Recently, the United States District Court for the Southern District of Florida addressed what constitutes a “suit” within the context of Florida’s right-to-repair procedure for construction defect disputes.  In Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., No. 13–80831–CIV, 2015 WL 3539755 (S.D. Fla. June 4, 2015), the district court held that a notice under Chapter 558 of the Florida statutes, the “notice and repair” statute, “does not constitute a ‘civil proceeding’” and thus “is not a ‘suit’” triggering an insurer’s duty to defend under Altman’s Crum & Forster commercial general liability (CGL) policies.

The district court explained that Chapter 558, which “provides a presuit procedure for a property owner to assert a claim for construction defects against a contractor,” constitutes “a ‘mechanism,’ not a ‘proceeding’[.]”   “[F]or something to be a ‘civil proceeding,’ there must be some sort of forum and some sort of decision maker involved.”  “Chapter 558[, however,] has no ‘enforcement,’ no ‘adjudication’ and no ‘administration’ of ‘rights, remedies[,] laws or regulations.’”  That is, “‘Chapter 558 encourages settlement by providing a procedure to lead the parties to the waters of compromise; it does not make them drink.’”  (Id. at *8, quoting Hebden v. Roy A. Kunnemann Const., Inc., 3 So.3d 417, 419 [Fla. 4th DCA 2009]).  Thus, because the construction defect notice involved no forum or decision maker, it failed to trigger any coverage.  The district court’s decision is consistent with a line of California cases holding the phrase “damages” on account of a “suit” refers to “money ordered by a court.”  (Certain Underwriters at Lloyd’s of London v. Superior Court, 24 Cal. 4th 945 [2001].)

Altman has appealed the district court’s decision.  In its opening brief, Altman argues the Chapter 558 process is a civil proceeding, and therefore a “suit,” because it “is a required first step in any construction defect litigation” and “is undisputedly part of a larger action and a ‘civil proceeding[.]’”  Altman further contends the district court “erroneously relied upon the definition of ‘civil proceeding’ in the 10th edition of Black’s Law Dictionary, which had not been published at the time the policies were in effect[.]”  The 10th edition of Black’s defines “civil proceeding” as “‘[a] judicial hearing, session, or lawsuit in which the purpose is to decide or delineate private rights and remedies, as in a dispute between litigants in a matter relating to torts, contracts, property, or family law.’”  (Altman, at *6.)  Relying on that definition, Altman contends the district court “erred in finding that ‘for something to be a ‘civil proceeding,’ there must be some sort of forum and some sort of decision maker involved.’”

Reviewing cases from other states, the district court ruled consistently with courts considering the right-to-repair statutes in Hawaii and Nevada, while disagreeing with courts considering similar statutes of California and Colorado.

Notably, while the district court ruled that a 558 notice does not trigger an insurer’s duty to defend, it also recognized legislative history indicating that a 558 notice does trigger an insured’s duty to notify its liability insurer of the claim.  Id. at *4.

Whether the 11th Circuit affirms the district court’s decision or not, its opinion will be important to insurers questioning when insurance coverage is triggered by an event other than a formal proceeding initiated in a court of law.