Category Archives: Construction

Florida Shortens Time to File Construction Claims and Imposes Materiality Requirement for Building Code Violations

Posted on by
Reply

Ralf Rodriguez | Cozen O’Connor

On March 24, 2023, and April 13, 2023, Governor Ron DeSantis signed House Bill 837 and Senate Bill 360 into law, respectively. These new legislative amendments change Florida’s litigation landscape by shortening the statute of limitations for general negligence claims and the statute of repose for construction claims and altering the potential triggering events for commencement of the statute of limitations and repose periods. Additionally, the legislation amends the statute governing private causes of action alleging a violation of the building code by imposing a materiality threshold. 

Statute of Limitations for Negligence Claims is Shortened from Four to Two Years

As a result of new legislative amendments, Florida’s statute of limitations for general negligence claims has been reduced from four to two years.1 Prior to this change, the statute of limitations period for filing general negligence claims was four years from the date the cause of action for negligence accrued. However, as of March 24, 2023, a plaintiff alleging a general negligence claim in Florida must now file their claim within two years from the date the cause of action accrues, or the claim will be barred as a matter of law.

Commencement of the Four-Year Statute of Limitations for Construction Defects is Revised

The statute of limitations to file a claim based on the design, planning, or construction of an improvement to real property still remains at four years. However, the triggering event for when that time period commences has changed.2 Under the new legislation, the four-year statute of limitations begins to run from the earliest date, rather than the latest, of the potential triggering events specified in the statute. In addition, the legislation removed two potential triggering events from that list – the date of the owner’s actual possession of the improvement and the date of completion or termination of a contract between certain design professionals and their employers, while adding two new potential triggering events – issuance of the temporary certificate of occupancy, and issuance of the certificate of completion. The statute leaves in place an exception for latent defects, in which case the discovery rule applies, and the four-year statute of limitations period begins to run from the time the defect is discovered or should have been discovered with the exercise of due diligence.

Statute of Repose for Construction Claims is Shortened from Ten Years to Seven Years, and the Potential Triggering Events for Commencement are Revised

The new legislative amendments also reduced the statute of repose for construction claims from ten years to seven years. The amendments also changed the start of the repose period by altering its potential triggering events for when the time to file a claim begins to run on claims based on the design, planning, or construction of an improvement to real property. Similar to the amendments pertaining to the statute of limitations, under the new legislation, the repose period begins to run from the earliest date, rather than the latest, of the potential triggering events specified in the statute, with the same changes to the list of potential triggering events carried over for commencement of the limitations period to the statute of repose.

As a result, a claim arising from the design, planning, or construction of an improvement to real property must now be filed no later than seven years from the earliest triggering event specified in the statute, even if a claim arises from latent or undiscovered defects. Otherwise, the claim is time-barred. Note that the statute of repose works independently from the statute of limitations, cutting off a right of action after the seven-year period regardless of when the cause of action accrues. 

The shortened statutory repose period is anticipated to impact the amount of litigation associated with condominium projects. Specifically, turnover from a developer to a condominium association can occur up to seven years after the date the condominium declaration is recorded.3 Assuming a condominium declaration is recorded on or after any of the triggering events specified in the statute and assuming turnover occurs in the seventh year, the condominium association’s right to assert a construction defect claims may be significantly curtailed if not altogether time-barred.

Specific Carve-Outs for Multi-Building Improvements and Model Homes

Under the new legislation, if the improvements to real property include the design, planning, or construction of multiple buildings, each building is considered its own improvement with respect to calculating the commencement of the statutory periods.

If the improvement to real property is the construction of a single-dwelling residential building used as a model home, the limitations period commences upon the date that a deed is recorded first, transferring title to another party.

Effective Date of Amendments to Fla. Stat. § 95.11

The amendments to the construction defect statute of limitations and statute of repose in Florida apply to all actions that commence on or after April 13, 2023, regardless of when the circumstances giving rise to the cause of action actually occurred or accrued. However, the new legislation provides a grace period for civil actions that have not yet commenced but would have been considered timely prior to the amendment. Those civil actions must be commenced no later than July 1, 2024.

Amendments to Fla. Stat. § 553.84 Limit the Right To Recover for Material Violations of the Florida Building Code

Section 553.84 provides a private right of action to persons who are damaged as a result of violations of the Florida Building Code. This section is amended by the new legislation to limit recovery for material violations of the Florida Building Code. The new legislation also amends the statute to include a definition of material violation, meaning a violation “that exists within a completed building, structure, or facility which may reasonably result, or has resulted, in physical harm to a person or significant damage to the performance of a building or its systems.” This amendment notably eliminates any claims for technical violations which caused no damage to an individual or to the performance of the building or its systems and eliminates claims for code violations associated with an incomplete building, structure, or facility.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Construction Litigation Roundup: “… and the Kitchen Sink!”

Posted on by
Reply

Daniel Lund III | Phelps Dunbar

… and the kitchen sink!

In a case that is a roadmap to recovery for a surety against individual indemnitors, the individual indemnitors resisted their indemnity obligations asserting – unsuccessfully – every possible defense imaginable.

The indemnitors had all signed an indemnity agreement with the surety, which wrote a series of bonds for a project in Missouri, naming the co-indemnitor construction company as principal on the bonds. The project ended up in a dispute between the contractor and a subcontractor, which concluded with an arbitration award of $7.8 million in favor of the subcontractor on just some of the disputed claims. At that point, the construction company sought bankruptcy protection, leaving the surety to cover the loss. The surety eventually paid in excess of $23,000,000.

Opposing the surety’s motion for summary judgment, the individual indemnitors urged:

  • Lack of consideration: the ideas that (i) the surety did not rely upon the financial wherewithal of the indemnitors when issuing the bonds, but only the strength of the contractor, and (ii) the indemnitors received no benefit from the bonds. The court disposed of the second item easily, and, although the court had little information on the first item (“speculation [by the indemnitors regarding consideration] does not create a factual dispute”), the court quickly dispatched with that argument. The court did so noting that “parol” evidence would not be allowed to counter a “recitation of consideration” in the indemnity agreement.
  • Holding the individual indemnitors liable would violate principles of equity: according to the court, “[E]quitable relief cannot be granted where the rights of the parties are governed by a valid contract.”
  • The amount of damages sought was excessive: the individual indemnitors urged the court to reserve judgment until the contractor’s bankruptcy resolved in any monies therefrom were distributed. The court responded: “Any other recovery by [surety] is speculation at this point. Nothing currently precludes entry of summary judgment in favor of [surety].”
  • Ambiguity concerning the individual liability of indemnitors who signed on behalf of the construction company: the court was not swayed, as the indemnity agreement clearly had the natural persons signing “Individually” (it was not clear from the court’s discussion whether the indemnitors actually signed twice – once for the company and once individually – although the court pointed out that signing twice is “the preferred method” of establishing individual indemnity obligations).
  • Holding the individual indemnitors liable would be unconscionable: this was the individual indemnitors’ shot at the breadth of the indemnity agreement, which allows the surety recovery rights simply for making disbursements “‘in good faith’ under a ‘belief’ that it was liable…,” as well as complaining about the indemnitors’ lack of bargaining power when the contract was confected. Here, the court found no evidence of disparate bargaining power, and relied on prior jurisprudence holding that indemnity obligations as such – “while strict” – are “common” in the surety context.

Summary judgment in excess of $25,000,000 was granted in favor of the surety against the indemnitors.

Fid. & Deposit Co. v. Blanton, 2023 U.S. Dist. LEXIS 72650 (E.D. Mo. Apr. 26, 2023)

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Florida Legislature Enacts Major Changes to the Statute of Repose for Construction Defect Claims

Posted on by
Reply

Cesar Avila and Kellyt Melchiondo | Bilzin Sumberg

On April 13, 2023, governor Ron DeSantis signed Senate Bill 360 (“SB 360”) into law, which drastically reduces the time limit for property owners to file suit against builders and construction professionals for construction defects and imposes a more stringent standard for bringing a claim under the Florida Building Code. The statute now clearly identifies the triggering event for when the clock begins ticking on the statute of repose, rather than leaving it to courts to identify (and disagree upon) it. We examine here the history of Florida’s construction statute of repose, and how this new, bright-line law will affect Florida’s construction and real estate industries. 

Statutes of Limitation and Repose

In Florida, plaintiffs must bring construction defect claims within the time limits prescribed by the statute of limitations and statute of repose, which are both governed by §95.11(3)(c), Fla. Stat. While there may typically be exceptions to the statutes of limitations, the statute of repose is the absolute last date on which a property owner can sue a builder or construction professional. Failure to file suit before the running of the statute of repose constitutes a waiver of such claims. 

Changes to Time Limits and Triggering Events

Without question, SB 360’s most impactful change is the reduction of the statute of repose from 10 years to seven. By substantially shortening the statute of repose, SB 360 reinforces the Florida Legislature’s intent of eliminating stale construction defect claims. 

Florida’s four-year statute of limitations for construction defect claims remains the same under the new bill, with the important exception that the date from which the clock begins to run is the earlier, as opposed to the later, of the triggering events

Before the legislature enacted SB 360, the statute of limitations and statute of repose began running on the later of: (i) the date of actual possession by the owner; (ii) the date of the issuance of a certificate of occupancy (CO); (iii) the date of abandonment of construction if not completed; or (iv) the date of completion or termination of the contract. Despite the Florida Legislature’s intent of providing finality and certainty to potential defendants, the previous version of by §95.11(3)(c) did anything but. Certain of the statutes’ triggering events invited creative pleading capitalizing on the ambiguities as to when the “completion or termination” of the contract occurred. For example, in Cypress Fairway Condo. v. Bergeron Constr. Co., Inc., 2015 WL 2129473 (Fla. 5th DCA, May 8, 2015), the court grappled with whether a contract was “completed” on the date that the contractor submitted its final application for payment, or the date that the owner actually made that final payment. Although the contested period was only three days, the difference in those days was jurisdictional for the plaintiff. There, the court determined that a contract is “complete” when final payment is made. This ambiguity was not limited to the date of “completion or termination.”  Sabal Chase Homeowners Association, Inc. v. Walt Disney World Co., 726 So.2d 796 (Fla. 3d DCA 1999) involved a community of multiple townhomes and condominiums. Under the then-applicable 15-year statute of repose, the court determined that the statute of repose ran according to the date on which the last certificate of occupancy was issued in the community. In Harrell v. Ryland Group, 277 So.3d 292 (Fla. 1st DCA 2019), the statute of repose ran, not according to the date of the issuance of the certificate of occupancy, but rather, the date on which the homeowners took possession of the home as reflected on a warranty deed. And, just recently, after SB 360 passed, the Second District Court of Appeal issued its opinion in Westpark Pres. Homeowners Ass’n v. Pulte Home Corp., No. 2D21-2084 (Fla. 2d DCA May 10, 2023), in which the court found that the statute of repose ran on the date of the issuance of the last certificate of occupancy for a development, and not on the date on which individual homeowners took possession of their homes from the developer by warranty deed.

The new iteration of §95.11(3)(c) eliminates the case-by-case factual investigation of potential dates. Under the revised version of §95.11(3)(c), the statutes begin to run on the earlier of (i) the date of issuance of a temporary certificate of occupancy (TCO), a CO, or a certificate of completion (CC); or (ii) the date of abandonment if construction is not completed. This change provides a tangible point in time from which to measure the limitations or repose period where a CC, TCO, or CC is issued. Accordingly, owners, design professionals, and contractors, alike will know exactly when the time for filing suit will expire. 

Ostensibly, the bill benefits potential defendants by reducing the time of their exposure to liability. Florida law requires insurance carriers to offer coverage to contractors for liability arising out of current or completed operations for a period sufficient to protect against liability arising out of an action brought within the time limits provided in §95.11(3)(c). §627.441(2), Fla. Stat. (2022). Put otherwise, the longer the statute of repose, the longer the period that a contractor, and its insurance carrier, remain “on the hook.” Contractors, in turn, pass these increased costs on to developers and property owners.

While opponents of the bill argued that SB 360 would leave property owners more vulnerable to contractors who performed shoddy work, given the inextricable link between the costs of commercial general liability policies and the length of the period of repose, enacting SB 360 could result in a “win-win” for builders and developers by combatting rising construction and insurance costs.

New Requirement for Materiality for §553 Claim

Finally, SB 360 enacts a heightened standard for claims brought pursuant to Chapter 553, Fla. Stat., otherwise known as the Florida Building Code. Florida law now limits recovery to only “material violations” of the Florida Building Code, defined as a “violation that exists within a completed building, structure, or facility which may reasonably result, or has resulted, in physical harm to a person or significant damage to the performance of a building or its systems.”  §553.84, Fla. Stat. (2023). This requirement of “materiality” appears to curtail owners’ ability to sue builders and other construction professionals. What constitutes “significant damage” will likely produce the next wave of Florida construction defects jurisprudence.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Building and Construction Industry Exemption to Withdrawal Liability May Apply Narrowly

Posted on by
Reply

Michael McNally | Fox Rothschild

A recent decision from the Southern District of New York reveals that courts may be inclined in some withdrawal liability cases to narrowly apply the building and construction industry exemption based on the nature and location of the work performed.

It is commonly understood by union contractors that contribute to a multiemployer pension fund on behalf of their employees that the building and construction industry exemption will protect them and they will not owe withdrawal liability if they cease operations. Only if they “go non-union” do they potentially face withdrawal liability.

While that is correct as a general proposition, some employers may discover that the exemption may not apply to them depending on the nature of the work their union employees perform and where they perform it.

How the Building and Construction Industry Exemption Works

In general, when an employer either completely or partially ceases to have an obligation to contribute to a multiemployer defined benefit pension plan, it has withdrawn from the plan. If the plan has unfunded vested benefits (UVBs), and depending upon the allocation method, the employer is then liable for their allocable share of the plan’s UVBs.

Congress, however, recognized the unique nature of the unionized building and construction industry – as it existed in 1980 – and crafted special rules for employers in the industry.

Under the building and construction industry exemption, an employer is deemed to have withdrawn from a plan only if it ceases to have an obligation to contribute to the plan, but continues to perform work of the type for which contributions were required in the trade and geographic jurisdiction of the collective bargaining agreement pursuant to which contributions were made within the five-year period following the cessation of the obligation to contribute.

That means that if a building and construction industry employer ceases operations, or discontinues performing work that was covered under the collective bargaining agreement, no withdrawal has occurred.

If on the other hand however, the employer terminates a collective bargaining agreement pursuant to which it made contributions, and continues to perform work of the type for which contributions were required in the jurisdiction of the collective bargaining agreement within the five-year period following termination, the employer has withdrawn.

Most commonly, withdrawal liability for building and construction industry employers will arise when an employer is no longer signatory to a collective bargaining agreement and operates non-union, thus not contributing to the pension fund, and either self-performs or subcontracts work covered by the former collective bargaining agreement. Less commonly, it may occur when an employer remains signatory to a collective bargaining agreement, but the collective bargaining agreement no longer includes an obligation to contribute to the plan.

On its face the exemption appears straightforward. But far less straightforward is the question of what constitutes work in the building and construction industry, and when the exemption applies to an employer.

The exemption covers an employer where “substantially all the employees with respect to whom the employer has [had] an obligation to contribute to the plan perform[ed] work in the building and construction industry.”

The phrase “substantially all” is not defined in regulations or guidance from the Pension Benefit Guaranty Corporation (PBGC), but has been consistently interpreted by courts to mean 85%.

The term “building and construction industry” is not defined in MPPAA and is given the same meaning in MPPAA as it has for purposes of the Taft-Hartley Act. Most courts have held that the term should be interpreted under MPPAA according to the case law under § 8(f) of the National Labor Relations Act.

The National Labor Relations Board has generally defined the term as “subsum[ing] the provision of labor whereby materials and constituent parts may be combined on the building site to form, make[,] or build a structure.”

The cases have made clear that certain work, although involved in building or construction of a “structure,” does not fall within the exemption because it is not performed on the “building site.” For example, neither the fabrication of materials in a manufacturing shop nor the delivery of materials to a site would qualify for the exemption.

More plainly stated, building and construction industry work is jobsite work, whereas work not performed on a jobsite is not.

But the law is less settled about specific nature of the work, and what constitutes a “building site.”

Telecommunications Installation

In Dycom Indus. v. Pension, Hospitalization & Benefit Plan of Elec. Indus., a federal judge confirmed an arbitration award assessing $13 million in withdrawal liability where the arbitrator applied a narrow reading of the exemption. The employer had a contract with Time Warner Cable and employed field technicians who completed cable installation and disconnections primarily at residential single and multi-family units. The general scope of work included running wire from a pole to a house or building and throughout the house to the actual device. The specific tasks typically included drilling wall anchors into the exterior of the home, running wire throughout the home, and then making connections to devices.

The employer argued that this constituted work in the building and construction industry for purposes of the exemption because its employees provided labor to combine materials at residential or commercial buildings to receive new or additional cable, Wi-Fi, internet, phone and security services. The Fund argued that the employer was not issued building permits for its work, and that telecommunications installation performed outside of new construction does not constitute work in the building and construction industry.

The arbitrator sided with the Fund, relying heavily on the fact that the employer almost never worked on new construction projects; rather it provided installation where residences had been prewired, which generally did not require any repairs or alterations to an existing building or structure. The arbitrator also considered relevant that the employer never obtained building permits for the work performed, that the employees did not have any qualifications or training to be a licensed/journeyman electrician, and that the employees were not paid the same rate as construction journeyman electricians.

The court confirmed the arbitrator’s award, finding in a de novo review that the arbitrator’s legal and factual analysis were sound.

The court’s and arbitrator’s rulings offer a narrow reading of the building and construction industry exemption that may surprise employers who believe their operations fell within the exemption. It is critical that construction industry employers with union operations have a thorough understanding of how the exemption may apply to their workforce when considering ceasing covered operations.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Maybe Supervising Qualifies as Labor After All

Posted on by
Reply

Christopher G. Hill | Construction Law Musings

Remember back in 2021 when I “mused” about Dickson v. Fidelity and Deposit Company of Maryland et al.?  Remember how the Eastern District of Virginia held that mere supervision does not qualify as “labor” under the federal Miller Act?  Well, the 4th Circuit recently weighed in on the appeal of that case and had some interesting things to say about the definition of labor.

As a quick reminder, Plaintiff worked as a project manager on a project to repair and upgrade certain stairs at the Pentagon. Plaintiff subcontracted with prime contractor Forney Enterprises Inc. on this project. On Dec. 20, 2018, the prime contract was terminated. Plaintiff filed the Miller Act suit on Feb. 5, 2020. Dickson alleged that Fidelity and Deposit Company of Maryland, or F&D, must pay him, pursuant to the Miller Act, the amount he is owed for the labor he performed on the project. Now before the district court were cross-motions for summary judgment. In evaluating Plaintiff’s claims, the district court examined the defendant’s claims that (1) Dickson’s work did not qualify as “Labor” under the Miller Act, and (2) that the suit was not timely filed.  The Eastern District of Virginia court agreed with both arguments.

The Fourth Circuit Court of Appeals disagreed with the lower court that Dickson’s supervisory work was not “labor” under the Miller Act.  After a review of the history of the Miller Act (and its predecessor, the Hatch Act), the Court opined that because Dickson’s work was mostly, if not all, supervision of manual labor, and not merely “mental labor,” the work performed qualified as labor and would have been compensable.  The good news for Dickson was short-lived, however, because the appellate court agreed with the lower court that the statute of limitations had run and therefore the claim was barred.

I highly recommend the 4th Circuit opinion to your reading.  It goes into a fair amount of detail and analysis that is too long for a blog post but that provides good insight into the thought process courts may go through when analyzing whether certain work falls under the Miller Act and is thus allowable for a payment bond claim.  As always, I recommend that all construction professionals that believe they may have a Miller Act claim consult an experienced construction attorney to analyze the claim and provide guidance.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.