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General Contractors/Developers Have New Rights Under California Ruling

Developers and General Contractors have new rights under California Supreme Court Ruling

Contracts signed prior to June 1, 2006 are greatly affected 

Trade Contractors and Suppliers are liable for contractually required defense costs even if they are ultimately found not to be negligent.


A July 21, 2008 decision by the California Supreme Court said that where trade contractors and suppliers are contractually liable for Developer and General Contractor's defense costs, that liability will be triggered immediately on tender of defense, even if the work of the trade contractor or supplier is ultimately determined not to be negligent.

The ruling in Crawford v. Weather Shield www.courtinfo.ca.gov/opinions/documents/S141541.DOC , greatly affects all trade contractors and suppliers in California who signed contracts prior to June 1, 2006, and confirms their defense liability in a non-insurance context.

In the case, the Plaintiff homeowners original complaint alleged construction defects were in part the fault of the window manufacturer/supplier's negligence (Weather Shield). A jury ultimately found that Weather Shield was not negligent. The subcontract gave the builder (JMP) no right to indemnity unless the subcontractor was negligent. 

The question presented to the California Supreme Court was, considering the facts: was the subcontractor obligated to defend the builder under the defense obligation in the subcontract? The Supreme Court's answer was yes! Weather Shield, because of the wording of their contract, was obligated to defend construction defect claims against JMP (Builder/Developer), even though they were not at fault.

The holding greatly impacts contracts signed prior to January 1, 2006. The statutory laws for indemnity changed for contracts entered after January 1, 2006 and limit a subcontractor's liability both for defense and indemnity. 

The court also specifically looked at the language in the contract between the J.M. Peters Com and Weather Shield when determining whether the duty to defend attached to work that was alleged to be related to the work of the subcontractor. The specific language in the Weather Shield contract was "to defend any suit or action" against a developer "founded upon" any claim "growing out of the execution of the work." The language of the contract was a key consideration for the Court.

The holding of this case is:

"We therefore conclude that the duty to defend JMP against claims founded upon damage or loss caused by Weather Shield's negligent performance of its work, as set forth in Weather Shield's subcontract, imposed such duties on Weather Shield as soon as a suit was filed against JMP that asserted such claims, and regardless of weather it was ultimately determined that Weather Shield was actually negligent."

This decision gives Developers and General Contractors the right to seek immediate contractual defense from subcontractors even if the subcontractor is later proven to have no fault. The defense obligation is independent of the indemnity obligation and will attach after a written tender of defense. 

In other words, Developers and General Contractors need to IMMEDIATELY know and understand their rights under this new ruling. If you have questions about how this case can help you to shift defense liability, or are looking for legal counsel, please contact Lena Louis at (949) 252-9990 or llouis@manlystewart.com
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