The 11th posed this certified question to the Florida Supreme Court:
Is the notice and repair process set forth in chapter 558, Florida Statutes, a “suit” within the meaning of the commercial general liability policy?The Court, in Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., No. SC16-1420, 2017 WL 6379535, at *1 (Fla. Dec. 14, 2017), answered yes, Chapter 558 defect notice is a suit for purposes of CGL coverage. As such there insurer had a duty to defend. The holding has potential implications for insurers in other states that subscribe to similar defect notice schemes or rights to repair. See, e.g., Cal. Civ. Code §§ 895 et seq.; Colo. Rev. Stat. § 13-20-801 et seq.; Tex. Prop. Code. Ann. §§ 27.001 et seq. There are upwards of 30 states nationwide.
First of all, what is Fla. Stat. chapter 558? In Florida, before suit can be commenced by any owner claiming that a construction defect exists, the owner must follow a certain notice and response procedure. Basically the owner must give notice to the contractor or design professional of the alleged defect. Then those receiving notice provide notice to any lower-tier subcontractors that may have responsibility for the defect in question and all recipients can respond to the owner. If the owner does not receive adequate responses, it then can file suit. The legislative findings specifically identified this process as an "alternative dispute resolution mechanism" such that the inspections involved and any findings or settlement offers made as a result of the inspections become inadmissible if there are future proceedings.
Under the CGL policy, the insurer has the "right and duty to defend the insured against any 'suit' seeking those damages [of personal or property damage]." The definition of a "suit" is a "civil proceeding in which damages . . . to which this insurance applies are alleged." It also includes "an arbitration proceeding . . . to which the insured must submit or does submit with our consent" or "any other alternative dispute resolution proceeding . . . to which the insured submits with our consent."
Therefore, the question was whether Fla. Stat. ch. 558 notice is a "suit." The Court analogized the notice to "other alternative dispute resolution proceeding" (especially given the legislative history) and confirmed it was indeed a suit. The issue of insurer "consent" was a hurdle that the Court did not need to cross in the decision. The Court observed that "whether [the insurer] consented to [the general contractor's] participation in the chapter 558 process . . . is outside the scope of the certified question and an issue of fact disputed by the parties."
The author, Katharine Kohm, Esq. is a committee member for The Dispute Resolver. She is an associate at Pierce Atwood, LLP in Providence, Rhode Island. Katharine thanks Anthony Lehman, Esq. of Hudson Parrott Walker in Atlanta, Georgia for his input on this post.