23.10 Indemnification and Tender of Defense

• Jurisdiction: Arizona

23.10 Indemnification and Tender of Defense. Any entity in the chain of distribution of a product may be joined as a defendant to a product liability action, including those that had done nothing to render the product defective or unreasonably dangerous.¹⁶³ Under the common law, such “innocent sellers” could seek indemnification from the manufacturer of a defective product for any judgment rendered against the seller for injuries caused by that product.¹⁶⁴

The common law remedy required the seller to “vouch in” the manufacturer by providing timely and sufficient notice of the lawsuit against the seller, and by tendering defense of the action to the manufacturer.¹⁶⁵ The Litton court described a valid tender of defense as one that contains (1) full and fair information regarding the pending action; (2) an unequivocal demand to undertake the defense thereof; and (3) an offer to surrender control of the defense at least as to that portion of the claim for which the seller seeks to hold the manufacturer liable. The notice should be given as soon as possible following the filing of the underlying lawsuit so as to permit complete control of the pretrial proceedings by the manufacturer. Where parties had engaged in months of discovery, including voluminous interrogatories, and the deposition of the plaintiff and other witnesses, a tender of defense made 20 months after the suit was first filed was considered insufficient as a matter of law.¹⁶⁶ This result was upheld even though the manufacturer had received pre-suit notice of the plaintiff’s claim.

With enactment of A.R.S. § 12-684 , the Arizona legislature codified the seller’s substantive rights of defense and indemnification from the seller:

A. In any product liability action where the manufacturer refuses to accept a tender of defense from the seller, the manufacturer shall indemnify the seller for any judgment rendered against the seller and shall also reimburse the seller for reasonable attorneys’ fees and costs incurred by the seller in defending such action, unless either paragraph 1 or 2 applies:

1. The seller had knowledge of the defect in the product.

2. The seller altered, modified or installed the product, and such alteration, modification or installation was a substantial cause of the incident giving rise to the action, was not authorized or requested by the manufacturer and was not performed in compliance with the directions or specifications of the manufacturer.

Indemnification is available under the statute to sellers of both new and used products.¹⁶⁷ The statute does not purport to change the common law regarding the form and content of a proper tender of defense.¹⁶⁸ However, it is customary to forward a copy of the complaint to the manufacturer, and to cite or quote A.R.S. § 12-684 within the tender of defense. Where the manufacturer did not formally respond to the seller’s tender of defense in Bridgestone/Firestone, it was held to have refused that tender.

A.R.S. § 12-684 is intended to place burden and costs of defending products on their manufacturers, who are best situated to detect, control or prevent...