Potential Changes to Chapter 558, Florida Statutes

In an effort “to promote efficient resolution of claims and reduce litigation,” Florida House Bill 295 (related Senate Bill 1488), introduced in October 2019, contains major changes to Florida’s construction defect law, Chapter 558, Florida Statutes. Most notably, the proposed legislation removes an association as a claimant under the statute; requires that all settlement funds be spent on repairs; includes mandatory, non-binding arbitration; and requires reasoned awards and special verdict forms to allow comparison for fee shifting after trials de novo.

The bill removes “association” (meaning condominium association and homeowners association) from Chapter 558, Florida Statutes’ class of persons defined as a “claimant” and strikes through all further references to associations in the statute.  According to a staff analysis report from the Florida House of Representative’s Civil Justice Subcommittee (the first subcommittee to review the bill), associations will no longer have the right to bring construction defect actions on behalf of condominium unit owners or homeowners. Under this interpretation, it is unclear who, if anyone, could bring a construction defect claim to an association’s common elements and areas.  Furthermore, the impact, if any, that these proposed changes will have on an association’s ability to bring a construction defect action sounding in tort, contract, or statutory violations also remains uncertain. The removal of “association” from the statute, could arguably mean that associations are simply no longer obligated to comply with the statutory requirements of Chapter 558 because only “claimants” are prohibited from filing an action subject to Chapter 558 without first complying with the requirements. However, this is not specified in the proposed language and would seemingly also defeat the legislative intent of reducing litigation. While the impact of this proposed change remains unclear, it should be noted that the bill is still in its infancy.

Additionally, under the proposed legislation, a contractor, subcontractor, supplier, or design professional who serves a written response that includes an offer to repair is only obligated to pay any judgment, order, decision, verdict, finding, or settlement after the claimant enters into a contract for the performance of repairs within 90 days after the judgment, order, decision, verdict, finding, or settlement.

If the contract is for less than the judgment, order, decision, verdict, finding, or settlement, the judgment, order, decision, verdict, finding, or settlement is reduced to the full contract price and the judgment, order, decision, verdict, finding, or settlement is satisfied after the work is completed.

The proposed bill outlines a payment structure for the holding and disbursement of repair funds. Notably, if contractor, subcontractor, supplier, or design professional elects to pay a percentage of the full contract price (as opposed to the full contract price) and the payments are held in a trust, the repair contractor must withhold the last ten percent of the payment until the repair contractor executes a signed affidavit attesting that the contracted work is completed and was performed without set-off or reduction and serves such affidavit on the claimant and contractor, subcontractor, supplier, or design professional.

If contractor, subcontractor, supplier, or design professional makes payments directly to the repair contractor, the contractor, subcontractor, supplier, or design professional will not be liable for the repair work performed or for making proper payment.

Furthermore, if the proposed bill passes, non-binding arbitration per Chapter 682, Florida Statutes, becomes mandatory after all parties have been joined in the action, but no later than 180 days after the lawsuit is filed.  If the arbitrator finds in favor of the claimant, the arbitrator must include in the award a detailed description of the nature of the defect and the monetary amount awarded against each party separately.Additionally, a jury verdict must be patterned in the same manner to allow for comparison to the arbitration award to assess whether attorneys’ fees have been triggered.

The bill also states that “any defense, with or without a reservation of rights, provided by a carrier to a party asserting additional insured status or indemnitee status in a proceeding under this chapter or any subsequent civil proceeding, shall be limited to the scope of work of the named insured.” For example, if the general contractor is named as an additional insured on the waterproofing subcontractor’s insurance policy, the general contractor’s status as an additional insured on said policy is limited to the waterproofing subcontractor’s scope of work. Whereas, under the current statute, the waterproofing subcontractor’s insurance carrier can be on the hook for the general contractor’s entire scope of work.

Lastly, in addition to the current notice of claim requirements, the bill also requires the notice of claim: be personally signed by the claimant; include the amounts and types of damages, if known; describe in detail the nature of each defect, the damage resulting, the cost of repair and any other monetary damages, if known; and include the identity of experts and reports, including documents relied upon. Furthermore, the claimant will be required to distribute a list of all non-responders and deniers of the notice of claim to all other applicable parties.

If the bill passes all of its committees, it will go to the House floor for its second and third readings for debate, amendments, and final vote. If there are differences between the House and Senate bills, the bill will go to a conference committee, which may produce a final version. If the bill receives a simple majority vote in favor in each chamber, it will then be presented to the governor.  If the bill is ultimately signed into law, it will take effect on July 1, 2020. We will continue to monitor the bill as it makes its way through the legislature and provide periodic updates at this page.

If you have any questions about this proposed bill or notices of construction defect claims, generally, please contact Dean Meyers at dean.meyers@csklegal.com or 954-343-3912.

Our team is available to discuss the topics written here and ready to provide additional information contained in this article. Contact us for more information.

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