Florida Business Litigation & Insurance Coverage Law Blog

Wednesday, April 11, 2018

Does A 558 Notice Constitute A “Suit” Under The Terms Of A CGL Policy? The Florida Supreme Court Says It Does, But It May Not Matter

In Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 232 So. 3d 273 (Fla. 2017), the Florida Supreme Court answered a certified question from the United States Court of Appeals for the Eleventh Circuit in the affirmative, finding that a Chapter 558 Notice does constitute a “suit” under the definitions in a CGL Policy.

Why Does The Definition Of “Suit” Matter?

An insurance carrier’s duty to defend is only triggered when there is a “suit” seeking damages for “property damage.” Specifically, a standard CGL policy states:

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.

Id. at 275.

Usually, determining whether a suit has occurred is not a problem. You simply look to see if there has been a lawsuit filed. But a CGL policy’s definition of “suit” is broader. A “suit” under a CGL policy is a “civil proceeding in which damages because of … ‘property damage,’” including:

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

Notably, the “Legislature explicitly described chapter 558 as ‘[a]n effective alternative dispute resolution mechanism,’ intended to be beneficial for reducing construction defect litigation.”  Id. at 278 (citing § 558.001) (emphasis in original). Further, “[c]hapter 558 falls within this definition as a statutorily required presuit process aimed to encourage the claimant and insured to settle claims for construction defects without resorting to litigation.” Id. Therefore, the Court concluded that “the chapter 558 process is an ‘alternative dispute resolution proceeding’ within the plain meaning of this policy term, the same as mediation would be.” Id.

The Court goes on to note a 558 Notice satisfies the damages part of the “suit” definition because it includes “monetary payment” as a potential resolution of a chapter 558 claim. Id. at 279. Accordingly, the Florida Supreme Court held a 558 Notice constitutes a “suit” under the terms of a CGL policy.

If the drafters of the CGL policy chose not to define a “suit,” the Supreme Court may have decided this case differently. However, because the CGL policy expands the meaning of “suit” to include “alternative dispute resolution proceeding,” the Supreme Court decided a 558 Notice falls within the definition of an “alternative dispute resolution proceeding,” thus constituting a “suit.”

So Why Might The Definition Of “Suit” Not Matter?

The Court notes that the “alternative dispute resolution proceeding” subsection includes a consent element. Specifically, the “alternative dispute resolution proceeding” subsection of the “suit” definition includes “to which the insured submits with our consent.” Essentially, the carrier must consent to the contractor’s participation in the chapter 558 process to trigger the carrier’s duty to defend.

This is significant because many CGL policies define “suit” the same way. If a CGL policy does not contain the consent aspect, all it would take to trigger the duty to defend is a 558 Notice. However, with the consent element, it is still up to the carrier to decide whether it wants to defend at the 558 Notice stage.

The Davis Law Firm is located in Jacksonville, Florida and serves clients throughout the states of Florida and Georgia, including Jacksonville, Miami, Pensacola, Orlando, Tampa, St. Petersburg, St. Augustine, Fort Myers, Daytona Beach, Panama City, Destin, Melbourne, Fort Lauderdale, West Palm Beach, Tallahassee, the Florida Keys, and everywhere in between.

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