The Art of Pleading Construction Defect Claims Within Coverage
Under Chapter 558 of the Florida Statutes, claimants such as homeowners, HOAs, and condominium associations that have sustained property damage resulting from construction defects are required to participate in a pre-suit dispute resolution process. From a practical standpoint, construction disputes rarely reach a resolution in the pre-suit stages, as contractors and subcontractors struggle to obtain insurance coverage for their potential exposure at this juncture.
Importantly, last year the Florida Supreme Court held that a Chapter 558 notice serves as a “claim” under a commercial general liability policy. See Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., No. SC16-1420, 2017 WL 6379535 (Fla. Dec. 14, 2017). The foregoing decision will likely have a profound impact on construction defect litigation, as insurance carriers are now less likely to sit back following receipt of a Chapter 558 notice and are instead more likely to take an active role earlier in the process in an effort to settle the matter in an expeditious manner.
In light of the increasing likelihood that insurance carriers will be inclined to settle construction defect claims in the pre-suit stages, it is now even more important that the operative pleadings are sufficiently pled to trigger the insurer’s duty to defend. A standard commercial general liability (CGL) policy generally contains several exclusions to insurance coverage, including an exclusion for property damage to the premises. Generally, however, there are exceptions to the exclusions to coverage, including damage to “other property” (i.e., property that is not included in the contractor’s scope of work).
Accordingly, to properly plead into coverage, construction defect claims should allege damage to “other property.” In the event that the operative pleadings fail to set forth allegations of damage to other property, the claimant may ultimately be unsuccessful in engaging the insurance carrier and may instead be forced to seek recovery directly from the contractor and/or subcontractor.
As such, it is beneficial for claimants to obtain detailed inspection reports early on in the process in compliance with Chapter 558, which should include the various construction defects, locations of same, and the resulting property damage occurring from such defects. By virtue of preparing more detailed inspection reports, claimants can buttress their allegations related to damage to “other property,” and may therefore be more likely to trigger the insurance carrier’s duty to defend.
Given the complexity of the rules that emerge from new legal precedents, it is imperative that claimants such as homeowners associations and condominium associations contact experienced Florida construction lawyers like us to help you successfully litigate your claims.