In Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company, No. SC16-1420, 2017 WL 6379535 (Fla. Dec. 14, 2017), the Florida Supreme Court addressed whether the notice and repair process set forth in chapter 558, Florida Statutes, constitutes a “suit” within the meaning of a commercial liability policy issued by Crum & Forster Specialty Insurance Company (“C&F”) to Altman Contractors, Inc. (“Altman”). The Court found that because the chapter 558 pre-suit process is an “alternative dispute resolution proceeding” as included in the definition of “suit” in the policy by C&F to Altman, C&F had a duty to defend Altman during the chapter 558 process, prior to the filing of a formal lawsuit.
Chapter 558, titled “Construction Defects,” sets forth procedural requirements before a claimant may file a construction defect action. It requires a claimant to serve a written notice of claim on the applicable contractor, subcontractor, supplier, and/or design professional prior to filing a construction defect lawsuit. The legislature intended for Chapter 558 to be an alternative dispute resolution mechanism in certain construction defect matters allowing an opportunity to resolve the claim without further legal process.
Altman was a general contractor for the construction of a high-rise residential condominium in Broward County, Florida. C&F insured Altman for the project through seven consecutive one-year commercial general liability insurance policies (collectively, “policy”). The policy required C&F to defend Altman against any “suit.” The policy, in part, defined “suit” as a civil proceeding. The Court found that the pre-suit 558 process was not a civil proceeding because the recipient’s participation in the 558 process was not mandatory or adjudicative. However, in defining the term “suit,” the policy also included “[a]ny other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.” The Court found that the plain meaning of the term, “alternative dispute resolution” means a procedure for settling a dispute by means other than litigation. Hence, it determined that the chapter 558 process is an alternative dispute resolution proceeding within the plain meaning of the policy term, falling within the definition of “suit,” and triggering C&F’s duty to defend Altman during the 558 process.
Depending on how broadly an insurance policy is worded, insurance companies may be required to defend and indemnify their insureds through the chapter 558 process, before any formal lawsuit has been filed. Although this is beneficial to contractors, subcontractors, suppliers, and design professionals, the insurance companies will be burdened with having to pay legal fees in defending these parties during this process. As Altman expands what is considered a “suit” to include the 558 process in some instances, insurance companies would be wise to analyze how they define “suit” in their policies going forward to avoid triggering a duty to defend and indemnify its insureds even before formal litigation has been initiated.