Reporting Requirements for Architects under California Business and Professions Code Section 5588

Below is an overview of the changes to California Business and Professions Code Section 5588 and its effect on the reporting requirements, for architects, in the construction industry.

Section 5588 Prior to 2005 Legislative Changes

Section 5588 of the California Business and Professions Code sets forth the reporting requirements for many business professionals including architects. Since 1979, Section 5588 has required architects and their insurers to report to the California Architect Board (the Board) “any settlement or arbitration award in excess of five thousand dollars ($ 5,000) of a claim or action for damages caused by the license holder’s fraud, deceit, negligence, incompetency, or recklessness in practice.”1

The language of the code section left open for interpretation the question of what types of settlement claims must be reported to the Board. Thus, in 2004, the Attorney General of the State of California published an opinion stating that a reportable settlement includes “any agreement resolving all or part of a demand for money which is based upon an insured architect’s alleged wrongful conduct.”2 He then went on to conclude that the only qualifications placed on the term “claim” for purposes of Section 5588 is that “(1) the demand be premised on the license holder’s alleged ‘fraud, deceit, negligence, incompetency, or recklessness in practice,’ and (2) the value of the claim, as measured by the settlement amount or arbitration award, exceeds $5,000.”3

The Board’s Recommendation to Amend Section 5588

In response to the Attorney General’s opinion, the Board directed the Regulatory and Enforcement Committee (REC) to determine the standard for reportable events. On December 7, 2004 the REC met and the consensus was that the Board should use “formal action (i.e., actions associated with any civil action judgment, settlement, arbitration award, or administrative action) as the standard for reportable events”.4

In order to set forth the standard for reportable events, the REC recommended, and the Board approved, amending section 5588 to require that “only settlements precipitated by legal action or arbitration awards that exceed $5,000 and allege wrongful conduct (fraud, deceit, negligence, incompetence, or recklessness) with respect to the architectural services being provided must be reported to the Board.”5

Thus, in 2005 Section 5588 was amended to states that “A licensee shall report to the board in writing within 30 days of the date the licensee has knowledge of any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or arbitration award against the licensee in any action alleging fraud, deceit, negligence, incompetence, or recklessness by the licensee in the practice of architecture if the amount or value of the judgment, settlement, or arbitration award is five thousand dollars ($5,000) or greater.”6

The Impact the Changes to Section 5588 has on Reporting Requirements

An enforcement analyst of the Board stated that “it is the policy of the California Architects Board to only require reporting of formal settlements. That is, settlements reached through court action, arbitration or administrative action. Settlements reached through informal compromise or through voluntary mediation are not reportable.” Furthermore, he concluded that this interpretation “follows from the intent expressed by the Board while considering its response to the 2004 AG opinion.”

Thus, whether a settlement is either formal or informal is one of the necessary factors to consider when determining whether the Board will require a settlement to be reported. Therefore, although the amendment to Section 5588 occurred in 2005, the distinction between reporting requirements for informal and formal settlements continues to remain relevant within the construction industry.


2 87 Ops. Cal. Atty. Gen. 121
3 Id.
6 Cal. Bus. & Prof. Code § 5588

Reciprocity for Architects and Engineers in Nevada

Professional Engineers and Land Surveyors

To qualify for a Professional Engineer reciprocal license, you need to meet the following requirements:

  • Must have an accredited BS Engineering degree from the US or have an ABET equivalent foreign BS Engineering degree. – NRS 625.183
  • If you don’t have a BS Engineering degree you, must have had a minimum of 10 years’ experience in the discipline you are applying for and have been licensed in another state prior the July 1, 2010.
  • Have completed the NCEES Fundamentals of Engineering exam or qualify for a waiver of the exam – NRS 625.193
  • Have completed the NCEES 8-hr Professional exam in the discipline you are applying for.
  • With a BS degree, have a minimum of 4 years of acceptable engineering work experience after graduation. Two years must be under a licensed PE in the discipline you are applying for. References are accepted from US and Canadian PEs.

To qualify for a Professional Land Surveyor reciprocal license you need to meet the following requirements:

  • Must have an approved BS Surveying degree from the US or have an ABET equivalent foreign BS Surveying degree. – NRS 625.270
  • If you don’t have a BS Surveying degree, you must have been licensed in another state prior the July 1, 2010.
  • Have completed the NCEES Fundamentals of Land Surveying exam or qualify for a waiver of the exam – NRS 625.271
  • Have completed the NCEES 6-hr Professional Surveyor exam.
  • With a BS surveying degree, have a minimum of 4 years of acceptable surveying work experience after graduation. Two years must be under a licensed PLS. References are accepted from US PLS only.
  • Complete the Nevada 2-hr PLS exam after Board approval of the application.

Nevada only accepts reciprocal applicants licensed in the U.S. or Canada, no other foreign countries.


The state of Nevada requires that all candidates for registration via reciprocity:

  1. Hold certification with the National Council of Architectural Registration Boards and have a copy of their Blue Council folder (certificate) transmitted to the board office.
  2. Have successfully completed all portions of the NCARB exams administered by NCARB standards at the date of your initial registration or any exam deemed equivalent by the board.
  3. Have fulfilled the seismic requirement by exam, completion of an NCARB-approved seismic seminar, or a seismic treatise submitted to another western state. Seismic design was included in the NCARB December 1965 Structural Examination.
  4. Complete the Application for Architect Registration by Reciprocity.

Each applicant may or may not be required to appear before the board for an oral interview. The applicant is required to take an open-book written test on Chapter 623 of the Nevada Revised Statutes, Blue Book and Rules of Conduct. The board will review the test, application, integrity and ethical standards for registration in the state of Nevada.

Update on The Fallout From The Berkeley Balcony Collapse

Approximately one year ago, six people were killed in Berkeley, California when an apartment building balcony collapsed during a party attended by exchange students form Ireland. As we have previously reported on this blog – Berkeley Balcony Collapse Raises Questions; Bill in Response to Berkeley Balcony Collapse; Berkeley Balcony Collapse Update; and Builder Segue Construction’s Temporary Restraining Order, the legal fallout from this tragedy continues to reverberate.

Most recently, the Alameda County District Attorney decided not to press criminal charges because the investigation determined that it would be difficult to establish evidence sufficient to meet the legal threshold for manslaughter resulting from criminal negligence. No evidence could support a finding that any firm or individual involved with construction and design of the balcony acted with gross negligence or reckless conduct “akin to a disregard to human life…” such that there would be reasonably foreseeable deadly consequences.

Meanwhile, the California State License Board has just completed a nine month long investigation into the five construction companies that were involved in building the balcony and apartment complex in which it was located.

The License Board found that the collapse was caused by “…water incursion that caused dry rot” and that the contractors did not perform their work to “trade standards”. Those five companies are Segue Construction, Etter and Sons Construction, R. Brothers Waterproofing, North State Plastering and the Energy Store of California. They were the general, framing, plastering and waterproofing contractors and also the material supplier of ventilation equipment, respectively.

The License Board has decided to forward its results to the California Justice Department for further proceedings. Punishment could range from an infraction to a license suspension. The Justice Department’s investigation results and findings will not be released until or unless charges are formally filed and no further information about those proceedings is available.

Meanwhile the status of Senate Bill 465, a bill initiated in the California State Senate intended to require all contractors to disclose past felonies or lawsuits alleging defects brought against them for negligence or fraud, was being considered by Committee members for potential action, but lacking a consensus, the bill stalled in Committee.

Stay tuned to this blog site for further updates on these proceedings.

Builder Segue Construction’s Temporary Restraining Order Against The Alameda County District Attorney’s Office Denied

Segue Construction, the builder of the apartments where the balcony collapsed in Berkeley, CA killing six people, sought to obtain a temporary restraining order against the Alameda County District Attorney’s office from investigating the condition of the collapsed deck without Segue’s participation. The Alameda County District attorney is investigating the remnants of the collapsed deck, and another one similar to it, located on the same building and immediately underneath it, as part of a criminal investigation into the accident. Segue’s attorneys argued that crucial evidence in the collapse would be jeopardized by any “destructive testing” of the decks’ remnants and requested that its team be given access to any testing that the Alameda County District attorney’s investigators perform.

In its moving papers Segue argued that allowing it access to observe the deck materials and remnants would not prevent the district attorney from performing its investigations. Segue contended that it was merely requesting the opportunity for its own consultants to be present during any testing of the deck materials and remnants. The district attorney argued that the proposed temporary restraining order would violate section 526 of the California Code of Civil Procedure because it would interfere with the execution of the district attorney’s investigation and prosecution of potential criminal activity. The district attorney further offered that the evidence gathered as part of an ongoing criminal investigation is by its nature confidential and that such confidentiality of the investigation would be destroyed and would compromise the “integrity and viability of the investigative process.”

The district attorney argued that Segue failed to demonstrate that it had any rights with regard to this balcony because it did not own the balcony, and was not part of any formal lawsuit filed against it. The district attorney also contended that if such a temporary restraining order were granted by the court, it could impede future criminal investigations, setting a precedent that would allow “a bank robber …to participate in the fingerprinting of a teller’s station.” The balcony was not its property and other third parties would be denied the same opportunities as Segue would get if it were allowed to participate in the investigation.

More legislative and legal activity is sure to follow.

Berkeley Balcony Collapse Update: New, Stricter City Ordinances; State Bill Narrowly Defeated

As expected, the response to the tragic balcony collapse in Berkeley, California that killed six people has been swift but with mixed results. On the local level, the Berkeley City Council voted Tuesday to make several immediate changes to their local building requirements. First, all new balconies must be made of corrosion-resistant materials and be ventilated to prevent the buildup of moisture. While the investigation into the cause of the collapse is still ongoing, investigators have been pointing to the lack of any venting mechanism on these balconies as a potential cause for the alleged dry rot that is believed to be the cause of the collapse. As well, the council mandated that all balconies in Berkeley be inspected within the next six months and every three years after that. No details were given as to what those inspections would entail (visual or destructive) or who would be conducting the inspections. It will be interesting to see whether the city puts the onerous on the owners or whether this will be a city-run initiative.

Meanwhile, on the state level, a bill that would require contractors to disclose past felonies or lawsuits alleging defects, negligence, or fraud to the California State License Board (SB465) died in committee by a vote of 7-3. Only 8 votes were required for the bill to leave committee and be brought to the floor of the state senate for debate. Four of the committee members abstained from voting citing their concerns that the bill was “half-baked” and that there had not been enough time given to work out the specific details with the state licensing board. Supporters of the bill believe that this defeat in committee likely means that the bill has no chance of passing this year.

While there is mounting public pressure for the legislature to do something in response to this tragedy, passing a “half-baked” bill is not the solution. While there may be some logic in reporting requirements for contractors in certain situations, some significant thought must be given into exactly how that will happen and how the CSLB will treat such reports. Simply reporting the total value of a settlement in a construction defect case does not tell the whole story as to the quality of construction or the negligence of the parties involved. Given the relative ease with which construction defect cases are filed in California and the low threshold required for making allegations of negligence and even fraud, some thought has to be given to how the claims will be treated once they are reported to the CSLB and whether the CSLB has the resources available to conduct an evaluation of each claim for purposes of determining which cases warrant any action against a given contractor. It will be interesting to see how this bill evolves over the next few months before it is brought to the floor for debate.

Bill in Response to Berkeley Balcony Collapse Dies in Committee

Legislation written in response to last month’s deadly balcony collapse in Berkeley failed to advance July 14th in the Assembly Business and Professions Committee and is therefore stalled until next year. It fell one vote short of passage. Senate Bill 465 would have required contractors, and their insurers, to report to the Contractors State License Board settlements in excess of $50,000, or a binding arbitration resulting in an award of more than $25,000 involving cases of defects, fraud, negligence or incompetence. The bill would have made the provisions operative only if the Legislature appropriated money and granted hiring authority to the board for the purpose of acting on the information. The bill was opposed by the California Building Industry Association.

Berkeley Balcony Collapse Raises Questions About Reporting Requirements for Contractors

In the wake of the recent balcony collapse that killed six people in Berkeley, California, questions have been raised regarding past claims made against the general contractor of that building, Segue Construction, particularly those regarding improperly waterproofed balconies at previous projects. Several news stories have discussed past lawsuits from personal injury lawyer firms and settlements involving Segue in which allegations of improperly waterproofed balconies were made on several projects in the bay area. While it is difficult to draw any conclusions as to what occurred in Berkeley from any of these past claims, the question that is now being raised in the media is whether the California State License Board (CSLB) should be tracking claims made against contractors in an effort to keep events like these from occurring in the future.

Currently, there are no reporting requirements in California for contractors who are named as defendants in construction defect litigation matters. The only construction-related entities who have reporting requirements in California are architects (settlements, arbitration awards, or civil judgments in excess of $5,000; California Business and Professions Code section 5588, et seq.) and engineers (settlements in excess of $50,000, or judgments/arbitration awards in excess of $25,000; California Business and Professions Code sections 6770, et seq, and 8776, et seq.).

The real question is whether reporting requirements for all contractors will have the desired effect of reducing defective construction on future projects. Unlike design professionals whose design, if defective, could be used/repeated on multiple, future projects, contractors are generally faced with an entirely new set of circumstances on each new project. From location, to design drawings, to the subcontractors utilized to perform the work, to the materials used and/or specified, each project presents an entirely new set of facts to work within. For general contractors in particular, who more often than not do not self-perform any of the work on a given project, the question is whether a reporting requirement will have the desired effect of deterring defective workmanship when they are not the party actually performing the work.

For the subcontractors who actually perform the work, it’s possible that a reporting requirement may be justified, particularly if a given subcontractor is shown to have a history of defective workmanship. From a practical standpoint, however, one issue will be exactly what each subcontractor is required to report. Unlike design professionals, most contractors do not have a consent clause in their insurance policies, and therefore the insurance carrier defending the claim can resolve the case anyway it sees fit, which may mean paying more money to resolve a case to avoid the uncertainties of trial. As well, there may be numerous non-defect related components to a given settlement such as contractual defense and indemnity obligations as well as the potential threat of joint and several liability with other joint tortfeasors who may have no assets and no insurance. As such, the amount a subcontractor pays to resolve a case may have little correlation to the overall quality of their work. Given the complexity of any potential contractor reporting requirement, for such a requirement to be effective and not negatively impact the building industry, significant resources would need to be added to CLSB to allow the degree of investigation that would be necessary to assure that contractors are treated fairly.

The question has also been posed regarding how confidentiality provisions that appear in many settlement agreements in construction defect cases may affect potential reporting requirements for contractors where the terms of the settlement are to remain confidential. In light of the tragedy that occurred in Berkeley, the media has questioned whether the legislature should ban such confidentiality provisions under to the guise of a greater public safety concern. However, unlike in the narrow situations where the legislature has taken such a drastic step (i.e. medical device claims), it is the rarest of circumstances where construction defects result in significant personal injury, and therefore the public safety argument may not be as strong. In the event the legislature or CSLB does take action to require reporting requirements for contractors, however, a simple carve out in the confidentiality provision allowing the contractor to report only the information required may still allow for the use of such provisions.

Given the international attention the Berkeley balcony collapse has received, the debate is just beginning on this subject and it is likely that the state legislature will have the final say on whether reporting requirements will be extended to contractors.

The Slavin Doctrine (Florida) – Recent Developments

In 1958 the Slavin doctrine was first articulated by the Florida Supreme Court. Slavin v. Kay, 108 So.2d 462 (Fla. 1958). That doctrine is that “a contractor is relieved of liability caused by a patent defect after control of the completed premises has been turned over to the owner.” Easterday v. Masiello, 518 So. 2d 260 (Fla. 1988)(Court expanded the Slavin doctrine to apply to architects and engineers). Two recent cases in Florida relied upon the Slavin doctrine precluding liability against design professionals.

In Transp. Eng’g, Inc. v. Cruz the trial court, relying upon the Slavin doctrine granted summary judgment in favor of the contractor and denied the same relief to the design professional. The court affirmed summary judgment in favor of the contractor and vacated the trial court’s order denying summary judgment to the engineer, finding, “it was undisputed . . .  that DOT accepted the project with bare (uncushioned) guardrail ends within the clear zone, and that this was an open and obvious condition. Therefore, even if TEI violated its standard of care . . . summary judgment should have been granted in TEI’s favor based upon Slavin and Easterday. Transp. Eng’g, Inc. (TEI) v. Cruz, 2014 Fla. App. LEXIS 18273, 39 Fla. L. Weekly D 2333 (Fla. Dist. Ct. App. 5th Dist. Nov. 7, 2014)(case involved changes to state’s standard design for guardrails by Florida DOT which were followed by design engineer; thereafter, a third party was killed hitting the unprotected guardrail).

In McIntosh v. Progressive Design & Eng’g the district court, relying upon the Slavin doctrine affirmed the lower court where the jury determined that the design professional was negligent in its design of a traffic signal (the legal cause of a traffic fatality); however, “the negligent design was accepted and discoverable by FDOT with the exercise of reasonable care.” McIntosh v. Progressive Design & Eng’g (In re Estate of McIntosh), 2015 Fla. App. LEXIS 163, *7, 40 Fla. L. Weekly D 160 (Fla. 4th DCA Jan. 7, 2015). The result in McIntosh is factually distinguishable from other cases that have relied upon the Slavin doctrine. In McIntosh, the ultimate owner of the traffic signal was not FDOT, but rather was Broward County, Florida; which entity would not give its final acceptance of the project work until the final phase of the project was completed (the burn-in period). The fatal accident occurred prior to control of the traffic signal being turned over to the county. The district court rejected this argument; instead finding, that “responsibility for a patent defect rests with the entity in control [when the design was approved and accepted] and with the ability to correct it.” Id. at *12. In McIntosh, the entity in control was the FDOT. Only time will tell whether other district courts will follow the approach taken in McIntosh.

Post Beacon California Appellate Case Finds No Duty for Designer

In State Ready Mix Concrete v Moffatt and Nichols, 2d Civil No. B253421, the California Court of Appeals found that an engineer did not owe a supplier a duty of care and therefore dismissed the supplier’s cross-complaint.  The course followed the lead of Beacon[1] by applying the Biakanja [2] factors to determine whether a duty existed.

Certainly, the ruling would seem to provide protection to engineers from direct actions brought by contractors and suppliers.  However, as with Beacon itself, the application of the Biakanja factors make it difficult to develop hard fast rules.  While designers would like to argue that they do not owe contractors a duty of care when producing their design, this case will not be particularly helpful.

In State Ready Mix, Moffatt & Nichols did not develop the concrete mix design but only reviewed it for the benefit of the project manager.  More importantly, State Ready Mix produced a non-conforming concrete and failed to test the concrete to make sure it met the specification.  These two factors weighed heavily in the courts analysis.  This decision will be of little value in an instance where the contractor attempts to sue a design professional alleging that the designer’s work caused the contractor increased costs.  The application of Beacon to this scenario and other common situations will be looked at in depth during a panel discussion at West Coast Casualty’s Construction Defect Seminar in Anaheim, California, May 14 & 15, 2015.


[1] Beacon Residential Community Assn. v. Skidmore, Owings & Merrill (2014) 59 Cal.4th 568
[2] Biakanja v. Irving (1958) 49 Cal.2d 647

After Beacon: Use of Indemnity Provision in Conjunction With Limitation of Liability Clause

Design professionals in California have often used limitation of liability clauses as an effective risk transfer technique.  Given that a third-party plaintiff’s recovery is not capped by the limitation clause in a contract between the design professional and the developer, we have made it a practice to recommend to our clients that, in addition to the limitation, they attempt to negotiate an indemnity provision in which the owner indemnifies the design professional for any judgment in excess of the limitation of liability.

Even where developers are willing to agree to a limitation of liability provision, they often resist also including indemnification for any judgment in excess of the limitation of liability.   However, the July 3 Supreme Court of California ruling in Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP highlights the purpose of an indemnity provision.

For the limitation to be truly effective, the indemnification agreement is necessary.  In the residential context, the developer is strictly liable for design errors.  Therefore an indemnification agreement only confirms that the developer will be responsible for the design exposure above the limitation of liability.

Design professionals should use the Beacon case as an opportunity to explore the risk transfer inherent in a limitation of liability with their clients and hopefully convince them of the appropriateness of using an indemnity provision in conjunction with a limitation of liability.