Indemnification in Construction Contracts
Civil Code section 2782 Eliminates the Use of Type I Indemnity Provisions in California Construction Contracts
Traditionally in California, when interpreting indemnity provisions, most courts categorize these provisions into three categories for guidance. These categories are typically labeled as Types I through III, and they help determine an indemnitor’s scope of liability. Almost all construction agreements between general contractors and subcontractors contain some form of an indemnity provision, which may require a subcontractor to indemnify a general contractor for the general contractor’s active negligence, willful misconduct, and/or passive negligence.
Type I provisions, which are commonly used in construction contracts, are those which provide “‘expressly and unequivocally’ that the indemnitor is to indemnify the indemnitee for, among other things, the negligence of the indemnitee,” regardless of whether the liability was a result of the indemnitee’s sole negligence or co-negligence with indemnitor. MacDonald & Kruse, Inc. v. San Jose Steel Co. (1972) 29 Cal.App.3d 413, 419 (hereinafter MacDonald). As such, when utilized in construction subcontracts, such provisions require subcontractors to indemnify general contractors for damages caused by the general contractors’ active and passive negligence–a result desirable to general contractors, but presumably undesirable to subcontractors.
The days of Type I provisions are numbered. Civil Code section 2782.05, enacted January 1, 2012, eliminates these provisions in construction agreements entered into after January 1, 2013. Specifically, agreements which state that a subcontractor will indemnify a general contractor, construction manager, or other subcontractor indemnitee for damages stemming from that indemnitee’s active negligence or willful misconduct, are void and unenforceable. Going forward, with limited exceptions, the liability of those designated as indemnitors of construction contracts will be limited to that related to indemnitees’ passive negligence.
Though at first glance the elimination of Type I provisions appears to be a major shift in the law, the new law’s impact may be minimized by judicial interpretation. Proponents of Type I provisions may broaden their interpretation of passive negligence to include conduct they once considered active. Contractual language will inevitably change, but the true impact of Civil Code section 2782.05 is yet to be seen.
 A Type II provision is “that which provides that the indemnitor is to indemnify the indemnitee for the indemnitee’s liability” resulting from his own sole or contributory passive negligence, but not active negligence. MacDonald, supra, 29 Cal.App.3d at 419. Type II provisions, referred to as general indemnity provisions, usually contain language similar to: “howsoever may be caused,” “regardless of responsibility for negligence,” or “which might arise in connection with the agreed work.” Id. A Type III provision is “that which provides that the indemnitor is to indemnify the indemnitee for the indemnitee’s liabilities caused by the indemnitor, but which does not provide that the indemnitor is to indemnify the indemnitee for the indemnitee’s liabilities that were caused by other than the indemnitor.” Id. at 410. In other words, the indemnitee is to indemnify only for injuries it caused. As a general rule, under this type of provision, any negligence on the part of indemnitee will bar indemnification. Id.