Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company: Balancing the Interests Surrounding Potential Insurance Coverage for Ch. 558 Notices of Claim
The legislature enacted F.S. Ch. 558 in 2003 to provide “an alternative method to resolve construction disputes” between owners and contractors.1 The Ch. 558 process starts when a “claimant” serves a “written notice of claim” on the contractor describing the nature of any alleged defects, the location of each defect, and any resulting damages.2 In December 2017, in the case of Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co. , 232 So. 3d 273 (Fla. 2017), the Florida Supreme Court addressed for the first time whether a “written notice of claim” constitutes a “suit” within the meaning of a commercial general liability (CGL) insurance policy issued to a general contractor. This article examines the Altman decision and how it addressed the interplay between the notice and opportunity-to-repair process embodied in Ch. 558 and the duty to provide a defense to “suits” as defined in standard CGL policies that are widely sold to general contractors and others in the construction industry. This article summarizes the parties’ positions and the Supreme Court’s ruling, and then examines the court’s decision and considers the potential effects of the Altman decision on how insurance carriers and their insureds will deal with construction defect (CD) claims presuit in the future.
Overview of Ch. 558 Notice and Opportunity to Repair Process
The Florida Legislature’s stated goal in enacting Ch. 558 was to provide an “alternative method” to resolve construction disputes that would “reduce the need for litigation as well as protect the rights of property owners.”3 Ch. 558 was designed to provide written notice to the contractor, subcontractor, supplier, or design professional of an alleged defect in design or construction and “an opportunity to resolve the claim without resort to further legal process.”4 The process starts with the “claimant,” defined exclusively as an owner or owner’s association,5 serving a “written notice of claim” on the contractor, subcontractor, supplier, or design professional.6 Under the version of Ch. 558 in effect at the time of the events in Altman , the notice of claim was required to “describe the claim in reasonable detail sufficient to determine the general nature of each alleged construction defect and a description of the damage or loss resulting from the defect, if known.”7
Service of the notice of claim starts the clock on a period of time of either 60 or 120 days in length during which the claimant is obligated to await the contractor’s response to the notice of claim.8 If the contractor does not respond within 45 days after service of the notice of claim (or within 75 days in the case of an association representing more than 20 parcels), the claimant may then immediately file suit against the contractor for the defects described in the notice of claim.9 If the contractor responds and makes any kind of offer — whether repairs or payment of monetary compensation (or both) — the claimant must accept or reject the offer before the claimant files suit.10 Service of the notice of claim tolls the applicable statute of limitations for a period of 90 days (or 120 days as applicable) after service of the notice of claim unless the claimant accepts the contractor’s offer, in which case the statute of limitations is tolled until 30 days after the end of the period for the contractor’s performance of repairs or payment under the offer.11
If the contractor elects to respond to the written notice of claim and offers to settle with monetary compensation, repairs, or both, the offer “will not obligate the [contractor’s] insurer.”12 Alternatively, the contractor may, as part of its offer, provide a copy of the written notice of claim to its insurer with an offer of payment of whatever monetary compensation the contractor’s insurer determines to offer, if any.13 However, providing a copy of the notice of claim to the insurer expressly “shall not constitute a claim for insurance purposes.”14
The Facts of Altman
Between April and November 2012, the Sapphire Fort Lauderdale Condominium Association, Inc. (Sapphire) served Altman Contractors, Inc. (Altman) with multiple Ch. 558 notices of claim which collectively claimed over 800 construction defects in the condominium. On January 14, 2013, Altman notified Crum & Forster of Sapphire’s claims and demanded that Crum & Forster defend and indemnify Altman as to Sapphire’s claims under the terms of seven insurance policies issued by Crum & Forster to Altman over the affected years. Crum & Forster declined Altman’s demand on the basis that the notices did not constitute a “suit” under the policies. Faced with Crum & Forster’s refusal, Altman retained its own counsel to defend the notices of claim.
Subsequently, on August 5, 2013, Crum & Forster, while maintaining its position that the notices of claim did not invoke its duty to defend Altman, nevertheless hired counsel to defend Sapphire’s claims. Crum & Forster did so under a reservation of rights, with the explanation that it was retaining counsel in anticipation that Sapphire may file a lawsuit. Altman objected to Crum & Forster’s selection of counsel and demanded that Crum & Forster pay its original counsel to continue with the defense. Altman further requested reimbursement from Crum & Forster for the fees and expenses it incurred after it forwarded Sapphire’s notices of claim. Crum & Forster denied Altman’s requests.
Altman ultimately settled all of Sapphire’s construction defect claims without any lawsuit being filed and without Crum & Forster’s participation. Altman then filed a declaratory judgment action in the U.S. District Court for the Southern District of Florida and sought a declaration that Crum & Forster owed a duty to defend and indemnify Altman under its CGL policies, as well as reimbursement for its fees and costs incurred in defense of Sapphire’s claims. The district court resolved the case on summary judgment in favor of Crum & Forster on the basis that the association’s notices of claim did not constitute a “suit” under the policies. Altman appealed to the U.S. Court of Appeals for the 11th Circuit. The 11th Circuit heard oral argument, and then certified the following question to the Florida Supreme Court: “Is the notice and repair process set forth in Ch. 558, Florida Statutes, a ‘suit’ within the meaning of the commercial general liability policy issued by [Crum & Forster] to [Altman]”?15
Altman’s Policies with Crum & Forster
Crum & Forster issued a total of seven CGL policies for Altman with effective dates from February 1, 2005, through February 1, 2012. The relevant provisions of the policies were all identical16 and included the insuring agreement (I, paragraph 1.a), the duties in the event of occurrence, offense, claim or suit (IV, paragraph 2.a), and the definition of a “suit” (V, paragraph 18).
The insuring agreement provides, in relevant part, as follows: “We will pay those sums which 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 these damages.”
Regarding duties of the insured in the event of a claim or “suit,” the policy form provides:
b. If a claim is made or “suit” is brought against any insured, you must:
(1) Immediately record the specifics of the claim or “suit” and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or “suit” as soon as practicable.
c. You and any other insured must:
(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or “suit”;***
d. No insured will, except at that insured’s own cost , voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.
Finally, while the term “claim” is not defined in the policy, “suit” is defined 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:
a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.
As it happens, the court’s decision in Altman turns almost exclusively on its construction of the above definition of the term “suit.” But the definition was problematic for both Altman and Crum & Forster. A “civil proceeding” alleging “damages” seems to contemplate some sort of process, be it an arbitration or court proceeding, which results in an award of damages. This tends to support Crum & Forster’s position that the Ch. 558 process is not a “suit.” However, the second sentence, in subsection b, includes “any other alternative dispute resolution proceeding,” which is very broadly written. Yet, to concede that a Ch. 558 notice of claim initiates a process falling under subsection b of the definition of “suit” puts the insurer in the awkward position of having to grant or withhold consent to the insured’s participation in the process, with the attendant fact questions bound to arise in individual cases. These tensions were evident in the parties’ briefs submitted to the Florida Supreme Court.
Altman’s Position Before the Supreme Court
Altman sought a ruling that a Ch. 558 notice of claim is always a “suit” under a standard form CGL policy, with or without the insurer’s consent. To do so, Altman’s brief went to great lengths to argue that the Ch. 558 process fits the definition of “suit” as an “alternative dispute resolution proceeding,” but not one falling within subsection b.
Altman’s first position was that, because a Ch. 558 notice of claim must be sent before filing suit, it is necessarily part of the lawsuit process and, thus, part of a “civil proceeding.” According to Altman, Ch. 558 “creates a detailed and multi-step process that the parties are [required] to engage in before filing a lawsuit.”17
Altman relied specifically on the Florida Supreme Court’s decision in Raymond James Fin. Serv., Inc. v. Phillips , 126 So. 3d 186 (Fla. 2013), which relied in part on a dictionary definition of the word “process” as “a particular step or series of steps in the enforcement, adjudication, or administration of rights, remedies, laws, or regulations.”18 According to Altman, the Ch. 558 process satisfies this definition because it is a mandatory process in the sense that a claimant must send the notice of claim as a condition precedent to filing suit; and the party receiving the notice “must” serve a written response to the claim under the express terms of the statute, even though the statute attaches no penalty to a failure to serve a written response.19 According to Altman, “[t]he absence of specific penalties for non-compliance does not make the requirements of Ch. 558 any less mandatory.”20 The mandatory nature of the Ch. 558 process and the fact it is a prelude to litigation, in Altman’s view, make it “inextricably intertwined” with construction litigation.21 According to Altman, the Ch. 558 process is not an alternative to litigation, but a first step in pursuing litigation.22
Altman’s second argument was that, even if the Ch. 558 process is considered “alternative dispute resolution” rather than a “civil proceeding,” the definition of “suit” is sufficiently broad that it includes “various forms” of ADR.23 Nothing in the policy, according to Altman, indicates that the list of ADR proceedings in the policy (in subparagraphs a and b) was intended to be exclusive.24 The word “includes” in the policy actually means “includes, but is not limited to” the forms of ADR expressly listed.25 Thus, the Ch. 558 process is simply another form of ADR covered by the definition of “suit.” In making this argument, Altman relied on a Colorado opinion that interpreted identical policy language and held that Colorado’s “CDARA” process (which has some similarities to Florida’s Ch. 558 process) was both a “civil proceeding” and an ADR process to which the insurer had consented.26
Altman’s final argument was that, if the court was not convinced of its arguments, and found Crum & Forster’s argument plausible, then that was evidence that the policy was ambiguous and should be construed liberally in favor of coverage.27 Altman argued that, to hold otherwise would simply encourage contractors “to invite lawsuits to be filed in order to receive insurance coverage.”28 This is because many in the construction industry lack the financial resources to participate in the Ch. 558 process without the benefit of insurance coverage. Thus, the availability of insurance coverage promotes the legislature’s stated goals in enacting Ch. 558 by providing the parties the financial resources needed to avoid litigation.29
Crum & Forster’s Position Before the Supreme Court
At the polar opposite of Altman’s argument was Crum & Forster’s position that a Ch. 558 notice of claim is never a “suit” for coverage purposes. Crum & Forster characterized the Ch. 558 process as mostly about repairs of defective construction, including such mundane things as “replacing a non-functioning garage door opener or broken roof tiles on a single family house.”30 In Crum & Forster’s view, the Florida Legislature enacted Ch. 558 to “give construction trades the opportunity to fix deficiencies in their work” rather than litigate over it.31 What the Florida Legislature created is a “collaborative process” rather than an adversarial proceeding.32 The legislature deliberately stopped short of requiring insurer participation in the Ch. 558 process. For example, merely providing a copy of the 558 notice of claim to a contractor’s insurer, as the statute permits, does not constitute a claim for insurance purposes.33 This evidenced the legislature’s intent to permit, but not require, insurer participation in the Ch. 558 process.34
Crum & Forster also argued that the Ch. 558 “notice-and-repair process” does not fit the policy’s definition of “suit” because “suit” means a “civil proceeding” under the policy’s definition.35 Even though “civil proceeding” itself is not defined in the policy, Black’s Law Dictionary nevertheless defines “civil proceeding” as a “judicial hearing” that involves disputes between litigants, the purpose of which is “to decide or delineate private rights and remedies.”36 Because the Ch. 558 process clearly is not a “lawsuit,” it is, therefore, not a “civil proceeding.”37 Crum & Forster acknowledged that the policy broadens the definition of “suit” to include the two types of “alternative dispute resolution proceeding” identified in subparagraphs a and b of the definition of “suit.”38 Nevertheless, it maintained that the Ch. 558 process satisfies neither prong of this definition. The Ch. 558 process does not require arbitration, but rather is a condition precedent to arbitration under the express terms of the statute.39 Moreover, the Ch. 558 process does not satisfy the definition of ADR as provided in subparagraph b of the policy definition of a “suit” because, under another dictionary definition the Raymond James court cited, a “proceeding” means “[a]ny procedural means for seeking redress from a tribunal or agency.”40 Ch. 558 does not provide for any tribunal or agency to adjudicate rights or remedies.
Crum & Forster also argued that the Ch. 558 process is not an “alternative dispute resolution proceeding” under subparagraph b because, even if it is a “proceeding,” it is not one that seeks covered damages. Instead, Ch. 558 is a process to obtain repairs, not damages.41 Ch. 558 does not provide a mechanism to determine an amount of damages that the insured would be legally obligated to pay. As such, there is nothing for the liability insurer to “defend” because the Ch. 558 process will never end in a verdict or judgment for damages that a policy would cover.42
The insurer also took issue with Altman’s argument that a lack of coverage would deter contractors from participation in the Ch. 558 process.43 Crum & Forster argued that Altman’s own experience belied that claim, as Altman ultimately resolved over 800 defect claims without Crum & Forster’s participation.44 Conversely, Crum & Forster urged that requiring insurers to defend Ch. 558 notices would lead to more disputes between insurers and insureds and more coverage lawsuits, and would inevitably lead to premium increases and decreased availability of liability coverage for contractors.45
The Supreme Court’s Decision
Justice Polston’s majority opinion framed the issue as one of insurance policy interpretation, and noted the court’s rule of interpretation that courts are to construe insurance contracts according to their plain language.46 The opinion then reviewed the Ch. 558 process that was in effect in 2012 when Altman received Sapphire’s first notice of claim.47 The court quoted the legislative findings and declaration contained in 558.001 and emphasized the references to “an alternative method to resolve construction disputes” and to the need to provide an “alternative dispute resolution mechanism” for construction defect matters.48
The opinion then analyzed the applicable policies’ definition of the term “suit.” The court first analyzed whether the Ch. 558 process fits the portion of the definition that references a “civil proceeding.”49 The majority opinion cited Raymond James and its two definitions of “proceeding”: One that defined a “proceeding” as “[a]ny procedural means for seeking redress from a tribunal or agency”;50 and the other that defined a proceeding as “a particular step or series of steps in the enforcement, adjudication, or administration of rights, remedies, laws, or regulations.”51 The court also referenced the definition of “civil proceeding” contained in the 10th edition of Black’s Law Dictionary, which references a judicial hearing, session, or lawsuit.52 From these definitions, the court concluded that the Ch. 558 process is not considered a “civil proceeding.” As the majority opinion explains:
“[C]hapter 558 does not place any obligation on the insured to participate in the Ch. 558 process. The Ch. 558 framework has never been anything other than a voluntary dispute resolution mechanism on the part of the insured, despite its requirement that the claimant serve the insured with a notice before initiating a lawsuit. Further, the Ch. 558 process does not take place in a court of law or employ any type of adjudicatory body. Nor does the Ch. 558 process produce legally binding results. Rather Ch. 558 sets forth a presuit process whereby the claim may be resolved solely by the parties through a negotiated settlement or voluntary repairs without ever filing a lawsuit. Therefore, the Ch. 558 process is not a “civil proceeding” within the policy definition of ‘suit.’”53
Thus, the court agreed with Crum & Forster that there was nothing “mandatory” about the Ch. 558 process, at least from the standpoint of the insured. The court also agreed with Crum & Forster that a “civil proceeding” contemplates an adjudicative process, which is noticeably absent from Ch. 558. However, the court’s opinion then turned to the second sentence of the definition of “suit.”
The majority opinion noted that the second sentence of the definition of “suit” broadened the term to include “[a]ny other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.”54 To find the “plain meaning” of these terms, the court looked again to Black’s Law Dictionary, this time for a definition of the term “alternative dispute resolution”: “A procedure for settling a dispute by means other than litigation.”55 The court found that the Ch. 558 process fell within this definition as a presuit process designed to encourage claimants and contractors to settle claims for construction defects without litigation. Indeed, the legislature itself had described Ch. 558 as “[a]n effective alternative dispute resolution mechanism [.]”56
The court concluded that the Ch. 558 process is an “alternative dispute resolution proceeding,” and then further found that the Ch. 558 process satisfied the requirement that it contain a claim for “such damages” covered under the policy. The opinion noted that the statute defines a “claimant” as one who maintains a “claim for damages.”57 The court also noted the statute’s requirement that a written notice of claim describe the damage or loss that results from the alleged defect, if known. Finally, the opinion notes that a “monetary payment” is included as a potential resolution to a claim. Thus, Ch. 558 contemplates claims for damages as required by the definition of “suit” contained in subsection b.
Although the court found that a Ch. 558 notice of claim falls within subsection b in the definition of “suit” as a matter of policy interpretation, the court did not address the issue of whether Crum & Forster consented to Altman’s participation in the Ch. 558 process initiated by Sapphire. The court found this issue was outside the scope of the certified question and, therefore, returned the case to the 11th Circuit for further proceedings.58
The Altman decision is unusual in that it involves a question of insurance contract interpretation that intersects with a question of statutory interpretation. Determining what is a “suit” for purposes of the insurance policy, and whether the Ch. 558 process qualifies as a “suit,” requires consideration of what, exactly, the legislature intended to create when it enacted Ch. 558. Is it merely designed to give contractors the opportunity to fix defects in their work, as Crum & Forster would have it? Did the legislature intend something more? Did it intend for insurance companies to participate?
Almost from the beginning,59 the text of Ch. 558 expressly addressed the interplay of the Ch. 558 process with potential insurance coverage. As noted above, any offer a contractor makes in response to a written notice of claim does not obligate the contractor’s insurer. Moreover, the provision of a copy of a notice of claim to a contractor’s insurer “shall not constitute a claim for insurance purposes.”60 Yet, remarkably, the majority opinion never mentions these provisions of Ch. 558. Instead, the court looks exclusively to the legislative findings and declaration in 558.001 that describe the process created as an “alternative dispute resolution mechanism.” Comparing this to the Black’s Law Dictionary definition of “alternative dispute resolution” as a “procedure for settling a dispute by means other than litigation,” the court concludes that the Ch. 558 process is an alternative dispute resolution proceeding within the “plain meaning” of the policy because the statute created a process “aimed to encourage the claimant and the insured to settle claims for construction defects without resorting to litigation.”61
But despite its discussion of the statute’s “aims,” the court never acknowledges that it engages in statutory interpretation to determine those aims.
It appears that the majority opinion, without saying so, applied the court’s maxim that “[w]here a statute’s language is plain and unambiguous, its plain meaning will control and further statutory construction is not necessary.”62 But when ascertaining a statute’s plain meaning, it is important not to violate the court’s “elementary principle of statutory construction” that “significance and effect must be given to every word, phrase, sentence, and part of the statute if possible, and words in a statute should not be construed as mere surplusage.”63 The majority opinion’s straightforward interpretation of the statute based on words the legislature actually used is certainly consistent with the “plain meaning rule.”64 But if the court’s jurisprudence teaches anything, it is that the words in the rest of the statute, notably those in 558.004, also deserve consideration. Indeed, in his dissent, Justice Lawson offers his own competing interpretation of the “plain language” of Ch. 558:
In other words, the statute not only prohibits the claimant’s Ch. 558 notice from acting as an insurance claim, but expressly directs the contractor to respond to the notice without involving its insurer and to send notice of any covered claim only after it has analyzed the notice, exchanged information, and fashioned its response — at the end of the Ch. 558 process. To me, this reflects the [l]egislature’s understanding that the singular type of claim for which it was establishing this process — a construction defect claim — does not generally involve insurance. And, in light of this understanding, the [l]egislature very carefully drafted the statute so as to exclude from the Ch. 558 process secondary claims for personal injury or property damage caused by a construction defect (to which insurance would typically apply). Therefore, the majority construes the statute as applying to a type of claim that the plain language of the statute excludes from the Ch. 558 process.65
Arguably, the court’s reliance on the legislative findings and declaration violates the maxim that specific statutory provisions that cover a subject prevail over a more general statutory provision that covers the same and other subjects in general terms.66 To be fair, 558.004 states that furnishing a notice of claim under 558 is not a “claim” for insurance purposes, and does not directly address whether furnishing the notice is a “suit,” which is a different term in the policy with its own definition (the term “claim” being undefined in the policy). But for purposes of providing guidance to lower courts and litigants, it is remarkable that the court held that a written notice of claim under Ch. 558 is a “suit” under a standard form CGL insurance policy without squaring that result with the statute’s textual command that a Ch. 558 notice is not a “claim” for insurance purposes and, therefore, arguably not even eligible to be considered a “suit.”67
Turning to the insurance policy interpretation question, if one accepts the premise that “any other alternative dispute resolution proceeding” ( i.e ., subsection b) is broad enough to encompass the “alternative dispute resolution mechanism” nominally created by Ch. 558, then the rest of the court’s analysis is unremarkable. The court’s construction requires a far less tortured reading of the policy’s definition of “suit” than either of the parties proposed.68 That the court declined all invitations to strain to reach an all-or-nothing result is commendable. Moreover, although not relied upon by the court, the court’s construction seems to fit with what the Insurance Services Office (ISO) intended when it added subsection b to the policy definition as part of the 1988 revision.69
Implications for Insurers and Policyholders Facing 558 Notices
The first potential impact from Altman concerns the duties of insureds under their CGL policies toward the insurer. If a Ch. 558 notice of claim is a “suit” for purposes of a CGL policy, is the insured now obligated to notify its insurer each time it receives a Ch. 558 notice of claim? The answer is not clear from the court’s decision, and a wrong guess by an insured could result in a loss of coverage. The court’s opinion, unfortunately, provides no answer.
Assuming an insured provides notice of receipt of a Ch. 558 notice of claim, the immediate impact of the Altman decision is to shift the terms of the debate from whether a Ch. 558 notice of claim could ever constitute a suit for insurance purposes to a more fact-intensive inquiry. Did the insured provide timely notice to the insurer of the written notice of claim? Did the insurer consent (expressly or by implication) to the insured’s participation in the Ch. 558 process? Did the insured make voluntary payments to resolve the claim for which there is no coverage under the policy? These matters were all contested in the Altman case, and are likely to be contested in future cases.
Despite this, the Altman decision should not result in ruinous liability for insurers for defense costs incurred in responding to Ch. 558 notices. In the short term, even if the insured provides timely notice, insurer consent is still required for coverage. Although there is some risk of a later finding of waiver of the consent requirement, insurers will doubtless adopt standard responses to Ch. 558 notices much like they have already done to respond to lawsuits under a reservation of rights. Moreover, many Ch. 558 notices result in the insurer retaining defense counsel to defend the notice under a reservation of rights, but little else after that, as contractors will often elect not to respond to Ch. 558 notices when it becomes clear they have no plausible liability for the claimed defects and at other times elect to resolve the claim through repairs.
In the longer term, insurers ultimately control the terms of the policies they write. If insurers deem the exposure created by the Altman decision too great, then much like the insurance industry has done with respect to pollution and mold claims, insurers have the ability to add restrictive endorsements to their policies either completely eliminating or severely limiting coverage of defense costs for Ch. 558 proceedings. There need not be any “insurance crisis” — as some predicted — under these circumstances.
For practitioners who represent contractor insureds, prompt notice to the insurer will be paramount as well as follow-up to obtain (or create a record of attempting to obtain) the insurer’s position on whether it will consent to the insured’s participation in the Ch. 558 process. One potential downside to consider is the possibility that forwarding Ch. 558 notices of claim to a contractor’s insurer may result in contractors’ claims experience (known in the industry as “loss runs”) being negatively affected. For this reason, consideration should be given to notifying the insurers of a contractor’s subcontractors, assuming the subcontract required the subcontractor to name the general contractor as an additional insured under the subcontractor’s CGL policies. These policies represent additional potential sources of coverage for Ch. 558 defense costs, but without the potential downside of negatively affecting the contractor’s loss run. Because the majority’s opinion in Altman did not address the statute’s command that furnishing a copy of a Ch. 558 notice of claim is not a claim for insurance purposes, it will fall to later court decisions to resolve this issue. Insurers may begin endorsing their policies to specifically address Ch. 558 notices of claim and whether they are considered a “claim” for notice as well as underwriting purposes, but until that happens, practitioners will have to deal with several years’ worth of CGL policies already written without such endorsements.
At face value, the Altman decision strikes a reasonable balance between policyholders and insurers with an interpretation of the CGL policy firmly grounded in a plausible interpretation of the policy’s terms — terms the industry is free to modify in future policies. Any such modification will take precedence over any contrary language in the statute based on the language added in the 2015 amendment to Ch. 558. In the meantime, however, practitioners must grapple with the tension between the court’s interpretation of existing policies and the text in Ch. 558 that the court overlooks, with no certainty of how the legislature or the courts will sort out these tensions. Altman almost certainly will not be the last chapter written on this subject.
1 Fla. Stat. §558.001 (2017).
2 Fla. Stat. §558.004 (2017).
3 Fla. Stat. §558.001 (2017).
5 Fla. Stat. §558.002(3) (2017).
6 Fla. Stat. §558.004(1)(a) (2017). For ease of reference, this article refers exclusively to “contractor” when referring to the party to whom a notice of claim is sent.
7 Fla. Stat. §558.004(1) (2012). In 2015, the legislature amended the statute to read: “The notice of claim must describe in reasonable detail the nature of each alleged construction defect and, if known, the damage or loss resulting from the defect. Based upon at least visual inspection by the claimant or its agents, the notice of claim must identify the location of each alleged construction defect sufficiently to enable the responding parties to locate the alleged defect without undue burden. The claimant has no obligation to perform destructive or other testing for purposes of this notice.” See Fla. Stat. §558.004(1)(b) (2017).
8 Fla. Stat. §558.004(1)(a) (2017). The period is 120 days in cases that involve an association that represents more than 20 parcels. See id.
9 Fla. Stat. §558.004(6) (2017).
10 Fla. Stat. §558.004(7) (2017).
11 Fla. Stat. §558.004(10) (2017).
12 Fla. Stat. §558.004(5)(b), (c) (2017).
13 Fla. Stat. §558.004(4)(e) (2017).
14 Fla. Stat. §558.004(13) (2012). This provision was amended in 2015 to add “unless the terms of the policy specify otherwise.” Fla. Stat. §558.004(13) (2017).
15 Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co. , 832 F.3d 1318, 1326 (11th Cir. 2016).
16 The first policy was written on Insurance Services Office (ISO) form CG 00 01 10 01, while the remaining policies were written on ISO form CG 00 01 12 04.
17 Initial Brief on the Merits of Appellant, Altman Contractors, Inc. (Altman Brief) at 16.
18 Id . at 22 (quoting Raymond James Fin. Serv. Inc. v. Phillips , 126 So. 3d 186, 190 n. 4).
19 Id. at 21 (quoting Fla. Stat. §558.004(4)).
20 Id. at 22.
21 Id. at 13.
22 Id . at 17.
23 Id. at 23.
25 Id .
26 See id. at 24-26 (citing Melssen v. Auto-Owners Ins. Co. , 285 P.3d 328, 334-35 (Colo. App. 2012)).
28 Id. at 31.
29 See id . at 31-32.
30 Answer Brief on the Merits of Appellee, Crum & Forster Specialty Ins. Co. (C&F Brief) at 14.
32 Id. at 6.
33 Id. at 7 (citing Fla. Stat. §558.004(13)).
35 Id. at 16.
36 Id. at 16-17 (quoting Black’s Law Dictionary 300 (10th ed. 2014)).
37 Id. at 17.
39 The statute defines “action” as including “any civil action or arbitration proceeding for damages[.]” See Fla. Stat. §558.002(1) (emphasis added).
40 C&F Brief at 18 (citing Raymond James Financial Svcs. v. Phillips , 126 So. 3d at 186, 190 (2013)).
41 Id. at 19.
43 Id. at 32-33.
44 Id. at 32.
45 Id. at 35. Crum & Forster cited Colorado’s experience after its statute was amended to require coverage for CDARA notices of claim. According to Crum & Forster, this led to “skyrocketing insurance costs.” Id. at 36-37.
46 Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co. , 232 So. 3d 273, 276 (Fla. 2017).
47 The court referenced the 2015 amendments to Fla. Stat. §558.001 in a footnote, but did not expressly rely upon them. Id . at 276 n.2.
48 Id . at 276.
49 Id. at 277.
50 Id . at 277-78 (quoting Black’s Law Dictionary 1324 (9th ed. 2009)).
51 Id . at 278 (quoting Merriam-Webster’s Dictionary of Law 387 (1996)).
52 The full definition reads as follows: “A judicial hearing, session, or lawsuit in which the purpose is to decide or delineate private rights and remedies, as in a dispute between litigants in a matter relating to torts, contracts, property, or family law.” Black’s Law Dictionary, 300 (10th ed. 2014).
53 Altman, 232 So. 3d at 278.
54 Id .
55 Id . (quoting Black’s Law Dictionary 91 (9th ed. 2009)).
56 Id . (quoting Fla. Stat. §558.001 (emphasis in original)).
57 Id. at 279 (quoting §558.002(3)).
58 Id. Upon receiving the Florida Supreme Court’s answer to the certified question, the 11th Circuit vacated the final summary judgment previously entered in favor of Crum & Forster and remanded the case back to the district court for further findings, presumably including the issue of Crum & Forster’s consent. See Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 880 F.3d 1300, 1302 (11th Cir. 2018).
59 The provisions in Ch. 558 relating to insurers were added as part of the 2004 amendments.
60 Fla. Stat. §558.004(13) (2017).
61 Altman , 232 So. 3d at 278.
62 Petty v. Florida Ins. Guar. Ass’n , 80 So. 3d 313, 316 n.2 (Fla. 2012) (Polston, J.). That the court considered the legislature’s intent in enacting Ch. 558 in deciding the coverage issue is made plain by the majority opinion’s reference to how the legislature “explicitly described Ch. 558.” Altman , 232 So. 3d at 278.
63 Mendenhall v. State , 48 So. 3d 740, 749 (Fla. 2010) (per curiam opinion joined by Justice Polston).
64 See, e.g., Mendenhall , 48 So. 3d at 748 (stating “legislative intent is determined primarily from the statute’s text.”).
65 Altman , 232 So. 3d at 284-85 (emphasis added) (Lawson, J.).
66 See Mendenhall , 48 So. 3d at 748 (quoting McDonald v. State , 957 So. 2d 605, 610 (Fla. 2007)).
67 For instance, subsection b encompasses alternative dispute resolution proceedings in which covered damages “are claimed.” Although not clear, it is arguably consistent with how the policy is written to construe a “suit” as a “claim” that is asserted in a judicial, arbitral, or “other” alternative dispute resolution proceeding. Under that construction, if a Ch. 558 notice is not a claim for insurance purposes, then, ipso facto, it cannot be a “suit.”
68 In particular, Altman argued the definition of suit is broad and “includes, but is not limited to” the types of ADR listed in subsections a and b, such that the Ch. 558 process falls in some unwritten third category. See Altman Brief at 23. Crum & Forster’s Amici , American Insurance Association, conversely, argued that, if Ch. 558 is mandatory on the insured as urged by Altman, then it would fall outside the types of ADR listed in the definition, such that it would be “ADR” but of a type not included in either subsection a or b. See Brief of Amici Curiae American Insurance Association, et al . at 7-8. Each of these approaches contort the definition of “suit” to reach the desired result.
69 According to amicus curiae United Policyholders, subsection b was added by the ISO to the definition of the term “suit” in the 1988 revision of the ISO form CGL policy “at the urging of industry groups to ‘encourag[e] the use of alternative dispute resolution (ADR) proceedings to help control the legal costs associated with liability insurance claims.’” United Policyholders Amicus Curiae Brief in Support of Altman Contractors, Inc. at 11 (quoting Annotated ISO CGL Policy at 28 (International Risk Management Institute, Inc. 2016)).
REESE J. HENDERSON, JR., is a shareholder with GrayRobinson, P.A., in Jacksonville. He is a board certified specialist in construction law and certified mediator who regularly represents clients in a variety of construction-related disputes. Henderson has extensive experience consulting with clients on Ch. 558 compliance issues.