On April 13, 2023, Florida Governor Ron DeSantis signed into law SB 360, a bill to make significant changes to the state’s construction defect claims process. The new law, which goes into effect immediately, should provide some additional protections to those in the construction industry by shorting the time period for bringing design and construction defect claims, clarifying the application of these time periods on multi-building projects, and adding a “materiality” requirement to statutory claims for violation of Florida’s Building Code according to Fla. Stat. § 554.84.
Matthew is Board Certified in Construction Law and is chair of Henderson Franklin's Tort & Insurance Litigation Department and Construction Law Group. He concentrates his practice in the areas of construction litigation, construction contracts, business and real estate litigation. Matthew also has an active appellate practice.
Matthew participates in the legislative subcommittee for Florida Construction Lawyers, where he examines proposed legislation related to the construction industry. He offers recommendations and potential revisions to ensure the legislation aligns with industry standards and requirements.
Throughout his career, Matthew has received numerous accolades, including being named to Florida Trend Magazine’s “Up and Comers” list (2009) and Legal Elite (2010, 2011, 2016-2017), Naples Illustrated “Top Lawyers” (2018, 2020-2023), and Florida Super Lawyers® magazine.
Construction warranties seem simple enough but often result in a great deal of confusion, particularly when it comes to understanding the amount of time a project owner has to file a lawsuit alleging the breach of such warranties.
The complication arises because an owner’s right to sue for breach of a warranty does not expire on the date the warranty expires.
A Common But Confusing Scenario
Assume a situation in which a contractor has completed construction of a residence on January 1, 2015. The contractor has been fully paid for the work and the owner appears happy with the work. Further assume that the construction contract included a standard two-year warranty on labor and materials.
Now fast forward five years to the year 2020 and the contractor is served with a lawsuit from the same owner who is alleging breach of construction warranties. How can this be? The warranties expired in 2017, right? It would appear that this should be a simple case for the contractor to defend and win. Unfortunately, it is not so simple.
A common misunderstanding in the construction industry lies in the distinction between the concept of a warranty period and the statute of limitations for filing a lawsuit.
Four-Year Statute of Limitations
Most of us in the construction industry are familiar with contractual provisions which require one of the parties to obtain insurance on the project (frequently called “builder’s risk” policies). These provisions are typically accompanied by “waiver of subrogation” provisions. Usually, if everything goes well on a construction project, these provisions don’t ever come up for discussion. However, in the event there is an accident during the course of construction, these provisions can be critical for purposes of allocating risks and potentially protecting a contractor or its subcontractors from liability.
How do these provisions work?
Typically, a construction contract will require the owner (or the contractor) to obtain property insurance to protect the project during the course of construction. For example, the standard AIA General Conditions require the owner to “purchase and maintain property insurance upon the entire work at the site to the full insurable value thereof.” This insurance is to include the interests of the owner, the contractor and all subcontractors. In short, the insurance is intended to protect the project against all “perils” and is generally intended to provide protection for everyone involved in the work.
A “Waiver of Subrogation” provision is typically designed to prevent an insurance company from asserting claims against the party who may have been responsible for causing damage to the property. Thus, if the project is damaged during construction and the insurance company is forced to pay for the damage, the insurance company is prohibited from asserting claims against the contractor or its subcontractors or others who may have been responsible for the damage.
Section 624.1055, Florida Statutes, is part of the recent Omnibus Insurance Bill, HB 301: Contribution Rights Among Insurance Carriers. This new legislation impacts those involved in Florida construction defection litigation and applies to claims, suits or other actions initiated after January 1, 2020.
Old Rule – No Right of Contribution
The longstanding rule in Florida has been that there is no right of contribution among insurance carriers for attorney fees incurred in defending a mutual insured. The rationale has historically been that each carrier owes a complete and independent obligation to provide a defense under the insuring policy, such that, by issuing the policy, the carrier did so without contemplation that it would be entitled to recover payment from another carrier for such defense costs. The Florida Supreme Court described the rationale for the current rule in the case of Argonaut Ins. Co. v. Maryland Cas. Co., 372 So.2d 960, 964 (Fla. 1979), as follows:
The Legislature has not seen fit to allow contribution for costs or attorney’s fees between insurance companies. If contribution for costs were allowed between insurance companies, there would be multiple claims and law suits. The insurance companies would have no incentive to settle and protect the interest of the insured, since another law suit would be forthcoming to resolve the coverage dispute between the insurance companies. This is contrary to public policy, particularly since the insured has been afforded legal protection and has not had to personally pay any attorney’s fees.”
New Legislation and Impact
HB911 is proposed legislation that would substantially revamp Ch. 558, Florida Statutes, by substantially doing away with pre-suit notice requirements and replace those requirements with mandatory non-binding arbitration to take place within 180 days of the lawsuit being filed.
Notably, the new provisions would apply not only to completed projects (like the current version) but also to ongoing projects.
Impact of HB911 on Florida Construction Defect Insurance Claims
If you have been in the business world for any reasonably length of time, or if you have leased property or entered into a contract for construction or remodeling, you have probably been a party to a contract that contains an indemnification provision.
The concept of the indemnification provision is generally very simple. If one contracting party (the indemnitee) becomes liable to a third party as a result of wrongful conduct on the part of the other contracting party (the indemnitor), the at fault party (the indemnitor) must compensate or indemnify the party who is not at fault.
Indemnification provisions are prevalent in construction contracts, independent contractor agreements, leases and other business arrangements where there is a possibility that one party might get sued as a result of someone else’s conduct.
The problem is that few people appreciate the significance of the indemnification provision or how it works and Florida courts have reached some decisions that would likely be surprising, if not shocking, to the uninitiated.
“I might have to pay because I’m potentially liable?”
Freedom to contract is one of the cornerstones of our system of jurisprudence. As long as the subject of the contract is not illegal or contrary to an established public policy, we Americans can contract in just about any manner we wish.
Yet, all too often when disputes arise in connection with a construction project, we find parties who have no contract or (potentially worse) a contract which is not suitable for the nature of the project and/or the interests the parties wish to protect.
The construction industry is somewhat unique because of the wide range of potential parties and relationships involved in a project: owners/developers, general contractors, design professionals, subcontractors, materials suppliers, lenders, sureties, just to name a few. These numerous relationships make it all the more important to protect yourself with appropriate contractual provisions.Continue Reading What You Need to Know About Construction Contracts to Protect Your Business