Insurers and policyholders continue to debate the age-old question vital to the determination of insurance coverage – what triggers the insurer’s duty to defend? States are complicating this question by enacting various statutes that provide individuals avenues to remedy disputes and claims outside of, or prior to filing a traditional suit or civil procedure. These statutes have created confusion and disagreements between the insurers and policyholders. Courts are now trying to help insurers’ clarify their obligations under their policies with respect to these statutes.
This issue was recently addressed by the Florida Supreme Court in Altman Contractors Inc. v. Crum & Forster Specialty Insurance Co., No. SC-16-1420, 2017 WL 6379535 (Fla. December 14, 2017). In Altman, the Florida Supreme Court evaluated whether the notice and repair process set forth in chapter 558 of the Florida state statute constituted a “suit” within the meaning of the commercial general liability policy issued by the insurer to the policyholder. Chapter 558, which is titled “Construction Defects”, sets forth certain procedural requirements before a claimant may file an action for a construction defect. The statute requires a claimant to serve a written notice of a claim on the contractor, subcontractor, supplier, or design professional, as applicable before a claimant may file an action for a construction defect.
In this case, Altman Contractors Inc. was the general contractor for the construction of a condominium and was insured by Crum & Forster Specialty Insurance Company on a general liability policy. Under the terms of the policy, Crum & Forster had a duty to defend Altman in any “suit,” as defined by the policy, arising from the project. The policy defined “suit” to mean “a civil proceeding in which damage because of ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ to which the insurance applies is alleged.” The policy further states that “suit” includes arbitration proceedings or any “other alternative dispute resolution” alleging the above-mentioned damages and which the insured must submit to or does submit to with the consent of Crum & Forster. The policy did not otherwise define “civil proceeding” or “alternative dispute resolution proceeding.”
The Florida Supreme Court answered the certified question in the affirmative, holding that the notice and repair process set forth in chapter 558 constituted a “suit” within the meaning of the commercial general liability policy. The Court went on to state that while “the chapter 558 process does not constitute a ‘civil proceeding,’ it is included in the policy's definition of ‘suit’ as an ‘alternative dispute resolution proceeding’ to which the insurer's consent is required to invoke the insurer's duty to defend the insured.”
This case highlights just one issue that can arise when interpreting insurance policies. As case law and statutory law continue to evolve, make sure you re-examine your insurance policies to ensure you are adequately protected.