Morgan Miller Blair

Governor Schwarzenegger recently signed into law Assembly Bill 2738 (AB 2738), which, among other things, affects all subcontracts and amendments to subcontracts for residential construction entered into on or after January 1, 2009, and the contributions, allocations, and disclosures on both residential and non-residential construction projects with wrap-up insurance programs.  

 More specifically, AB 2738 significantly changes (I) the rights and obligations of builders, general contractors, subcontractors and insurance companies with respect to insurance, defense and indemnity obligations on residential construction projects, (II) the amount that a subcontractor can be required to contribute towards deductibles, allocations, and self-insured retentions on residential construction projects with a wrap-up insurance program (a “Wrap Policy”), and (III) the information that must be disclosed to subcontractors on residential and non-residential construction projects with a Wrap Policy. 

 As a result of AB 2738, residential owners, builders and general contractors should review and amend the indemnity and defense provisions in their subcontracts to be consistent with AB 2738, and all project participants on residential and non-residential projects with Wrap Policies should analyze their contract documents and the corresponding disclosures, contributions, and allocations associated therewith, to make sure they comply with AB 2738.  

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