Matrix Newsletter June 2022

A significant victory for architects and designers, in an otherwise challenging legislative session, involved the removal of three little words: “able to be.”

Senate File 3850 – which was brought forward and championed by AIA Minnesota, the American Council of Engineering Companies of Minnesota, the Association of General Contractors of Minnesota, the Minnesota Nursery and Landscape Association, and the Minnesota Subcontractors Association – amended Minnesota Statute Section 604.21 by clarifying application of the responsibility to indemnify, thus addressing challenges in the execution of contracts.

Sheri Hansen, AIA Minnesota’s Director of Communications, Advocacy, and Public Outreach; Sarah Strong-Belisle, our lobbyist with Cook Girard; and several members of the AIA Minnesota Government Affairs Committee, most notably Mark Kalar, AIA, architect and lawyer with Cuningham, led the organization’s efforts, providing testimony and successfully securing support from legislators in a rare showing of bi-partisanship. The bill was sponsored by Deputy Majority Leader Mark Johnson (01, R). It was passed unanimously by both the House (134-0) and Senate (65-0), signed into law by Governor Walz on May 22..

Minn. Stat. 604.21 covers certain prohibitions and restrictions on agreements with design professionals. It states that, “A provision contained in, or executed in connection with, a design professional services contract is void and unenforceable to the extent it attempts to require an indemnitor to indemnify, to hold harmless, or to defend an indemnitee from or against liability for loss or damage resulting from the negligence or fault of anyone other than the indemnitor or others for whom the indemnitor is legally liable.” This statute and its clear interpretation is critical to design professionals in Minnesota because a design professional’s professional liability insurance does not cover defense of third parties and does not cover broad indemnification obligations; specific exclusions in the E&O insurance policies exclude such coverage.

However, until SF 3850 led to its amendment, the statute included the following language: “(C) This section does not apply to the extent that the obligation to indemnify, to hold harmless, or to defend an indemnitee is able to be covered by insurance.”

AIA Minnesota and our collaborating associations argued that the language “able to be covered” was too vague and ambiguous and could leave the statute up to subjective interpretation. Striking “able to be” to now read “is covered” makes the statute clear and allows for an objective interpretation; either the matter “is” or “is not” covered by insurance. We emphasized that design professionals cannot procure insurance for the defense and broad indemnity of others; that no such insurance coverage exists and there are no design professionals in Minnesota who can purchase such coverage. We reinforced that professional liability insurance for design professionals only covers (and should only cover) defense of the design professional for the design professional’s errors and omissions.

AIA Minnesota had heard from many of our members over the years that the indemnification language as it had been written in Minn. Stat. 604.21 was causing significant negotiating issues with clients who were unaware that there is no insurance product available to meet the obligations of the statute. It created situations where the presence of an insurance product as outlined in subsection (C) in the market – no matter whether it is well rated or not – could have negated section 604.21 in its entirety.

Our purpose in advocating for this change to the law was to bring clarity to insurance issues for architecture firms, streamlining processes and reducing the likelihood that clients will demand policies that require architects to be liable for things outside their control. We and our collaborating associations believe the passage of the amendment will help clarify responsibilities and prevent undue cost burdens for architects and designers.

It is yet to be seen whether the other major legislative advocacy efforts of AIA Minnesota – including passage of a significant bonding bill to keep steady the pipeline of public projects and save taxpayer dollars through asset preservation, and passage of a tax bill which would make permanent the Historic Preservation Tax Credit – will come to pass through a special session. Pressure on legislators to do so will need to be intense and in the near term, as all 201 seats in the Minnesota Legislature are up for election this November, in brand-new districts, as the result of redistricting.

It is important to celebrate this victory of SF 3850  – and to express gratitude for the efforts of Sheri and Sarah, Mark and other AIA Minnesota volunteer leaders, and our collaborators across the AEC industry. And, we won’t rest until action is taken on a bonding bill and a tax bill. Please add your voice to strengthen these collective efforts by reaching out to your state legislators and urging them to reconvene to finish their work. Onward!