Cozen O’Connor: Newly Paved Path for Asserting Construction Defect Claims in Florida [Commercial Litigation Alert]

Newly Paved Path for Asserting Construction Defect Claims in Florida

Commercial Litigation Alert

September 15, 2015

Florida Governor Rick Scott signed HB 87 into law, codified at ch. 2015-165, which amends the notice and opportunity to cure provisions of Chapter 5581, Florida’s Construction Defect Statute. These amendments will go into effect on October 1, 2015 and will reshape the landscape of construction defect litigation in Florida. The amendments seek to further streamline the claim presentation and evaluation process at both ends. From the property owners’ side, the amendments aim to fortify the strength of their construction defect claims by requiring property owners to provide concrete details of the alleged construction defects. This, in turn, provides the construction professionals with more detailed and requisite information of the alleged defects, which allows the construction professionals to assess more fully the alleged construction defects. Overall, these amendments seek to further the intended public policy purpose of Chapter 558, which is to provide an alternative dispute resolution mechanism and result in fewer lawsuits and lower litigation costs incurred by parties involved in construction defect matters.

The Florida Legislature has inserted the following amended language:

Section 558.001 is amended to include a provision that the insurer of the contractor, subcontractor, supplier or designer responsible for the alleged defect should also be provided an opportunity to resolve a claim “through confidential settlement negotiations.”

Section 558.002(4) contains an amended definition of “completion of a building or improvement” to provide that the issuance of a temporary certificate of occupancy qualifies as “completion of building or improvement.”2

Section 558.004(1)(b) states that “the notice of claim must identify the location of each alleged construction defect sufficiently to enable the responding parties to locate the alleged defect without undue burden. The claimant has no obligation to perform destructive or other testing for purposes of this notice.” Such identification must be based upon a visual inspection.

Section 558.004(4) is amended to provide that the contractor's response to the notice of claim must be in writing and must include at least one of the responses already provided for in section 558.004(5)(a)-(e)3 as chosen by the responding party with all of the information required for that statement.

Section 558.004(13) has a seven word amendment – “unless the terms of the policy specify otherwise” – which echoes the reasoning set forth in Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co.¸ No. 13-80831-CIV, 2015 WL 3539755 (S.D. Fla. June 4, 2015). In Altman, the court rejected the argument that an insurer has a duty to defend and indemnify an insured who received a Chapter 558 Notice of Claim. Relying explicitly on the policy language in that case, the court determined that a notice of claim did not trigger the insurer’s duty to defend and indemnify despite the policy defining “suit” as “any other alternative dispute resolution proceeding.” In the dicta, the court cautioned insurers that despite the absence of an obligation to defend a notice of claim, it may be prudent for insurers to exercise the right to investigate a potential construction defect claim in order to be poised to defend the insured in the event that litigation ensues.

Section 558.004(15) is amended to expand the scope of supporting information that should be provided by a claimant. Specifically, it lists videos or photographs of the alleged construction defect identified in the notice of claim. Also, maintenance records and other documents related to the discovery, investigation, causation and extent of the alleged defect identified in the notice of claim and any resulting damages are included in the scope of supporting documentation in asserting a construction defect claim.

The amendments to the notice and opportunity to cure provisions of Chapter 558 promise to streamline the clogged-up manner in which construction defect cases are currently litigated. These amendments will force complaining parties to make more concrete claim submissions, and responding parties to make better, more informed decisions about remediating or settling before denying a claim.

The law also amends §§ 718.203 and 719.203, Florida Statutes, conforming provisions to the changes in the Chap. 558 amendment.

2 The “completion of a building or improvement” definition was amended in §§ 718.203(3) and 719.203(3), related to warranties for condominiums and cooperatives for purposes of consistency.

3 Section 558.004(5)(a)-(e) states as follows:

(5) Within 45 days after service of the notice of claim, or within 75 days after service of a copy of the notice of claim involving an association representing more than 20 parcels, the person who was served the notice under subsection (1) must serve a written response to the claimant. The response shall be served to the attention of the person who signed the notice of claim, unless otherwise designated in the notice of claim. The written response must provide:

(a) A written offer to remedy the alleged construction defect at no cost to the claimant, a detailed description of the proposed repairs necessary to remedy the defect, and a timetable for the completion of such repairs;

(b) A written offer to compromise and settle the claim by monetary payment, that will not obligate the person’s insurer, and a timetable for making payment;

(c) A written offer to compromise and settle the claim by a combination of repairs and monetary payment, that will not obligate the person’s insurer, that includes a detailed description of the proposed repairs and a timetable for the completion of such repairs and making payment;

(d) A written statement that the person disputes the claim and will not remedy the defect or compromise and settle the claim; or

(e) A written statement that a monetary payment, including insurance proceeds, if any, will be determined by the person’s insurer within 30 days after notification to the insurer by means of serving the claim, which service shall occur at the same time the claimant is notified of this settlement option, which the claimant may accept or reject. A written statement under this paragraph may also include an offer under paragraph (c), but such offer shall be contingent upon the claimant also accepting the determination of the insurer whether to make any monetary payment in addition thereto. If the insurer for the person served with the claim makes no response within the 30 days following service, then the claimant shall be deemed to have met all conditions precedent to commencing an action.

 


Authors

Jeffrey Gilbert

Member

jgilbert@cozen.com

(305) 704-5952

Related Practices


Related Industries

To discuss any questions you may have regarding this Alert, or how it may apply in your particular circumstances, please contact Jeffrey Gilbert at jgilbert@cozen.com or (305) 704-5952.