Colorado Bill - Duty to Defend Provisions in Public Contracts Illegal

ACEC along with AIA, ASLA, and several other design organizations are supporting a bill that will make duty to defend provisions in public contracts illegal. This is a big problem for designers because we have no insurance for this liability, unlike contractors which do have insurance for this risk.

The City and County of Denver has come out in strong opposition to this legislation with some rather misleading language.

In response to their objections:
1. This will not shift burden to the taxpayers for a design-professionals negligent errors and omissions. That burden is still borne by the design professional as it should be.

2. The City is asking all design professionals, including small, disadvantaged, minority, and women-owned businesses bear the burden of the City’s own defense, even in cases of misconduct by the City. This is patently unfair. The City should be required to defend itself for its own acts.

3. Currently the City has no obligation to pay for its own defense costs in these design contracts and is not required to repay the defense costs to the design professional if the design professional is found not negligent.

4. The City requires the design professional to bear these upfront costs of defense for “any and all claims” even if they have nothing to do with the design professional’s work. The design professionals have repeatedly asked the City and County of Denver to change its contract for which the City has refused.

The Colorado State contract for design professionals has none of these requirements, nor do most municipalities in Colorado. It is a small number of municipalities, including the City and County of Denver that wishes to pass responsibility it has for its own defense onto others unfairly. We should all support this legislation and be willing to refuse to sign a contract that contains this language or you risk losing your entire company in exchange for a city contract.

Please inform your clients and staff to support the bill by contacting your state representatives.


ACEC Colorado’s Talking Points for Proposed Bill “Concerning Fairness in Public Contracts Act.”

• There is already a Colorado statute that limits the extent of indemnity obligations in private sector construction contracts. C.R.S. 13-21-111.5(6).  ACEC Colorado is asking to have existing private sector principles expanded to public sector contracts, as well.
• The fundamental purpose of the proposed modification is fairness.  Right now, design professionals are being asked to defend public entities against third party claims before there has been any determination that the design professional has committed error. 
• The costs of such a defense can be staggering, and are beyond the control of the design professional. These defense costs would come out of the design professionals’ pocket, and not from their professional liability insurance policy. Just like the presumption of innocence, a design professional should not be presumed responsible for a cost without a determination of wrong-doing.
• Design professionals’ professional liability insurance will only cover legal costs to the extent caused by the negligent errors and omissions of the design professional. A design professional’s professional liability insurance policy does not provide defense for its clients like a contractor’s general liability insurance policy does.
• The existing law, in effect, makes design professionals insurers of the state’s public entities.  Design professionals are in the business of creative design, not insurance.
• Many of the design firms being required to sign these contracts are small, minority and women-owned companies, all of whom are Colorado-based and know the communities they serve. 
• While the big national firms - who are self-insured - may be willing to accept these provisions, the small Colorado firms risk closing their doors if they refuse to accept an onerous indemnity obligation or in the alternative, take the work and subsequently have to pay for defense, even if they’re found to have not been negligent.
• Large prime engineering firms who do sign these contracts must pass down these provisions in the contracts they sign with their sub-consultants.
• We are asking that the statute narrow (NOT ELIMINATE) the obligation a design professional must shoulder to indemnify a public entity to just those situations where the design professional has been found to have committed an error.  The statute’s existing prohibition against a public entity requiring a construction professional to indemnify it against the public entity’s own negligence is good public policy.
• The change, although initiated by the design professional community, will apply to and benefit all companies involved in the construction industry, including contractors.
• The language restricting the situations in which a construction entity will be required to indemnify a public entity “tracks” other similar Colorado statutes, and adopts the long-standing principle repeatedly expressed by the Colorado legislature that a party should not be responsible for the mistakes of others.

In summary, we are asking that:

• the public contracts’ statute has existing principles regarding indemnity obligations that is in private sector contracts - C.R.S. 13-21-111.5(6);
• the legislators continue to adopt a long-standing principle that a party should not be responsible for the mistakes of others.  It’s only fair.
• Colorado small businesses be able to compete for public sector work without risking their businesses to do it.