Crawford v. Weather Shield Mfg., Inc.Crawford v. Weather Shield Mfg., Inc.
Opinion
Stаndard comprehensive liability insurance policies provide that the insurer must both indemnify and defend the insured against claims within the scope of the policy coverage. The insurer’s duty to defend is broader than its duty to indemnify. The latter duty runs only to claims that are actually covered by the policy, while the duty to defend extends to claims that are merely potentially covered. (E.g., Buss v. Superior Court (1997)
Here, however, we address issues concerning the contractual duty to defend in a noninsurance context. We consider whether, by their particular terms, the provisions of a pre-2006 residential construction subcontract obliged the subcontractor to defend its indemnitee—the developer-builder of the project—in lawsuits brought against both parties, insofar as plaintiffs’ complaints alleged construction defects arising from the subcontractor’s negligence, even though (1) a jury ultimately found that the subcontractor was not negligent, and (2) the parties have accepted an interpretation of the subcontract that gave the builder no right of indemnity unless the subcontractor was negligent. We conclude that the answer is yes. We will therefore affirm the judgment of the Court of Appeal.
FACTS AND PROCEDURAL BACKGROUND
The basic facts are not in dispute. J.M. Peters Co. (JMP) was the developer, builder, and general contractor of a large Huntington Beach residential project. Weather Shield Mfg., Inc. (Weather Shield), contracted with JMP to manufacture and supply wood-framed windows for the project. In the contract, Weather Shield promised (1) “to indemnify and save [JMP] harmless against all claims for damages . . . loss,. . . and/or theft. .. growing
In September and October 1999, 220 owners of 122 finished homes in the project sued JMP, Weather Shield, and other participants in the project’s construction. The defendants included Darrow the Framing Corporation (Darrow), the project’s principal subcontractor, whose responsibilities included framing the structures and installing the windows. The complaints alleged numerous construction defects, including electrical, plumbing, roofing, chimney, framing, and other structural problems. As relevant here, they also asserted that, because of improper design, manufacture, and installation, windows in the homes, including those supplied by Weather Shield, leaked and fogged, causing extensive damage. Theories of negligence, strict liability, breach of warranty, and breach of contract were set forth.
In April 2000, JMP cross-complained against Weather Shield, Darrow, and all the other project subcontractors sued by the homeowners. The cross-complaints asserted, among other things, that under the pertinent subcontract provisions—all of which had been drafted by JMP and were identical on the point—the subcontractors owed JMP duties of indemnity and defense against the homeowners’ complaints. The cross-complaints sought declaratory relief with respect to JMP’s alleged indemnity and defense rights.
JMP, and all the subcontractors except Weather Shield and Darrow, settled before trial. The “sliding scale” settlement agreement provided the homeowners a minimum payment of $2.55 million, and guaranteed an additional sum of $1.45 million against any recovery from the nonsettling subcontractors. The settling defendants also agreed to assist the homeowners in prosecuting their claims against the nonsettling parties. JMP and the settling subcontractors mutually released all claims, demands, and liabilities among themselves. All complaints and сross-complaints were dismissed except as to Weather Shield and Darrow.
The window leak and framing issues went to trial against Weather Shield and Darrow on the remaining theories of negligence and breach of warranty. In October 2002, the jury returned general verdicts against Darrow and in favor of Weather Shield. The jury awarded the homeowners approximately $1 million in damages against Darrow. Following the jury verdict, Darrow settled all the complaints against it.
Thereafter, in March 2003, IMF’s cross-complaint against Weather Shield was separately tried to the court. IMP sought both (1) exрress indemnity for amounts paid to the homeowners in settlement, and (2) under the duty-to-defend provisions of Weather Shield’s subcontract, attorney fees and expenses incurred by IMP in defending itself against the homeowners’ suit.
The trial court ruled that the subcontract’s terms obliged Weather Shield to indemnify IMP for amounts paid to the homeowners only if Weather Shield was found negligent. Thus, the court determined, the jury’s verdict that Weather Shield was not negligent absolved Weather Shield of indemnity liability in this case. On the other hand, the court concluded, the subcontract did give Weather Shield responsibility for IMF’s legal defense against the homeowners’ claims, insofar as those claims concerned the windows supplied by Weather Shield, regardless of whether Weather Shield was ultimately found negligent.
IMP presented evidence that it had incurred $375,069 in attorney fees to defend the homeowners’ claims, and that 70 percent of the homeowner settlement amount was attributable to the window problems. IMP therefore urged that, under their subcontracts, Weather Shield and Darrow were together liable for 70 percent of IMF’s defense fees, or $262,548. The court apportioned this amount equally between Darrow and Weather Shield, and thеrefore awarded IMP $131,274 in damages against Weather Shield. The court also found Weather Shield contractually liable to IMP, as the prevailing party on IMF’s cross-complaint, for $46,734 in attorney fees incurred by IMP to prosecute the cross-action.
Following entry of judgment in this case in March 2003, the homeowners moved for a judgment notwithstanding the verdict (judgment NOV) (
Weather Shield appealed (1) the new trial order, and (2) the declaratory relief judgment insofar as it required Weather Shield to reimburse IMF’s expense of defending the homeowners’ action and prosecuting IMF’s cross-complaint. Two of the groups of homeowner plaintiffs filed protective cross-appeals from the judgment against them, and in Weather Shield’s favor, on the construction-defect claims. IMP did not appeal the order absolving Weather Shield from contractual indemnity liability for amounts paid by IMP to the homeowners.
In a divided decision, the Court of Appeal affirmed the orders and judgments challenged by Weather Shield, and dismissed the cross-appeals as moot. On the issue of Weather Shield’s liability for IMF’s defense, regardless of its own negligence, the majority reasoned, in essence, that Weather Shield’s promise “to defend” IMP against suits founded upon claims arising out of the execution of Weather Shield’s work necessarily contemplated an immediate duty to provide a service, which duty arose at the time such a suit was brought and a defense was therefore needed. Thus, the majority concluded, the duty could not depend upon the outcome of issues to be litigated in the very action Weather Shield was obliged to defend.
The concurring and dissenting opinion argued that the contract language did not compel the majority’s interpretation of the duty to defend. Moreover, the concurring and dissenting opinion urged, policy concerns weigh against allowing a builder or developer with superior bargaining powеr to impose contractual defense obligations on a nonnegligent subcontractor.
DISCUSSION
Parties to a contract, including a construction contract, may define therein their duties toward one another in the event of a third party claim against one or both arising out of their relationship. Terms of this kind may require one party to indemnify the other, under specified circumstances, for moneys paid or expenses incurred by the latter as a result of such claims. (See
As befits the contractual nature of such arrangements, but subject to public policy and established rales of contract interpretation, the parties have great freedom to allocate such responsibilities as they see fit. (E. L. White, Inc. v. City of Huntington Beach (1978)
In general, such an agreement is construed under the same rules as govern the interpretation of other contracts. Effect is to be given to the parties’ mutual intent (§ 1636), as ascertained from the contract’s language if it is clear and explicit (§ 1638). Unless the parties have indicated a special meaning, the contract’s words are to be understood in their ordinary and popular sense. (§ 1644; Continental Heller, supra,
Though indemnity agreements resemble liability insurance policies, rules for interpreting the two classes of contracts do differ significantly. Ambiguities in a policy of insurance are construеd against the insurer, who generally drafted the policy, and who has received premiums to provide the agreed protection. (See, e.g., Buss, supra,
This public policy concern influences to some degree the manner in which noninsurance indemnity agreements are construed. For example, it has been said that if one seeks, in a noninsurance agreement, to be indemnified for his or her own active negligence, or regardless of the indemnitor’s fault— protections beyond those afforded by the doctrines of implied or equitable indemnity—language on the point must be particularly clear and explicit, and will be construed strictly against the indemnitee. (E.g., E. L. White, Inc., supra,
For similar public policy reasons, statutory law imposes some absolute limits on the enforceability of noninsurance indemnity agreements in the construction industry. At the time Weather Shield contracted with JMP, a party to a construction contract could not validly agree to indemnify the promisee for the latter’s sole negligencе or willful misconduct. (§ 2782, subd. (a); see also § 1668.)
In this regard, the statute first provides that a promise of indemnity against claims, demands, or liability “embraces the costs of defense against such claims, demands, or liability” insofar as such costs are incurred reasonably and in good faith. (§ 2778, subd. 3, italics added.) Second, the section specifies that the indemnitor “is bound, on request of the [indemnitee], to defend actions or proceedings brought against the [indemnitee] in respect to the matters embraced by the indemnity,” though the indemnitee may choose to conduct the defense. (Id., subd. 4, italics added.) Third, the statute declares that if the indemnitor declines the indemnitee’s tender of defense, “a recovery against the [indemnitee] suffered by him in good faith, is conclusive in his favor against the [indemnitor].” (Id., subd. 5.) On the other hand, section 2778 provides, if the indemnitоr got no reasonable notice of the action or was not allowed to control the indemnitee’s defense, recovery by the third party against the indemnitee is only presumptive evidence against the indemnitor. (Id., subd. 6.)
With these principles in mind, we examine the pertinent terms of Weather Shield’s subcontract with IMP. We agree with the Court of Appeal majority that, even if strictly construed in Weather Shield’s favor, these provisions expressly, and unambiguously, obligated Weather Shield to defend, from the outset, any suit against JMP insofar as that suit was “founded upon” claims alleging damage or loss arising from Weather Shield’s negligent role in the Huntington Beach residential project. Weather Shield thus had a contractual obligation to defend such a suit even if it was later determined, as a result of this very litigation, that Weather Shield was not negligent.
We focus on the particular language of the subcontract. Its relevant terms imposed two distinct obligations on Weather Shield. First, Weather Shield agreed “to indemnify and save [JMP] harmless against all claims for damages to persons or to property and claims for loss, damage and/or theft . . . growing out of the execution of [Weather Shield’s] work.” Second, Weather Shield madе a separate and specific promise “at [its] own expense to defend any suit or action brought against [JMP] founded upon the claim of such damage . . . loss, ... or theft.” (Italics added.)
A contractual promise to “defend” another against specified claims clearly connotes an obligation of active responsibility, from the outset, for the
A duty to defend another, stated in that way, is thus different from a duty expressed simply as an obligation to pay another, after the fact, for defense costs the other has incurred in defending itself. Section 2778, the statute governing the construction of all indemnity agreements, makes the distinction clear. On the one hand, as noted above, the section specifies that a basic contractual indemnity against particular claims, demands, or liabilities “embraces the costs of defense” against such claims, demands, or liabilities. (Id., subd. 3.) On the other hand, the statute separately specifies the indemnitor’s duty actually “to defend,” upon the indemnitee’s request, proceedings against the latter “in respect to the matters embraced by the indemnity,” though “the person indemnified has the right to conduct such defenses ... if he chooses to do so.” (Id., subd. 4.) Finally, section 2778 sets forth how the indemnitor’s obligations will be affected if the indemnitor fails to accept an indemnitee’s tender of defense or, alternatively, if the indemnitor is denied an opportunity to assume and control the defense. (Id., subds. 5, 6.)
Thus, in Safeway Stores, Inc. v. Massachusetts Bonding & Ins. Co. (1962)
The Court of Appeal agreed with Safeway. The court noted that “under the contract of indemnity, no contrary intention appearing, King was bound to defend the actions. (
Similarly, in Buchalter v. Levin (1967)
In Gribaldo, Jacobs, Jones & Associates v. Agrippina Versicherunges A. G. (1970)
After the insureds settled a third party claim, they sought declaratory relief against the underwriters on the issue of liability for defense costs. The insureds contended that under subdivision 4 of
The trial court disagreed. It reasoned that, under the particular terms of the policy, the underwriters were not obliged to defend the insureds. Hence, the court concluded, any liability of the underwriters for the insureds’ defense costs arose solely under subdivision 3 of
Accordingly, the majority reasoned, the underwriters had breached no duty under subdivision 4 of
Recently, City of Watsonville v. Corrigan (2007)
Thus, as these decisions indicate, subdivision 4 of
Implicit in this understanding of the duty to defend an indemnitee against all claims “embraced by the indemnity,” as specified in subdivision 4 of
Here, the subcontract at issue not only failed to limit or exclude Weather Shiеld’s duty “to defend” IMP, as otherwise provided by subdivision 4 of
Moreover, the subcontract at issue included a further express indication that the express duty “to defend” actions against IMP was not strictly limited to those claims on which, in the end, Weather Shield actually owed indemnity. The indemnity and defense clauses of the subcontract contained linguistic differences that conform to the logical distinctions between the two duties. On the one hand, the subcontract obligated Weather Shield to “indemnify . . . [IMP] . . . against” all claims for injury, damage, loss, or theft arising from performance of the subcontract, while, on the other, it required Weather
One can only indemnify against “claims for damages” that have been resolved against the indemnitee, i.e., those as to which the indemnitee has actually sustained liability or paid damages. Indemnification, after all, is the act of saving another from the legal consequence of an act. (
By contrast, as noted above, the subcontract required Weather Shield “to defend” IMP against “any suit or action . . . founded upon the claim of such damage . . . .” (Italics added.) Under this language, the duty to defend arose, as it logically must, as soon as a “suit or action” was brought against IMP that was “founded upon” a covered claim, i.e., that asserted a claim within the coverage of both clauses. Necessarily, a duty expressed in this manner did not require a final determination of the issues, including the issue of Weather Shield’s negligence, before Weather Shield was required to mount and finance a defense on JMP’s behalf.
The Court of Appeal majority so concluded. Dissenting on this point, Justice O’Leary conceded at the outset that “the word ‘defend,’ as defined in the abstract, would ordinarily mean providing legаl services for a pending claim.” Nonetheless, she stressed, noninsurance indemnity contracts, unlike liability insurance policies, are construed to limit the obligations imposed, and the duties undertaken must be stated with particular clarity and specificity. Examined in that light, she asserted, Weather Shield’s subcontract did not make absolutely clear that Weather Shield’s duty to defend, unlike its duty to indemnify, arose regardless of its negligence.
To conclude that, absent greater specificity, the indemnity and defense obligations stated in the subcontract both required a finding of Weather Shield’s negligence, Justice O’Leary reasoned as follows: The indemnity and defense obligations in Weather Shield’s subcontract were “described in a single sentence” with two clauses. The first clause, stating the indemnity obligation, covered “ ‘claims for damages . . . growing out of the execution of [Weather Shield’s] work . . . .’ Everyone (the litigants, trial court, and majority) seems to agree [that] matters embraced by this indemnity clause [were] narrowly limited to damages caused by [Weather Shield’s] own
But Justice O’Leary’s analysis overlooks the clear differences in the two clauses that we have described above. In particular, Weather Shield’s express contractual duty to defend suits “founded upon” the kinds of claims specified in the agreement necessarily extended to suits that alleged such claims, not just suits in which they were proven. Assuming, as we must, that Weather Shield’s subcontract obligated it to indemnify JMP against claims arising from Weather Shield’s negligent performance of the subcontract, it follows that Weather Shield’s contractual duty to defend JMP encompassed suits or actions that alleged such negligence on Weather Shield’s part. Weather Shield could not avoid this duty on the ground that the very litigation to be defended might later result in a finding Weather Shield was, in fact, not negligent.
Parties to an indemnity contract can easily disclaim any responsibility of the indemnitor for the indemnitee’s defense, or the costs thereof. Short of that, they can specify that the indemnitor’s sole defense obligation will be to reimburse the indemnitee for costs incurred by the latter in defending a particular claim. However, the instant subcontract did neither. On the contrary, it specified that Weather Shield would be required, “at [its] own expense,” to “defend” JMP against suits “founded upon” claims arising from Weather Shield’s performance of its subcontract. This language indicated a more immediate obligation, one that would necessarily arise before the litigation to be defended could determine whether Weather Shield owed indemnity to JMP.
In arguing otherwise, Weather Shield relies heavily on Heppler, supra,
However, the plaintiffs in Heppler did not contend that, even if the indemnity clause in Mueller’s subcontract was triggered only by Mueller’s actual negligence, the duty-to-defend clause applied more broadly. Accordingly, the Heppler court never separately addressed the defense clause of the subcontract, or considered how the particular language of that clause might distinguish it from the indemnity clause. In affirming the general verdict for Mueller, the court simply assumed that the indemnity and defense provisions of the subcontract were congruent.
Here, by contrast, we directly confront the relationship, and the distinctions, between the two clauses. Upon examination, as explained above, their language differs in a way suggesting that, even if the indemnity obligation is triggered only by an ultimate finding of the indemnitor’s fault, the defense obligation applies before, and thus regardless of, any finding to be made in the course of the litigation for which a defense is owed. Hence, whatever Heppler’s merits on the issues actually considered in that case, we do not find the decision helpful or persuasive on the narrow question before us.
Similarly, Goldman, supra,
Nor, under close examination, is Mel Clayton Ford, supra,
In Mel Clayton Ford, an agreement between a vehicle manufacturer and its retail dealer specified that the manufacturer would defend and indemnify the dealer against any third party suits, complaints, or claims “ ‘concerning . . . injury or . . . damage arising out of an occurrence caused solely by’ ” a manufacturing or design defect in a vehicle supplied to the dealer by the manufacturer. (Mel Clayton Ford, supra,
: In 1989, the plaintiff purchased from the dealer a truсk supplied by the manufacturer. Thereafter, the dealer performed maintenance on the vehicle. In 1997, while the plaintiff was driving the truck, it burst into flames, seriously injuring him. He sued both the manufacturer and the dealer, alleging not only a defectively designed and manufactured product, but also claims based on failure to warn, breach of warranty, and “ ‘theories of [the dealer’s] direct or active negligence in the maintenance of the vehicle.’ ” (Mel Clayton Ford, supra,
The Court of Appeal held that the manufacturer had no duty to undertake the dealer’s defense under such circumstances. This was because “[t]he indemnity provision required [the manufacturer] to defend the Dealer only where the occurrence was caused solely by a production defect, and not
Thus, in Mel Clayton Ford, it was not an allegations-versus-proof distinction that negated the duty to defend. Rather, given the word “solely” in the indemnity/defense clause there at issue, the crucial fact was that the suit for which a defense was sought included allegations other than those to which the manufacturer had limited its defense duty—design or production defects attributable to the manufacturer itself.
Here, Weather Shield’s contractual duty was not similarly limited. Weather Shield promised to defend IMP against any suit “founded uрon” a “claim of . . . damage” “growing out of the execution of [Weather Shield’s] work.” The contract did not specify, or even hint, that no defense duty would exist unless the suit was solely concerned with Weather Shield’s performance under its own subcontract and included no other claims or allegations. Nor does Weather Shield so claim. Hence, nothing decided in Mel Clayton Ford establishes that until Weather Shield’s faulty performance of its work was proven, it had no duty to defend IMP.
Finally, we are not persuaded by Regan Roofing, supra,
In Regan Roofing, after a housing developer, Pacific Scene, was sued for construction defects, it cross-complained against numerous project subcontractors to establish its contractual indemnity and defense rights. Each of these agreements required the subcontractor to indemnify Pacific Scene against all mechanic’s liens related to the subcontractor’s work, as well as “ ‘any other liability, cost or expense of any nature or kind arising out of or in any way connected with Subcontractor’s performance . . . , save and except only such liability, cost or expense caused by [Pacific Scene’s] sole negligence or sole willful misconduct.’ ” (Regan Roofing, supra,
Pacific Scene sought pretrial summary adjudication of a number of issues, including rulings on the subcontractors’ duties to indemnify and defend. The trial court determined that the indemnity provision of the subcontracts included coverage for Pacific Scene’s own negligence. However, the court found that the question whether the subcontractors actually owed indemnity was premature, because, among other things, Pacific Scene had not yet incurred liability or paid claims subject to indemnity. On the other hand, the court concluded, under the language of thе agreements and
The Court of Appeal reversed on the latter point. The appellate court indicated that “summary adjudication of the duty to defend and its relationship to the duty to indemnify (i.e., the scope of ‘the matters embraced by the indemnity’) is premature. No determination has yet been made as to whether the subcontractors were negligent in the performance of their work, giving rise to a duty to indemnify and a related duty to defend. Pacific Scene has not clearly established that under this indemnity clause, the duty to defend against claims of liability is entirely free-standing of the duty to indemnify for liability arising out of a subcontractor’s negligence. [Citation.]” (Regan Roofing, supra,
In reaching this conclusion, however, the Court of Appeal erred. The court seems to have assumed that, under subdivision 4 of
However, as we have explained, the duty to defend upon the indemnitee’s request, as set forth in subdivision 4 of
Regan Roofing was therefore mistaken insofar as it concluded that, under the agreements there at issue, the subcontractors’ defense duties arose only if the subcontractors became liable for indemnity. We will disapprove the Regan Roofing decision to that extent.
Weather Shield and its amici curiae raise numerous, and substantial, policy concerns about an indemnity agreement that requires a subcontractor to defend a residential developer or builder in a construction defect suit before, and regardless of whether, the subcontractor itself is found to be at fault. Arguments asserted include the following: Large builders and developers use their superior bargaining power, and self-drafted contract terms, unfairly to shift the financial consequences of their own legal liability to faultless subcontractors, who are not compensated for the risk and agree only because
As Weather Shield and its amici curiae point out, statutes effective January 1, 2006, and January 1, 2008, respectively, were adopted to address just such concerns. These new laws, which apply to residential construction contracts entered after their effective dates, void any term in such a contract that obliges a subcontractor to indemnify certain other project participants, “including the cost to defend,” against construction defect claims “to the extent” the claims “arise out of, pertain to, or relate to” the negligence of those other entities. (§ 2782, subds. (c), (d), as added by Stats. 2005, ch. 394, § 1; see § 2782, subd. (e), as added by Stats. 2007, ch. 32, § l.)
In effect, Weather Shield and its amici curiae ask us to conclude as a matter of law that, in a pre-2006 residential construction contract, a term which expressly obliges a subcontractor “to defend” a builder, developer, or general contractor against claims “founded upon” the subcontractor’s negligent work, but says nothing further about the scope of the duty, means only that the subcontractor must reimburse the promisee, after the fact, for the promisee’s legal expenses as part of any indemnity ultimately owed by the subcontractor to the promisee. They suggest that to produce a contrary result, the subcontract should say, in so many words, that the duty to defend arises immediately when a claim is asserted against the promisee, is not limited to later reimbursement of the promisee’s legal expenses, and applies regardless, and independent, of any duty of indemnity for which the subcontractor may later become liable.
We are sensitive to the policy issues raised by Wеather Shield and its amici curiae. Nonetheless, for reasons stated at length above, we decline the holding they propose. Even applying the rule of strict construction they espouse, the instant contract already sets forth, in unambiguous terms, an immediate and independent duty to defend. As we have indicated, an express promise “to defend” another against claims “founded upon” the promisor’s acts or omissions inherently incorporates the characteristics they insist must be set forth in additional explicit terms. And if the parties intended only to give the indemnitee a right to after-the-fact reimbursement of its legal expenses as a component of any indemnity otherwise owed by the indemnitor, they would need no language to say so. That right is already included in every indemnity contract, unless otherwise specifically provided, under subdivision 3 of
We therefore conclude that the duty “to defend” IMP 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 IMP that asserted such claims, and regardless of whether it was ultimately determined that Weather Shield was actually negligent. Accordingly, we affirm the judgment of the Court of Appeal.
The judgment of the Court of Appeal is affirmed. The decision in Regan Roofing Co. v. Superior Court, supra,
George, C. J., Kennard, J., Werdegar, J., Chin, J., Moreno, J., and Corrigan, J., concurred.
Notes
The cases were consolidated for pretrial and trial purposes.
JMP’s cross-complaints alleged that the cross-defendant subcontrаctors had a “present” duty to provide, and JMP had a “present” right to receive, a contractual defense. Each cross-complaint also recited that “[b]y way of this Cross-Complaint, [JMP] hereby tenders the defense of this action to the Cross-Defendants, and each of them, pursuant to the applicable subcontracts. [JMP] is informed and believed and based thereon alleges that the Cross-Defendants, and each of them have and/or will reject, ignore, or fail to properly accept the tender of defense.” The record is silent as to whether JMP had previously tendered defense of the homeowners’ actions to the cross-defendant subcontractors, or any of them. Weather Shield does not urge on appeal that it was absolved of any duty to defend by reason of JMP’s failure to timely tender the defense of the homeowners’ actions.
We were informed by the parties that, following the trial court judgment, IMP assigned all its rights thereunder to the homeowners. The homeowners then defended JMP’s defense-cost award in the Court of Appeal. In this court as well, the homeowners have briefed the defense-cost issue as assignees of JMP’s rights under the defense-cost аward.
Subsequent to our grant of review, an issue arose whether, despite our limitation of issues, the pendency of review precluded further proceedings in the trial court under the new trial order, the propriety of which order we did not intend to address. Concluding that there was no reason to delay the homeowners’ strict-liability trial while we considered the defense-cost issue, we therefore dismissed review with respect only to the order granting a new trial on that issue, as affirmed by the Court of Appeal. We directed the Court of Appeal to issue a partial remittitur in accordance with the partial dismissal order.
All further unlabeled statutory references are to the Civil Code.
Pursuant to subdivision 5 of
We do not suggest that the indemnitor’s duty to defend would continue even if, during the progress of the third party proceeding against the indemnitee, all claims potentially subject to the contractual indemnity obligation were eliminated, or if the promisor otherwise conclusively established that the claims were not among those “embraced by the indemnity" (
Unlike subdivision 4 of
This aspect of the ruling in Heppler, supra,
This assumption is confirmed by Baldwin Builders v. Coast Plastering Corp. (2005)
To the extent there is any ambiguity in Mel Clayton Ford’s holding on this point, it cannot be resolved by further examination of the Court of Appeal’s opinion in that case. Except for the summary passage quoted above, the Court of Appeal’s discussion of this interpretive issue appeared in the unpublished portion of its partially published opinion.
We realize that Regan Roofing’s finding of prematurity was also substantially influenced by the practical difficulties of sorting out multiple, and potentially conflicting, duties to assume the active defense of litigation then in progress. (See Regan Roofing, supra,
The instant parties apparently saw no impropriety in this procedure, and neither do we. At least with respect to pre-2006 residential construction subcontracts, and subject to any future contrary or inconsistent legislation, the following procedures seem appropriate: When a party sues one or more other persons, seeking to establish a contractual right to a defense against litigation not yet concluded, these issues may, if the parties agree, be deferred until the underlying litigation is complete. If any party moves for summary judgment or adjudication (
By noting this argument, we do not dismiss the possibility that in many instances, subcontractors may prefer to assume, and control, the defense of suits against builders, developers, or other contractors, especially when the claims raised may expose the subcontractors themselves to direct or indirect liability.
As noted above, section 2782, subdivision (a) has long provided that a party to a construction contract cannot agree to indemnify another project participant for the latter’s sole negligence or willful misconduct. Subdivision (c) of section 2782, as adopted in 2005 and slightly amended in 2007, additionally provides in pertinent part: “For all construction contracts, and amendments thereto, entered into after January 1, 2006, for residential construction . . . , all provisions, clauses, covenants, and agreements contained in, collateral to, or affecting any construction contract, and amendments thereto, that purport to indemnify, including the cost to defend, the builder ... by a subcontractor against liability for claims of construction defects are unenforceable to the extent the claims arise out of, pertain to, or relate to the negligence of the builder or the builder’s other agents, other servants, or other independent contractors who are directly responsible to the builder, or for defects in design furnished by those persons .... This section shall not be waived or modified by contractual agreement, act, or omission of the parties. Contractual provisions, clauses, covenants, or agreements not expressly prohibited herein are reserved to the agreement of the parties.”
Subdivision (d) of section 2782, also adopted in 2005 and effective January 1, 2006, provides in pertinent part: “Subdivision (c) does not prohibit a subcontractor and builder from
Subdivision (e) of section 2782, as added in 2007 and effective for residential construction contracts entered after January 1, 2008, uses parallel language to expand the categories of project participants as to whom a subcontractor cannot be made contractually responsible for construction defect indemnity, including defense costs, “to the extent” such claims “arise out of, pertain to, or relate to” the negligence of those entities or their agents, their servants, or the independent contractors directly responsible to them. Under subdivision (e), the categories of project participants who may not obtain such contractual indemnity from a subcontractor now include not only the builder, but also “the general contractor or contractor that is not affiliated with the builder.”
Amicus curiae Jeld-Wen, Inc., suggests “[t]here is good reason to believe” that
Questioned on this subject at oral argument, Weather Shield’s counsel did not deny that Weather Shield is a sizeable multistate purveyor of manufactured windows.