A real estate developer began development of a townhouse project on a property bordered on one side by a canal. The developer entered into a professional services contract with a surveyor. One of the surveyor’s duties was to prepare a survey identifying boundary lines and rights-of-way. The contract included a limitation-of-liability provision that limited the liability of the surveyor for its sole negligence. The surveyor prepared a survey, but failed to accurately identify a right-of-way owned by the canal’s operator. The surveyor prepared drawings and a final plat based on its erroneous survey. The city refused to issue building permits for the project when the canal’s operator disputed the final plat due to the incorrect depiction of the right-of-way. The developer sued the surveyor for breach of contract and professional negligence, alleging that the surveyor negligently prepared the survey and caused the developer to incur increased costs from delays and additional engineering services.

The trial court granted partial summary judgment in favor of the surveyor, holding that the limitation-of-liability provision was enforceable. The trial court also decided that any damages due to the developer for professional negligence were capped at the amount the developer actually paid to the surveyor pursuant to the contract. On appeal, the appellate court held that Article 18, Section 5, of the state constitution required that the enforceability of the limitation-of-liability provision had to be decided by a jury and the appellate court remanded for jury resolution of the issue.

On appeal, the developer asserted that the limitation-of-liability provision violated state public policy as reflected in statutes such as A.R.S. Section 32-1159 (anti-indemnity statute), which allegedly prohibited enforcement of such provisions. However, the court stated that the statute did not declare that limitation-of-liability provisions were unenforceable. While an indemnity or hold harmless provision would have completely insulated the surveyor from liability, the limitation-of-liability provision merely limited liability. In essence, the anti-indemnity statute did not apply because the limitation-of-liability provision did not eliminate the surveyor’s liability.

The court concluded that the limitation-of-liability provision did not violate public policy. Furthermore, the limitation-of-liability provision did not constitute an “assumption of risk” subject to Article 18, Section 5, of the state constitution. Rather than abrogating the surveyor’s duty toward the developer, the limitation-of-liability provision limited the recoverable damages if that duty was breached.

1800 Ocotillo, LLC v. WLB Group, Inc., 196 P.3d 222, 2008 Ariz. LEXIS 203, 542 Ariz. Adv. Rep. 11 (Ariz. 2008).