On December 14, 2017, The Florida Supreme Court issued its long-awaited opinion in the case of Altman Contractors, Inc. v. Crum and Forster Specialty Insurance Company; Case No. SC16-1420. This case answers the question of whether Florida’s statutory pre-suit notice and repair process for resolving construction defect claims, under Florida Statutes Chapter 558, constitutes a “suit” within the definition of a standard ISO commercial general liability (CGL) policy.
The Florida Supreme Court concluded that the Chapter 558 process qualifies as a “suit” under the standard ISO definition, but noted that the Chapter 558 framework was not a “civil proceeding” as it did not produce legally binding results, did not take place in a court of law, and was nothing more than a voluntary dispute resolution process. However, the Supreme Court noted that the Chapter 558 process met the criteria of an “alternative dispute resolution proceeding” and could therefore trigger a duty to defend if the insurer consented to the insured’s participation in the process.
As a practical matter, the Court’s opinion may create more questions than it resolves, including what constitutes “consent” to the insured’s participation in the 558 process and whether the insurer’s decision to decline participation in the 558 process can be challenged in the same way as an insurer’s decision to decline defending a lawsuit.
However, at least for now, the Court’s ruling squarely leaves the decision regarding participation to insurers. If the insurer declines to consent, then the insured faces the prospect of participating in the process and resolving defects and damages at its own cost. On the other hand, if the insurer consents to its insured’s participation, the insurer must understand that doing so will give rise to a duty to defend throughout the 558 process (and possibly beyond). In the wake of this decision, insurers will need to carefully consider any responses to 558 notices since the consequences of acceptance and rejection are not fully known at this time.