NAVIGATING FLORIDA CHAPTER 558, FLORIDA’S CONSTRUCTION DEFECT STATUTE
NAVIGATING FLORIDA CHAPTER 558, FLORIDA’S CONSTRUCTION DEFECT STATUTE
With the boom of families moving to Florida since COVID-19 pandemic there has been an increase in not only new construction and renovation of residential properties but also commercial buildings. This increase has been accompanied by an uptick in litigation concerning construction problems such as design defects, poor workmanship, and code violations. As a result, the service of 558 Notices on behalf of owners pursuant to Florida Statute have also been on the rise. The below summary is intended to provide a summary of the background and particulars of Chapter 558 Notices and the practical implications of same.
Background & Notice Requirements:
In 2003, the Florida Legislature enacted a construction defects statute that established pre-suit requirements potential claimants must follow and placed mechanisms which enable early evaluation for contractors and design professionals to potentially resolve claims before litigation is commenced. The statute generally requires that owners (including associations) provide pre-suit notice to developers, contractors, subcontractors, material suppliers and design professionals (hereafter “contractors” for ease of reference) before the commencement of legal action regarding an alleged defect. The notice must describe in “reasonable detail” the defects, the nature of each alleged construction defect and, if known, the damage or loss resulting from the defect. On its face, the claimant or its agents must sufficiently identify the location of each alleged construction defect to afford the responding parties the ability to locate the alleged defect without undue burden. When dealing with claims involving associations, the notices will generally be accompanied by a report prepared by a construction expert. To that end, a claimant’s non-compliance may relieve savvy contractors and insurers from exposure to costly litigation.
Define a “Construction Defect”:
Under Chapter 558, Florida Statutes, a “construction defect” is defined as a deficiency in or arising out of the construction of a property due to the installation of defective material, the work resulted in a violation of building codes, and/or the design of the property was defective or deviates from the standards of the trade.
558 Notices – Exceptions to the “When” & “How” Requirements:
The statute clearly lays out the method and timeframe in which one must serve a 558 Notice. Typically, it is a condition that must be satisfied prior to the filing of a construction defect lawsuit. However, what happens if, in the middle of an ongoing construction defect lawsuit, additional defects, which may be reasonably related to or caused by the originally noticed defects arise? There is an exception within Chapter 558, Florida Statutes, which provides that as long an additional claim is “reasonably related” or “caused by” a previously noticed defect(s), the additional claim may be included in the proceeding and the notice requirement will essentially be considered “waived” as to the defects discovered post-suit. This eliminates the additional costs incurred when starting from square one in the process of sending out new notices and scheduling inspections.
Define “Reasonably Related”:
The term “reasonably related” is ambiguous and there is no case law that addresses this issue. Therefore, this will remain a point of contention for litigants to argue on both sides as to whether the proposed defect is or is not reasonably related to the originally noticed defects.
Defendant’s Remedies:
Under Chapter 558, Florida Statutes, if a claimant fails to comply with the notice requirements, the defendant may file a motion to stay the action. The court is required to stay the action until the claimant has complied with the notice requirements unless staying the case is futile. This is the only remedy provided under Chapter 558 when dealing with defective notice. We have also seen claims for attorney’s fees where parties have failed to follow the 558 Notice procedures, which is within the discretion of the Court, and depends upon the particular judge presiding over the action.
Effect on Statute of Limitations:
In 2019, Section 558.04(1)(d), Florida Statutes, was amended such that service of the 558 Notice no longer tolls the 10-year statute of repose period established under F.S. 95.11(3(c). Accordingly, this reversed the opinion in Gindell v. Centex Homes, 27 So.2d 403 (4 th DCA, 2018). Section 558.04(10) does toll the applicable statute of limitations by 90-120 days or 30 days beyond the repair or payment period.
Insurance Considerations:
As a threshold question, some insurers may wonder whether the receipt of a 558 Notice triggers any duty to defend under their policies. In 2017, the Florida Supreme Court decided Altman Contractors Inc. v. Crum and Forester Specialty Ins. Co., 232 So.3d 273 (Fla. 2017) and addressed this issue as to the Commercial General Liability policies. The Court in Altman held that while the pre-suit process was not a “suit” under the policy provision defining suit as a “civil proceeding,” the pre-suit process was nevertheless a “suit” under the policy provision defining suit as “any other alternative dispute resolution proceeding.” Thus, policies requiring a defense in alternative dispute resolution proceedings are likely to be interpreted as requiring a defense when a 558 Notice is served. As discussed in further detail below, we would encourage full participation in the 558 process.
Contractor Rights & Time to Exercise:
Sub-Chapter 558.004, Florida Statutes, sets forth the timing and mechanisms available to contractors in the dispute resolution process. As set forth above, the notice requirements themselves require prospective plaintiffs to conduct a detailed inspection for the purpose of ensuring that an adequate description(s) of the defects and damages is provided. Notably, the statute precludes a claimant from filing suit sooner than 60 days (120 in the case of an association). Contractors are afforded with the following rights:
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Within 30 days (50 in a claim brought by an association) the contractor is entitled to perform a reasonable inspection to assess each alleged defect. Testing can include destructive testing by mutual agreement. If the claimant does not permit reasonable destructive testing, the claimant shall have no claim for damages which could have been avoided or mitigated had destructive testing been allowed upon request such that a feasible remedy could have been promptly implemented.
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Within 10 days of receipt (30 in a claim brought by an association) a contractor can serve a copy of the notice to any subcontractor supplier or design professional whom they reasonably believe is responsible for a defect alleged in the notice. Such notice cannot be construed as an admission in later proceedings.
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Within 15 days of receipt of a claim by a contractor, a subcontractor must provide a written response, including a report of the scope of any inspection, findings, and results of the inspection. The subcontract must also provide a response as set forth below.
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Within 45 days of the notice of claim (75 in a claim brought by an association claim), the noticed contractor must provide a written response to the claimant which includes one of the following:
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A written offer to remedy the alleged construction defect at no cost to the claimant, a detailed description of the proposed repairs necessary to remedy the defect, and a timetable for the completion of such repairs;
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A written offer to compromise and settle the claim by monetary payment that will not obligate the person’s insurer, and a timetable for making payment;
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A written offer to compromise and settle the claim by a combination of repairs and monetary payment, that will not obligate the person’s insurer, that includes a detailed description of the proposed repairs and a timetable for the completion of such repairs and making payment;
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A written statement that the person disputes the claim and will not remedy the defect or compromise and settle the claim; or
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A written statement that a monetary payment, including insurance proceeds, if any, will be determined by the person’s insurer within 30 days after notification to the insurer by means of serving the claim, which service shall occur at the same time the claimant is notified of this settlement option, which the claimant may accept or reject. A written statement under this paragraph may also include an offer under paragraph (c), but such offer shall be contingent upon the claimant also accepting the determination of the insurer whether to make any monetary payment in addition thereto. If the insurer for the person served with the claim makes no response within the 30 days following service, then the claimant shall be deemed to have met all conditions precedent to commencing an action.
Implementation of Additional Mechanisms:
While a contractor is in its right to choose not to utilize any of the mechanisms set forth above and elect to dispute of the claim(s) under paragraph 4(d), we believe that is a mistake, and here is why:
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Right To Inspect: As set forth above, the mechanism for inspection should afford the contractor sufficient time to examine defects close in time to their discovery. Section 558.004, Florida Statutes, states that a claimant should endeavor to serve the notice of claim within 15 days of a defect—though failure to do so does not bar claimant from filing a future action. Timely inspection of defective conditions often provide better insight into causation and damage issues, as well as potentially allowing for a remedy before a defective condition is exacerbated. Moreover, the ability to involve an expert in assessing conditions early on may assist greatly in accurately evaluating potential damage and risk
before a suit is filed.
– Right to Serve Sub-Contractors: The ability to involve subcontractors in the 558 process is a powerful tool in potentially limiting future costs. Subcontractors can assist in resolution through information provided and can serve as an invaluable resource in conducting repairs or contributing to a settlement. Often, if defects are detected early on, contractors may still retain leverage over subcontractors in the form of holdbacks that can aid in resolution of claims. Additionally, the early involvement of subcontractors can bring about early cooperation and potential joint defense agreements that may greatly assist in early fact gathering stages.
– Right of Repair: In conjunction with the right to inspect and involve subcontractors, the right of repair also can be a powerful tool for resolving a potential construction dispute through the 558 process. Self-performed repairs are typically less expensive than estimates by claimant-retained experts. Additionally, self-performance by contractors and subcontractors can often reduce the necessary insurance contribution without the need for delving deeply into coverage issues.
Additional Recommendations Regarding 558 Notices:
There are many underlying benefits 558 Notices can trigger and it is important to keep them in mind. In addition to the mechanisms proscribed under the statute, a 558 Notice should trigger additional considerations which include the following:
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Preservation of Evidence: A 558 Notice provides a contractor with early warning of a potential suit and an opportunity to send early preservation of evidence letters to the owner and other parties as well. While an owner has a right to make emergency repairs under the statute, it is advisable to put the owner on notice of the duty to preserve evidence by keeping samples of products and taking pictures or videos of allegedly defective conditions.
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Vouching In: A 558 Notice provides the perfect opportunity to vouch in potentially responsible parties at the earliest opportunity to start the clock running for responsible fees on parties who may potentially be responsible for indemnification and fees.
