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FL Construction Law Authority

Insurance Considerations post-Baltimore

Posted in Articles, Disaster Preparation and Recovery, Insurance, Litigation

Let me start with the caveat that I am not getting into the political or race issues at the heart of recent events in Baltimore. However, from the point-of-view of someone working in construction and insurance law, the insurance and rebuilding questions created by the protests/riots in these cities is of great interest. Although the specific article here references insurance issues and struggles to rebuild in Maryland, similar concerns and analyses would apply anywhere that such events take place.

As the article from Insurance Business America notes, many small businesses have been unable to reopen post damage as they are caught in a web of what is and is not covered under their applicable policies. Many questions loom: does the property insurance policy afford coverage; what about the Business Interruption policy; what are the applicable deductibles?

As is typical of any insurance coverage the devil is in the details of the specific policy at issue. Insurance policies can cover almost anything but the more a policy covers the more expensive it likely is and thus cost prohibitive to many small business owners. As a result many business owners reduce coverage, or increase deductibles, in order to afford the policy premium.

Unfortunately, many owners are now finding out that:
– They are underinsured;
– Older buildings need to be brought up to code and their policies do not include such “Law & Ordinance” coverage;
– The storefront glass is not a covered loss;
– Depending on the characterization of the event, “riot” as opposed to “rebellion”, may impact coverage;
– The deductible period for a business loss may cover the time frame when the majority of the damage occurred;

Unfortunately for these business owners it is too late and they are stuck with the insurance policy they bought or did not buy as the case may be. However, it is beneficial for all business and property owners to review their existing policies and sit down with the professionals to hammer out any changes that may need to be made. For those that believe that they are not “at risk” for such casualties such as in Baltimore, that is the narrow and short view of insurance. Reviewing the policies would be beneficial for all other risks including fire, flood, hurricanes, etc. In the long run that may be one of the best invested couple hours of a business or property owner’s life.

Citizens Property Insurance Not Liable for First Party Bad Faith Claims

Posted in Cases, Disaster Preparation and Recovery, Hurricane, Insurance, Litigation

Thursday, the Florida Supreme Court issued its opinion in Citizens Property Insurance Corp., v. Perdido Sun Condominium Association, Inc., considering the issue as to whether Citizens Property Insurance could be liable for First Party Bad Faith Claims.  The Supreme Court determined that Citizens was not liable for such claims and that no exception for such claims existed from Citizens statutory immunity.  This places Citizens in a different position, in regard to insureds, than other insurance carriers who may be offering similar property policies.

The issue in was whether the Legislature intended CitizensProperty Insurance Corporation, a state-created entity that provides property insurance, to be liable for statutory first-party bad faith claims as an exception to its statutory immunity from suit.  The issue had come before the Supreme Court from the First District’s decision in Perdido Sun Condominium Ass’n v. Citizens Property Insurance Corp., 129 So. 3d 1210 (Fla. 1st DCA 2014), which had determined that the “willful tort” statutory exception to Citizens’ immunity applied to statutory first-party bad faith claims.  The First District opinion was at odds with the Fifth District’s opinion in Citizens Property Insurance Corp. v. Garfinkel, 25 So. 3d 62 (Fla. 5th DCA 2009) which held that Citizens was statutorily immune.  The First District certified a conflict between Districts and the Supreme Court took up the issue.

Additionally, the First District passed the following question, which it certified to be of great public importance, to the Supreme Court:

WHETHER THE IMMUNITY OF CITIZENS PROPERTY INSURANCE CORPORATION, AS PROVIDED IN SECTION 627.351(6)(s), FLORIDA STATUTES, SHIELDS THE CORPORATION FROM SUIT UNDER THE CAUSE OF ACTION CREATED BY SECTION 624.155(1)(b), FLORIDA STATUTES[,] FOR NOT ATTEMPTING IN GOOD FAITH TO SETTLE CLAIMS?

As noted above, the Supreme Court answered this question in the affirmative.  The basis for the opinion was a review of the statutory exceptions to Citizens’ immunity.  The Supreme Court found no support for the proposition “that the Legislature intended for Citizens to be liable for a breach of the duty to act in good faith by allowing its policyholders to bring a statutory first-party bad faith cause of action.”  The Supreme Court then reviewed the listed exceptions.  The Court noted that an exception to immunity was not provided and for  the contrary, “the Legislature chose to immunize Citizens for ‘any action taken by [it] in theperformance of [its] duties or responsibilities under . . . subsection [627.351(6)(s)],’ which necessarily includes a breach of the duty of good faith.”

The opinion is not yet final as there could be motions for rehearing.

Preparing for the 2015 Hurricane Season

Posted in Disaster Preparation and Recovery, Hurricane, Insurance, News

The Atlantic hurricane season is defined as running from June 1 through November 30.  No one bothered to tell that to Tropical Storm Ana which hit South Carolina over the weekend.  The Ana had sustained winds of 45 mph at landfall and brought anywhere between 2″-6″ of rain depending on location.  The early start of the hurricane season does not mean that we will necessarily have more hurricanes or what the severity of those hurricanes will be.  However, it is always good to be prepared and plan ahead. The next few weeks will be important to finalize, or even start, our personal and business hurricane preparedness plans.  Even if you do not have one yet there is still time to prepare.

Below is a 12-point Hurricane Preparedness Checklist for condominium and homeowner associations to prepare for the 2015 hurricane season:

1. Disaster Plan – If you have a disaster plan be ready to implement it. At a minimum, designate a responsible community member as Disaster Plan Coordinator and another as Information Facilitator to field queries and respond to from community members. These individuals should be outside the impacted areas so that they can field and disseminate information.

2. Evacuation Routes – Establish clear building or community evacuation routes and be sure that all community members are provided with copies. It may be a good idea to conduct a building or community evacuation drills.

3. Emergency Generators & Supplies – Verify emergency generators are in working order and have adequate fuel supplies, stock a building or community emergency supplies storeroom with flashlights, batteries, water and other necessities for residents and employees in the aftermath.

4. Backup Computer Files – Be sure that computer files crucial to running the building and association, including the governing documents and original plans and specifications for the building, are backed up to CDs or Portable Storage Devices and keep a list of office computer hardware and software vendors and repairmen in case computers crash or systems fail.

5. Secure the Premises – Make preparations for routine lockdown of the building or other facilities so the building is secure during the storm and safe from vandalism or looting if a hurricane strikes.

6. List of Owners & Employees – Have on hand a current, hard-copy reference list complete with the names all property owners, emergency contact numbers and details of second residence addresses, as well as a list of all association employees, with full contact details.

7. Photograph or Video Premises – Keep a visual record through video or photographs of premises, facilities and buildings to facilitate damage assessment and speed damage claims in a storm aftermath.

8. Building and Facilities Plans – Make sure a complete set of building or community plans are readily available for consultation by first-responders, utilities workers and insurance adjusters following a storm.

9. Insurance Policies & Agent Details – It is too late to obtain new windstorm or flood insurance which would cover Hurricane Isaac, but secure copies of all current insurance policies along with contact details for insurance companies and agents.

10. Bank Account Details & Signatories – Keep handy a list of all bank account numbers, branch locations and authorized association signatories, and make contingency plans for back-up signatories in case evacuation or relocation becomes necessary.

11. Mitigation of Damages – In the immediate aftermath of a storm, take the necessary steps to mitigate damages — this includes “Drying- In,” which is the placement of tarps on openings in the roof and plywood over blown out doors and windows, and ” Drying –Out,” which is the removal of wet carpet and drywall to prevent the growth of mold.

12. Debris Removal – Have a plan for speedy removal of debris by maintenance staff, outside contractors or civic public works employees.

For more information, we have several pre-recorded webinars devoted to disaster planning, contracting and restoration of casualty damages. Please go to Becker & Poliakoff Webinars to view the webinars available for download.

New Case: Cypress Fairway v. Bergeron Construction (Statute of Repose)

Posted in Cases, Construction Defects, Litigation

Interesting opinion issued last week by the Florida’s Fifth District Court of Appeal on the statute of repose.  The opinion can be found here.  It is not yet final.

The Cypress Fairway Condominium was a conversion condominium.  The suit was brought by the Association “individually” and also as assignee of claims by the general contractor.  Suit was filed against parties involved in the original construction and also the conversion.

Suit was filed on February 2, 2011. There is no reference to when the certificate of occupancy was issued.  Rather, the last non-settling defendant argued that the statute of repose period began when application for final payment was made on January 31, 2001, which was they argued was the completion date of construction.  The Association argued that the repose period did not begin until February 2, 2001, when final payment was actually made.  The trial court granted summary judgment to the defendant on this basis.

The 5th DCA reversed based on the fact that final payment had not been made until February 2, 2001.  The 5th DCA reasoned that under the plain meaning of Section 95.11(3)(c), the last act for completion of the contract was the final payment not when the application for payment was made.  There was no discussion of the certificate of occupancy or whether the Association’s legal standing came from the assignation of the general contractor or arose under Rule 1.221.

The opinion may be modified before becoming final.  However, as it stands, the opinion makes less clear when the statute of repose actually begins to run for condominium defect cases and potentially creates significant factual issues precluding summary judgment on the statute of repose.

2015 Florida Construction Legislation Update

Posted in Construction Defects, Legislation, Litigation, Public Construction

The regular Florida legislative session is almost concluded.  The House adjourned on Tuesday and the Senate is in session until Friday.  A special session to address the state budget is expected but not yet set.  I previously addressed two construction related bills being considered this year: HB 87/SB418 related to construction defects, as noted here, and HB 501/SB 1158 related to shortening the statute of repose from 10 years to 7 years, as noted here.

The Chapter 558 bill, HB 87, was amended to address many of the concerns raised in my prior blog post.  The amended bill passed the House on a vote of 112 to 0. The House bill was substituted for the “companion” Senate bill, SB 418, and passed 35-4.  The bill will be sent to the Governor for his consideration. The Governor will have 7 days to veto, sign or allow the bill to become law without his signature, IF his office officially receives it during session (by May 1); if not sent to him until after May 1st, he will have 15 days to act.  It is expected that the governor will not veto this legislation and that the changes to Chapter 558 will take effect on July 1, 2015.  Although not perfect, the Chapter 558 bill, is significantly better than it was.  The text of the final bill can be found here.

The other pending construction bill, HB 501/SB 1158 regarding Statute of Repose, appears to be done for the year as it was not considered and passed in either chamber.  Although the bills could be considered as part of the special session, that is not likely.  The good news is that this legislation appears to be dead for this year.  The bad news is that this type of anti-owner legislation will come back, in the near future if not next year.  It will be important for all owners, public or private, in construction projects to watch for such legislation and oppose vigorously.

HB 501 Passes Civil Justice Subcommittee

Posted in Construction Defects, Legislation, Litigation, Public Construction

HB 501 to reduce the statute of repose in construction cases was heard by the House Civil Justice subcommittee.  There was an amendment to the bill to allow any claims that are currently over 7 years, but less than 10 years, to have until July 1, 2016, to file suit.  This “savings clause” is similar to the one used in 2006 when the statute of repose was then reduced from 15 years to 10 years.  The bill passed the subcommittee on a vote by 8-6.  For those interested in watching the hearing you can do so here beginning at the 7:18 mark.  Special recognition to Ronald Woods, P.E. of Woods Engineering and Tom Miller, P.E. of Structural Engineering and Inspections, Inc. for appearing and speaking out against the bill.

Proposed Legislation Will Hurt Owners by Shortening Timeframe to Bring Claims

Posted in Building Codes, Construction Defects, Legislation, Litigation, News

In addition to the proposed legislation to substantially change Chapter 558, link here, the Legislature is considering other legislation that will materially impact owners and taxpayers.  HB501 proposes to reduce the time owners have to pursue construction defect claims from 10 after completion to 7 years after completion.  Specifically, the proposed legislation reduces the time frame within which a claim can be brought for latent defects (a defect you did not know about or had no reason to know about) in the design, planning or construction of improvements to real property from the current 10 years to 7 years.  This reduction of time to pursue claims apply to claims where the building code was violated.  Why should Florida provide less protection to owners when historically, and now again, the biggest building booms have been occurring in Florida.  Even the AIA Form Agreements, not always owner friendly, provide for a 10 year statute of repose. More time should be provided because significant defects cannot often be discovered earlier.

In the Firm’s practice some of the most frequent defects which evidence themselves more than 7 years after completion:

  • the failure to properly treat post tension cables in high rise projects. The ends are not capped or treated with grout and waterproofing;
  • improper concrete cover over reinforcing steel on balconies;
  • stucco delamination;
  • bursting condenser sensor water pipes behind walls that have seams or improper fitting that fail;
  • roof membranes improperly installed and leaking into structural deck and trusses causing structural damage;
  • roof tiles improperly fastened and not compliant with wind codes;
  • a roof that appears new yet it is discovered it covers and old existing roof and has not adhered;
  • window frames with a useful life in excess of 20 years fail in year 10 by pitting and blistering;
  • sink hole issues that all should be familiar with in Florida;
  • poorly compacted soil;
  • concrete that is of less than the required compressive strength starts to crumble impacting structural members;
  • columns and beams with insufficient steel that is not apparent until a failure occurs ;

The attempt to reduce the time frame for the Statute of Repose for latent defects affects owners in existing buildings as the clock is running on those buildings already.  It is important that every condominium owner realize that this bill is a further stripping away of the rights of condominium unit owners and deserves to be soundly defeated.  Repair of significant defects will be solely on the owners rather than the parties that created the defective situation. However, not only are condominiums impacted but public construction such as schools, hospitals, roadways and public facilities such as stadiums. If deficiencies exist where the statute has expired, the public will pay for the corrective work as opposed to those that created the condition through faulty workmanship and design. The burden to pay should be borne by those accountable for the issue.

Why in this climate is legislation helping shoddy construction being pushed?  The only beneficiaries are construction professionals that perform lousy work that can avoid liability for their poor performance by waiting out the clock. The bottom line is that it is the consumer and taxpayer that are impacted by this legislation designed to help contractors, design professionals, subcontractors and suppliers.

Proposed Legislation to change Chapter 558

Posted in Construction Defects, Legislation, Litigation, Public Construction

The Legislature will be considering legislation this year to change Chapter 558, Florida Statutes.  Chapter 558 is  required process for any party seeking to pursue claims for construction defects.  The original goal of Chapter 558 was to provide an opportunity to settle defect claims without litigation or arbitration, and not to create another source of dispute or litigation.  This bill is contrary to that original intent. The proposed bill would create new rights and defeats any realistic hope to amicably resolve claims as more fully explained below.  These changes, if enacted, will negatively impact all owners of construction improvements including hospitals, doctor’s offices, school buildings, condominiums, single family homes and commercial buildings.  The proposed legislation can be found here and the specific problems are noted below.

Lines 66-76:

Requiring the notice to specify the location of each alleged defect is impossible relative to any structure of any size.  To require a claimant to inspect all buildings (20, 30, 40 or 50+) and identify with specificity every instance where a specific defect (e.g. crack in the stucco) appears would be prohibitively expensive, and not necessary at this stage.  The parties to whom a notice of claim would be sent are the construction professionals – they should be able to locate the defects if the Notice of Claim describes “in reasonable detail sufficient to determine the general nature of each construction defect.” The last sentence, which provides that the failure to provide the information is prima facie evidence of a defective notice, invites disputes over the sufficiency of a notice of claim.  Once the nature of the defect is identified, the notified parties can inspect and draw their own conclusions just as easily as the claimant can.  The only thing this will accomplish is to create a “gotcha” for claimants.

Overall, the proposed procedure will increase the burden on owners (residential and commercial) to go beyond what a court would require to prove a case at trial. It will also have a chilling effect because the cost to do so would be exorbitant and many would simply not be able to get it done and afford it. Chapter 558 was created to lower expense as opposed to increasing the cost to reach a resolution.  This will effectively stop homeowners and owners from being able to make a claim when legitimate defects exist in residential and commercial construction.

All of these issues were addressed in 2003 when Chapter 558 was originally enacted and then later revised to clarify and resolve some early inequities in the process. Why is this being revisited now?  This will place the burden of defective construction on claimants as opposed to shifting responsibility to the party that created the problem.

Further, requiring the notice to specify the specific provisions of the Building Code that are violated would again impose prohibitive costs on claimants, who would have to pay consultants for hours of analysis and report preparation which, again, is not necessary at this stage.  The intent of Chapter 558 is to require notice and give an opportunity to inspect and allow a cooling-off period for the parties to talk before suit is filed.  The purpose of Chapter 558 and the notice procedure is to not have trial specific proof but enough information to allow the parties to discuss the defects and achieve a possible remediation or settlement.

Collectively, these changes are not designed to facilitate resolution, but are instead punitive toward claimants.

Lines 120-129:

There is no need for another statutory provision allowing fees for “frivolous” claims.  Section 57.105 already exists for that purpose.  Further, the courts already have inherent jurisdiction to sanction parties for bad faith or egregious conduct.  See Bitterman v. Bitterman, 714 So. 2d 356 (Fla. 1998) .

Lines 154-157:

Requiring claimants to produce maintenance records and “other documents” pre-suit imposes costs on claimants but is not helpful at this stage.  The statute already allows for visual inspections and destructive investigation.  An inspection, destructive or otherwise, will allow the notified party to form an opinion about whether the alleged defect is truly a defect or merely the result of a lack of maintenance.  Producing records will be neither helpful nor relevant unless and until suit is filed as they are matters of proof.  Having these records does not assist a party in responding to the notice of claim as the recipients will either agree to fix the problem, make a monetary offer or not.  Once again, the point of Chapter 558 is to allow the inexpensive and efficient resolution of disputes, not create obstacles to filing suit.

Lines 166 – 181:

This section creates a mini-litigation process of its own.  The whole point of creating Chapter 558 was that it was to be an alternative to litigation.  Chapter 558 does not currently require a notified party to do anything.  A notified party is not required to retain consultants, review documents, provide a remediation or do anything at all under the existing statute.  In fact, a notified party can simply not respond to a notice of claim and no punishment is afforded under current law.  The idea that contractors must spend substantial sums investigating and defending against Chapter 558 claims is not true.  There is no purpose to be gained by adding subsection (16) except to create a club with which to threaten claimants.

At the end of the day, these changes will make pursuing real construction defects more difficult and will pass along the liability for those defects to the owners and purchasers rather than those that constructed the improvements.

Pay Attention to the Solicitation Requirements for the Bidding Entity

Posted in Bid Protest, Procurement

dv791015When submitting a bid to perform public work, pay attention to the solicitation requirements for the bidding entity. Must the bidding entity possess a particular license? Can any of the work be subcontracted? Do subcontractors have to be listed in the bid? These are all important questions that should be evaluated well in advance of bid submission. Failure to adhere to these requirements may result in disqualification.

Similarly, bidders oftentimes rely on the qualifications of parent or affiliated companies to fulfill experience components of a solicitation. Here too, bidders should carefully review whether such reliance will be considered responsive or if the bidding entity itself must directly possess all of the requisite experience.

For example, Florida Statutes defines “Responsive bid,” “responsive proposal,” or “responsive reply” to mean a bid, or proposal, or reply submitted by a responsive and responsible vendor which conforms in all material respects to the solicitation. What if the solicitation terms require that a bidder possess two years of comparable experience and the bidder relies on a parent or affiliate company to satisfy the requirement? Depending upon the specific terms of the solicitation, the bid may be non-responsive and rejected.

That is exactly what happened in one case. In reviewing an intended award by the Florida Department of Transportation, the Administrative Law Judge for the Division of Administrative Hearings concluded that an ITB contained a requirement that the bidder set forth its experience under penalty of being determined non-responsive if the bidder failed to do so.  The low bidder stated that it and its predecessor had been in business for more that two years.  The Administrative Law Judge concluded that, on its face, this statement was not responsive, and entered an order finding that an award to the low bidder would therefore be arbitrary and capricious. (See, Statewide Process Service of Florida, Inc. v. Department of Transportation, Fla. Div.Admin.Hrgs, Case No. 95-5035BID).

So even though principals of the bidder may have the requisite experience by and through another entity, if the entity that actually submits the bid does not directly possess the experience, the bid may be rejected. If the solicitation documents are unclear as to whether affiliated entity experience may be considered, there may be a process to seek clarification. If the agency agrees that clarification is needed, it may issue an addendum. Putting in the time to review the terms and conditions of the solicitation and bidding through an appropriately qualified entity may be the difference between an award and loss of a business opportunity.