(Article from Insurance Law Alert, January 2018)
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Answering a question certified by the Eleventh Circuit, the Florida Supreme Court ruled that a statutory process for resolving construction defect claims is a “suit” that can trigger defense obligations under a general liability policy. Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 2017 WL 6379535 (Fla. Dec. 14, 2017).
Altman, the general contractor for the construction of Sapphire Condominiums, was insured under consecutive general liability policies issued by Crum & Forster. During the coverage period, Sapphire served Altman with numerous notices of claim under chapter 558, Florida Statutes, which sets forth a process for resolving construction defect claims and is a condition precedent to filing a lawsuit. Altman sought defense and indemnity from Crum & Forster, which the insurer denied on the basis that the statutory process was not a “suit” under the policy, defined as “a civil proceeding in which damages . . . are alleged,” an arbitration, or “[a]ny other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.” Thereafter, Altman sought a declaration that Crum & Forster was obligated to defend and indemnify the claims and moved for partial summary judgment on whether the duty to defend was triggered by the initiation of the statutory procedure.
After the Florida district court ruled that the chapter 558 process was not a “suit,” Altman appealed to the Eleventh Circuit, which certified the following question: “Is the notice and repair process set forth in chapter 558, Florida Statutes, a suit within the meaning of the commercial general liability policy issued by C&F to Altman?” The Florida Supreme Court accepted certification and answered the question in the affirmative.
The Florida Supreme Court ruled that the chapter 558 process is not a “civil proceeding” under the policy because, although the statute requires a claimant to serve a notice of claim prior to filing suit, the recipient’s participation is not mandatory and the process does not take place in a court of law or involve any type of adjudicatory body. However, the court concluded that the chapter 558 process does fall within the scope of “any other alternative dispute resolution proceeding,” noting that the Legislature expressly described the statute as an “effective alternative dispute resolution mechanism.” The court also held that the damages component of the suit requirement was met because chapter 558 provides for damage awards.
The court declined to address whether Crum & Forster had consented to the proceeding (as required by the policy’s definition of “suit” to trigger the insurer’s duty to defend), explaining that it was outside the scope of the certified question. The court remanded the matter for a factual determination.