A ruling by the California Supreme Court affirms that a subcontractor’s duty to defend is greater than its duty to indemnify. The case, Crawford v. Weather Shield Manufacturing, states that a subcontractor’s contractual obligation to defend a builder exists regardless of the subcontractor’s actual negligence.
The decision will significantly impact the way cases with similar issues are decided in the future. The question before the court was: Did a contract under which a subcontractor agreed to defend any suit or action against a developer founded upon any claim growing out of the execution of the work require the subcontractor to provide a defense to a suit against the developer even if the subcontractor was not negligent?
The answer from the California Supreme Court was an emphatic “yes.”
Prior to 2006, Weather Shield entered a contract and agreed to:
- indemnify and hold the builder harmless against all claims for damages, loss and/or theft growing out of the execution of Weather Shield’s work; and
- defend, at its own expense, any suit or action brought against the builder founded upon the claim of such damage, loss or theft.
The builder filed a cross complaint against Weather Shield seeking defense and indemnity. At trial, the jury found Weather Shield was not negligent and absolved the company of any indemnity. However, the court found Weather Shield had an obligation to defend the builder regardless of whether Weather Shield was ultimately found negligent.
The court found Weather Shield had two distinct obligations under its contract with the builder: a duty to defend and a duty to indemnify. The court held that a duty to defend arises immediately and does not depend on whether indemnity is actually owed.
The duty to defend extends to suits that allege negligent performance, not just suits in which negligence is proven.
Note, Weather Shield’s contract pre-dated AB 758. Civil Code Section 2778 under AB 758 allows parties to contractually agree to the timing and immediacy of a defense obligation, including reallocation based on a final determination of the indemnity obligations of the subcontractor. Contracts that pre-date AB 758, like Crawford’s, enforce a separate contractual defense obligation against a subcontractor, even if that subcontractor is not found to be negligent.
This decision, along with any applicable statute, should be considered when drafting indemnification agreements to ensure the separate duty to defend is reflected.