August 2016 – 11th Circuit Certifies Question of Whether Language of CGL Policy Triggers Duty to Indemnify & Defend Chapter 558 Notice of Construction Defect
In ALTMAN CONTRACTORS, INC. v. CRUM & FORSTER SPECIALTY INSURANCE COMPANY, 26 Fla. L. Weekly Fed. C588a (11th Cir. August 2, 2016), the Eleventh Circuit Court of Appeal certified to the Florida Supreme Court the issue of whether Chapter 558’s statutorily prescribed notice and repair process constitutes a “suit” under a commercial general liability (CGL) insurance policy, so as to trigger the insurer’s duty to defend. The certification to the Florida Supreme Court turns on the language of the CGL policy. In 2015, the Florida Legislature amended Fla. Stat. § 558.004(13) to read: “However, notwithstanding the foregoing or any contractual provision, the providing of a copy of such notice to the person’s insurer, if applicable, shall not constitute a claim for insurance purposes unless the terms of the policy specify otherwise.” (emphasis supplied) The Eleventh Circuit agreed with the district court that based upon the statutory language there is no statutory bar to defense and coverage of Chapter 558 proceedings. The focus is on the language of the CGL policies.
The CGL policies state as follows:
We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply. We may, at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result. (emphasis supplied)
The policies define the term “suit” as follows:
“Suit” means a civil proceeding in which damages because of “bodily injury”, “property damage” or “personal and advertising injury” to which this insurance applies are alleged. “Suit” includes:
- An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
- Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.
Based upon the language of the CGL policy, the district court had ruled in favor of the insurer, concluding that the Chapter 558 process did not constitute a “suit” and that, as a result, the insurer had no obligation to defend or indemnify the contractor under the CGL policies.
The undersigned anticipates that the Florida Supreme Court will similarly view Chapter 558 as not precluding indemnification and defense, and will therefore focus on the language of the CGL policy. Pending the Florida Supreme Court’s answer to the certified question regarding whether the CGL policy is triggered by a Notice of Construction Defect, recipients of Chapter 558 Notices of Construction Defect should at minimum notify applicable CGL insurers and, where warranted by the nature of the claims made, request policy information and defense and indemnity. The language of the CGL policy should be examined to determine whether coverage is triggered and the scope of coverage. An example would be where a homeowner serves a Chapter 558 Notice on the General Contractor and the alleged defects implicate multiple trades. The General Contractor, when serving the Notice upon the applicable trades as required by Fla. Stat. § 558.004(3), the General Contractor, who typically benefits from indemnification provisions contained in the subcontracts, should serve a request for insurance information as provided for by Fla. Stat. § 627.4137.