The United States District Court for the Southern District of Florida recently issued an opinion in Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., No. 13-80831-CIV, 2015 WL 3539755 (S.D. Fla. June 4, 2015), addressing an issue of first impression. In Altman, the Court 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. Altman is important because a Court ruled that a Chapter 558 Notice of Claim is not a “civil proceeding” and therefore is not a “suit” under a standard form CG 00 01 insurance policy. Therefore, the insurer had no obligation to defend or indemnify ACI, and it did not breach the policies, as a matter of law.
In the underlying dispute, a condominium association served Altman Contractors, Inc. (“ACI”), a general contractor, with a Chapter 558 Notice of Claim. ACI notified its insurer of the claim and demanded a defense and indemnification. ACI’s insurer denied that it had a duty to defend or indemnify ACI because the matter was not in suit. Without waiving this position, the insurer told ACI that it would exercise its discretion to participate in the preparation of ACI’s response to the Notice of Claim. ACI, however, objected to the insurer’s selection of counsel as it already had counsel and wanted its chosen law firm to continue on its behalf. ACI also demanded reimbursement for attorneys’ fees and costs already incurred from the time it placed the insurer on notice of the Notice of Claim. This demand was likewise denied. ACI then filed suit seeking a declaration that its insurer owed it a duty to defend and indemnify it as to the Notice of Claim and for damages flowing from the alleged breach.
ACI moved for partial summary judgment as to whether the insurer had a duty to defend, asserting this duty was triggered when ACI demanded a defense to the Notice of Claim. The insurer moved for summary judgment on all issues, arguing that the language of Chapter 558, specifically section 558.004(13), Florida Statutes, bars a notice of claim from constituting a claim for insurance purposes, and, therefore, there was no duty to defend or indemnify ACI.
The Court disagreed with the insurer’s position that the language of Chapter 558 bars a notice of claim from constituting a claim for insurance purposes. However, the Court ultimately determined that under the specific language of the standard form CG 00 01 policies at issue, the Notice of Claim did not trigger the insurer’s duty to defend. Specifically, the policies stated that the insurer has “the right and duty to defend the insured against any ‘suit’ seeking [damages because of ‘bodily injury’ or ‘property damage’].” The policies defined “suit” as a “civil proceeding” in which specific damages are alleged. The definition of “suit” includes an “arbitration proceeding” or any “other alternative dispute resolution proceeding.”
The Court reasoned that the intent of Chapter 558 is to avoid the commencement of an action by providing a mechanism to guide the parties to enter into discussions with one another. From this, the Court concluded that a Notice of Claim under Chapter 558 does not constitute a “civil proceeding” and therefore is not a “suit” under the subject insurance policies. Accordingly, the Court determined that the insurer had no obligation under the insurance policies to defend or indemnify ACI, and therefore the insurer did not breach the terms of the policies as a matter of law.
The Court did note that carriers are free to define “civil proceedings” to include non-binding, pre-suit proceedings like the Chapter 558 process. However, the standard form policy provides the insurer with the right, but not the duty, to investigate pre-suit losses. In disputes with the potential for large, covered losses, carriers might be well-advised to exercise the right to investigate defect claims to preserve evidence and to narrow the issues to be litigated if suit is filed. For the time being, insureds can expect carriers to maintain the position that no defense or indemnity will be provided during Florida’s Chapter 558 Notice of Claim pre-suit process.
If you have any questions about Altman or would like to discuss how it may apply to a particular set of facts, please contact David Salazar at firstname.lastname@example.org or (350-350-5363), or George Truitt at email@example.com or (305-350-5331).