Contractor’s Notice of Defect – Does it Trigger Insurance Coverage?

Contractor’s Notice of Defect – Does it Trigger Insurance Coverage?

One court in Florida has said “No”.

In Florida, Chapter 558 of the Florida Statutes provides pre-suit procedures for a property owner to assert construction defect claims against a contractor.  The statutes provide  a mechanism giving notice to the contractor and providing the contractor with an opportunity to cure the alleged defects prior to litigation.

In Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company, the Sapphire Condominium Association sent Altman Contractors, the general contractor, a Notice of Claim pursuant to Chapter 558, Florida Statutes, alleging defective construction of the condominium. 2015 WL 3539755 (S.D. Fla. June 4, 2015).  Altman Contractor’s sent this notice to its insurance company, Crum & Forster.  Crum & Forster denied that it had a duty to defend Altman Contractors because the case was “not in suit”.

Altman Contractors sued Crum & Forster seeking a declaration determining that Crum & Forster owes a duty to defend and indemnify it relative to the 558 Notice; and for breach of contract for Crum & Forster’s refusal to defend Altman Contractors.  The court held that Chapter 558 is a “mechanism” and not a “proceeding”.    Since the 558 process is not a “civil proceeding” or a “suit” under the policy, Crum & Forster had no obligation to defend or indemnify Altman Contractors in the 558 process.

Contractor’s Right to Insurance Benefits of Homeowner

Contractor’s Right to Insurance Benefits of Homeowner

Does a remediation or restoration contractor have the right to sue a homeowner’s insurance company for nonpayment for construction work performed?

Yes.  In the case of United Water Restoration Group, Inc. v. State Farm Florida Insurance Company, a homeowner, Mr. Walker, experienced water damage to his home. 2015 WL 4111662 (July 8, 2015).  Mr. Walker hired United Water to repair the damage.  In connection with the construction contract, Mr. Walker executed a written assignment of ‘any and all insurance rights, benefits, and proceeds’ from his State Farm Policy to United Water.

State Farm refused to pay United Water’s bill and United Water sued State Farm for breach of the insurance contract as assignee of Mr. Walker’s rights and benefits.  State Farm moved to dismiss the case on the basis that it had inspected the home which showed that the damage was consistent with a policy exclusion  — “repeated leakage and seepage”.  The trial court granted State Farm’s motion holding that only the insured (Mr. Walker) can challenge the issue of coverage.

On appeal, the First District Court of Appeal reversed, holding that “an assignee of post-loss insurance benefits can sue for breach of such benefits.”  The assignee stands in the shoes of the assignor and is able to maintain suit in its own name as the real party in interest.  Therefore, United Water could bring suit seeking recovery under the State Farm policy.

Vacant and Unoccupied – Insurance Claim

Property insurers often reject claims based on the vacant and unoccupied provisions in the policy.  Often times the insurance company breaches its contract when it improperly rejects claims based on these provisions. 

In Independent Fire Insurance Comnpany v. Butler, 362 So. 2d 980 (Fla. 1st DCA 1978), the First District Court of Appeal defined the terms “vacancy” and “occupancy”.  The term vacancy as used in these policies applies to inanimate objects.  Therefore, a court will look to furniture or furnishings located in the property to determine whether the property is vacant.  The term “occupied” referse to a dwelling which is in actual use by human beings.  It is not essential that someone sleep in a dwelling in order to render it occupied.  Occupancy is largely a matter of intent.  A court will look to the nature and character of the building, the purposes for which it is designed, an the uses contemplated by the parties as expressed in the insurance contract.

If your insurance company denied a claim based on the vacant and unoccupied policy provision, you may have a right to recover based on these definitions.