Monthly Archives: September 2018

The Timeliness of Construction-Related Lawsuits – Recent Amendments to Fla. Stat. § 95.11(3)(c)

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Morgan Foster | Shutts | September 20, 2018

In Florida, the allowed timeframe for bringing a lawsuit based either on a defect in the design, planning, or construction of a building or based on other improvements to real property is governed by Fla. Stat. § 95.11(3)(c).  The Florida Legislature recently passed House Bill 875, effectively amending Fla. Stat. § 95.11(3)(c).  Chapter 18-97, Florida Laws, provides that the amendments discussed herein became effective on July 1, 2018.

Notably, the year prior to the amendments discussed herein, the Florida Legislature amended Fla. Stat. § 95.11(3)(c) to define “completion of the contract” as “the later 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 was made.”   Fla. Stat. § 95.11(3)(c) (2017).  However, the 2017 amendments did not define “final performance.”

Therefore, Fla. Stat. § 95.11(3)(c) has been amended to include a provision that directly address the issues surrounding the interpretation of “final performance.”  Specifically, Fla. Stat. § 95.11(3)(c) now includes the following language:

With respect to actions founded on the design, planning, or construction of an improvement to real property, if such construction is performed pursuant to a duly issued building permit and if a local enforcement agency, state enforcement agency, or special inspector, as those terms are defined in s. 553.71, has issued a final certificate of occupancy or certificate of completion, then as to the construction which is within the scope of such  building permit and certificate, the correction of defects to completed work or repair of completed work, whether performed under warranty or otherwise, does not extend the period of time within which an action must be commenced.

Fla. Stat. § 95.11(3)(c) (2018).  This new language makes it clear that in relation to completed work, the correction of defects or deficiencies or completion of warranty obligations does not extend the time to bring a claim by tolling the limitations period.

The second 2018 amendment to Fla. Stat. § 95.11(3)(c) specifically relates to statute of repose.  The new language provides:

However, counterclaims, crossclaims, and third-party claims that arise out of the conduct, transaction or occurrence set out or attempted to be set out in a pleading may be commenced up to 1 year after the pleading to which such claims relate is served, even if such claims would otherwise be time barred.

Fla. Stat. § 95.11(3)(c) (2018).  This means, for example, that when a plaintiff brings an action on the eve of the expiration of the statute of repose, the defendant now has the benefit of a one-year extension of the statute of repose to investigate the need to bring claims against other parties.

Importantly, this extension runs from the time a party is served, not from when the action is filed.  Chapter 18-97, Florida Laws, provides that for actions instituted prior to July 1, 2018, any counter, cross, or third-party claim must be commenced before July 1, 2019 and any action that would not have been barred prior to the recent amendments may be commenced before July 1, 2019 or will otherwise be barred.

Time will tell if the 2018 amendments to Fla. Stat. § 95.11(3)(c) will provide more clarity regarding the timeliness of construction-related law suits and result in a decrease in litigation related thereto.

Florida Court Clarifies That Pre-Suit Notice for Construction Defect Claims Tolls Statute of Repose

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Richard J. Maleski and Joseph F. Rich | Cozen O’Connor | September 20, 2018

Florida imposes a statutory requirement to provide pre-suit notice to recovery targets when the potential claim involves construction defects. While the required notice tolls the statute of limitations for such claims, an open question remained regarding what effect the notice would have on the statute of repose. That is, what happens when pre-suit notice is given prior to the expiration of the statute of repose and the claimant then files a lawsuit after the expiration of the repose period? A new opinion from Florida’s Fourth District Court of Appeal helps clarify this issue and shows that the tolling also applies to Florida’s statute of repose.

In section 558.004, Florida Statutes, the legislature mandated that a claimant give pre-suit notice of a construction defect (or damages arising from a construction defect) to the responsible party at least 60 days before filing a civil action (120 days in the case of an association involving more than 20 parcels). If the claimant fails to abide by this pre-suit notice provision, the civil action may be stayed pending compliance with the provision. The statute clearly tolls the statute of limitations upon serving the pre-suit notice but does not mention what effect it may have on the statute of repose. In Florida, there is a 10-year statute of repose for claims arising out of improvements to real property and the pre-suit notice requirement for construction defect claims crosses over into areas covered by the statute of repose, although its ultimate effect on the tolling of claims was not previously defined.

In the recent case of Gindel et. al. v. Centex Homes et. al., No. 4D17-2149 (Fla. 4th DCA Sept. 12, 2018), the Fourth District Court of Appeal held that compliance with the pre-suit notice requirements of section 558.004, Florida Statutes, tolls the statute of repose in addition to the statute of limitations. In so holding, the court looked to the definition of “action” in Chapter 95, Florida Statutes, which governs statutes of limitations. The definition includes “a civil action or proceeding.” In Gindel, the court held that to only toll the statute of repose upon the filing of a lawsuit would render meaningless the “or proceeding” portion of the definition. The court further explained that because the pre-suit notice provision in section 558.004, Florida Statutes, is mandatory, the “proceeding” is instituted when the claimant complies with the initial requirement; i.e., the pre-suit notice provision. The court reasoned that to hold otherwise would penalize claimants for complying with the statutory requirements.

While this decision is favorable for claimants in construction defect actions, subrogation professionals should make themselves aware of the pre-suit obligations imposed by Chapter 558 and ensure timely compliance to preserve their subrogation rights on claims involving Florida’s statute of repose.

Insurance Company Adjuster Training Scripts and Role Paying

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Chip Merlin | Property Insurance Coverage Law Blog | September 24, 2018

Insurance companies spend time training their insurance adjusters. Training is a very important. It sets the tone and culture of how the claims department functions. Training can be ethical and professional as discussed by Ken Brownlee in Insurance Companies Must Perform in Good Faith Regardless of Their Customer’s Imperfect Actions. It can also lead into bizarre scenarios as exampled by the “Jewish Lawyers List” in Hindin v. State Farm – The Landmark Claims Practice Case That Few Know About Finally Ends.

April Hall sponsored a wonderful Overhead and Profit seminar in Dallas last Friday. Public adjusters, independent adjusters, contractors and some roofers were in attendance. One former insurance catastrophe adjuster sent me a script and role-playing training exercise required of an insurance company. I wonder how roofers, contractors and policyholders would feel if the insurance company would provide them this script and role-playing training actually used following a catastrophe:

Good morning!

I know many of us spend quite a bit of time dealing with roofers who are wanting to charge an additional 21% (10 and 10) profit and overhead for the more simple hail and wind claims. Please understand that I am not intending to cover here when we do, or do not owe additional profit and overhead. We have guidance on that in iConnect. Please consult those sources and your TM if you are not familiar with this issue.

My intention here is to help you structure your argument when you encounter the issue and it is not warranted.

Roofer: I have a right to charge profit and overhead!

Good: You are absolutely right! You have the right to charge whatever you want. We live in a free market place. However, for that same reason, I will be paying what the going competitive market rate is for this sort of repair. If I have missed something on my estimate, I am more willing to work with you to get it right. Otherwise, if you and I cannot reach an agreement on a competitive price for the work, I will engage another local, reputable, insured, and bonded roofer to review the covered damage and my estimate to see if they are able to complete the work for that amount. My insured is of course free to hire you to do the work, but I will be paying the competitive market rate for the job.

Bad: Oh, okay. I will need you to send me the invoices from your subcontractors to show me that you indeed are acting as a General Contractor. Okie dokie?

Ugly: Our estimating guidelines say I am not allowed to pay you that.

 

Roofer: (This is a TX thing) The Department of Insurance has ruled that insurance companies owe for profit and overhead.

Good: Oh, yes, I am familiar with that. What the DOI said is that when an insurance company calculates the actual cash value of a loss, they must include profit and overhead in that calculation. If you would like to read it, I can send you a link to it. Xactimate pricing includes an amount of profit and overhead that reflects the competitive market for this type of job, and I have included it in my calculation of the actual cash value of the loss.

Bad: Oh okay. Please send me that ruling when you send in your final bill, and if that is true, I’ll take care of it.

Ugly: You lie like an old rug!

 

Conversation with the customer:

Good– I wanted to let you know up from that XYZ Roofing typically charges about 20% over the going market rate for hail work in this area. They call it profit and overhead. The vast majority of roofers do not charge that extra amount. Because the majority of roofers want to do this work for you for 20% less than XYZ charges, I will not be agreeing to the extra amount. My estimate will include profit and overhead for the job, but not the additional 20% that XYZ typically charges. I wanted to let you know in advance, so you can consider how you want to move forward with the repairs. You may hire whoever you wish to do the repairs. If you like, I can refer you to other local roofers who will complete the work for what I will estimate. If they find additional damage, or I miss something, I would work directly with them. You would not have to play middle person.

Bad- I see you have an XYZ sign in your yard. I want to let you know up front that they charge 20% profit and overhead, and I can’t pay for that.

Ugly- That’s too bad you chose XYZ roofing. They are very difficult to deal with. I’ll tell you up front; my manager says I can’t pay their high rates.

There is a battle being waged by many insurance companies regarding property claims payments. Regulators should start making Market Conduct Studies of the ethics found in these training programs.

Many field adjusters are caught in a no-win situation where they are simply ordered what to say to reduce claims payments. Many are taught relatively sophisticated techniques developed by claims managers with significant insight into the psychology of claims negotiation rather than techniques for proper evaluation and investigation. This training is purely designed to reduce the amount paid and often without regard to what constitutes proper and legal construction.

California Passes Law Requiring Insurance Companies Take Specific Measures To Periodically Review The Estimated Replacement Cost Of Structures Insured Under Residential Property Insurance Policies

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Lawrence Moon | Property Insurance Coverage Law Blog | September 23, 2018

Last month, California passed legislation that requires residential property insurers to take specific measures to review the estimated cost of rebuilding or repairing structures insured under residential property insurance policies. Assembly Bill 1797 added section 10103.4 to California’s Insurance Code. With certain, limited exceptions, under the new statute, residential property insurers must, at least biennially, at the time of renewal of a policy, offer to provide the insured an updated estimate of the cost to rebuild or replace the insured structures, or offer updated coverage limits based on an inflation factor that reflects the cost of construction in the policyholder’s geographic area.

Effective the first of July 2019, section 10103.4 states, in its entirety:

(a) An insurer that provides replacement cost coverage in accordance with Section 10102, except an insurer that satisfies the requirements of subdivision (b), shall, on an every other year basis, at the time an offer to renew a policy of residential property insurance is made to the policyholder, provide an estimate of the cost necessary to rebuild or replace the insured structure that complies with Sections 2695.180 to 2695.183, inclusive, of Article 1.3 of Subchapter 7.5 of Chapter 5 of Title 10 of the California Code of Regulations, as those sections provided on January 1, 2018.

(b) An insurer that satisfies either of the following is not subject to subdivision (a):

(1) The policyholder has requested, within the two years prior to the offer to renew the policy, and the insurer has provided, coverage limits greater than the previous limits that the policyholder had selected.

(2) The insurer has, in connection with its annual offer to renew the policy, done both of the following:

(A) Offers, on an every other year basis, the policyholder the right to have a new estimate of the replacement cost for the insured dwelling, that is compliant with Sections 2695.180 to 2695.183, inclusive, of Article 1.3 of Subchapter 7.5 of Chapter 5 of Title 10 of the California Code of Regulations, as those sections provided on January 1, 2018, provided the policyholder provides the necessary, requested information.

(B) Offered the renewal of the policy and the dwelling coverage limit in the renewal offer is based on an inflation factor that reflects the cost of construction in the policyholder’s geographic area. This paragraph applies whether or not the policyholder has elected to accept that coverage limit.

(c) This section shall not be deemed to limit or preclude an insurer and insured from agreeing to provide coverage for a policy limit that is greater or lesser than the estimate of replacement value provided in accordance with subdivision (a).

(d) This section is not intended to change existing law with respect to the duty of the policyholder or applicant to select the coverage limits for a policy of residential property insurance.

(e) This section shall become operative on July 1, 2019.

The new statute is intended to reduce the incidence of underinsured homeowners, a problem that has plagued the state in recent years. Notably, subsection (d) of the statute states that the statute is not intended to alter the existing law with respect to the duty of the policyholder or applicant to select the coverage limits.

Insurance Companies Must Perform in Good Faith Regardless of Their Customer’s Imperfect Actions

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Chip Merlin | Property Insurance Coverage Law Blog | September 21, 2018

Insurance companies routinely argue for immunity from their wrongful actions because acts of their customers are not perfect following a loss. Policyholders are not claims specialists. Policyholders generally are not in the insurance claims business much less the civil litigation business which the insurance industry is the number one participant by far.

In a third party “bad faith” case, the Florida Supreme Court yesterday reiterated these practical issues by stating:

To take the Fourth District’s reasoning to its logical conclusion, an insurer could argue that regardless of what evidence may be presented in support of the insured’s bad faith claim against the insurer, so long as the insurer can put forth any evidence that the insured acted imperfectly during the claims process, the insurer could be absolved of bad faith. As Harvey argues, this would essentially create a contributory negligence defense for insurers in bad faith cases where concurring and intervening causes are not at issue. We decline to create such a defense that is so inconsistent with our well-established bad faith jurisprudence which places the focus on the actions on the insurer—not the insured.1

It is unfortunate that we call these cases “bad faith” cases when they are really “lack of good faith” cases. Just read the ethical rules that historically called for insurance companies and their employees to act in the “utmost of good faith and fair dealing” with their customers.

My mother used to remind me that “Chip, two wrongs never equal a right.” The above-mentioned ruling emphasizes this idea. I often find myself reminding attorneys in my firm, as well as myself, that this is true regardless of what the other side is doing in a lawsuit, appraisal or insurance claim. Professionalism and ethical behavior call for honest, legal, proper and civil conduct regardless of how poorly a party on the other side behaves. Still, it is sometimes difficult to turn the other cheek, but it is also not proper for a professional to get walked over by those using improperly aggressive and unprofessional behavior.

I am writing, researching and preparing for a speech at the Georgia Association of Public Adjusters Association (GAPIA) Fall Meeting in Atlanta next week regarding insurance and public adjuster professionalism. My belief is that the most successful adjusters for insurers or pubic adjusters for insureds in the long run are extraordinary examples of consummate professionals. They know much more than others, are vested in becoming personally even better at what they do and are above the fray of any one claim.

These extraordinary performing claims handlers appreciate the other side and understand the other point of view. They look at the policyholder just as importantly a customer following the loss as before and that the insurance company is an important part and has an important societal responsibility of taking care of the policyholder and claimant’s problems promptly. They look at their personal insurance claims work as involving the public trust, do not game the system and look to act fairly, regardless of personal incentives and company objectives not aligned with honesty or fairness.

From the insurance company standpoint, claims educator Ken Brownlee CPCU wrote in Winning By The Rules:

Why, then, do so many insurers and their claims representatives treat third-party claimants and injured employees as if they were an enemy? Why do so many third-party claimants and employees seek attorneys to represent them in their claims against the insurer? Could it be that insurers have been treating these product users as if the insurer were in charge instead of the injured or damaged party?

…

If adjusters got back out on the streets and met with folks immediately after their accidents or losses, which is what used to occur forty of fifty years ago, the public might begin to trust the insurance industry again. It might not be so prone to sign up with those television-advertising attorneys. It might also reduce the number of lawsuits that have to be defended at great expense, because when the adjuster knows the claim is valid it would be quickly settled, and when the adjuster knew it wasn’t valid, the denial would be quick, authoritative, and well-documented.2

Little has been written about public adjusters and their obligations to the insurance industry, the public, and their clients. There are very fine public adjuster organizations now at state level promoting professionalism. NAPIA certainly has been stalwart in the growth of licensing the public adjusting profession. It has also been instrumental with The Institutes regarding certification for those seeking to be recognized for knowledge and expertise in their public adjuster profession.

Yet, I tell my Merlin Law Group lawyers to vet every case from every public adjuster. It is not just that we have an ethical obligation to do so. Some public adjusters do not tell their clients what they estimate the loss amount to be because they either overestimate the loss on purpose and do not want to create unrealistic expectations, or they are so poor at negotiating an exact estimate of loss that they leave fairness behind to collect their fee quickly, regardless of the consequence to the client policyholder.

Sometimes, both the public adjuster and insurance company adjuster play the Xactimate game of “who knows what the magic method is to control the Xactimate process” for determining loss. Sometimes, outcome-oriented engineering opinions from either side seem to be the critical suspect issue between the battling interests.

As lawyers for the policyholder, there is one way we now look at to build and repair damaged buildings, and that is legally. What are the contractor specifications to do the job? What is required for labor by the materials needed to be used to make the repair? What do the manufacturer’s specifications call for? What do laws require for safely performing the demolition and construction? What taxes and permits have to be paid? What professionals have to be hired to do the job legally and practically? What do Building Codes call for? What is required so that somebody inspects the job to ensure the people doing the job have done it right—meaning legally and to the specifications demanded?

I now often consult with and hire contract specification experts because there is so much gamesmanship and ignorance displayed by overworked adjusters and public adjusters that I cannot trust either side to get the construction scope and pricing right. I am finding myself saying to experts, “are you sure?” “Are you saying this just because you think I want to hear it?” “Please, do not embarrass me in front of a jury or judge—is this your honest and hard worked upon opinion?”

Again, two wrongs do not make a right! The insurance company is the long-term entity required to always investigate, evaluate and promptly settle or pay claims in good faith. I think that is the practical point of the Florida Supreme Court case from yesterday. Still, the rest of us also owe the public and our clients a duty to do our jobs as professionally as we can.

Success!!

Thought For The Day

“Always place the best interests of your clients above your own direct or indirect interests.”
—True Blue Life Insurance Code of Ethics