New Legislation Creates Additional Carve-out

By Candace Matson

Legislation effective January 1, 2006 (AB 758), amending California Civil Code §2782, creates a further exception to parties’ ability to negotiate indemnity terms in construction agreements. AB 758 has been touted as addressing the “insurance crisis” of residential subcontractors. Some opine that, viewed in conjunction with SB 800 (Civil Code, Title 7, “Requirements for Actions for Construction Defects”), it prohibits builders from pushing down their strict liability obligations onto subcontractors through indemnity agreements. Others maintain that it basically deals with an issue of fairness, i.e., whether liability is fairly imposed on subcontractors.

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Candace Matson is a partner in the Real Estate, Environmental and Construction Practice Group in Sheppard Mullin’s Los Angeles office.