North Carolina signs law that constitutes monumental change for general contractors and design professionals
On July 8th North Carolina Governor Roy Cooper signed into law an amendment to G.S. 22B-1 that constitutes a monumental change for general contractors and design professionals engaged in agreements governed by North Carolina law.
In summary, the amendment to G.S. 22B-1 adds major liability protections for North Carolina general contractors and design firms in contract negotiations with owners. The new law declares as against public policy and makes void and unenforceable any provision in a construction agreement or design professional agreement (defined in G.S. 22B-1(f)(5)) that purports to require a contractor or design professional to “defend” an owner or any other party against claims involving professional liability asserted by third parties. The amendment further declares as against public policy and make void and unenforceable any provision in a construction contract or design professional agreement that does not limit a contractor’s/design professional’s indemnity obligation to the fault of the contractor/design professional that also is a proximate (direct) cause of the loss, damage, or expense indemnified. Finally, and relevant to contractors/design professionals providing services to public utilities, railroads and the NCDOT, the amendment eliminates the prior exemptions to the indemnity provisions now making the new indemnity provisions applicable to these entities as well.
This new law becomes effective August 1, 2019 and applies to contracts entered into, amended, or renewed on or after that date. This continues a recent trend providing more protection for design professionals. California adopted a similar law in 2018. We expect to see more states join in this change.
If you’re a general contractor or design professional and have questions about your firm’s contracts, contact our experienced Design Professional attorneys.