Governor Brown signed SB 496 into law last Friday, establishing reasonable limits on the obligation of design professionals to defend their clients.
The new law, which goes into effect for contracts signed on or after January 1, 2018, states that “in no event shall the cost to defend charged to the design professional exceed the design professional’s proportionate percentage of fault.”
This new limit on the defense obligation will apply to most contracts for both public and private clients. It will not, however, apply to the following:
- Contracts for design professional services where a project-specific general liability policy covers all design professionals for their legal liability
- A design professional who is a party to a written design-build venture agreement
- Contracts with any agency of the state
SB 496 was authored by State Senator Anthony Cannella, PE (R – Ceres), written and sponsored by the American Council of Engineering Companies, California, and supported by the AIACC, the Structural Engineers Association of California, the California Council of the American Society of Landscape Architects, the California Geotechnical Engineering Association, and the State Building & Construction Trades Council of California.
What does SB 496 mean in the real world for architects? Some of that is unknown at this point. For example, we are uncertain if it will stop the duty to provide upfront defense costs. AIACC staff talked with attorneys who have said it both ways: It will stop the duty to provide upfront defense costs and it will not stop. On this point, time will tell.
Importantly, SB 496 does limit the amount of defense costs a design professional may have to pay. It accomplishes this important change by limiting the share of the defense costs to the design professionals share of fault. The importance of this cannot be overstated. Under current law, a design professional can have the legal obligation to provide significant defense costs regardless of fault – the design professional, even if he or she did nothing wrong, could still have significant, and uninsurable, defense costs. With SB 496, a design professional’s share of defense costs is limited to his or her share of fault, and will have no defense cost obligation if the design professional is not at fault.
Additionally, SB 496 should put the design professional in a stronger position to negotiate the defense obligation to his or her client when the call to provide defense is made.
The AIACC will prepare a more detailed issue brief on SB 496 and what it means to architects for publication later this year.
Please feel free to call or email Mark Christian, Hon. AIACC at 916-642-1708 or firstname.lastname@example.org if you have any questions or comments.