Grassroots Letter Writing Campaign - UDC-Universal vs.CH2M Hill

Last Updated: March 26, 2010

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Dear AIA Member,

The profession needs your participation in an important AIACC grassroots letter writing campaign in response to the recent California Court of Appeal decision concerning UDC-Universal v. CH2M Hill.

The letter writing campaign is part of a multi-approach effort by the AIACC and others to reverse this adverse and far reaching decision. Please take the time to read the following information to become familiar with the issue and learn what you can do to help. Thank you in advance for you participation.

As one of the multiple efforts to overturn the Court's decision regarding the CH2M Hill case, the AIACC is coordinating its activities with the law firm of Weil and Drage to participate financially, and as an amicus curiae (friend of the Court). We need your help with this effort!

As many of you are aware, a party cannot file a formal amicus brief until such time as the Supreme Court has accepted the case for review. However, until this time, there are other actions we can take. The Supreme Court will accept letters from individuals on behalf of their firms. Essentially, this involves a "grassroots" letter writing campaign whereby AIA Members send letters to the Supreme Court explaining how they and their firms are personally impacted by the Court of Appeal decision, and why review or depublishing (so that if the review is denied the Court of Appeal decision cannot be cited as valid case authority going forward) of the decision is of critical importance to them.

For its part, CH2M Hill's Attorneys (Watt, Tieder, Hoffar & Fitzgerald) have filed their petition seeking review. First, the trial court's application of Crawford v. Weather Shield to a design professional's contract with new terms related to the scope of the defense and indemnity obligation. Second, the petition seeks review of the trial court's decision to overlook the contractor's failure to comply with CCP 411.35 (which is the certificate of merit statute). Third, the petition seeks review of whether a contractor who does not possess the correct classification of contractor's license, should be barred from enforcing the defense and indemnity obligations in the design professional's contract. All of these issues are of great concern and interest to the AIACC and its members. Please join us and participate in this grassroots letter writing campaign effort.

Your letter should summarize your firm's practice area and address the following issues:

• The Court of Appeal decision incorrectly interprets the indemnity and defense provision which required a finding of negligence against CH2M Hill in order to invoke CH2M Hill's duty to defend the developer. The jury unanimously determined that CH2M Hill was not negligent. Therefore, CH2M Hill should not have been required to "defend" the developer against the homeowner association's claims.

• Design professional insurers do not cover a contractual defense obligation. Professional liability policies almost uniformly exclude coverage for liability assumed by contract not otherwise required by law. As such, when design professionals contract to "defend" their clients in the event of the claim, they will likely receive a reservation of rights letter from their insurer disclaiming coverage for the defense obligation. As such, design professionals are essentially "exposed" from the standpoint of insurance coverage from a demand by an owner or developer to provide an immediate defense against claims asserted by third parties. The design professional may have to pay out of pocket for the defense against such claims, even before there has been a determination that the design professional was negligent. Such defense fees and costs can easily eclipse the value of the claim and wreak financial havoc on the design firm.

• Design professionals typically charge modest fees and enjoy modest profits as compared to other participants in the construction industry. Consequently, in terms of the overall budget for the development of a project, owners and developers are able to secure design services which constitute a relatively small line item in the budget. By forcing design professionals to pay for their clients' defense costs, without even a finding of negligence, design professionals have unwittingly taken on risk far in excess of any fees (much less profits) they ever could hope to garner from a given project. Thus, the balance of risk and reward is upset and cannot be restored in the short run.

• The design and construction community, especially in California, is in dire straits. The Court of Appeal decision may well be the proverbial "last nail in the coffin" because of the extraordinary defense fees and costs that owners and developers may be able to foist upon design professionals in construction lawsuits, even where there is no finding of negligence against the design professional.

• The above points are simply general guidelines for drafting your letter. However, we encourage you to include your own comments and concerns as you deem fit. We recommend that you personalize your letter to express how this decision may adversely affect your own practice and that of your firm. Because this decision affects all design professionals, we encourage you to forward this letter to your colleagues and consultants so they too may participate in this endeavor.

Letters should be addressed to the California Supreme Court as follows:

Honorable Ronald M. George, Chief Justice and the Associate Justices
California Supreme Court
350 McAllister Street
San Francisco, CA 94102

Re: UDC-Universal Development, L.P. v. CH2M Hill California

Supreme Court No. S180454

Dear Chief Justice George and Associate Justices:

This letter is in support of CH2M Hill's Petition for Review in the above referenced case.

[Insert your substantive comments and arguments]

Note: The letter can be single spaced but must be 13 point font.

On behalf of all the members of The AIACC, thank you for your support of this important matter. Please feel free to contact Kurt T. Cooknick, Assoc. AIA, should you have any questions via email at .

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