In Florida, a homeowner, or other claimant, such as a condominium or homeowner’s association, that has suffered property damages resulting from construction defects is required to engage in a pre-suit dispute resolution process under Chapter 558, Florida Statutes (the “558 process”). According to the Florida legislature, the 558 process was created as an alternative method to resolve construction disputes that would reduce the need for litigation as well as protect the rights of property owners. In reality, the 558 process has not been particularly effective in resolving construction defects over the years. Instead, the claimant and contractors usually go through the required motions so that they can proceed to litigation or arbitration. In the author’s experience, the 558 process consistently met this fate because contractors and subcontractors could not obtain insurance coverage for the costs and potential exposure of claims until a lawsuit was actually filed.
Insurance coverage for the 558 process, however, appears to now be a question of the past. In Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., the Altman court’s analysis focused heavily on the Florida legislature’s declaration that the 558 process was an alternative method of resolving construction disputes and compared such declaration to Altman’s CGL policy language, which provided that a “suit” included “any other dispute resolution proceeding.” Based upon the plain language of the CGL policy, the Altman court found that the 558 process was a “suit” within the meaning of a commercial general liability (“CGL”) policy issued by Crum & Forster to Altman Contractors. As such, depending upon the language of the CGL policy, an insurance company may have a duty to defend its insured during the 558 process.
As a result of the Altman decision, claimants, contractors, and subcontractors now have important decisions to make while engaging in the 558 process. For claimants, it appears important that any 558 notice of claim include (1) a very detailed description of the construction defects; (2) list any damage to other portions of the claimant’s property that were damaged by the construction defects – not just the construction defects themselves – to not only ensure insurance defense, but potentially insurance indemnification during the 558 process; and (3) send a copy of the 558 notice of claim to the contractor’s insurance company reflected in the Certificate of Insurance provided at the outset of work. For contractors and downstream parties, it appears important that they provide a copy of the 558 notice of claim to its insurer immediately upon receipt (1) to avoid an argument that the contractor waived its rights to insurance coverage; (2) to prevent insurance coverage defenses, such as failure to give timely notice of claims or failure to obtain the insurance company’s consent to participating in the 558 process; and (3) to ensure insurance coverage during the 558 process.