Advise & Consult, Inc. | September 9, 2015
Construction defect notices under Chapter 558 of the Florida “notice and repair’ statute, “does not constitute a ‘civil proceeding’” and thus “is not a ‘suit’” triggering an insurer’s duty to defend as ruled on in Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., No. 13–80831–CIV, 2015 WL 3539755 (S.D. Fla. June 4, 2015). This question of what constitutes a “suit” under the right-to-repair statute for construction defect disputes was therefore answered – at least for now.
In further explanation the court said that Chapter 558 provides a ‘mechanism’, not a ‘proceeding’ under which a ‘property owner can assert a claim for construction defects against a contractor’. Chapter 558 is a process for which the two parties are thereby encouraged to find a way to settle. For a ‘civil proceeding’ to occur, there must be some kind of forum with a decision maker involved. Chapter 558 has not enforcement, adjudication, or administration of rights, remedies, laws or regulations. So, in this case, the construction defect notice involved no forum or decision maker, and therefore, failed to trigger any insurance coverage or duty to defend under Altman’s commercial general liability (CGL) policies.
Altman has since appealed and is claiming that Chapter 558 is a civil proceeding, and therefore a ‘suit’, because it “is a required first step in any construction defect litigation” and “is undisputedly part of a larger action and a ‘civil proceeding[.]’” Another area of dispute is that Altman feels that the court erred in relying on the definition of ‘civil proceeding’ from the 10th edition of Black’s Law Dictionary, which was not in publication at the time the policies were in effect. The 10th edition of Black’s defines “civil proceeding” as “‘[a] judicial hearing, session, or lawsuit in which the purpose is to decide or delineate private rights and remedies, as in a dispute between litigants in a matter relating to torts, contracts, property, or family law.’” (Altman, at *6.)
This court decision is in line with decisions on right-to-repair rulings in Hawaii and Nevada, while California and Colorado are found to be in disagreement with similar statutes.
The court also ruled that Chapter 558 does not trigger a duty to defend by the insurer, but noted legislative history in that a 558 notice does trigger an insured’s duty to notify its liability insurer of the claim. Id. at *4.
As we await the appeals ruling, we can contemplate the importance of this ruling to insurers questioning when insurance coverage is triggered outside of a formal proceeding beginning in a court of law.