would be a problem for any firm, and they could cause a small to medium size firm to go out of business.
Here’s a link to SB 885 (Wolk) along with the initial fact sheet.