Pre-Suit is the New Lawsuit: Florida Supreme Court holds Insurance Carrier Had Duty to Defend Policy Holder during Pre-Suit Proceedings


By: Jake Carroll
Given the pace of construction in Florida over the past three decades, it should come as no surprise that the Sunshine State has a robust statutory scheme for construction defect claims. Indeed, Florida’s Construction Defects Statute, Chapter 558, Florida Statutes (“FCDS”), outlines a complex pre-suit procedure requiring owners to send a “notice of claim” to contractors while identifying any alleged construction and/or design defects in “reasonable detail” before a lawsuit for such defects can be brought. The FCDS also details procedures for building inspection, destructive testing, obtaining construction documents and maintenance records, and utilizing consultants. Under the FCDS, contractors are required to provide a written response to the notice, to accept or dispute each reported defect, and may include offers to repair, partial payment, or partial settlement.
Contractors may represent themselves during the notice process, but do so at their own peril. Instead, contractors are encouraged to retain legal counsel as soon as possible following receipt of a 558 Notice.
However, in the case of Altman Contractors, Inc. (Altman) v. Crum & Forster Specialty Insurance Company (C&F), 42 Fla. L. Weekly S960b, Altman forwarded the notices to its carrier (C&F), seeking coverage and defense under its CGL policy. C&F initially denied Altman’s request on the basis that the Chapter 558 process did not trigger the duty to defend.
The Florida Supreme Court disagreed with C&F, holding that the insurance carrier’s duty to defend may be triggered when a contractor receives a construction defect notice, depending on the language of the policy and the allegations in the notice. The ruling impacts all stakeholders in the construction industry, including owners, condominium associations, developers, contractors, and insurers.
The decision encourages insurer participation in the pre-suit process for resolving defect disputes and may result in more out-of-court resolutions—avoiding complex and expensive litigation that burdens litigants and the court system.
Insurance trade groups warn the decision could drive up premiums for some CGL policies within the construction industry, while other industry professionals note the potential for bad faith claims if carriers refuse to participate in Chapter 558 proceedings where a construction defect claimant is seeking covered damages from the policyholder.
At the very least, contractors should review their CGL policies, comply with the terms of the policies, and forward any FCDS notices to their carriers before issuing a response. Depending on the specific policy language, costs incurred during the Chapter 558 process may be the insurance carrier’s responsibility.
It is also worth noting that parties may choose to opt out of FCDS, if agreed to in writing beforehand. Such provisions are commonly included in construction contracts.
Jake Carroll represents owners, contractors, and design professionals in all construction matters including contract negotiations, payment disputes, and claims resulting from delays, contract terminations, and defective work. Mr. Carroll is licensed to practice in both Georgia and Florida. If you have any questions or would like more information, please contact Mr. Carroll at [email protected].