DEEP POCKETS NO MORE? LET THE PUNISHMENT FIT THE CRIME

I guess everybody who has children knows what “deep pockets” means. I don’t want to go into details but having five children means I really have to have “deep pockets” for the millions of things kids need. It looks like the pocket is never deep enough..

In construction, and in legal jargon, “deep pockets” has a different meaning, but it is also connected to your finances. It means that if you’re drawn into a law suit and have insurance, watch out..!!! California law allows the court to assign guilt, therefore money, not based on your real or alleged mistakes and the damages it caused but also to cover your co-defenders share of the burden – if your co-defenders have no financial means or Error and Omissions insurance to cover their share. Totally unrealistic and unjust, but this is the law. At least up until now.

Governor Brown signed California Senate Bill 496, (SB 496) SB 496 revises and modifies the previous section 2782.8 about the design professional’s contractual duty to defend by limiting a design professional’s potential liability for defense fees and costs to the design professional’s portion of fault. The language of SB 496 reads as follows:

“In no event shall the cost to defend charged to the design professional exceed the design professional’s proportionate percentage of fault.”

SB 496 will only apply to contracts entered into on or after January 1, 2018. But the importance of it cannot be emphasized enough. In countless cases responsible design professionals who carried Error and Omissions insurance were penalized that their insurance had to cover other parties share of fees and costs because the others did not carry any insurance and/or were not in the position to come up with the cost of damages they caused. Of course, insurance companies who were on the hook to pay for other people’s/companies mistakes raised the premiums for the design professionals and in worst cases even cancelled future insurance.

Kudos for Governor Brown!!!

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