Florida Court Expands Statute of Repose for Improvements to Real Property

Madeline Hughes | Baker Donelson | November 1, 2018

The Fourth District Court of Appeals in Florida recently issued a decision in Gindel v. Centex Homes, that increases the amount of time homeowners have to file a lawsuit against homebuilders. The Court relied on basic principles of statutory interpretation to conclude that issuing pre-suit notice is an “action” under Florida’s statute of repose.

The statute of repose for improvements to real property provides a ten-year time period for homeowners to file an action against the homebuilder.1 In the Gindel case, homeowners moved into a townhome complex built by Centex Homes on March 31, 2004. Based on the statutory timeline, the homeowners had until March 31, 2014 to file an action against Centex Homes for any defects in the townhomes.

On February 6, 2014, before the ten-year deadline, the homeowners sent Centex a pre-suit notice of defect. The homeowners sent the notice to Centex in compliance with Florida’s mandatory pre-suit procedure statute. The statute requires a homeowner to notify the homebuilder of any construction defects before filing a lawsuit.2 The purpose of the statute is to give the homebuilder a chance to cure the defect as an alternative to litigation.

For the homeowners in this case, the additional procedural steps almost cost them their entire claim. Once Centex notified the homeowners that it would not cure the defects described in the pre-suit notice, the homeowners filed a lawsuit on May 2, 2014, a month past their ten-year deadline. Centex filed a motion to dismiss based on the statute of repose.

The issue before the court centered on whether the statute of repose was satisfied by the pre-suit notice given on February 6th. The court explained that because the statute of repose defines “action” as a civil action or proceeding, and because pre-suit notice is a proceeding, the pre-suit notice satisfies the statute of repose. The court reasoned that requiring homeowners to file a lawsuit to satisfy the statute of repose would render the term “proceeding” superfluous. The court explained that a better reading of the statute includes pre-suit notice as a proceeding that is part of an “action.”

The court held that the requisite pre-suit notice was sufficient to satisfy the statute of repose. Because the action commenced prior to the March 31, 2014 deadline, the homeowners were not barred from then filing suit.

The court’s interpretation of the statute of repose allows the homeowners to continue their suit against Centex to recover damages for construction defects made over 14 years ago. While this ruling likely will not open the flood gates of litigation, lawyers representing both homeowners and homebuilders should be aware that the statute of repose for improvements to real property does not require a formal lawsuit; rather pre-suit notice of a construction defect will protect plaintiffs from having their case dismissed.

1 Section 95.11(3)(c), Florida Statutes (2014).

2 Section 558.004, Florida Statutes (2014).

Florida’s Fourth District Appeals Court Clarifies What Actions Satisfy Florida’s Construction Defect Statute of Repose

Rahul Gogineni | The Subrogation Strategist | October 30, 2018

In Gindel v. Centex Homes, 2018 Fla.App. LEXIS 13019, Florida’s Fourth District Court of Appeal recently concluded that the date on which the plaintiffs provided a pre-suit notice in compliance with §558.004 of Florida’s construction defect Right-to-Cure statute, Fla. Stat. §§ 558.001 to 558.005, et. seq., is the date on which the plaintiff commenced a “civil action or proceeding,” i.e. an “action,” within the meaning of Florida’s construction defect statute of repose, Florida Statue § 95.11(3)(c). Thus, reversing the decision of the trial court, the Fourth District held that the plaintiffs timely-filed their construction defect action against the defendants.

The Gindel case arises from the allegedly defective construction of a group of homes by Centex Homes. On March 31, 2004, Mr. Gindel (the lead plaintiff) as well as the other homeowners (hereinafter collectively referred to as either “plaintiffs” or “homeowners”) took possession of their homes. After discovering an alleged construction defect, the homeowners provided a pre-suit notice of defect to Centex on February 4, 2014. After being notified that Centex would not cure the defect, the homeowners filed suit on May 2, 2014, against Centex and its subcontractor, Reliable Roofing and Gutters, Inc. Upon motion, the district court dismissed the case against Centex, finding that: (1) Florida’s 10-year statute of repose applied; and (2) the plaintiffs failed to bring their action within 10 years of taking possession of their homes.

Statute of Repose

In the United States, almost all states have adopted a statute of repose in connection with improvements to real property. Similar to a statute of limitations, a statute of repose imposes a time limitation within which a plaintiff has to file suit. However, a statute of repose is different from a statute of limitations in that it can start to run even before the plaintiff’s claim arises. Accordingly, a plaintiff’s claim may be barred by a statute of repose before the plaintiff is even aware of the latent construction defect giving rise to the plaintiff’s claim.

In Florida, there is a 10-year statute of repose for claims brought in connection with an improvement to real property. Under § 95.011 of the Florida Statutes, “[a] civil action or proceeding, called “action” in this chapter… shall be barred unless begun within the time prescribed in this chapter.” That time is further defined in §95.11(3)(c) of the Florida Statutes, which states:

An action founded on the design, planning or construction of an improvement to real property… must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of the certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.” (Emphasis added).

In overturning the lower court’s decision, the appellate court concluded that, by including both “civil action” and “proceeding” within the definition of the term “action,” the statute contemplated that more than the filing of a civil action would satisfy the time requirement for the Statute of Repose. It further concluded that, because the Right-to-Cure statute, §558 of the Florida Statutes, sets out a series of mandatory steps that must be taken prior to bringing a judicial action, it sufficiently constituted an “action” for purposes of Florida’s Statute of Repose. Accordingly, the appellate court found that the plaintiffs, through their pre-suit notice sent on February 4, 2014, brought their “action” against Centex within 10 years of taking possession of the property. Thus, the court held that the plaintiffs were not time-barred from bringing their claims in a subsequent civil action.

This case serves as a good reminder to review the applicable statute of repose for any possible exception that may apply to your case. Additionally, it should be noted that some jurisdictions have “Right-to-Cure” statutes, which should also be reviewed prior to bringing litigation related to a construction defect.

Post-Opinion Motions

As of this writing, the parties have filed post-opinion motions related to the case, including a motion to certify the matter for appeal to Florida’s Supreme Court. Thus, the precedential value of the case, whether in the Fourth District or in other Florida appellate districts, is subject to change. Accordingly, until the Supreme Court of Florida addresses this issue, subrogation practitioners should contemporaneously file both the pre-suit notice required by Florida’s Right-to-Cure statute and a civil suit in the appropriate court. To the extent that the defendant contends that the suit is premature, a court should, pursuant to Florida Statute § 558.003, stay the suit to allow the parties time to comply with the Right-to-Cure statute.

Florida Supreme Court Rebuffs Legislature’s Mandate to Adopt Daubert Standard

Clifford J. Zatz and William L. Anderson | Crowell & Moring LLP | October 22, 2018

Five years after the Florida legislature amended the state’s evidence code to incorporate the Daubert standard for admissibility of expert testimony, the Florida Supreme Court last week held the amendment unconstitutional. “With our decision today,” said the Court, “we reaffirm that Frye, not Daubert, is the appropriate test in Florida courts.” Florida now rejoins the minority of states that adhere to the “general acceptance” standard for expert testimonyEqually important for toxic tort defendants, the Court held that medical causation testimony, including the “every exposure” theory of mesothelioma causation, “is not new or novel and is not subject to Frye analysis.”

This year marks the 25th anniversary of the U.S. Supreme Court’s decision in Daubert v. Merrell Dow Pharmaceuticals, IncDaubert announced a new, “flexible” standard for the admissibility of scientific expert testimony, holding that the “general acceptance” test of Frye v. United States, had been displaced by the Federal Rules of Evidence. Since then, Daubert has been the test in the federal courts; its standard is now incorporated in the text of Federal Rule of Evidence 702.

But the Daubert – Frye debate has continued in the state courts. In 2016, in litigation alleging that cell phone radiation causes brain tumors, the District of Columbia finally abandoned Frye in favor of Rule 702. By legislation effective in August 2017, Missouri adopted the Daubert standard. In August of this year, the New Jersey Supreme Court required trial courts to consider the Daubert factors, but stopped short of declaring New Jersey a “Daubert jurisdiction,” declining to accept the entire body of Daubert case law. At last count, Daubert states outnumbered Frye states by a ratio of about 4:1. (Three states – Nevada, North Dakota, and Virginia – maintain their own unique standards for admissibility.) Over the years, studies have shown that Daubert leads more often than Frye to the exclusion of expert testimony, especially in favor of defendants.

Perhaps no state has grappled with the Daubert – Frye decision more than Florida. But the debate has come to an apparent end with the decision in DeLisle.

The path to the DeLisle decision was a long one, and reflected strong disagreement within the bar. After the legislature passed the so-called “Daubert Amendment” in 2013, the Florida Bar’s Code and Rules of Evidence Committee received comments on the Amendment. The comments were opposed to the Amendment by a count of 81-29. Accordingly, the Committee recommended, by a vote of 16-14, that the Supreme Court not adopt the Amendment. The Court then received comments of its own – this time 131-56 in favor of adopting Daubert. But in a February 16, 2017 per curiam order, the Court declined to adopt the Amendment, to the extent it was procedural, “due to the constitutional concerns raised, which must be left for a proper case or controversy.”

DeLisle was that “case or controversy.” The plaintiff in DeLisle alleged that he had contracted mesothelioma as a result of exposure to asbestos, both occupationally and in cigarette filters. The jury reached a verdict of $8 million in his favor. Reviewing the admission of the plaintiff’s expert testimony under Daubert, the Florida Fourth District Court of Appeal reversed, ordering a new trial for defendant R.J. Reynolds and entry of a directed verdict for defendant Crane. It held that the trial court had “failed to properly exercise its gatekeeping function” as to plaintiff’s causation experts.

The Supreme Court’s decision turned on whether the Daubert Amendment was properly characterized as substantive or procedural. The latter, it pointed out, could be enacted only by the Court itself, and repealed only by a supermajority of two thirds of each house of the legislature. Here, only the state Senate, not the House, had passed the bill by the requisite vote.

The majority opinion addressed the relative merits of Daubert and Frye only in a footnote, expressing concern that the amendment “would affect access to the courts…by imposing an additional burden on the courts.” A concurrence, however, offered a laundry list of objections to Daubert: any other approach “reflects a mistrust of the jury system”; it “has blocked more court access than it has enabled”; defendants “exploit” its requirements “as a sword against plaintiffs’ attorneys”; it applies more often than Frye”; it often requires expensive, multi-day hearings”; it increases the burdens on the parties.

Curiously, the majority described Frye as “the higher standard of reliability,” quoting its own decision in Brim v. State, yet also reaffirmed its view that “Frye is inapplicable to the vast majority of cases…” It ignored R.J. Reynolds’ argument that the DeLisle plaintiff’s expert testimony should be excluded under either standard. Without analysis and in a single paragraph, the Court held that “medical causation is not new or novel and is not subject to Frye analysis.” The Court thus effectively authorized “every exposure” testimony to reach the jury in Florida toxic tort cases without judicial screening.

 

Fla. Supreme Court Changes Standard for Admitting Expert Testimony Into Evidence

Ernest Wagner | Marice Wutscher LLP | October 25, 2018

The Supreme Court of Florida recently held that the Florida Legislature’s 2013 amendment of the Florida Rules of Evidence adopting the federal Daubert standard for admitting expert testimony was unconstitutional.

In so ruling, the Court returned Florida to the Frye standard for admitting expert testimony.

A copy of the opinion in Richard DeLisle v. Crane Co., et al. is available at: Link to Opinion.

The case involved the admissibility of expert testimony in a plaintiff’s personal injury action against several cigarette manufacturer defendants. The plaintiff used multiple experts to establish that smoking cigarettes caused his cancer. The trial court examined the admissibility of the expert testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the prevailing standard in Florida at the time of the trial.

As you may recall, in Daubert, the Supreme Court of the United States pronounced the standard to admit expert scientific testimony in federal court. In doing so, the Supreme Court announced that Federal Rules of Evidence 702 had superseded the prior standard to admit expert testimony announced in Frye v. United States, 293 F. 1013 (D.C. Cir. 1923).

The Frye Court had held that courts should admit “expert testimony deduced from a well-recognized scientific principle or discovery” that had “gained general acceptance in the particular field in which it belongs.”

Daubert receded from Frye holding that to qualify as admissible “scientific knowledge, an inference or assertion must be derived by the scientific method.” This shifted the focus from “general acceptance” to “principles and methodology, not on the conclusions that they generate.”

Following Daubert hearings, the trial court admitted the experts’ testimony and the plaintiff prevailed at trial.

The defendants appealed to Florida’s Fourth District Court of Appeal. The Fourth District reversed for a new trial as to one defendant and a directed verdict in favor of another defendant finding under Daubert that the trial court did not “properly exercise its gatekeeping function” for several of the experts.

The Supreme Court of Florida granted the plaintiff’s request for review.

The Court noted that it has worked with the Florida Legislature for almost 40 years “to enact and maintain codified rules of evidence.” In 1976 the Florida Legislature enacted the Florida Evidence Code. In 1979, the Court adopted the Evidence Code to the extent that it was procedural.

In doing so the Court found that any evidence rules that were substantive in nature were the Legislature’s responsibility, but that the Court had the sole responsibility for any procedural evidence rules or rules that govern “the parties, their counsel, and the Court throughout the progress of the case from the time of its initiation until final judgment and its execution.”

In 2013, the Florida Legislature amended section 90.702, Florida Statutes to incorporate Daubert into the Florida Rules of Evidence and to cease applying the Frye standard to expert testimony. The Frye rule was the standard in Florida before the 2013 amendment.

The Court observed that in Article II, section 3, the Florida Constitution “prohibits one branch of government from exercising any of the powers of the other branches.”

Relevant here, Article V, section 2(a) gives the Court “the exclusive authority to ‘adopt rules for the practice and procedure in all courts.’ ” The Florida Constitution further provides that to repeal any court rule or decision, the Legislature must enact a law “by a two-thirds vote of the membership of each house of the legislature.” The Court concluded that the Legislature exceeded its authority because the vote to amend section 90.702 did not meet this requirement.

Moreover, the Court found that the 2013 amendment to section 90.702 was not substantive because it didn’t “create, define, or regulate a right. Instead, it is procedural because it solely regulates the action of litigants in court proceedings.”

Next, the Court noted that to declare the 2013 amendment to section 90.702 unconstitutional it also had to “conflict with a rule of this Court.” The Court had little trouble finding that its rulings adopting the Frye standard created a procedural rule because the Court may pronounce a rule in case law.

Thus, the Court found the 2013 amendment to section 90.702 unconstitutional and reaffirmed “that Frye,not Daubert, is the appropriate test in Florida courts.”

Applying Frye to this case, the Court noted that Frye does not apply “to the vast majority of cases because it only applies when experts render an opinion that is based on new or novel scientific techniques.” Against this backdrop, the trial court properly admitted the expert testimony because “medical causation testimony is not new or novel and is not subject to Frye analysis.”

Accordingly, the Court reversed the Fourth District’s ruling and remanded to the trial court to reinstate the judgment in favor of the plaintiff.

Much Needed Clarification of Appraiser Qualifications in Florida

Tamara Chen-See | Property Insurance Coverage Law Blog | October 23, 2018

The appraisal alternative dispute resolution procedure in most first-party property insurance policies in Florida is a valuable process for insureds. In our experience at Merlin Law Group, few states in the country have a greater need for an understandable, enforceable appraisal process than Florida. Since at least Hurricane Andrew in 1992, policyholders and insurers have resorted to appraisal as a quicker, more cost-effective, binding means to determine a critical issue under the policy – the amount of a loss.

Other states with fewer court rulings evaluating the standards of the appraisal remedy are now dedicating tremendous party and judicial resources to interpretation of the sparsely-worded appraisal provision in most policies. Practitioners in Florida share a concern that the confusion about the appraisal remedy evident in other states may be exported into the courts of Florida. Florida’s Third District Court of Appeal recently stilled some of those concerns in Brickell Harbour Condominium Association v. Hamilton Specialty Insurance Company,1 affirming long-standing precedent governing appraiser qualifications.

The Brickell Harbour Condominium Association suffered a large water loss after a water valve leak caused major damage to its building. The carrier made a substantial advance payment of $150,000 and another payment of $300,000. When the insured did not accept that its loss had been fully paid, the insurer demanded appraisal.

The appraisal provision in the policy required appointment by the parties of “competent and impartial” appraisers, who would then select an umpire. The insured contested that the insurance company’s appraiser, an employee of J.S. Held, was “impartial” because he was hired by J.S. Held, which was to be directly compensated by the insurer. The insured providing no evidence of the nature of the appraiser’s, or J.S. Held’s compensation.2

The District Court of Appeal recognized there is little authority evaluating the impact of appraiser compensation on meeting the “impartiality” standard of qualification under the policy – other than the Third DCA’s own 1998 opinion in Rios v. Tri-State Insurance Company3 determining that “an appraiser’s direct or indirect financial interest in the outcome of the arbitration,” including an arrangement for a contingent fee was not itself disqualifying, and merely required disclosure to the other members of the panel and the parties.4 The court decided disclosure remained a “workable approach.”5

The court also held that impartiality means “something other than the ‘dictionary definition’ as it relates to appraisers appointed and paid by the parties.”6 In recognizing this reality that the party-selected appraisers will have some bias favoring the party that appointed them, the court held that the jointly selected umpire provides the real impartiality in the appraisal process:

If an appraiser acts unprofessionally, skews what should be objective calculations regarding materials and labor costs, and puts the proverbial thumb on the scale, the umpire is the safeguard empowered to reject such efforts by siding with the other party-appointed appraiser. Alternatively, a professionally-qualified umpire may negotiate one or both of the party-appointed appraisers into a reasonable compromise.7

The decision in Brickell Harbour clarifies confusion in other state and federal opinions attempting to interpret Florida’s state law on this topic. In 2014, the Fifth District Court of Appeal had speculated that changes in the AAA and ABA Code of Ethics cited as a basis for merely requiring disclosure of a contingent fee compensation arrangement in Rios had been undercut when that Code of Ethics was later changed.8 And, the federal Southern District of Florida recently issued an opinion echoing this doubt whether Rios was still good law.9 The appellate court in Brickell Harbour acknowledged both cases in footnote discussions in its opinion, and then overrode the suggestion that its disclosure approach in Rios had been undermined:

Following a survey of decisions in other jurisdictions and a review of the Code of Ethics for Arbitrators in Commercial Disputes, this Court concluded that an appraiser’s ‘direct or indirect financial interest in the outcome of the arbitration,’ including an arrangement for a contingent fee, requires disclosure rather than disqualification in the case of an appraiser. This Court then ordered the appraisers to make the disclosures to each other and the parties as provided by the Code.

We conclude that this remains a ‘workable approach to this issue,’ and encourage such disclosures in the present case before the confirmation of the appraisal. On the record before us, we agree with the trial court that the Insurer’s appointment of Mr. Ison did not warrant disqualification.10

For whatever reason, appraisal challenges have become a cottage industry in property insurance disputes, much like litigation regarding examinations under oath was used by insurance carriers seeking a means to forfeit coverage following the 2004 and 2005 hurricanes in Florida.11 Given the value to both parties of the appraisal remedy, decisions like Brickell Harbour are important to the clarity of Florida’s state law governing appraisal, and enabling prompt, cost-effective, binding decisions on the critical issue of the benefit owed the insured under the policy.
_____________________________
1 Brickell Harbour Condo. Assoc. v. Hamilton Specialty Ins. Co., – So.3d – , 2018 WL 4904927 (Fla. 3d DCA Oct. 10, 2018).
2 The insured also argued that the appraiser should be disqualified because his employer, J.S. Held, was being investigated by the Florida Department of Financial Services for alleged fraud. Since this investigation had apparently been initiated based on allegations of the Association’s own public adjuster for the claim, the Third DCA found the argument “circular.” It refused to rely on the allegations of an interested party to the appraisal, in effect, as a self-fulfilling prophecy leading to disqualification.
3 Rios v. Tri-State Ins. Co., 714 So.2d 547 (Fla. 3d DCA 1998).
4 Brickell Harbour, 2018 WL 4904927 *3.
5 Id.
6 Id.
7 Id.
8 See Florida Ins. Guar. Ass’n v. Branco, 148 So.3d 488, 495 (Fla. 5th DCA 2014)(dicta).
9 Verneus v. Axis Surplus Ins. Co., 2018 WL 3417905 *5-6 (S.D. Fla. July 13, 2018).
10 Brickell Harbour at *3 (citations omitted).
11 See Whistler’s Park, Inc. v. The Florida Ins. Guaranty Ass’n, 90 So.3d 841, 845 (Fla. 5th DCA 2012): “As discussed in Curran [83 So.3d 793 (Fla. 5th DCA 2011) aff’d 153 So.3d 1071 (Fla. 2014)], several of Florida’s district courts of appeal have concluded that the failure of an insured to appear for an EUO prior to filing suit to recover an unpaid claim is a material breach of contract, requiring forfeiture of coverage. These decisions have led to a cottage industry of EUO litigation. If an insurer can procure a failure to comply—or, even better, a refusal to comply—with the EUO requirement, they have a perfect defense to payment. Similarly, if counsel for insureds can bait the insurer into refusing payment without adequate justification, this may trigger a bad faith claim. The actual, if unglamorous, true purpose of the EUO—verification of the insured’s loss—has been lost in this larger battle. No doubt there can be genuine instances of insurance fraud, but the recent and ever—escalating number of EUO cases that have arisen all over the state appear to be more about strategy than truth.”