Deciphering Indemnity within Public Agency Contracts

Architects and other design professionals should always be aware of the implications of indemnity provisions in their contracts. Typically, indemnity provisions require one party to promise to save another party from a legal consequence of the conduct of one of the parties, or of some other person. For those who contract with public entities, indemnity is governed by Civil Code § 2782.8.

Civil Code § 2782.8 (aka AB 573) states in part:

(a) For all contracts, and amendments thereto, entered into on or after January 1, 2007, with a public agency for design professional services, all … agreements contained in … such contract … that purport to indemnify, including the cost to defend, the public agency by a design professional against liability for claims against the public agency, are unenforceable, except for claims that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the design professional. This section shall not be waived or modified by contractual agreement, act, or omission of the parties. . . .

(c) This section shall only apply to a professional service contract, or any amendment thereto, entered into on or after January 1, 2007.

What does this statute mean? The intent of this law is to prohibit indemnity agreements between design professionals and public agencies such as school boards, cities, municipalities, or other governmental entities. However, there is an important exception: indemnity provisions are allowed when they limit the indemnity to claims caused by the design professional, for example, for a design professional’s negligence.

Does this statute help me? This provision benefits the design professional by protecting her from having to indemnify a public agency for problems for which she was not the cause. This limitation also allows for the possibility that the responsibilities incurred by the indemnification may be covered by a professional liability policy.

Section 2782.8 also provides other benefits to the design professional. It prevents contracts requiring the design professional to indemnify the public agency for breaches of contract. This type of indemnity agreement is prohibited because the indemnity may not necessarily be tied to the design professional’s negligence.

Furthermore, this provision may limit a design professional’s “cost of defense.” Because the indemnity should only be limited to the design professional’s negligence, the design professional may only have to pay for the defense to the extent it is directly related to her negligence.

What does this mean for my practice? Be aware when reviewing contracts with public agencies that the design professional has certain rights when it comes to indemnity clauses. It is the best practice to have all of your contracts reviewed by legal counsel. The bottom line, what you don’t understand in your contract can hurt you!

By: Nicole A. Davis-Tinkham, Esq., and Christie B. Swiss, Esq. Ms. Davis-Tinkham and Ms. Swiss are associates at Collins Collins Muir + Stewart LLP where they dedicate their practice to the full-service representation of architects, engineers and other professionals. They are also members of the AWA. Ms. Davis-Tinkham can be reached at ndavis@ccmslaw.com, and Ms. Swiss can be reached at cswiss@ccmslaw.com.

Nothing contained within this article is intended as legal advice. Always consult with an attorney before acting on anything contained in this or any other article on legal matters as facts and circumstances will vary from case to case.