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CONTRACTUAL OBLIGATION TO DEFEND IS DISTINCT FROM OBLIGATION TO INDEMNIFY
On January 31, 2006 the California Court of Appeals issued a decision in the case of Crawford v. Weather Shield Mfg. Inc., that may have far-reaching effects, particularly with respect to construction disputes. The Court concluded that the express indemnity provision in the subcontract required the subcontractor to defend the developer for claims growing out of the subcontractor's work.
Of particular importance was that the defense obligation was triggered when the plaintiff asserted its claim against the developer, and more importantly, the defense obligation survived a finding that the subcontractor was not negligent in the performance of its work, which was a prerequisite to the contractual obligation to indemnify the developer for damages. The Crawford decision is consistent with the Centex and Continental Heller decision in that parties to a contract are free to allocate the risks. In the absence of express language to the contrary, an indemnitor will be responsible for mounting a defense regardless of fault.
The effect of this decision is to require subcontractors and their insurers to defend the developer immediately upon tender, and is not contingent upon a finding the subcontractor has an obligation to indemnify the developer for damages arising out of a settlement or judgment. This lengthy and complex opinion will be covered in the upcoming Tharpe & Howell publication entitled "Transferring Risk of Defense after Crawford v. Weather Shield - What The Court Said and Strategies For Responding."
This article has been brought to you by Robert Freedman, a Partner of Tharpe & Howell at the Firm's Sherman Oaks Office. Mr. Freedman is Co-Chair of the Firm's Commercial and Construction Practice Groups.
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LOS ANGELES ORANGE COUNTY VENTURA/OXNARD CENTRAL COAST
BAY AREA SACRAMENTO LAS VEGAS RENO PHOENIX
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