Florida Construction Defect Notice Is Not A “Suit”

Case: Altman Contractors, Inc., v. Crum & Forster Specialty Ins. Co.
U.S. District Court for the Southern District of Florida
Case No. 13-80831-CIV-MARRA; 2015 U.S. Dist. LEXIS 72466

The federal district court in Altman Contractors held that an insured’s construction defect notice under Florida Statutes Chapter 558 did not constitute a “civil proceeding” and was not a “suit” under the insurance policies at issue. The insurer thus had no duty to defend or indemnify the insured.

Altman Contractors, Inc. (Altman) served as the general contractor for the construction of a high-rise luxury building and held a number of commercial general liability (CGL) policies with Crum & Forster Specialty Insurance Company (C&F) covering the project. After the building association served Altman with a notice of claim pursuant to Chapter 558 (a notice and repair law) alleging defects and deficiencies in the construction project, Altman demanded that C&F defend and indemnity it under the CGL policies for its costs to investigate and defend the notices of claim. C&F refused to do so, but later unilaterally appointed counsel not accepted by Altman.

Altman subsequently filed suit alleging that C&F breached its duty to defend and indemnify it in connection with the notices of claim. The parties filed cross-motions for summary judgment. C&F argued that Florida Stat. §558.004(13) bars a notice under Chapter 558 from constituting a claim for insurance purposes, such that it had no duty to defend or indemnify Altman. Altman, on the other hand, argued the statute does not state that a Chapter 558 notice cannot constitute a claim for insurance purposes and, further, that traditional principles of contract interpretation, the terms of the policies and the purpose of Chapter 558, all support the conclusion that the notice process rises to the level of a “suit.”

In ruling, the court first rejected C&F’s argument that Florida Stat. §558.004(13) precluded Altman’s claim, reasoning that all the Section does is clarify that nothing in the statute is intended to supplant the notice requirements under any applicable insurance policy. The court further reasoned there is nothing in the Section to support the “extreme position” taken by C&F that the Florida Legislature intended to bar a notice under Chapter 558 from constituting a claim for insurance purposes such that an insurer would have no duty to defend or indemnify an insured in connection therewith. The court also noted nothing in the text of the statute or the legislative history suggested the provision acted as a bar to insurance coverages if the policy otherwise would provide coverage.

Having found no statutory bar to coverage, the court turned to the language of the C&F policies to determine whether the Chapter 558 notices triggered a duty to defend on the part of C&F. The policies defined a “suit” as a “civil proceeding,” and the court rejected Altman’s contention that a Chapter 558 notice was an act or step that is part of a later action, thereby satisfying the legal definition of a civil proceeding. “Far from an act or step that is part of a later action,” the court reasoned, “Chapter 558 is intended to avoid the commencement of an action.” Accordingly, the court concluded the Chapter 558 mechanism did not constitute a “civil proceeding” and was not a “suit” under the C&F policies and C&F did not breach the terms of the policies as a matter of law.