On August 15, we wrote a blog post (which can be accessed here) about how the Eleventh Circuit certified to the Florida Supreme Court the issue of whether Florida’s pre-suit process in contractor cases, under Chapter 558 of the Florida Statutes, constitutes a “suit” under CGL policy language, which would trigger the insurer’s duty to defend. On October 25, various construction trade organizations and a nonprofit policyholder advocacy group, United Policyholders, urged the Florida Supreme Court to rule in favor of Altman Contractor Inc.’s (“Altman”) interpretation that a construction defect notice issued under Chapter 558 constitutes a “suit” under CGL policies because such a reading would promote insureds and insurers to resolve disputes with the underlying plaintiff out of court and because CGL policies should be construed broadly to provide coverage for pre-litigation proceedings.
First, the construction trade organizations argued that a ruling contrary to Altman would prevent policyholders and their insurers from resolving disputes out of court because neither side would have a desire to cooperate: the policyholder would contest or not respond to Chapter 558 notices in order to trigger the duty to defend, which would compel the underlying plaintiff to file a lawsuit, and the insurer would not be willing to participate in the Chapter 558 process between the policyholder and underlying plaintiffs because they would not have any contractual obligation mandating them to defend the notices of the claims.
Additionally, the trade organizations noted a 2015 amendment to Chapter 558 that they claim shows that the statute was intended to provide an avenue for policyholder’s and their insurer’s to resolve construction defect disputes through confidential settlement negotiations. The organizations argued that ruling Chapter 558 is not a suit, which would not trigger a duty to defend, is against the Florida Legislature’s intent to have both the policyholder and the insurer meaningfully participate in the pre-litigation process to resolve the dispute between the underlying plaintiff and the policyholder.
Second, United Policyholders argued that the Florida Supreme Court should rule in favor of Altman because contemporary CGL policies were designed to provide broad coverage for pre-litigation proceedings, such as a Chapter 558 process. United Policyholders argued that the CGL in dispute ambiguously defined a “civil proceeding,” which should not be read to only cover arbitration or an alternative dispute resolution proceeding where the insurer consents. The group argued that insurers should not be able to limit the scope of a “suit” in the insurance policies simply by withholding consent for a policyholder’s settlement under Chapter 558.
If the Florida Supreme Court finds that a Chapter 558 process is a “suit,” this will greatly affect coverage that is available for Florida’s construction design professionals. We will continue to monitor this case until the Florida Supreme Court hands down its ruling.