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Florida Supreme Court Finds Chapter 558 Construction Defect notice is a

On Behalf of | Jan 5, 2018 | Insurance Claims |

Last month, the Florida supreme court in the case of Altman Contractors, Inc., v. Crum and Forster Specialty Insurance Company, held that the Florida Statute Chapter 558 pre-suit notice was a “suit” under an insurance policy provision defining “suit” as “any other alternative dispute resolution proceeding.”

This ruling could have a significant impact on the construction defect pre-suit process.  Chapter 558 was instituted to encourage claimants and contractors to settle claims for construction defects without resorting to litigation.  This process is an alternative form of dispute resolution that is designed to get the parties to resolve construction defects through a negotiated settlement or voluntary repairs without ever having to file a lawsuit.

By designating the chapter 558 pre-suit notice as a “suit” as defined in this particular policy, an insurance company presented with such a notice by its insured contractor would have a duty to defend the claim on behalf of a contractor.  However, this ruling does not automatically mean that an insurance company would be responsible for making payments towards, or requiring repairs of, alleged defective construction.

The contractor of course would still have to decide whether it is in its best interest to involve its insurer at the pre-suit notice stage.  On the one hand, a contractor who advises his insurance company of the receipt of a construction defect notice runs the risk of skyrocketing premiums or being dropped by its insurance company altogether.  However, failing to do so might jeopardize the contractor’s ability to avail itself of its insurance benefits if the construction defect claim ever makes its way into the courts for litigation.

I would also expect that insurance companies will begin to rewrite their definition of the term “suit” or “claim” within their insurance policies in order to eliminate their obligation to provide the defense or indemnity of pre-suit construction defect claims.

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin