Assigned to COMPS & JUD FOR
COMMITTEE
Assigned to COMPS & JUD FOR
COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
construction contracts; indemnification; liability provision
Purpose
Limits indemnity agreements in private construction contracts.
Background
In construction contracts for public buildings or improvements, current law only allows a contractor, subcontractor or design professional to indemnify itself from liabilities, damages, losses, costs, attorney's fees and court costs (liabilities) resulting from the negligence, recklessness or intentional wrongful conduct of the performing subcontractor or design professional. Design professional services includes architect services, engineer services, land surveying services, geologist services and landscape architect services (A.R.S. § 34-226). Current law also voids any clause in a construction contract or subcontract that purports to indemnify, to hold harmless, or to defend the contractor of, from or against liability for loss caused by its own negligence (A.R.S. § 41-2586).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Limits provisions indemnifying a contractor, subcontractor, architect or engineer (contractor) from liability in contracts for private buildings or improvements to only the extent caused by the negligence, recklessness or intentional wrongful conduct of the performing contractor, subcontractor, architect or engineer (subcontractor).
2. Prohibits a contractor from requiring a subcontractor to defend, indemnify, insure or hold harmless the contractor, except for liabilities caused by the subcontractor's own negligence, recklessness or intentional, wrongful conduct.
3. Exempts the following construction-related agreements from limited indemnification:
a) agreements for indemnification of a surety on a payment or performance bond;
b) agreements between an insurer under an insurance policy and its named insureds; and
c) agreements between an insurer and its insured under a single insurance policy for a defined project or workplace, provided the agreement does not excuse the insurer's duty to defend, indemnify and pay on behalf of its insureds or require the insured to indemnify another insured beyond liabilities caused by negligence, recklessness or intentional wrongful conduct.
4. Clarifies that a construction contract includes actual and proposed agreements, including agreements for any structure, street, roadway or appurtenance.
5. Applies the indemnity limitation to only contracts executed or amended after the general effective date.
6. Applies Board of Technical Registration definitions for architect and engineer professional.
7. Contains a legislative intent clause.
8. Makes technical and conforming changes.
9. Becomes effective on the general effective date.
Prepared by Senate Research
February 1, 2018
GH/lb