Arizona Hold Harmless Agreement: Commercial, Dwelling, Public

A hold harmless agreement in an Arizona construction contract is enforceable only within limits set by state statute, and those limits change with the type of project. Three statutes do the work: A.R.S. § 32-1159 for general private construction, § 32-1159.01 for dwelling projects, and § 34-226 for public projects. Each voids indemnity and hold harmless language that tries to shift too much of the promisee’s own fault onto someone else, but each draws the line in a different place. A clause that is perfectly enforceable on a commercial build may be partly or entirely void on a home.

Commercial Private Projects Under § 32-1159

A.R.S. § 32-1159 is the baseline rule for private construction contracts and architect-engineer service contracts in Arizona. It voids any clause that attempts to indemnify, hold harmless, or defend the promisee from liability caused by the promisee’s sole negligence.¹

The operative word is “sole.” If the promisee (usually the owner or general contractor receiving the protection) is 100 percent at fault, no clause can force the promisor to cover that loss. When fault is shared, a well-drafted indemnity clause can still be enforced. Intermediate-form and limited-form indemnity survive on commercial, industrial, and other non-dwelling private work; only broad-form indemnity for the promisee’s sole negligence is struck down.

The statute reaches only private contracts. Agreements involving the state or its political subdivisions are governed by separate law, including § 34-226.¹

Dwelling Projects Under § 32-1159.01

When the contract involves a dwelling, A.R.S. § 32-1159.01 replaces the general rule with a much stricter one. An indemnity or hold harmless clause is void to the extent it covers liability resulting from any negligence of the promisee or the promisee’s employees, subcontractors, consultants, or agents (other than the promisor itself).²

The practical gap between the two statutes is wide. On a dwelling, even a clause that makes a subcontractor indemnify the general contractor for a loss where the general contractor was only partially negligent is void to the extent of that negligence. Enforceable indemnity on a dwelling project is effectively limited to losses the promisor’s own fault caused.

“Dwelling” is defined by reference to A.R.S. § 12-1361, which ties the term to residential construction.² A contractor on a mixed-use development, warehouse, or office building operates under the more permissive § 32-1159. A contractor building homes is under the dwelling rule.

Public Projects Under § 34-226

Public construction contracts fall under A.R.S. § 34-226, and the state has preempted counties, cities, and towns from imposing their own indemnity rules on these projects.³

A contracting agency may require a contractor, subcontractor, or design professional to indemnify and hold harmless the agency and its officers and employees, but only to the extent the loss was caused by the negligence, recklessness, or intentional wrongful conduct of the indemnifying party or those working under them.³ Anything beyond that is void. Subcontracts may require a subcontractor to indemnify both the agency and the prime contractor, subject to the same fault-based limit. The statute does not bar insurance or additional insured requirements, as long as they respect the same limitation.

Defense Clauses Must Track the Promisor’s Work

Subsection D of § 32-1159.01 places a separate limit on contractual defense obligations. A clause in a construction or architect-engineer service contract that requires the promisor to defend the promisee is limited to defending claims that arise out of or relate to the promisor’s own work or operations.²

Without that limit, a general contractor could draft a contract making a plumbing subcontractor defend claims about roofing or electrical work. The statute ties each party’s defense duty to its own scope. A broadly written clause (“Subcontractor shall defend Owner against any and all claims arising from the Project”) is enforceable only to the extent the claim actually relates to the subcontractor’s work. The rest will not stand.

Additional Insured Endorsements on Dwelling Projects

On a dwelling project, an additional insured endorsement does not require the insurer to indemnify the additional insured for that party’s own percentage of fault.² The duty to defend survives in full. The statute expressly preserves the insurer’s obligation to provide a legal defense under the terms of the endorsement, even where the indemnity side is cut back.

A party counting on additional insured status for financial protection on a dwelling job should know that protection is narrower than the endorsement may appear to promise once a claim allocates fault.

Exceptions Written Into the Statutes

Both the general and dwelling statutes include an accommodation exception. When a contractor needs access to a neighboring property, and the owner grants access as an accommodation (the work is not for that owner’s benefit), the contractor can fully indemnify the accommodating owner.²

The dwelling statute also carves out several categories of agreements from its restrictions:

Agreements where a principal or indemnitors indemnify a surety on a payment or performance bond.
Contracts between an insurer and its named insureds under an insurance policy.
Agreements between an insurer and all insureds under a single project-specific wrap-up or controlled insurance program, though such agreements still cannot require one insured to indemnify another beyond the limits of subsections A, B, and C.
Rules or tariffs of a public service corporation approved by the Arizona Corporation Commission.

Agreements between an insurer and additional insureds are also carved out, but remain subject to the fault-based limits in subsections A, B, and C.²

What To Do When Drafting or Signing

On a dwelling project, any hold harmless clause that reaches beyond the promisor’s own negligence is wasted language and can create confusion during a claim. Track the statutory limit: indemnity for losses caused by the promisor’s work, nothing more.

On a commercial private project, there is room to negotiate intermediate-form indemnity, where the promisor covers the full loss as long as the promisor shares some fault. Whether to accept that allocation is a business call, but the clause will hold up.

On a public project, keep indemnity tied to the indemnifying party’s negligence, recklessness, or intentional conduct, and know that no local ordinance can change that baseline.

Defense obligations deserve a separate look. Even outside the dwelling context, keeping each party’s defense duty tied to its own scope of work matches how the law will read the clause anyway. And insurance requirements should be reviewed against the indemnity language, especially on dwelling work, where additional insured coverage will not pay for the additional insured’s own share of fault.

1
Arizona Legislature. Arizona Code 32-1159 – Indemnity Agreements in Construction and Architect-Engineer Contracts Void; Definitions
2
Arizona Legislature. Arizona Code 32-1159.01 – Indemnity Agreements in Construction and Architect-Engineer Dwelling Contracts Void; Definitions
3
Arizona Legislature. Arizona Code 34-226 – State Preemption; Indemnity Agreements in Construction and Design Professional Services Contracts Void; Definitions