SB 1077: Construction contracts: wrap-up insurance and indemnification.

Existing law regulates the use of wrap-up insurance or other consolidated insurance programs in connection with specified construction projects. Existing law distinguishes, in this regard, between residential construction projects, private residential works of improvement, as specified, and public works and other projects that are not residential, as specified. In this regard, among other things, for residential construction to which wrap-up insurance or another consolidated insurance program is applicable, existing law declares unenforceable a provision requiring a subcontractor who is enrolled and participating in the insurance to indemnify, hold harmless, or defend another for a claim or action covered by the insurance program. Existing law makes any waiver of these provisions void. Existing law permits a party to pursue an equitable indemnity claim in this context, subject to certain conditions, if these indemnification provisions have been deemed unenforceable. Existing law, with regard to a private residential work of improvement and public works, as specified, requires an owner, builder, or general contractor who obtains wrap-up insurance or other insurance to make specified disclosures regarding calculations of its cost and the premiums to be required from a subcontractor or other participant and, in the case of private residential works of improvement, that specified estimates are presumptively in good faith. Existing law requires a copy of the insurance policy to be provided to a subcontractor or other participant under certain circumstances. Existing law, with respect to construction contracts entered into on and after January 1, 2013, voids certain insurance and indemnity provisions, subject to a variety of exceptions that are reserved to the agreement of the parties.

This bill would recast the wrap-up insurance or other consolidated insurance program requirements for public and other works of improvement that are not residential construction, entered into or amended on and after January 1, 2019, to track generally the requirements that apply to residential projects. The bill would require the owner, builder, or general contractor obtaining the wrap-up insurance policy, or other consolidated insurance program, to demonstrate that the policy limits are sufficient, on a replacement cost basis, to cover exposure associated with the total value of the replacement cost of the project based on the initial contract sum and ongoing and completed operations coverage. The bill would provide that, notwithstanding any other law, any waiver of these provisions is contrary to public policy and void.