Type 1 Indemnity Under Attack.
Peter Dessau & Nancy Herby

Over the past several years, small subcontractors and their related associations have been lobbying the California legislature to prohibit builders’ use of Type I indemnity clauses in construction contracts. The resulting bill, ab 758, is currently on track to become law effective January 1, 2006. Although the bill has already been approved by the State Assembly and is rapidly making its way through the Senate on the fast-track to becoming law, Miller Morton is working with the Legislature to ensure that the proposed legislation is not ambiguous or overbroad.

AB758 applies equally to contracts and change orders. One of the issues Miller Morton highlighted in its positioning statement was the ambiguity over whether the legislation would apply to change orders created after January 1, 2006 for work performed on contracts entered into prior to January 1, 2006. As a result, the legislative analysts provided clarification in the legislative record that the new law will not apply to change orders created after January 1, 2006 relating to construction contracts entered into prior to that date.

Miller Morton is working with the legislature to ensure that the proposed legislation is not ambiguous or overbroad.Currently, Miller Morton is working with the Governor’s office to ensure that the term “residential construction” in the bill is narrowly-defined. As the bill currently reads,it is unclear whether the legislation would apply equally to high-rise mixed use condominiums and single-story detached homes.

Given the bill’s stated goal of protecting the “long-time contractor” from subcontractors who are “here today and gone tomorrow,” Miller Morton is working hard with representatives from the Governor’s Office of Policy and Research to ensure that the rights of the commercial contractors we represent are protected and the passage of ab758 does not result in unnecessary litigation arising from ambiguous terms.

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