The United States Court of Appeals, Fourth Circuit, recently took a close look at the application of a “controlled insurance program exclusion” (wrap-up exclusion) to additional insureds on a commercial general liability policy. In Cont’l Cas. Co. v. Amerisure Ins. Co., 886 F.3d 366 (4th Cir. 2018), the Fourth Circuit examined the interplay of an enrolled party’s additional insured status on an unenrolled party’s commercial general liability (“CGL”) policy with a wrap-up exclusion. The court applied North Carolina law and found that pursuant to the policy’s own language, the exclusion only applied to the original named insured, not the additional insureds.
Recently, in Vanacore Construction, Inc. v. Osborn, 2018 Fla. App. LEXIS 18068, 2018 WL 6579205, the 5th District Court of Appeal determined that a homeowners’ claims against a builder for construction defects bore a significant relationship to the parties’ construction contracts. Therefore, the claims were arbitrable pursuant to the broadly worded arbitration provision of the contracts.
If construction defect claims are not timely filed, Florida Statutes provide design and construction companies with a formidable defense. As a case in point, a Miami-Dade Circuit Court Judge issued an Order granting summary judgment based on Fla. Stat. § 95.11(3)(c), Florida’s Statute of Limitations governing actions founded on alleged construction defects.
Prior to the Fourth District Court of Appeal’s recent decision in Robert Gindel, et al. v. Centex Homes, et al., 43 Fla. L. Weekly D2112d (Fla. 4th DCA Sept. 12, 2018), Florida courts had not directly addressed the issue of whether the mandatory pre-suit notice for construction defects under Chapter 558 qualifies as an “action,” pursuant to the statute of repose in Chapter 95.
Gindel v. Centex is a construction defect case for damages arising from the alleged improper construction of townhomes. On March 31, 2004, the Homeowners closed on and took possession of the townhomes constructed by Centex and its subcontractors. On that date, the statute of repose, section 95.11(3)(c), Florida Statutes (2014), began to run as to any construction defect, the expiration of which was ten years later. After discovering the alleged defect, on February 6, 2014, the Homeowners provided the Chapter 558 requisite pre-suit notice of defect to Centex. At the conclusion of the mandatory pre-suit procedure, Centex declined to cure the alleged defect. The Homeowners filed suit on May 2, 2014.
A new amendment to §95.11, Florida Statutes, may impact Construction Law in Florida. The revision to §95.11(3)(c) was approved by Governor Rick Scott on March 23, 2018 upon the signing 2018 Fla. HB 875. The amendment again aims to modify the Statute of Repose period for latent defect actions. The Statute of Repose specifically time bars any action for latent defect arising out of the design, planning or construction of an improvement to real property based on a fixed time period.
The situation is one all too familiar to construction defect litigants. A homeowner contracts with a roofing contractor to install a new roof with a life expectancy of ten years. After only five years, the homeowner brings a claim for construction defects in the roof alleging that the roof requires complete replacement due to water intrusion. The homeowner seeks damages for the full replacement cost of the roof. However, under a “useful life” theory, the homeowner would not be entitled to damages for the full amount of the replacement cost. Instead, the homeowner would be entitled to one-half of the cost of the replacement roof, taking into account the fact that he or she had been deprived of only five, rather than ten, years of use.
The concept of betterment has long been used by defendants in cases involving defective design or construction to limit the damages awarded to a plaintiff. The theory behind betterment is that: “if in [the] course of making repairs [an] owner adopts a more expensive design, recovery should be limited to what would have been the reasonable cost of repair according to original design.” Betterment is often raised as an affirmative defense, requiring a defendant to prove that the plaintiff has received a good or service that is superior to that for which the plaintiff originally contracted. A recent South Florida case seems, at first blush, to suggest the burden of establishing the value of betterments may fall to the plaintiff, although a closer reading indicates the decision is likely to have limited applicability.
It is a fairly common fact pattern in construction defect claims: A design professional, such as an architect or engineer, is contracted by a client to provide a design, and perhaps perform construction administration for, an improvement to real property. Construction is completed, and everything seems fine for four or more years until the client asserts defects and deficiencies that implicate the services of the design professional. Upon further investigation, it appears the client knew of the alleged defects and deficiencies for at least two years before filing suit for professional negligence. The question invariably arises, “are the claims barred by the statute of limitations?”
Recently, in Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., the United States Court of Appeals for the Eleventh Circuit addressed an issue of first impression. In Altman, the Eleventh Circuit evaluated whether an insurer has a duty to defend and indemnify an insured who receives a Notice of Claim pursuant to Chapter 558, Florida Statutes (“Notice of Claim”). The Southern District of Florida previously ruled that a Notice of Claim did not constitute a suit, and thus, does not trigger a duty to defend and indemnify. The insured then appealed that ruling to the Eleventh Circuit, which ruled that the terms “suit” and “civil proceeding,” as found in the subject Commercial General Liability (CGL) insurance policies, may be ambiguous as used in the policies. Due to important public policy considerations, the Eleventh Circuit certified the following question to the Florida Supreme Court: “Is the notice and repair process set forth in Chapter 558 of the Florida Statutes a ‘suit’ within the meaning of the GCL policies issued by C&F to ACI?”
David Salazar, Esq., a partner in Cole, Scott & Kissane’s (“CSK’s”) Construction Group, recently filed and argued a Motion for Judgment on the Pleadings (the “Motion”) on behalf of a threshold inspector in a complex, multi-party construction lawsuit. The general contractor on the project sued CSK’s client for, among other things, professional negligence. The claimed Read More…