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Last Reviewed / Modified On 16 Apr 2018.

FLORIDA CONSTRUCTION CLAIMS RESOURCES

Construction Claims

Limitations & Repose Periods

Statute of Limitations

Generally, all construction related claims are governed by Fla. Stat. §95.11(3)(c) “Limitations other than for the recovery of real property”. All construction related claims are subject to the four-year statute of limitations; common construction related claims in Florida include:

  1. Negligence
  2. Breach of Contract
  3. Contractual Indemnity
  4. Common Law Indemnity
  5. Violation of the Florida Building Code
  6. Declaratory Relief

Triggering dates for the statute of limitations (whichever date is latest controls)

  1. Actual possession by the Owner;
  2. Date the certificate of occupancy is issued;
  3. Date of abandonment of construction if not completed; and
  4. Date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer.

Exception to the triggering dates:

  1. If a defect is patent, or the defect was known or should have been known, then the statute runs from the date of knowledge or inferred knowledge.
  2. Known or should have been known is a fact-centric issue and is case specific.

Statute of Repose

Fla. Stat. §95.11(3)(c) effectively implements a ten-year statute of repose notwithstanding whether defect is latent or patent

Trigger date for the ten-year statute of repose

  1. Actual possession by the Owner;
  2. Date the certificate of occupancy is issued;
  3. Date of abandonment of construction if not completed; or
  4. Date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer.

Problems with triggering date

  1. Fact pattern: When project is substantially complete, but certificate of occupancy is not issued until years later, is statute of repose effectively tolled?
  2. Fact pattern: What if project takes 4 years to complete; and subcontractor completes its work in year 2 and leaves the Project. The Project is delayed, and certificate of occupancy is not issued until year 5. Wording of the statute permits a claim to be brought against subcontractor in year 14, or 12 years after it completed work.

Determining dates and conflicts with other statutes:

Fla. Stat. §95.11(2)(c) provides a five year statute of limitations for breach of contract claims, but Fla. Stat. §95.11(3)(c) provides four years for all construction related claims

  1. Which statute controls?
  2. Dubin v. Dow Corning Corp., 478 So.2d 71 (Fla. 2d 1985) holds that the four-year statute applies since its specific to construction related claims.

When a project is complete and all triggering dates are known, do warranties – under Fla. Stat. §718.203 – prolong the contract date?

  1. Fact pattern: Project is complete, certificate of occupancy issued, and all work completed. Do the Fla. Stat. §718.203 warranties prolong the “Date of completion or termination of the contract?”
  2. Saltponds Condominium Ass’n, Inc. v. Waldbridge Aldinger, Co., 979 So.2d 1240 (Fla. 3d DCA 2008) sheds some light and states that an Associations’ claims are tolled from the Fla. Stat. §95.11(3)(c) statute of limitations until the Developer turns over control to the Association board; implying claims could benefit longer statute of limitations periods.

Right to Repair Laws and/or Pre-Suit Statutory Procedures

    Fla. Statute §558 Overview

    Process

    1. Fla. Stat. §558.003 Action; compliance - under this provision, a claimant cannot file an action without complying with the §558 Process;
    2. The statute requires the owner (an Association or single family owner) to send proper notice to the developer(s), general contractor(s), subcontractor(s), suppliers, and design professionals concerning alleged defects with reasonable detail;
    3. Applies to residential and commercial properties
    4. If a party files suit without complying with the §558 provision, then a defendant is permitted to file a motion to abate the action
      1. The motion to abate is rarely granted
      2. A court can deny the motion to abate, but order the parties to participate in the §558 process in early litigation
    5. Parties can contractually agree to waive the §558 notice procedure.

    Downstream Notice

    1. Generally, owners send the §558 notice to only the developers, general contractor, and design professionals
    2. Under §558.004(3) the general contractors will send §558 notices to the subcontractors, suppliers, and materialman.

    Time Constraints/Deadlines

    1. Owners must send the 558 notice within 15 days of learning of the defect
    2. Within 30-50 days, the recipient may request an inspection
    3. Within 45-75 days, a written response to the claimed defects is due to the owner

    Goal

    1. The Right to Repair statutes attempt to resolve costly and time-consuming construction litigation
    2. Many other states (e.g. CA, AZ) have strict pre-suit procedures.

Fla. Statute 558 Right to Inspect

  1. Defects explained
    1. 558.004(1)(b) requires the defect to be explained in “reasonable detail”
      1. Only requires the nature of defect, location, and a description that would permit a repair
      2. Owner’s expert generally will provide citations to relevant FBC provisions and relevant trade standards (e.g. ASTM, AAMA)
  2. Clients
    1. General contractors and Developers will generally attend inspections with the Association
    2. Subcontractors are also permitted for inspections and will walk the property with the general contractor/developer
  3. Experts
    1. Experts are generally not required to attend inspections
    2. It is advisable to bring experts during inspections to collaborate

Fla. Statute §558 Remedies

  1. There is no prevailing party fee
  2. §558.004(15) – if there is litigation, the section provides that sanctions may imposed if its determined a party failed to provide the requested materials

Fla. Statute §558 at Trial

  1. Tolling of the statute – the statute of limitations defense is often raised in the construction cases as defects take time to manifest or the claimant knew of the defect and failed to act timely.
  1. §558(4)(10) provides a tolling of the applicable statute of limitations
  2. There is no distinction on whether it includes the statute of repose

Indemnity and Contribution

  1. Contribution in Florida is effectively obsolete with Fla. Stat. §768.31 and T&S Enterprises Handicap Accessibility, Inc. v. Wink Indus. Maintenance & Repair, Inc., 11 So. 3d 411 (Fla. 2d DCA 2009). Under Fla. Stat. 768.31, comparatively fault controls liability and a party will only be held liable for its own negligence (absent certain indemnity agreements).
    1. It should be noted, that joint and several liability as it relates to additional insured suits may be applicable to an insurer.
  2. Indemnity
    1. Common Law Indemnity – A cause of action that provides a party can be indemnified if it is being held vicariously, constructively, derivatively, or technically liable for the wrong doing of another party. A requirement of common law indemnity is a special relationship between the parties, and one party is being held for the active negligence of another.
      1. If a party has a subcontractor, the usual practice is to allege common law indemnity. However, prevailing on the claim is difficult because the simple act of supervision imparts partial liability to the party who hired the subcontractor. If there is even a 1% apportionment of liability to the asserting party, then the common law indemnity claim fails.
      2. The special relationship - Houdaille Industries, Inc. v. Edwards, 374 So. 2d 490 (Fla. 1979), the Florida Supreme Court held common law indemnity requires a “special relationship.” The term hasn’t been specifically defined, but must contractual relationships can fulfill the special relationship element.
      3. In Diplomat Properties Ltd. Partnership v. Tecnoglass, LLC, et al., 114 So. 3d 357 (Fla. 4th DCA 2013), the Fourth District Court of Appeals held that a party asserting a special relationship is not required to specifically allege how a special relationship is created, but only that it is being held “vicariously, constructively, derivatively, or technically liable for the wrongful acts of the party at fault.”
    2. Contractual Indemnity – indemnity provision created by contract.
      1. Fla. Stat. §725.06 controls the indemnity provisions of contracts if a party seeks to have the contracting party indemnify the party for its own negligence. An example would be a general contractor who seeks to have a subcontractor indemnify the general contractor for acts where the general contractor was negligent. If so, then the indemnity provision will be strictly construed against the general contractor and must conform to Fla. Stat. §725.06.
        1. Fla. Stat. §725.06 requires “the contract contains a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any.”
        2. Fla. Stat. 725.06 requires that the indemnity amount be specified.
        3. It is possible that indemnity provision be silent on exact indemnity amounts if it references the insurance policy.
        4. Caution should be exercised by the party seeking to have its own negligence indemnified. While the provision meets Fla. Stat. §725.06 muster, the insurance policy provisions may exclude such coverage. At which point, the subcontractor will be responsible for the indemnity.

    Certificate of Merit – Experts

    1. Many states in the country require a certificate of merit in matters brought against design professionals. While the requirements vary state to state, the basic idea is that a design professional of similar type must provide and affidavit that needs to be filed in the litigation (often with the Complaint) stating that the claims made against the design professional in the litigation are meritorious.
    2. The State of Florida has no such requirement.
    3. Generally, only a similarly licensed or experienced person can serve as an expert to testify regarding the standard of care for that professional or trade. However, engineers are often retained to testify as to code requirements and construction standards on both sides in construction defect litigation.
    4. However, in construction defect matters regarding condominiums, Florida Statutes § 718.301 (4)(p) requires that at the time the unit owners taken over control of the association from the developer, the developer is to provide to the association a turnover report under the seal of an architect or engineer regarding required maintenance, useful life and replacement costs for certain enumerated building components.
    5. Furthermore, at Florida Statutes § 718.301 (7) it is required that:
    6. In any claim against a developer by an association alleging a defect in design, structural elements, construction, or any mechanical, electrical, fire protection, plumbing, or other element that requires a licensed professional for design or installation under chapter 455, chapter 471, chapter 481, chapter 489, or chapter 633, such defect must be examined and certified by an appropriately licensed Florida engineer, design professional, contractor, or otherwise licensed Florida individual or entity.
    7. The chapters cited in that section deal with the licensing and regulation of different professionals and construction industry trades as follows:
    8. Applicable Statutes:
      1. Chapter 455– general provisions of business and professional regulation;
      2. Chapter 471 – engineering;
      3. Chapter 481 – architects, interior design and landscape architecture;
      4. Chapter 489 – contractors and specialty trades; and
      5. Chapter 633 – fire safety.

    Economic Loss Doctrine

    1. The Economic Loss Doctrine (ELD) prohibits certain tort claims. Mainly, it will bar recovery of damages for the repair and replacement cost of a defective product.
    2. In construction litigation, the ELD is applicable to condominiums. The issue arises when the damage is only to the condominium itself and not to other property, and it argued that claims in negligence would fail because the product, the condominium unit, was the damaged product.
    3. Indemnity Insurance Company of North America v. American Aviation, Inc., 891 So. 2d 532, 542-43 (2004), confining ELD’s application to two scenarios: (1) when parties negotiated remedies in a contract, and 2) when a defective product damages itself but does not harm a person or damage other property.
    4. Tiara Condominium Association v. Marsh & McLennan Companies, 110 So. 3d 399 (Fla. 2013), appeared to limit the ELD to product liability cases. In the construction sense, the tort and contract claims are still being determined on common law contractual principles.
    5. In Gazzara v. Pulte Home Corp., case no. 6:16-cv-657, the Middle District of Florida reaffirmed that condominiums were products and subject to the ELD if the only damage was the condominium building themselves.

    Contractor Licensing Requirements

    1. In the State of Florida there are statewide licenses and local licenses. If a contractor is licensed statewide, then that contractor is not required to also be licensed locally for the same type of license. In the alternative, a locally licensed contractor does need to register with the state unless the type of license does not match a similar statewide license.
    2. Statewide licensing requirements and regulation for contractors and specialty trades are regulated by Chapter 489, Florida Statutes and Chapter 61G4, Florida Administrative Code. The Construction Industry Licensing Board (“CILB”) is the legislative body responsible for licensing and regulating the construction industry. Statewide licenses are available for the following:
      • Air Conditioning
      • Building
      • General
      • Internal Pollutant Storage Tank Lining Applicator
      • Mechanical
      • Plumbing
      • Pollutant Storage Systems
      • Pool/Spa
      • Precision Tank Tester
      • Residential
      • Roofing
      • Sheet Metal
      • Solar
      • Specialty
        • Drywall
        • Demolition
        • Gas Line
        • Glass and Glazing
        • Industrial FacilitiesM
        • Irrigation
        • Marine
        • Residential Pool/Spa Servicing
        • Solar Water Heating
        • Structure
        • Swimming Pool Decking
        • Swimming Pool Excavation
        • Swimming Pool Finishes
        • Swimming Pool Layout
        • Swimming Pool Piping
        • Swimming Pool Structural
        • Swimming Pool Trim
        • Tower
      • Underground Utility and Excavation

                    

    3. The State of Florida recognizes two types of statewide licensing – certified and registered. A "certified contractor" is contractor who possesses a certificate of competency issued by the CILB and is allowed to contract in any jurisdiction in the state without being required to fulfill the competency requirements of that jurisdiction. A "registered contractor" is a contractor who has registered with the CILB pursuant to fulfilling the competency requirements in the jurisdiction for which the registration is issued. Registered contractors may contract only in such jurisdictions.
    4. In the State of Florida, an individual is licensed, not the entity. An entity must have an individual that is licensed working for the entity. That person becomes the qualifier and must be approved to qualify the entity by the CILB. The entity is also required to provide information on its financial qualifier, the person financially responsible for the entity. One contractor can qualify multiple entities.
    5. Florida Statutes, § 489.128 affects work performed by person not properly licensed. A person or entity cannot contract for construction services for which he, she or it is not licensed or qualified. There is a severe consequence for contracting without a license, in that contracts entered into by an unlicensed contractor are unenforceable. Case law has indicated that this lack of enforceability not only applies to lien and contract claims, but also claims to recover under common law claims.

    Common Law & Statutory Claims

    1. Common law claims:       
      1. Negligence
        1. Generally, simple negligence claims require a duty, breach, causation and damages. Higher standards of care can be imposed on architects or engineers.
        2. Careful – negligence claims masked as indemnity claims could be subject to dismissal. As an example, an Association sues a general contractor for construction defect and alleged negligence. In turn, the general contractor seeks to pass-through liability and sues subcontractors including claims for negligence. However, since the general contractor’s “damage” element hinges on adjudication of the Association’s original negligence claim it can be asserted there is no “damage.”
      2. Breach of Contract
        1. The recognizable elements of: valid and enforceable contract, breach of the contract, and resulting damages from the breach.
        2. Indemnity provisions are subject to statutory limitations under Fla. Stat. §725.06.
        3. The contract claim may be subject to reciprocal prevailing party fees under Fla. Stat. §57.105(7).
      3. Common Law Indemnity
        1. A cause of action that provides a party can be indemnified if it is being held vicariously, constructively, derivatively, or technically liable for the wrong doing of another party. A requirement of common law indemnity is a special relationship between the parties, and one party is being held for the active negligence of another.
        2. If a party has a subcontractor, the usual practice is to allege common law indemnity. However, prevailing on the claim is difficult because the simple act of supervision imparts partial liability to the party who hired the subcontractor. If there is even a 1% apportionment of liability to the asserting party, then the common law indemnity claim fails.
        3. The special relationship - Houdaille Industries, Inc. v. Edwards, 374 So. 2d 490 (Fla. 1979), the Florida Supreme Court held common law indemnity requires a “special relationship.” The term hasn’t been specifically defined, but must contractual relationships can fulfill the special relationship element.
        4. In Diplomat Properties Ltd. Partnership v. Tecnoglass, LLC, et al., 114 So. 3d 357 (Fla. 4th DCA 2013), the Fourth District Court of Appeals held that a party asserting a special relationship is not required to specifically allege how a special relationship is created, but only that it is being held “vicariously, constructively, derivatively, or technically liable for the wrongful acts of the party at fault.”
    2. Statutory Claims:       
      1. Violation of Florida Building Code
        1. Fla. Stat. §553.84 provides a statutory cause of action to bring a claim for damages if there is violation of the Florida Building Code. However, there is limiting language and it holds that a claim under §553.84 will not prevail if the following conditions are present: supported if (1) the construction project passes all required inspections under the code, (2) there are no personal injury or damage to property other than the property that is the subject of the permits, plans, and inspections (3) and the person or party knew or should have known that the violation existed.
        2. In other words, if a Fla. Stat. §553.84 claim is brought against a contractor, but the contractor passed all inspections per code, there are no damages to person or other property, and the contractor did not know of the building code violations, then the claim would fail.
        3. Potential issues arise when there are technical building code violations, but no resulting damage to other property. As an example, stucco application – to an extent – is governed by relevant provisions of ASTM C926 and ASTM C1063. One of the requirements is to attach metal lath with staples to the plywood the staple must be 1-1/2” in length to achieve a ¾” embedment. Moreover, the staples should be attached through the plywood sheathing into the stud framing members. An issue is whether staples that are ¼” too short are used. There is a technical building code violation, but no resulting damage. On one hand, the argument is that a §553.84 claim would fail if there is no resulting damage. However, on the other, it can be argued there is a diminution in value because a seller would have to theoretically disclose the building violates the building code.
      2. Statutory Warranties
        1. Fla. Stat. §718.203 provide warranties from the Developer to the Association related to
          1. §718.203(1)(a) provides for a three year warranty for fitness and merchantability.
          2. §718.203(2) Provides for general contractor and subcontractor warranties.
          3. The warranties only apply to new construction, and are not given to Association in conversion projects.
        2. Fla. Stat. 718.618 applies to conversion projects, and is limited to developer warranties – not general contractors or subcontractors.
      3. FDUTPA Claims
        1. The Florida Deceptive and Unfair Trade Practices Act (Fla. Stat. Chap. 501) provides a cause of action if the party alleges unfair or deceptive trade practices.
        2. The statutory language follows the FTC Unfair or Deceptive Trade Act (Section 5 of the FTC Act), and FTC cases are persuasive authority
        3. A party can wield the FDUTPA claim to recover attorneys’ fees and costs in a cause of action that may not provide a prevailing party its fees and costs.
        4. Recently, in construction litigation, the FDUPTA was used against KB Homes for constructing buildings that violated the Florida Building Code, and arbitrarily refusing warranty work.

Construction Damages

Cost of Repair

  1. The Florida Supreme Court set forth the damages recoverable for defective construction in Grossman Holdings Ltd. v. Hourihan, 414 So. 2d 1037 (Fla. 1982). The court adopted subsection 346(1)(a) of the Restatement (First) of Contracts, and held that for a breach of a construction contract, and owner can recover, “(i) the reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste; or (ii) the difference between the value that the product contracted for would have had and the value of the performance that has been received by the plaintiff, if construction and completion in accordance with the contract would involve unreasonable economic waste,” Id at 1039. The aim of this measure of damages is to “restore the injured party to the condition he would have been if the contract had been performed,” Id.
  2. The Florida Standard Jury Instructions state that if the defendant does not contend that the damages claimed constitute economic waste, the proper measure of damages is, “the reasonable cost to (claimant) of completing the work in accordance with the contract less the balance due under the contract,” FL Stand Jury Instructions Con Bus Cases § 504.5.
  3. Items considered to be potentially recoverable as “reasonable” costs of repair include engineering and architectural fees necessary to accomplish the construction (Temple Beth Shalom and Jewish Ctr., Inc. v. Thyne Constr. Corp., 399 So. 2d 525, 526 (Fla. 2nd DCA 1981)), relocation and financing costs (Tillman v. Howell, 634 So. 2d 268, 271 (Fla. 4th DCA 1994)) and demolition and redesign costs (Centex-Rooney Constr. Co. v. Martin County, 706 So. 2d 20, 27 (Fla. 4th DCA 1997)).
  4. If the owner chooses a more expensive repair method or design, recovery is limited to the reasonable cost of repair according to the original design. Temple Beth Shalom at 526; see also Pinellas County v. Lee Construction Co., 375 So. 2d 293 (Fla. 2nd DCA 1979). In estimating the cost of repair, the price of materials and labor at the time of the breach will govern, without regard to subsequent fluctuations in price. Pullum v. Regency Contractors, Inc. 473 So. 2d 824, 827 (Fla. 1st DCA 1985).
  5. The owner must show that repair costs are reasonable or in good faith, and the amounts actually expended must be able to be proven with a reasonable degree of certainty. Young v. Johnston, 475 So. 2d 1309, 1313 (Fla. 1st DCA 1985). The defendant may refute the claimed repair costs through evidence of waste, extravagance and lack of good faith. Id.

Diminution in Value

  1. Damages for a breach of construction contract are measured from the time of the breach. Grossman at 1040. If the defendant in a construction defect action contends that the damages claimed would constitute unreasonable economic waste, and the jury agrees, the measure of damages is “the difference between the fair market value of (claimant’s) real property as improved and its fair market value if (defendant) had constructed the improvements in accordance with the contract, measured at the time of the breach,” FL Stand Jury Instructions Con Bus Cases § 504.5.
  2. Using the analysis utilized in Grossman, Florida courts have also permitted plaintiffs to claim unreasonable economic waste and pursue diminution in value damages. Gray v. Mark Hall Homes, 185 So. 3d 651, 653 (Fla. 2nd DCA 2016).
  3. Diminution in value is an appropriate measure of damages when “defects in a completed structure cannot be physically remedied without physically tearing down and rebuilding, at a cost that would be imprudent and unreasonable,” Grossman at 1039; see also Smith v. Mark Coleman Constr., Inc., 594 So. 2d 812, 813 (Fla. 2nd DCA 1992).

Punitive Damages

Punitive damages claims are permitted in civil cases only when intentional misconduct or gross negligence is alleged. § 768.72, Fla. Stat. Therefore, they are generally not plead in construction defect actions. However, actions for fraud in a construction case may support a punitive damages claim. First Interstate Dev. Corp. v. Ablanedo, 511 So. 2d 536, 539 (Fla. 1987) (punitive damages award permissible in case against development company who fraudulent claimed they would construct nature trail).

Attorney's Fees

  1. Under Florida law, each party bears its own attorney’s fees unless otherwise provided by statute or by contract. Price v. Tyler, 890 So. 2d 246, 251 (Fla. 2004).
  2. One statute that may be used in a construction defect case to recover attorney’s fees by either party is § 768.79, Fla. Stat., which covers offers and demands for judgment, or proposals for settlement. Under this statute, any party may serve a written offer of judgment on an opposing party; if this is not timely accepted, it may later form the basis for the recovery of attorney’s fees on the case.
    1. If a defendant serves an offer that is not accepted by the plaintiff within thirty days, and if a judgment obtained by the plaintiff is at least 25 percent less than the amount of the offer, the defendant may recover reasonable attorney’s fees and costs. § 768.79(6)(a), Fla. Stat.
    2. If a plaintiff serves an offer that is not accepted by the defendant, and if a judgment obtained by the plaintiff is at least 25 percent more than the amount of the offer, the plaintiff may recover reasonable attorney’s fees and costs. § 768.79(6)(b), Fla. Stat.
    3. For either of the two scenarios above, the amount of attorney’s fees recoverable is calculated from the date the offer was served. § 768.79(6), Fla. Stat.

    Joint and Several Liability (specific to construction)

    1. § 768.81, Fla. Stat., abolished joint and several liability and implemented comparative fault as the standard for apportionment of damages in negligence actions, however joint and several liability is still permitted for intentional torts.
    2. Although the statute refers to negligence, it defines “negligence action” as “a civil action for damages based upon a theory of negligence, strict liability, products liability, [and] professional malpractice whether couched in terms of contract or tort, or breach of warranty and like theories. The substance of an action, not conclusory terms used by a party, determines whether an action is a negligence action,” § 768.81(1)(c), Fla. Stat. Therefore, breach of contract and breach of warranty causes of action may be subject to comparative fault allocation as well.

    Cost Incurred to Access Repair Areas

    Cases directly addressing costs incurred to access repair areas are limited, but the existing case law states that these costs can be recovered. The Fifth District Court of Appeal recently affirmed a jury verdict awarding damages, including the “cost to access and repair water damage caused by faulty construction.” in Mid-Continent Cas. Co. v. Treace, 186 So. 3d 11, 12 (Fla. 5th DCA 2015).

    Consequential Damages

    1. Florida permits recovery for consequential damages that are proximately caused by a breach of warranty. Marcus v. Anderson/Gore Homes, Inc., 498 So. 2d 1051, 1053 (Fla. 4th DCA 1986).
    2. Additionally, an owner that loses use of a structure because of a delay in completion, including for construction defects, is entitled to damages for that lost use. Gonzalez v. Barrenechea, 170 So. 3d 13, 15 (Fla. 3rd DCA 2015). The appropriate measurement for loss of use damages is the property’s rental value during the period of delay. Vanater v. Tom Lilly Constr., 483 So. 2d 506, 508 (Fla. 4th DCA 1986). However, the owner must be completely deprived of use of the property in order to recover loss of use damages. Schryburt v. Olesen, 475 So. 2d 715, 717 (Fla. 2nd DCA 1985).

Coverage Trigger of Coverage

Definition of an Occurrence

A standard definition of “occurrence” found in most CGL policies is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Defective construction by a subcontractor is an “occurrence” under a standard form CGL policy. See U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007); Auto-Owners Ins. Co. v. Travelers Cas. & Surety Co., 227 F. Supp. 2d 1248 (M.D. Fla. 2002). The term “occurrence” is commonly understood to mean the event in which negligence manifests itself in property damage . . . .” Travelers Ins. Co. v. C.J. Gayfer’s and Co. Inc., 366 So. 2d 1199 (Fla. 1st DCA 1979).

Duty to Defend

  1. Contractual Indemnity
    1. Florida Statute §725.06 governs indemnity in Florida construction contracts. Under Florida law, to assume the tort liability of another, the intent to do so must be clearly and unequivocally expressed in the agreement. Charles Poe Masonry, Inc. v. Spring Lock Scaffolding Rental Equip. Co., 374 So. 2d 487, 489 (Fla. 1979). A contractual indemnity provisions will most likely comport with 725.06 if, for instance, subcontractor agrees to indemnify general contractor only for subcontractor’s negligence.
    2. Oftentimes, however, construction contracts contain an indemnity clause where subcontractor agrees to indemnify general contractor for damages caused, “in whole or in part,” by subcontractor’s negligence. Florida courts have interpreted this language to be insufficient, as a matter of law, to require subcontractor to indemnify general contractor for general contractor’s own active negligence related to subcontractor’s scope of work. Cox Cable Corp. v. Gulf Power Co., 591 So. 2d 627, 628 (Fla. 1992). Even if the language, often referred to as “special indemnity,” was sufficient, the clause does not comply with §725.06, Fla. Stat. and is, therefore, void and unenforceable.
    3. In private construction contracts, special indemnity for one’s own negligence is allowed, though disfavored. In addition to clear and unequivocal assumption of general contractor’s tort liability, subcontractor’s special indemnity would have to be limited in a commercially reasonable amount not less than $1 Million, unless otherwise agreed upon and must be made part of any bid documents or specifications.
  2. Anti-Indemnity Statutes
  3. (see above)

  4. Additional Insureds
    1. Coverage for AI’s own negligence vs. vicarious liability for Named Insured.
      1. Who is an insured is amended to include as an insured any person or organization, called an additional insured in this endorsement, whom you are required to add as an additional insured on this policy under a written contract or agreement related to your business. The insurance provided to the additional insured is limited as follows: That person or organization is only an additional insured with respect to liability arising out of premises you own, rent, lease or occupy, or caused, in whole or in part by “your work” performed for that additional insured, but only with respect to operations by or on behalf on the Named Insured.
      2. This requires AI coverage for active negligence of AI because there is no limiting language for Named Insured coverage to vicarious liability, only. Container Corp. of America vs. Maryland Cas. Co., 707 So. 2d 703 (Fla. 1998). It does not limit scope of AI coverage to AI’s vicarious liability for negligence of Named Insured.
      3. In the 1980s, the ISO CG 20 10 11 85 amended the section of the standard CGL policy, “Who is an Insured,” to include “only with respect to liability arising out of ‘your work’ . . . . “ This language was consistently interpreted broadly by the courts and provided coverage under the endorsement even for the additional insured’s own negligence.
      4. In 2004, ISO narrowed the “arising out of” language and amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury” or “property damage” caused, in whole or in part, by “your work” at the location designated and described in the Schedule of this endorsement performed for the additional insured.
      5. By replacing “arising out of” with “caused in whole or in part” was ISO’s attempt to narrow coverage to an additional insured by ensuring that the claim was caused, at least in part, by the named insured.
  5. Insureds Right to Independent Counsel and Consequences of Rejecting a Defense
    1. A standard CG 00 01 Insuring Agreement provides NO entitlement for insured to choose assigned counsel for defense provided under the insuring agreement, at the expense of the insurer. If an insured rejects a defense under a Reservation of Rights, it may maintain control of defense without voiding coverage. An insured may bind its carrier to settlement or judgment without the carrier’s consent, including waiver of liability defenses. However, a carrier may still contest coverage and reasonableness of settlement, and the carrier may not be obligated to reimburse insured for fees and costs.
    2. However, if the insured accepts conditional defense, it may not later reject defense and bind carrier, unless carrier materially changes the terms of the conditional defense. Mid-Continent Cas. Co. v. American Pride Bldg. Co., LLC, 601 F. 3d 1143 (11th Cir. 2010), reh’g denied. (carrier declaratory action adding reimbursement of fees and costs). In this scenario, the carrier may still contest liability and damages, despite insured’s concessions in underlying matter, and the Carrier is not obligated to reimburse fees and costs.

Coverage Defenses

  1. Coverage defenses are governed by Florida Claims Administration Statute, Fla. Stat. § 627.426. In particular, the statute reads, “A liability insurer shall not be permitted to deny coverage based on any particular coverage defense unless:
    1. (a)       Within 30 days after the liability insurer knew or should have known of the coverage defense, written notice of reservation of rights to assert a coverage defense is given to the named insured by registered or certified mail sent to the last known address of the insured or by hand delivery; and
    2. (b) Within 60 days of compliance with paragraph (a) or receipt of a summons and complaint naming the insured as a defendant, whichever is later, but in no case later than 30 days before trial, the insurer:
      1. Gives written notice to the named insured by registered or certified mail of its refusal to defend the insured;
      2. Obtains from the insured a nonwaiver agreement following full disclosure of the specific facts and policy provisions upon which the coverage defense is asserted and the duties, obligations, and liabilities of the insurer during and following the pendency of the subject litigation; or
      3. Retains independent counsel which is mutually agreeable to the parties. Reasonable fees for the counsel may be agreed upon between the parties or, if no agreement is reached, shall be set by the court.
  2. A “coverage defense” is defined by the Florida Supreme Court as “a defense to coverage that otherwise exists . . . [it] does not include a disclaimer of liability based on an express coverage exclusion in the policy.” Travelers Indem. Co. of Ill. v. Royal Oaks Enterprises, Inc., 429 F. Supp. 2d 1265 (M.D. Fla. 2004).
  3. Examples of coverage defenses include:
    1. Late Notice: You must see to it that we are notified as soon as practicable of an occurrence or an offense which may result in a claim.
    2. Failure to Cooperate: You and any other involved insured must cooperate with us in the investigation or settlement of the claim or defense against the suit.

Consent Judgments

In Florida, an insured may bind its carrier to settlement or judgment without the carrier’s consent, including waiver of liability defenses. However, a carrier may still contest coverage and reasonableness of settlement, and the carrier may not be obligated to reimburse insured for fees and costs.

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