California Senate Bill SB972 Introduced / Bill

 BILL NUMBER: SB 972INTRODUCED BILL TEXT INTRODUCED BY Senator Wolk FEBRUARY 8, 2010 An act to amend Section 2778 of the Civil Code, relating to indemnity. LEGISLATIVE COUNSEL'S DIGEST SB 972, as introduced, Wolk. Indemnity. Under existing law, specified rules are to be applied in the interpretation of a contract of indemnity, unless a contrary intention appears. Pursuant to these rules, the person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity, but the person indemnified has the right to conduct those defenses, if he or she chooses to do so. This bill would expand that rule to provide that the person indemnifying has no obligation to defend actions or proceedings prior to a preliminary or final determination of liability, nor in any amount that exceeds the finally determined indemnification percentage of liability based upon the comparative fault of the indemnitor. Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 2778 of the Civil Code is amended to read: 2778. In the interpretation of a contract of indemnity, the following rules are to be applied, unless a contrary intention appears:  1.   (a)    Upon an indemnity against liability, expressly, or in other equivalent terms, the person indemnified is entitled to recover upon becoming liable  ;   .   2.   (b)    Upon an indemnity against claims,  or  demands,  or  damages, or costs, expressly, or in other equivalent terms, the person indemnified is not entitled to recover without payment thereof  ;   .   3.   (c)    An indemnity against claims,  or  demands, or liability, expressly, or in other equivalent terms, embraces the costs of defense against  such   the  claims, demands, or liability incurred in good faith, and in the exercise of a reasonable discretion ;   .   4.   (d)    The person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity, but the person indemnified has the right to conduct  such   those  defenses, if he  or she  chooses to do so  ;   . The person indemnifying has no obligation to defend actions or proceedings prior to a preliminary or final determination of liability, nor in any amount that exceeds the finally determined indemnification percentage of liability based upon the comparative fault of the indemnitor.   5.   (e)    If, after request, the person indemnifying neglects to defend the person indemnified, a recovery against the latter suffered  by him  in good faith, is conclusive in his  or her  favor against the former  ;   .   6.   (f)    If the person indemnifying, whether  he is  a principal or a surety in the agreement, has not reasonable notice of the action or proceeding against the person indemnified, or is not allowed to control its defense, judgment against the latter is only presumptive evidence against the former  ;   .   7.   (g)    A stipulation that a judgment against the person indemnified shall be conclusive upon the person indemnifying, is inapplicable if he  or she  had a good defense upon the merits, which by want of ordinary care he  or she  failed to establish in the action.