When you’re working on a construction deal in Arizona, understanding the fine print matters—especially when it comes to indemnity clauses. At Degnan Horne, PLLC, we see plenty of contracts where indemnification language either protects clients well or creates unexpected liability. This article walks through what indemnity clauses are, why they matter in construction, what counts as a fair clause, where the risk lies, and how to safeguard your position in Arizona.
What Is an Indemnity Clause?
An indemnity clause is a contractual provision under which one party (the indemnitor) agrees to reimburse or “hold harmless” another party (the indemnitee) for certain losses, liabilities, or expenses. Essentially, one party shifts the risk to another. This can include claims, legal fees, damages, or other losses arising from the work.
In construction contracts, indemnity clauses often require subcontractors or contractors to indemnify owners, general contractors, or other parties for claims arising out of the work.
At Degnan Horne, we emphasize that an indemnity clause isn’t just boilerplate—it can determine who pays for risk and when. Missed nuance here can result in significant exposure.
Why Indemnity Matters in Construction Contracts
Construction projects are inherently risky: delays, defects, property damage, personal injury, change orders, and regulatory compliance are all potential sources of liability. A contract that clearly allocates those risks helps avoid disputes later. Indeed, our firm often reminds clients that construction contracts in Arizona should include insurance requirements and indemnification language to manage potential losses.
An indemnity clause can protect one party from claims that would otherwise target them, even when that party acted negligently. That’s what makes them powerful—and potentially dangerous. Contractors and subcontractors, in particular, should review the wording of indemnification clauses carefully and early.
What a Fair Indemnity Clause Looks Like
So what does fairness look like when it comes to indemnity? Here are key features to aim for:
- Trigger tied to your work or fault: A fair clause restricts the indemnity obligation to losses arising from the indemnitor’s work, acts, or omissions. For example: “to the extent caused by Contractor’s negligent acts or omissions.”
- Property damage or bodily injury only: Industry-standard contracts often limit indemnity to bodily injury or tangible property damage other than the work itself.
- Comparative fault language: A fair clause acknowledges that if the indemnitee is also at fault, its liability may be reduced. This is sometimes termed “comparative indemnity.”
- Limits on defending the indemnitee’s own negligence: Especially in Arizona, anti-indemnity statutes restrict or void provisions that attempt to require indemnification for the indemnitee’s sole negligence.
- Clarity and specificity: The intent to indemnify for another’s negligence must be spelled out clearly and unequivocally. Vague language could lead to enforcement issues.
When your contract includes an indemnity clause with these features, you’re more likely to have a balanced agreement.
What Counts as a Risky Indemnity Clause
On the flip side, here are red flags to watch for:
- Broad form indemnity: An indemnitor agrees to hold harmless the indemnitee even for losses caused solely by the indemnitee’s negligence. That is extremely risky and often unenforceable under Arizona law.
- Language that shifts all risk regardless of fault: Phrases like “any and all claims arising out of or in connection with the work” can place huge unanticipated burdens on one party.
- Obligation to defend for the indemnitee’s acts: If the clause makes you defend the other party (including for their negligent work), you may incur costs far beyond what you anticipated.
- Indemnification for intangible losses or speculative damages: Clauses covering “loss of use,” “business interruption,” or “economic loss” can go beyond what insurance typically supports.
- Flow-down clauses without review: When you work as a subcontractor, the general contractor and owner may require you to provide indemnity—but if you lack control over design, safety, or oversight, you take on unfair risk.
- No insurance alignment: If your insurance doesn’t cover the risk you’re asked to indemnify, you have a gap. A clause that goes beyond what your coverage supports creates danger zones.
These kinds of clauses may expose you to liability you never budgeted for—so spotting them early is crucial.
Arizona-Specific Rules You Must Know
Since your contract is governed by Arizona law (or you’re working in Arizona), here are some important statutory rules:
- Under Arizona law, for contracts involving a dwelling, any clause that purports to indemnify for the promisee’s (indemnitee’s) negligence is void.
- On public construction projects, Arizona statutes prohibit indemnification for the promisee’s negligence altogether.
- These rules mean that even if your contract says “to the fullest extent permitted by law,” you still need to check carefully whether the clause attempts to indemnify for the other party’s negligence. If so, it may be void or limited.
Therefore, especially in Arizona, it is critical to align indemnity clauses with local statute and not assume one-size-fits-all.
Practical Steps to Protect Your Interests
Here’s how to make sure your indemnity exposure is fair and manageable:
- Review the indemnity clause early: Before you sign the contract, check the indemnitor/indemnitee roles, trigger events, scope of losses, and whether there’s any attempt to indemnify for the other party’s negligence.
- Negotiate narrower scope: If you’re asked to indemnify broadly, seek language that limits your obligation to work you control, to your negligence, and to the work performed.
- Align insurance and indemnity obligations: Confirm your insurance covers your indemnity commitments (e.g., additional insured, defense coverage, etc.). Don’t accept a clause your policy cannot back up.
- Track flow-down obligations: As a subcontractor, ensure that the indemnity and insurance you provide match what you are given, and be wary of accepting upstream risk without upstream control.
- Use clear wording: Make sure the contract clearly states the indemnity trigger, scope, and limitations rather than vague “any loss” language.
- Consult experienced counsel: At Degnan Horne, we regularly help Arizona owners, contractors, and subcontractors evaluate and negotiate indemnity language in construction contracts. Contract review before obligations arise is far cheaper (and less stressful) than dealing with unintended liability later.
Protecting Your Construction Contract Strategy
When you negotiate or draft a construction contract in Arizona, treat indemnity clauses as risk-allocation anchors—they define who pays what when things go wrong. At Degnan Horne, we advise clients to treat these clauses with the same attention given to scope of work, insurance, payment terms, and dispute resolution.
By adopting clear, fault-based indemnity language, aligning insurance coverage, and understanding Arizona statutory limits, you give your construction project stronger protection and fewer surprises.
If you or your team need a contract review, negotiation, or draft that addresses indemnity, insurance, and broader construction risk, feel free to reach out.
Smart Risk Management for Arizona Builders
Indemnity clauses are far more than legal boilerplate—they shape the financial and operational risk profile of your project. A fair clause reasonably limits and aligns liability; a risky clause poorly shifts cost and opens you to exposure. In Arizona, statutory regulations add an extra layer of complexity.
The attorneys at Degnan Horne bring deep construction-law experience and can help you assess whether an indemnity clause is fair, enforceable, and strategically sound. Contact us today for a consultation and make sure your contract serves your interests—not the other way around.
