The answer to this certified question could profoundly impact the number of construction defect lawsuits filed in Florida, as well as the availability and price of CGL insurance for contractors. If a 558 notice is not a suit triggering a duty to defend, those in the construction industry might decline meaningful participation in the 558 process, and instead invite litigation in order to secure their insurer's contribution. On the other hand, imposing a duty on insurers to defend during the Chapter 558 process would necessarily involve a significant outlay of attorney's fees and costs, potentially driving up premiums in the process.
Surprisingly, in the 13 years since Chapter 558 was enacted, no Florida court has addressed the issue of whether the initiation of its notice and repair process constitutes a "suit" under a CGL policy, thereby triggering the duty of the insurer to defend. In recognition of the significance of this issue, the 11th Circuit, in Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company, recently certified the following question to the Florida Supreme Court:
"Is the notice and repair process set forth in Chapter 558 of the Florida Statutes a "suit" within the meaning of the CGL policies issued by C&F to ACI?"
This question arose from Altman's appeal of a District Court decision that the Chapter 558 process was not a "suit" within the unambiguous meaning of the policy issued by Crum to Altman. The District Court first noted that Chapter 558 contained no statutory bar to defense and coverage of 558 proceedings and, as such, proceeded to focus on the language of the subject insurance policy. Particularly, the District Court relied largely upon definitions contained in Black's Law Dictionary and its understanding of the 558 notice and repair process as a "mechanism" and not a "proceeding." The statute guided parties to enter into discussions about possible resolution, but did not provide for the parties to appear before anyone to assist with the process, or result in a decision or delineation of their respective rights and remedies. Of note, the relevant policy provisions were taken from ISO forms, such that most carriers, not just Crum, would be affected.
Justice Jordan of the 11th Circuit wrote that they were "not as sure" as the District Court on the unambiguous nature of the policy, noting that its definition of "suit" included "[a]ny other alternative dispute resolution proceeding." In that regard, there were "reasonable" arguments presented by both sides as to whether the Chapter 558 process constituted a "suit" within the meaning of the CGL policy issued by Crum. He also noted foreign authority holding that other states' statutory notice and repair processes (such as California's Calderon process and Colorado's Defect Action Reform Act) were "suits." However, unlike Chapter 558, which is silent in that regard, the parallel California statute specifically states that initiation of the Calderon process triggers obligations under an insurance policy as if a Complaint had been filed in state court.
Obviously, there are intertwined issues of public policy, statutory construction and policy interpretation at play. Regardless of the direction the Court rules, the decision will have huge implications in Florida as it relates to construction defect litigation. At issue are fees and costs incurred in the defense and resolution of claims which have not matured to a Complaint, and the efficiency of the 558 mechanism in resolving disputes pre-suit. We will monitor the Supreme Court's response, which is anticipated within the next six months, and update accordingly.