Navigating The Treacherous Waters Of California's Expanded Anti-Indemnity Laws For Construction Projects

California's long-standing anti-indemnity laws prohibit a public agency from forcing a contractor to indemnify the agency for its "active negligence." That prohibition has now been expanded in new and amended anti-indemnity statutes, which protect subcontractors and suppliers of goods and services (not just contractors) and prevent certain private owners (not just public agencies) from enforcing an indemnity for their own "active negligence" (the meaning of which is discussed below). The new laws apply to provisions contained in or affecting any construction contract entered into on or after January 1, 2013. The new laws also contain additional protections for subcontractors. Now, in many situations, a subcontractor entering into a construction contract after January 1, 2013 cannot be forced to indemnify or insure another party for that other party's "active negligence or willful misconduct," for defects in the project's design provided to the subcontractor, or for claims arising outside the scope of the subcontractor's work. California's new anti-indemnity laws and subcontractor protections are nuanced and depend on whether the project is public or private, whether the project is residential or nonresidential, and the role of the indemnifying and indemnified participants on the project. Unfortunately, these new laws are not always clear and consistent. Construction participants attempting to navigate their way through these new laws may find themselves in treacherous waters fraught with the risk of disputes and litigation. This Commentary analyzes the preexisting and new anti-indemnity laws and flags several uncertainties and risks in the hope that construction participants can better navigate these waters. California's Preexisting Indemnity Protections for Construction Projects In 1967, California enacted Civil Code section 2782 barring indemnity for a party's own "sole negligence" or "willful misconduct." Cal. Civ. Code §2782(a). (All further statutory citations are to the California Civil Code.) That is, any indemnification clause purporting to require a promisor, such as a general contractor ("GC"), construction manager ("CM"), or subcontractor, to indemnify any promisee, such as an owner, for liability for death, bodily injury, injury to property, or any other loss arising from the promisee's sole negligence or willful misconduct is against public policy and void and unenforceable. Id. The practical effect of section 2782 is that no one can be forced to indemnify another party for that other party's sole negligence or willful misconduct. There are, however, several situations where section 2782's anti-indemnity rule does not apply: certain agreements with adjacent land owners (see §2782.1), certain agreements with professional engineers providing inspection services to plants or facilities (see §2782.2), and certain agreements with geologists providing services in connection with hazardous materials (see §2782.6). Additionally, section 2782(a) does not prevent parties to a construction contract from negotiating and agreeing on certain liability limitations, namely the allocation, release, liquidation, exclusion, or limitation of any liability for design defects or for the promisee's liability to the promisor arising out of or relating to the construction contract (see §2782.5). In 1982, the Legislature amended section 2782 to specify that indemnity agreements that required contractors to indemnify a public agency for the public agency's own "active negligence" are void and unenforceable. §2782(b)(1). (As explained below, the recent amendments have expanded the reach of the protection against having to indemnify another party for its "active negligence.") In 2008, the Legislature added section 2782(d) to govern residential construction contracts entered into on or after January 1, 2009. As to those contracts, section 2782(d) provides that a clause that purports to require a subcontractor to insure or indemnify (including the cost to defend) a builder or general contractor is unenforceable (i) for claims of construction defects to the extent the claims arise out of, or relate to, the negligence of the builder or contractor (or their agents), (ii) for defects in design furnished to the subcontractor, and (iii) to the extent the claims do not arise out of, or relate to, the scope of work in the...