How Fla. Tort Reform Will Shift Construction Defect Suits

By Ryan Soohoo and George Truitt

With much fanfare, Florida enacted blockbuster tort reform in March that leveled the field for plaintiffs, defendants and insurers and propelled the state into the group of moderate jurisdictions whose laws do not generally favor any litigant.

Among other changes, the second committee substitute for H.B. 837 redefined admissible evidence to prove past and future medical expenses, the effect of a plaintiff having the majority of fault for an accident, and the elements of a bad faith claim against an insurer to include plaintiff's duty to act in good faith.

The committee substitute for S.B. 360, followed quietly on the heels of H.B. 837 when it was signed into law on April 13. However, S.B. 360 will significantly affect the landscape of Florida construction defect litigation.

By modifying Section 95.11, concerning the statute of limitations and repose for defect claims, and Section 553.84, concerning private statutory action for violations of the Florida Building Code, the Legislature clarified when repose and limitations periods begin and end and narrowed the scope of actionable violations of the Florida Building Code by eliminating technical violations as compensable events.

Statute of Repose for all Defects

The statute of repose aims to protect defendants from claims arising too far in the future after evidence is lost and witnesses have forgotten the events or passed on. It prevents the actions from accruing when the final element of the claim arises beyond the statutory time frame.

Statute of Repose for all Defects Prior to 2023

Prior to S.B. 360, the 10-year statute of repose for all patent and latent defects founded on the design, planning or construction of an improvement to real property commenced on the latter date of: (1) actual possession by the owner; (2) the certificate of occupancy; (3) abandonment; or (4) completion of the contract.

The dates of some of these events were easy to identify. For example, a certificate of occupancy is issued on a date certain reflected in the document.

But the dates of other trigger events were harder to identify. The most confounding event was the latest date on which the contract with the architect, engineer or contractor was completed. If the contractor was the last to complete, the architect, engineer and other parties were at the mercy of the owner and contractor to decide if the contract was complete and on what date.

Worse yet, the courts struggled with what it meant for a contract to be completed. Some courts held that completion occurred when the owner made final payment. Once again, parties were at the mercy of the owner who controlled final payment. Under that logic, an owner who refused to make final payment could create an infinite repose period that never commenced.

In 2017, the Legislature responded by amending the statute to define "completion" as the "later of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment is made."

The amendment traded one uncertainty for another. When final payment becomes due is not always a matter of simply reading the contract. When the owner disputes that a contractor has fully performed, it will often contend that final payment is not yet due.

On the other hand, a contractor who has not been paid may refuse to perform further work and never achieve final completion of the contract, claiming the owner's prior material breach excused further performance.

The situation is further muddied if the parties settle the dispute without agreeing on the date final payment became due. Litigating those collateral issues in a defect case adds complexity, uncertainty and expense that works against the definiteness that the statute of repose is intended to provide.

In 2018, the Legislature amended Section 95.11(3)(c) again to clarify that, if construction is performed pursuant to a permit issued by a local enforcement agency that has issued a final certificate of occupancy or certificate of completion, then the correction of defects to completed work or repair of completed work within the scope of the permit and certificate, whether performed under warranty or otherwise, does not extend the period of time within which an action must be commenced.

But the Legislature did not redefine completion of the contract as the date on which the certificate of occupancy for a permitted project is issued. Defendants were left to grapple with defining the date final payment became due to determine which event happened later — final performance or final payment becoming due.

Whether either event occurred could be a matter of dispute between the owner and contractor framed by the owner's refusal to pay and the contractor's refusal to further perform.

Plaintiffs continued to focus on completion of the last contract as the triggering event that defendants must rule out to establish the repose defense. The uncertainty surrounding final payments made summary final judgments for defendants a rare commodity and benefited claimants by allowing the case to continue grinding their way toward trial.

New Statute of Repose for all Defects

S.B. 360 makes three significant changes to the prior statute of repose. First, and most importantly, it shortens the period of repose from 10 years to seven years.

Second, it advances the running of the period by redefining the trigger date as the earliest event to occur rather than the latest.

Third, it removes the imprecise "actual possession" and "completion of contract" commencement dates as trigger events and expands and clarifies the events to include the dates of a temporary certificate of occupancy and a certificate of completion as additional potential commencement dates.

Under the revised statute, the earliest date on which a local enforcement agency issues a temporary or final certificate of occupancy, a certificate of completion or the date of abandonment is the date on which the repose period begins to run.

Except for the date of abandonment, all potential commencement dates are documented in certificates issued by the authority having jurisdiction — usually the municipality or county — and readily ascertainable.

Statute of Limitations for Latent and Patent Defects

Statute of Limitations for Latent Defects

For latent defects, the statute of limitations remains unchanged and runs for four years from "the time the defect is discovered or should have been discovered with the exercise of due diligence."

The courts have further interpreted the trigger as the discovery of damages caused by defects the presence of which would put a reasonable plaintiff on notice that its legal rights have been invaded.

Statute of Limitations for Patent Defect Claims Prior to or on April 13

Prior to S.B. 360, the four-year statute of limitations for actions for patent defects in the design, planning or construction of an improvement to real property commenced running in the same way as the repose period for all defects. The latter event controlled, and the same difficulties with determining the date the governing contract was completed prevailed.

Statute of Limitations for Patent Defect Claims After April 13

Like the limitations repose period for all defect claims, the limitations period commences as soon as a temporary certificate of occupancy, certificate of occupancy or certificate of completion was issued; or the date of abandonment, if the project was not completed.

Unique Issues of Multiple Buildings and Model Homes

S.B. 360 also provides new rules governing the unique situations of projects consisting of multiple buildings and single-dwelling model homes.

For projects involving multiple buildings, S.B. 360 ends the debate about whether statutes of limitations and repose periods are determined per building or per project.

It is not uncommon in Florida for large development projects to be constructed and completed in different phases and for the commencement and completion of phases to be affected by economic recessions and recoveries that result in some buildings being completed five to 10 years earlier than later buildings in the same phase or in later phases.

Thus, there is a high probability that some buildings in a multibuilding project will be completed before others, even though all buildings are completed under single contracts between the owner, architect, engineer and contractor.

S.B. 360 specifically accounts for design, planning or construction of multiple buildings by providing that each individual building must be considered its own improvement for purposes of determining the limitations and repose periods and by eliminating completion of the latest contract as a trigger event.

For a newly constructed single-dwelling residential building that is used as a model home, S.B. 360 provides that the time to bring a construction defect claim action begins to run from the date that a deed is recorded first transferring title to another party.

Private Statutory Action for Florida Building Code Violations — Better and Worse

S.B. 360 narrows the scope for causes of action a claimant may bring for violation of the Florida Building Code.

Prior to amendment of Section 553.84 of the Florida Statutes, a plaintiff could assert a claim for any technical violations of the Florida Building Code unless the required building permits were obtained, the plans were approved by the local government or public agency, the project passed inspection under the code and no personal injury or damage to property was incurred, unless the defendant knew, or should have known, it violated the code.

S.B. 360 amends Section 553.84 of the Florida Statutes to limit recovery for only material violations of the Florida Building Code, which it defines as a "Florida Building Code violation that exists within a completed building, structure, or facility which may reasonably result, or has resulted, in physical harm to a person or significant damage to the performance of a building or its systems."

Thus, minor technical and harmless violations of the Florida Building Code are no longer actionable.

However, nestled within the definition of a "material violation" is the phrase "may reasonably result" which may counteract the new restriction, allowing recovery of speculative damages that may never materialize. The hypothetical nature of the damages permitted by this definition has insurance coverage implications because typical liability policies do not cover damages that may arise in the future.

S.B. 360 became effective immediately upon being enacted on April 13. In most pending cases, the new statutory thresholds will apply. Jury instructions and verdict forms should be drafted accordingly.

Savings Clause

S.B. 360 applies to any construction defect action commenced on or after the effective date of the bill, regardless of when the cause of action accrued, except that any action that would not have been barred by the statute before that date must be commenced by July 1, 2024.

Claimants who would be barred from suing by application of the new statute of limitations for patent defects and new statute of repose but had time remaining under the prior statutes have until July 1, 2024, to file suit.

However, claimants who have not filed suit may not have a vested right to file suit within an existing limitations or repose period. A clever defendant might argue the new statute bars claims that would not have been barred by the prior statute or the new statute when enacted because plaintiffs had a reasonable opportunity to file under the new statute after the effective date.

Like H.B. 837, S.B. 360 is in line with moderate jurisdictions around the country. The new law reduces the repose period by 30% and provides certainty to litigants, insureds and insurers about the time during which a risk may be insured.

Those changes should benefit the litigation and insurance industries by allowing actuaries to predict risk more accurately, in turn encouraging more carriers to enter the market. More insurance options benefit insurers, insurance consumers and litigants.

Ryan Soohoo is an associate and George Truitt is a partner at Cole Scott & Kissane PA. The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general infoation purposes and is not intended to be and should not be taken as legal advice.

Article Published May, 2023 by Law360

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