Florida Construction Law Authority : Florida Construction Lawyer & Attorney: Becker & Poliakoff Law Firm: Construction Law

By: Mark J. Stempler

The case:  INSIGHT SYSTEMS CORP., and CENTERSCOPE TECHNOLOGIES, INC. v. THE UNITED STATES

The court: The United States Court of Federal Claims

A computer glitch forced disqualified proposers to challenge a U.S. government agency.  Here is an abridged version of what happened.  The United States Agency for International Development (USAID) advertised a Request for Quotations (RFQ).  Eventually during the process, proposers were allowed to submit their revised final quotes either in hard copy form, or electronically via email.  If the proposer submitted the quote electronically, it was its proposer's responsibility to send in the appropriate information, and to do so timely to the people designated to receive it. 

The two Plaintiffs in this case submitted quotations in response, and did so electronically and in their opinion, before the deadline.  The way the system was set up, emails from outside sources directed to the specified USAID email addresses pass from the outside mail server through a sequence of three (3) agency-controlled computer servers, before they are ultimately delivered to the recipients.  To make a long story short, the emails were received by the first USAID server, but due to technical error, were not passed on to the ultimate recipients until after the submittal deadline.  USAID notified the proposers that their proposals would not be considered because they were received after the deadline.  Arguing that late is late, the USAID felt that it did not matter whether the perceived lateness was due to technological malfunctions with its own computer system.

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When responding to an Invitation to Bid ("IFB") or other public solicitation, it is important to review terms above and beyond the scope of the work that may impact price. For example, the solicitation may include a contract form or other contract terms that should be carefully reviewed prior to bid submittal.

Many times, an IFB will provide the form of contract that the successful bidder will be required to sign. The contract form should not be considered "boiler plate" and may have terms that directly impact the cost of the work and profitability. We have seen instances where bidders have submitted the low bid, and are awarded the work without full appreciation of some of these contractual terms. Some examples of terms to consider when preparing a bid include:

• The type of insurance coverage and coverage limits;
• Warranty provisions;
• Time for performance and "liquidated damages" clauses; and
• Termination clauses.

Generally, Florida law does not allow a bidder to raise its price to account for mistakes made in the process of formulating the bid. So it is important to factor the these terms into the price bid, and in addition to the cost of the work itself.

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On occasion condominium associations have disputes with their contractors, which can unfortunately lead to litigation. In the course of litigation the contractor’s attorney may want to take the deposition of an Association’s corporate representative.

In one such lawsuit the contractor did just that, noticing for deposition the corporate representative of the association with the most knowledge of the allegations in the complaint, When the “representative” gave testimony that actually supported the contractor’s allegations in its complaint and negated affirmative defenses asserted in the association’s answer, the contractor filed a motion for summary judgment. The trial court thereafter granted judgment in favor of the contractor, notwithstanding the association’s filing of two affidavits (of its former president and current treasurer) in opposition. Finding the two affidavits to be inconsistent with and contrary to the previously given deposition testimony of the association’s designated corporate representative; the trial court struck the affidavits.

On appeal, however, the summary judgment in favor of the contractor was reversed and the case was remanded for further proceedings. Carriage Hills Condominium, Inc. v. JBH Roofing & Constructors, Inc., 109 So.3d 329 (Fla. 4th DCA 2013). The appellate court considered several issues, including by way of examples, that the subject matter of the requested deposition was unduly broad, the deposition was not properly noticed under the applicable rules of procedure, and the representative gave testimony that exceeded the scope of the deposition notice.

As demonstrated by the above scenario, when producing a condominium association’s corporate representative(s) for deposition, there are several matters to consider. At a minimum, the deposition notice should be examined to see what information the opposing party is seeking and if the notice presents any legal concerns. In addition, the association should select the appropriate representative(s) to testify on its behalf, being mindful of all claims and defenses in the particular case and providing testimony that ideally is consistent with the Association’s litigation positions. Other matters will likely need to be considered in such deposition preparation, depending on the facts of the particular case.

As can happen within a condominium association, members of a board and/or unit owners do not always completely agree. This reality only underscores the need for properly selecting and preparing an association’s corporate representative(s) for deposition.

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Your liability insurance policy has the obvious value of indemnifying you (up to the policy limit) in the event you are held liable for a covered loss. However, liability insurance policies like commercial general liability and professional liability policies have significant value beyond that principal purpose. Beyond that primary benefit, your liability insurance carrier might also be obligated to pay for an attorney to represent you in a lawsuit that involves a claim that might be covered under your policy. That would not only relieve you of that financial responsibility, but those defense costs might also be paid in addition to the policy limit, depending on the terms of your policy.

Your carrier’s obligation to defend you is generally governed by the terms of your policy and the law of the state in which you purchased the policy. Therefore, it is important for you to review your policy to make sure you comply with all notice and cooperation requirements, to avoid forfeiting benefits under the policy. Along with the terms of your policy, statutes and case law govern the particulars of an insurance company’s obligation to provide you with a defense in a lawsuit.  For example, under Florida case law, your carrier will likely be obligated to defend you against the entire claim being asserted against you, even if only a portion of the claim is covered by your policy. Also, if your insurance company agrees to provide you with an attorney to defend you, a Florida statute will probably require your carrier to provide a “mutually agreeable” attorney, empowering you to object to your insurance company’s offered attorney.

Litigation defense is potentially a significant benefit of your liability policy. Not only might the defense costs be paid in addition to your policy’s limit, but if the covered claim has a relatively low dollar value, the defense costs paid by your carrier could easily exceed what would otherwise be paid under the policy. Therefore, if a claim is asserted against you that might be covered by your liability policy, it is important to not only give your insurance company notice of the claim, but also request that your carrier defend you under the policy, to make sure you get the full value of your policy.

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The U.S. Green Building Council's long awaited updates to the LEED Rating System are almost complete. LEED v4 has been in the works for more than a year. The likely final public comment period for the new rating system ends on March 31st, and voting on the changes is scheduled to begin June 1st.

There are some significant changes in LEED v4. It will include a new credit category, Location and Transportation.   As the name suggests it focuses in part on location of buildings and connectivity to them. Some of the credits in this category, such as bicycle storage, reduced parking capacity and low-emitting vehicles are already part of the existing Sustainable Sites category, so they are just being moved. Speaking of which, a new credit for rainwater management has been added to the Sustainable Sites category in LEED V4, which will be an opportunity to earn points for capturing, treating and controlling on-site runoff.

There are some significant changes in the Water Efficiency category. There will be three prerequisites: Outdoor Water Use Reduction (applicable to projects with exterior vegetated areas); Indoor Water Use Reduction (like the former "Water Use Reduction" prerequisite, it requires 20% water use reduction, and will also require a WaterSense label for certain fixtures and fittings); and Building Level Water Metering (applicable to all projects, it calls for permanent water meters to measure usage, and the data must be shared with the USGBC for 5 years). There are also new credits for Cooling Tower Use and Water Metering.

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If you are considering a protest concerning a competitive solicitation pursuant to Chapter 120, Florida Statutes (the "Administrative Procedure Act"), a protest bond may be required. The bond may be due at the time of the formal protest, or even at the time of the notice of protest. It is critical that the protesting party confirm whether a protest bond is required by the particular agency's statutes and rules, and if so, the amount of the bond and when it is due. Protest bonds generally provide a guaranty that the protestor will pay any costs or attorney's fees that may be imposed against the protesting party.
 
The Florida Administrative Code also provides a form Protest Bond. As set forth therein, the Bond guarantees payment of all “costs and charges allowed” through both administrative and appellate court proceedings. Failure to provide the Protest Bond may result in a dismissal of the protest and a waiver of rights pursuant to the Administrative Procedure Act. Accordingly, it is very important to secure and submit the Protest Bond in the correct amount, form and by the particular deadline.
 
The Protest Bond is yet another example of the why the world of public procurement is all about dotting the i's, crossing the t's, and doing so within the strict deadlines required by law. Bid protests should be fully evaluated on a case by case basis, and it is important to involve legal counsel as early in the process as possible to avoid a waiver of rights and so that counsel has sufficient time to properly handle or intervene in the matter.

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 SB 84 and HB 85, as amended to reflect the merger with a competing bill, continues to pick up momentum. The House Bill passed the Government Operations Subcommittee three days ago by a vote of 11 to 1 and the Senate Bill is set for the Governmental Oversight and Accountability Committee today. Many interested parties have raised very good suggestions for changes in the statutory language and we’re addressing as many of them as we can. We’re excited that this legislation has garnered so much attention, as that indicates people are preparing themselves to implement it upon passage. Keep up the support!

I was recently interviewed by Carolina Bolado at Law360 about the legislation and the portion of her article addressing it is reprinted below. In the meantime, the newly formed Florida Council of Public/Private Partnerships is putting the final touches on our P3 conference set for May 16 and 17 in Orlando, which will coincide with the statewide launch of that trade association to the public. If you want to be on the e-mailing list to receive notice of the seminar when registration opens shortly, let me know. 

In the meantime, keep up the P3 momentum! Here is the segment of the Law360 article on P3:

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For the last eight (8) years, Florida’s economic loss rule has been applied to bar claims (1) where the parties are in contractual privity and one party seeks to recover damages in tort for matters arising out of the contract, or (2) where the defendant is a manufacturer or distributor of a defective product which damages itself but does not cause personal injury or damage to any other property. Indemnity Ins. Co. v. American Aviation, Inc., 891 So.2d 532 (Fla.2004).

However, in its March 7, 2013 5-2 split decision in Tiara Condominium Ass'n, Inc. v. Marsh & McLennan Companies, Inc., 38 Fla.L.W. S151A (Fla. March 7, 2013) the Florida Supreme Court has now receded from prior precedent and appears to have limited the application of the economic loss rule to product liability matters. The Court observed that the economic loss rule is a judicially created doctrine that sets forth the circumstances under which a tort claim is prohibited if the only damages suffered are economic losses. In addition, the Court noted that the economic loss rule had its origin in product liability matters

As to contract disputes, the Court observed that the economic loss rule had been applied to prevent parties to a contract from circumventing the allocation of losses set forth in the contract by bringing a tort claim. Expressing concern, however, about the over-expansion of this rule to contract matters, the Court in Tiara Condominium Ass'n held that the economic loss rule should be applied only in the product liability context.

Although a concurring opinion Justice Pariente referred to the Florida Court’s previous decision in Indemnity Ins. Co. v. American Aviation, Inc., and specifically the language which stated “when the parties have negotiated remedies for nonperformance pursuant to a contract, one party may not seek to obtain a better bargain than it made by turning a breach of contract into a tort for economic loss.” Stating that the Court’s decision in Tiara Condominium Ass'n did not change this statement of law, but it is principles of contract law, as opposed to the economic loss rule that provides this result.

Certainly, there will be much debate over the application of the Florida Supreme Court’s recent decision. Plaintiffs seeking to pursue tort claims against those with whom they are in contractual privity may argue that this decision provides further support for their ability to do so. Defendants opposing such claims may argue that not much has changed, and when substance is elevated over form, common law contractual legal principles should preclude such claims.

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As the legislative session is only a week away, our pending public/private partnership bill looks like it’s full steam ahead. All industry participants of whom I’m aware are on board, with only a few concerns having been raised thus far, none of which appear strong enough to derail the momentum. The bill has already passed its first Senate committee unanimously and the sponsors of a competing bill agreed to merge theirs into ours in exchange for changes that will make ours a stronger bill than before.   They include the appointment of a task force to create guidelines for a public agency receiving and processing P3 proposals, added flexibility in determining the amount of time for competitive bidding after an unsolicited proposal has been received, and authorizing discretionary interim agreements where appropriate, whereby the private entity can be compensated during the due diligence phase of the project as a means of ensuring issues like zoning, environmental mitigation, design, etc. are properly aligned for the job.

Keep an eye on this spot as we continue tracking SB 84 and the companion HB 85. The newly formed Florida Council for Public/Private Partnerships is planning on conducting a P3 seminar focused largely on how to implement the new legislation on May 16 and 17 in Orlando. Put this on your calendar and contact me if you wish to be notified when conference registration is available.

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A new report says the green building market in the U.S. is gaining traction and projects greater growth ahead.  McGraw-Hill Construction's 2013 Dodge Construction Green Outlook report finds green building represented 44 percent of all commercial and institutional sector construction last year, and will grow to 55 percent by 2016.  The report expects that the total green building market will be worth between $98 billion and $106 billion this year, growing to about $248 billion by 2016.

Green building is also becoming more popular in the home sector.  Residential green building is projected to represent about 25 percent of the market in 2013, which is worth approximately $34 billion to $38 billion, and growing to up to $116 billion by 2016.

Within this growth, some industry experts expect that the focus will shift from the construction and design of new buildings to the renovation of existing buildings to make them "greener".  In fact, a growing number of cities are installing or are preparing to install new green building mandates, primarily in the commercial sector. 

These projects should mean more opportunities for contractors and design professionals who know how to build green, and should also lead to healthier and more sustainable environments for all of us.

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While you might think that receiving a renewal notice from your insurance company means that you have the option to keep everything as it has been for another year, simply by paying the amount shown on the notice, that is not necessarily the case. To the contrary, your insurance company might have changed its criteria to be eligible for the type of policy that you have had in the past. Additionally, even if the eligibility requirements have not changed, your insurance company might have made changes to the specific terms of coverage under that type of policy.

Changes to the terms of coverage might be summarized on the renewal notice, or be detailed in the body of the policy, if a copy of the policy being offered is enclosed with the notice. However, eligibility requirements might not be described on either. I recently had a condominium association client find out that it was no longer eligible for a residential policy, but there was no way for the Association to know that based on the renewal notice that it received. Further, even though the renewal notice indicated that a copy of the new policy was enclosed, it was not.

Therefore, the Association had a decision to make. It could pay the renewal premium to prompt its insurance company to issue another less expensive residential policy, for which the Association knew it was not eligible. Alternatively, the Association could purchase a more expensive non-residential policy, for which it was eligible. If it chose not to disclose its ineligibility and simply renewed its residential policy, it faced a significant risk. Pursuant to Section 627.409(1), Fla. Stat., if the Association did not disclose its ineligibility, its insurance company could deny any claims that the Association submitted based on the Association’s failure to disclose. Luckily, the Association became aware of its ineligibility and was able to obtain an appropriate policy.

As the Association learned, it is important to have someone reevaluate your eligibility and coverage at renewal. Getting an insurance company to pay a claim is generally a difficult undertaking. Not confirming that you have an appropriate policy and adequate coverage, could make that task a losing battle.

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Investigating and placing potentially responsible parties on notice about the existence of construction or design defects against Developers, Contractors or Design Professionals in accordance with Chapter 558, Florida Statutes, is an important part of the claims process. As their defect claims progress, Individual Property Owners and Condominium Associations may need professional assistance from their attorneys and design consultants in calculating the potential costs to correct construction or design defects.

There are many other reasons why Owners or Associations would want to obtain repair proposals or estimates. For example, while repair estimates may help Owners and Associations budget for repairs, they may also help Owners and Associations to prioritize their claims for settlement purposes. Repair estimates enable Owners and Associations to identify any defects they may wish to withdraw from their Ch. 558 pre-litigation construction defects claims, or from litigation, during the course of settlement negotiations.

When negotiating a settlement, repair estimates are a valuable tool for attorneys to use in quantifying their clients’ settlement demands better and evaluating the economic value of any settlement offers for money or repairs which they may receive.

Sometimes, repair estimates can be used to show how a party’s monetary demands were calculated. Settlement meetings and mediations are usually more productive when all of the parties have a better understanding of an Owner’s or Association’s expectations as to what its construction or design defects claims may be worth, and how these amounts were derived.

Repair estimates may also identify portions of the claim that need further investigation or testing, such as when an Association has identified a few examples of a particular defect, but is not sure how widespread the problem actually is.

When obtaining repair estimates, Owners and Associations should consult with their attorneys. They should work together to obtain repair proposals from reputable, Florida licensed contractors or design professionals. Whenever possible, Owners or Associations should also try to procure multiple repair proposals for each defect. Doing so may illustrate whether there is a significant range in the Owners’ or Associations’ potential damages.

Ideally, repair estimates should include the scope of work, as well as costs for any permits, code upgrades, or design specifications which may be needed to effectuate the repairs. If the Owner or Association is working with a professional engineer or other design consultant, it should include the consultant in the bidding process. Among other things, a consultant can review the proposed repair methods, locations, materials and costs, and make recommendations for changes to protect the Owners’ or Associations’ interests.

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Whether you are an owner or a contractor, you have likely at least considered the additional security that a performance bond offers to assure yourself that the work downstream gets done, and gets done to your satisfaction. However, if you have a downstream entity obtain a performance bond, you must keep the bond’s scope in mind throughout the course of the project. When a performance bond is issued, it likely ties the surety’s obligation to the original scope of work in the downstream entity’s contract. From that point on, you might expand the contract’s scope numerous times, but expanding the contract’s scope does not necessarily expand the surety’s obligation to the same extent.

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Under Florida Statute 489.128, unlicensed contractors have no rights under their contracts or the Lien Law. However, those who contracted with unlicensed contractors, such as owners or subcontractors, retain all their legal rights to enforce the contract and claim against the contractor’s bond. A common defense raised by the unlicensed contractor to claims of unlicensed contracting was that the party with whom they contracted knew the contractor wasn’t licensed and therefore ought not benefit in a legal action from the lack of licensure. The validity of this defense was an unresolved issue until the Florida Supreme Court ruled last week in Earth Trades, Inc. v. T&G Corp., Case No.: SC10-1892 (Fla. January 24, 2013) [citation pending]. In that case the Supreme Court held the legislature put the burden of licensure on the contractor, not those with whom the contractor contracted, and therefore only the contractor bears the ramifications of unlicensed contracting regardless of whom else may have acquiesced to, or knew about, it.

Although not as clearly stated, this opinion also appears to make an unlicensed subcontractor solely responsible for its lack of licensure, even if the contractor that hired them knew of the lack of license. Previously, courts were split about whether a contractor could avoid its payment obligations to an unlicensed subcontractor, because some courts feared such an outcome would encourage contractors to hire unlicensed subs. The Supreme Court appears to rule that the contractor may indeed avoid any obligations under the contract with an unlicensed sub, since 489.128 requires the sub to be licensed and puts the ramifications of unlicensed subs solely on the subs.

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