Recently, a federal district court in Florida held that the Chapter 558 process is not a “suit” under a commercial general liability policy and the insurer had no obligation to defend the insured during this process. Under Chapter 558 of the Florida Statutes, before a lawsuit can be commenced concerning construction defects, the claimant must provide notice of the claim to the contractor and provide the contractor with an opportunity to resolve the claim (often referred to as the “558 process”).
This process can be expensive as it may require the hiring of counsel and experts and entail property inspections. Normally, a contractor will send the 558 Notice to its insurer and request the insurer hire counsel to protect the contractor’s interests. In most cases, the insurers will abide. Unfortunately for one contractor, its insurer denied to do so.
In Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company, Altman Contractors, Inc. (“Altman”) was served with a Chapter 558 Notice of Claim regarding the construction of a high-rise residential condominium. Altman forward the Notice to its insurer, Crum & Forster, and demanded that Crum & Forster defend and indemnify Altman during the process. Crum & Forster denied that it had a duty to defend Altman because the matter was not in “suit.” Altman filed suit against Crum & Forster for breach of contract as well as for a declaration determining whether Crum & Forster owed Altman a duty to defend the 558 process. Both Altman and Crum & Forster filed motions for summary judgment on these issues.