New Indemnification Language for A/E Contracts
July 18, 2012
by
John W. Carpita, PE
Category:
Administration
Is there a “brave new world” in which architects and engineers have gained the upper hand by limiting indemnification language that can be included in their contracts? Maybe not, but legislation enacted this year should cause local governments to review the indemnity language in their construction and design professional contracts. Read on for specific recommendations.
An indemnity is an obligation to pay for loss or damages. In 2012, EHB 1559 (effective June 7, 2012) amended RCW 4.24.115 to expressly extend the limitations on indemnity for construction contracts to those for architectural, landscape architectural, engineering, and land surveying services as well. Under the new language, a clause in a contract for design professional services that indemnifies against liability for damages resulting from the sole negligence of the customer is void, and a clause that indemnifies against liability for damages resulting from the concurrent negligence of the customer and design professional is enforceable only to the extent of the professional's negligence and only if specifically and expressly provided for in the agreement.
The bill also establishes comparable limitations on contract provisions related to the duty to pay for the defense costs related to a dispute. The standards for indemnification and duty to pay apply to any liability arising out of any services performed under the contract.
A City Attorney’s Observations
Kevin J. Yamamoto, City Attorney for Puyallup, provided the following analysis:
The statute, pursuant to the enacted or final version of SHB 1559, now expressly applies to contracts with architects, engineers, and so forth, but SHB 1559 does not prevent parties from negotiating to establish a contractual obligation to defend, indemnify, and hold harmless. The proposed original, engrossed, and substitute bills prohibited waiver or modification by contractual agreement. The language that prohibited waiver or modification by contractual agreement was struck from the final version of the bill.
Recommended Contract Language
Eric Larson, deputy Director of the Washington Cities Insurance Authority, has kindly provided the following recommended A/E indemnification language based on the (recently) revised RCW 4.24.115:
Indemnification / Hold Harmless Consultant shall defend, indemnify and hold the City, its officers, officials, employees and volunteers harmless from any and all claims, injuries, damages, losses or suits including attorney fees, arising out of or resulting from the acts, errors or omissions of the Consultant in performance of this Agreement, except for injuries and damages caused by the sole negligence of the City.Should a court of competent jurisdiction determine that this Agreement is subject to RCW 4.24.115, then, in the event of liability for damages arising out of bodily injury to persons or damages to property caused by or resulting from the concurrent negligence of the Consultant and the City, its officers, officials, employees, and volunteers, the Consultant's liability, including the duty and cost to defend, hereunder shall be only to the extent of the Consultant's negligence. It is further specifically and expressly understood that the indemnification provided herein constitutes the Consultant's waiver of immunity under Industrial Insurance, Title 51 RCW, solely for the purposes of this indemnification. This waiver has been mutually negotiated by the parties. The provisions of this section shall survive the expiration or termination of this Agreement.
More Information and Opinions
An indemnity is an obligation to pay for loss or damages. In 2012, EHB 1559 (effective June 7, 2012) amended RCW 4.24.115 to expressly extend the limitations on indemnity for construction contracts to those for architectural, landscape architectural, engineering, and land surveying services as well. Under the new language, a clause in a contract for design professional services that indemnifies against liability for damages resulting from the sole negligence of the customer is void, and a clause that indemnifies against liability for damages resulting from the concurrent negligence of the customer and design professional is enforceable only to the extent of the professional's negligence and only if specifically and expressly provided for in the agreement.
The bill also establishes comparable limitations on contract provisions related to the duty to pay for the defense costs related to a dispute. The standards for indemnification and duty to pay apply to any liability arising out of any services performed under the contract.
A City Attorney’s Observations
Kevin J. Yamamoto, City Attorney for Puyallup, provided the following analysis:
The statute, pursuant to the enacted or final version of SHB 1559, now expressly applies to contracts with architects, engineers, and so forth, but SHB 1559 does not prevent parties from negotiating to establish a contractual obligation to defend, indemnify, and hold harmless. The proposed original, engrossed, and substitute bills prohibited waiver or modification by contractual agreement. The language that prohibited waiver or modification by contractual agreement was struck from the final version of the bill.
- The former version of RCW 4.24.115 applied to construction (and other similar) contracts. SHB 1559 expands the scope of applicability to include certain professional services contracts.
- The former version of RCW 4.24.115 applied to indemnity provisions. SHB 1559 expands the scope of applicability to include provisions relating to the duty to defend and pay costs of defense.
- The former version of RCW 4.24.115 applied to indemnifying against liability for damages arising out of bodily injury to persons or damage to property. SHB 1559 expands the scope of the type of liability to which indemnification can extend to damages arising “out of such services.”
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RCW 4.24.115 (Before SHB 1559) |
SHB 1559 Revisions |
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Recommended Contract Language
Eric Larson, deputy Director of the Washington Cities Insurance Authority, has kindly provided the following recommended A/E indemnification language based on the (recently) revised RCW 4.24.115:
Indemnification / Hold Harmless Consultant shall defend, indemnify and hold the City, its officers, officials, employees and volunteers harmless from any and all claims, injuries, damages, losses or suits including attorney fees, arising out of or resulting from the acts, errors or omissions of the Consultant in performance of this Agreement, except for injuries and damages caused by the sole negligence of the City.Should a court of competent jurisdiction determine that this Agreement is subject to RCW 4.24.115, then, in the event of liability for damages arising out of bodily injury to persons or damages to property caused by or resulting from the concurrent negligence of the Consultant and the City, its officers, officials, employees, and volunteers, the Consultant's liability, including the duty and cost to defend, hereunder shall be only to the extent of the Consultant's negligence. It is further specifically and expressly understood that the indemnification provided herein constitutes the Consultant's waiver of immunity under Industrial Insurance, Title 51 RCW, solely for the purposes of this indemnification. This waiver has been mutually negotiated by the parties. The provisions of this section shall survive the expiration or termination of this Agreement.
More Information and Opinions
- "Indemnification Law on Public Contracts Amended," Mike Purdy's Public Contracting Blog, April 24, 2012
- "Design professionals win big in revised anti-indemnity statute," by Stan Beck and Grant Degginger, Daily Journal of Commerce, April 5, 2012
- "Washington's Anti-Indemnification Statute (RCW 4.24.115) is amended to Include Design Professionals and Contractors Receive a 'Kiss,'" by John P. Ahlers, Ahlers & Cressman PLLC Blog, April 17, 2012
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About John W. Carpita, PE
John was MRSC’s resource for many years on engineering design, purchasing and contracting issues, local improvement districts, and other infrastructure issues. He had a widely varied career as a consultant, county engineer, city engineer and project manager. He is now retired.
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