Dwarven Infantry hit each other when enemy units walk around or through their battalion's center, and is exacerbated when clumps of units engage eachother and is especially noticeable when enemy battalions walk through your own. Vault Wardens however seem to do friendly fire damage regardless of positioning, and although it's not included in the video, Dain Ironfoot's splash damage axe also does friendly fire damage.
I've tested Dale/Laketown and the Iron Hills units and they don't seem to share this bug.
Details of video are in desc, such as the method to prevent the Orc Warriors from attacking, or which units are bugged.
Map played: Fords of Isen II
Factions played: Mordor and Erebor