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Is the Mandatory Notice Process in Chapter 558, Florida Statutes, A “Suit” Within the Meaning of a Particular Commercial General Liability Policy?

December 28, 2017

The answer to this certified question (from the 11th Circuit to the Florida Supreme Court, Altman vs. Crum & Forster (“C&F”), SC16-1420) directly impacts Florida construction defect lawsuits and the cost of insurance. If a 558 notice (a mandatory pre-suit notice requirement in Florida expressly designed to provide a voluntary opportunity to resolve a construction defect claim “through confidential settlement negotiations without resort to further legal process”) is not a “suit” triggering a defense, then those in the construction industry (builders, contractors, design professionals, etc.) might decline the pre-suit alternative dispute resolution process. As the 558 notice is intended to avoid litigation, this course of action would instead actually invite costly litigation in order to secure a defense under an insurance policy, and defending a lawsuit would necessarily involve costly attorneys’ fees (not good for the insurer), and potentially drive up premiums (not good for the insured) – a lose-lose situation. Both insured and insurer fought over policy and legal definitions, along with legislative intent and insurer consent, during contested oral arguments on April 6, 2017, before Florida’s Supreme Court. On December 14, 2017, the Court issued its highly-anticipated opinion.

In short, the Florida Supreme Court found that C&F’s definition of “suit” in its policy included “alternative dispute resolution proceeding,” which is expressly what Chapter 558 provides. However, in doing so, the Court rejected that the 558 pre-suit notice is a civil “suit” or “civil proceeding,” and instead found that it could be an “alternative dispute resolution proceeding” – if the insurer consents to the insured’s participation (as required under C&F’s policy). The Court found that C&F’s consent was not before the Court and, therefore, did not address that issue. The case was decided on the facts before the Court, and the holding is based on the language and definitions contained in the C&F policy.

The Court’s decision concerning the mandatory 558 pre-suit notice puts the ball squarely into the insurer’s court to participate and/or provide a defense in pre-suit defect cases, depending on the express language in the policy. The decision may be viewed as a positive one for insurers, in that a statutory pre-suit notice for defects does not automatically trigger the duty to defend; at least one concurring Justice is of the view that the statutory process to cure defective work may not be covered at all. The decision is also positive for builders, contractors, and design professionals faced with a 558 notice, in that the decision clarifies the 558 process and affords them a reasoned argument to enforce the insurer’s duty to defend under a particular policy.

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