Last week, the Florida Supreme Court held that a Chapter 558 notice of construction defect constitutes a “suit” under a commercial general liability (“CGL”) policy sufficient to trigger the insurer’s duty to defend. The opinion can be found here, and our prior blog posts on this case here and here.
In 2012, Altman was served with several Chapter 558 notices of construction defect claims relating to work on a condominium project. Altman notified its insurer of the Chapter 558 notices; however, the insurer denied a defense and coverage, asserting that the Chapter 558 notices did not constitute a “suit” sufficient to trigger its defense obligations. The applicable policies defined “suit” as a “civil proceeding” including “[a]ny other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.”
Answering a certified question from the Eleventh Circuit Court of Appeals, the Florida Supreme Court held that the Chapter 558 process did not constitute a “civil proceeding” within the definition of suit, but that the Chapter 558 process is clearly an “alternative dispute resolution” for “damages” sufficient to trigger the insurer’s defense obligations. The Court did not reach the issue of whether the insurer had “consented” to Altman’s submission to the Chapter 558 Process.
Overall, the decision is a victory for construction industry policyholders. The Court’s holding is consistent with the legislature’s intent of resolving construction disputes without the need for litigation as it encourages insurers to participate in this process. However, because the Court did not reach the consent issue, policyholders should be cautioned to obtain consent in writing to their participation in the Chapter 558 process and any resulting settlement so as to avoid further coverage disputes where their policy contain the same consent language. If the insurer withholds consent, construction industry insureds may nonetheless be forced to not respond and wait for the claimant to file suit so as to trigger coverage under the policy—a process that will needlessly increase litigation costs for all parties and thus undermine the legislative intent in enacting Chapter 558.