Jason D. Salvin | Daily Business Review | June 9, 2017
On May 12, 2003, I took a leap of faith and left my job working for one of the nation’s leading general contractors to join the legal profession. Eight days later, the Florida Legislature presented then-Gov. Jeb Bush with a revolutionary bill intended to reduce litigation associated with construction and design defects claims in Florida state courts. The bill was approved by the governor a few days later, became effective on May 27, 2003, and is now commonly known in the construction industry as Chapter 558.
The original 2003 version of Chapter 558, aptly categorized as a notice and opportunity-to-cure statute, contains a legislative finding and declaration preamble in the first section (558.001) that sensibly states an effective alternative dispute resolution, or ADR, process in certain construction defect matters should involve the claimant filing a notice of claim with the builders, suppliers or designers that the claimant asserts are responsible and should provide them with an opportunity to resolve the claim without resort to further legal process.
By way of example of the firestorm of controversy and competing interests that erupted almost immediately after the inception of Chapter 558, the modest single sentence premise included in the preamble of Section 558.001 was modified by the Florida legislative body in 2004, 2006 and 2015.
The modified findings and declaration preamble included in the latest version highlight and perhaps clarify the Legislature’s intended or revised goals of reducing the need for litigation, protecting the rights of property owners, including the insurers of the accused in the Chapter 558 ADR process and specifying “confidential settlement negotiations” as part of the required “opportunity to resolve the claim.”
I can say with confidence that it appears the world has been polarized into two passionate groups: those who believe Chapter 558 works and would like to see it further refined, and those who don’t think Chapter 558 is necessary and would like to see it abolished. In my experience, critics and supporters who have dealt with Chapter 558 matters generally seem to agree that in most instances, it is beneficial to engage legal counsel as part of the Chapter 558 process in light of the risks and potential rewards inherent in the process.
Generally speaking, the simple premise of Chapter 558 to enact a fair and beneficial notice and opportunity-to-cure process has grown more complex and controversial with each iteration, and appears to be correspondingly more politically charged as the risks and rewards for the participants and nonparticipants becomes more apparent.
More Modifications
If history is indicative of future events, Chapter 558 will continue to evolve, and Florida’s immense condominium association and property management industries, contractor, supplier/manufacturer, design professional industries, and insurance and surety industries will be watching closely and, in certain instances, lobbying for further modifications to Chapter 558 and perhaps even its repeal.
The original version was revised on average of once every two years. Notwithstanding the six prior amendments, at the close of the legislative session in May, two bills which contain significant controversial changes to Chapter 558 died in committee. More specifically, Senate Bill 1164 and House Bill 1271 contained proposed changes to subsections 1, 2, 3, 7 and 10 of F.S. 558.004, including the following examples:
• Requirement for a claimant to personally sign the notice of claim, as opposed to having the notice of claim signed by the claimant’s counsel or claimant’s consultant(s);
• Requirement in the House bill for a claimant and any experts retained by the claimant concerning the claim, to be present at the Chapter 558 inspection[s] to identify the location of the alleged construction defects. The Senate bill includes a similar requirement except that it allows the claimant’s agent(s) to attend in the claimant’s place;
• Requirement that the person who is served with the notice of claim by the claimant must forward it to each contractor, subcontractor, supplier, or design professional that person who was served reasonably believes is responsible for each defect specified in the notice of claim. The current version of Chapter 558 (2015) states that the person “may serve” other entities/persons; and
• Requirement that the claimant personally sign any rejection of an offer properly served pursuant to Chapter 558, and that prior to such rejection, the claimant must serve a written demand for mediation on the person who made the offer. Unless mediation is waived by the offeror, it must take place within 20 days of the demand. Additionally, the claimant’s demand for mediation must explain why the claimant considers the offer to be inadequate.
As Florida’s next wave of construction and design defect claims approaches, Chapter 558 remains the law of the land, and it is imperative for property owners, associations, developers, designers, contractors, subcontractors, suppliers, insurers and others to understand the risks, potential rewards and the proposed legislative modifications to sensibly allocate resources and plan for the future.