Tag Archives: construction defects

Florida Legislature Makes Another Run at Revising the Statute of Repose for Construction Defects

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Jason Bullinger | Rumberger Kirk

In late December 2022, the Florida Legislature proposed changes to the Florida Statute of Repose for Construction Defects to clarify a statute with ambiguous language. The statute is used to determine how long a party has to file a claim for construction defects after a structure or improvement has been completed.

When Does the Statute of Repose Start to Run?

How Florida’s 10-year statute of repose period is calculated has been somewhat of an open question for some time. In its current form, the statute of repose starts to run from the latest of the following four events: 1) the date of actual possession by the owner, 2) the date of the issuance of a certificate of occupancy, 3) the date of abandonment of construction if not completed, or 4) the date of completion of the contract or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer. Fla. Sta. 95.11(c). After the 10-year period expires, a claim is cut off or extinguished, and can no longer be brought. Recent efforts by attorneys who regularly represent homeowners and condominium associations have fought to push any event triggering the running of the statute as far back as possible, and in some cases, 15 years or more after a contractor finishes their work and is paid for the job. This leaves contractors and design professionals wondering when—if ever—they can discard old records and move on.

Proposed Bill Attempts to Clarify and Change the Repose Period

House Bill 85 was introduced on December 29, 2022 and is the Florida legislature’s attempt to add clarity to the statute. Specifically, the most significant change is to the triggering events, which, if legislation passes, would be revised to read:

  1. the issuance of a temporary certificate of occupancy,
  2. the date of the issuance of a certificate of occupancy,
  3. or the date of issuance of a certificate of completion.

The repose period would start to run seven years from the earliest of the three events. And if any of the above three events have not occurred, the statute starts to run seven years after the abandonment of construction or the date of the completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is earliest.

Additional Proposed Changes

The statute also provides a carve-out for multi-dwelling buildings, setting each dwelling unit apart for the purpose of determining the limitations period. Most notably, the proposed revised statute eliminates the trigger concerning the “actual possession by the owner.” Just who is defined as the “owner” for the purpose of the statute has been unclear for years. Instead of trying to define whether that could be things the developer, related corporation, or the first natural person to buy the dwelling and live in it, the statute simply removes that phrase in its entirety.

Past Attempts to Renovate the Statute

This is not the legislature’s first attempt to renovate the statute. In 2017, the legislature added language to clarify what was meant by the “completion of the contract” between the contractor, engineer, and architect. See House Bill 377 (2017). However, this amendment failed to address what has become a more contested issue, which is who was meant to serve as the “owner” with respect to the triggering event of the “actual possession by the owner.” See, e.g., Sabal Chase Homeowners Association, Inc. v. Walt Disney World Co., 726 So.2d 796 (Fla. 3d DCA 1999); Harrell v. Ryland Group, 277 So.3d 292 (Fla. 1st DCA 2019).

Proposed Bill Reinstates Original Purpose of Statute

Florida’s statute of repose for construction claims was originally designed to protect contractors from stale claims. Memories fade, and when questioned, contractors often fail to recall specific details on the work they did sometimes well beyond 10 years before the lawsuit is filed. When a project involves dozens of subcontractors and multiple structures, the problem can be compounded. This puts both contractors and their counsel at a disadvantage when defending against these claims. The new bill is a welcomed attempt to add clarity to the triggering events that start the running of the repose period and is a benefit to contractors and design professionals who work in Florida.

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.

Economic Waste Doctrine and Construction Defects / Nonconforming Work

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David Adelstein | Florida Construction Legal Updates

I recently did a presentation on the economic waste doctrine. It is an applicable doctrine dealing with construction defects and nonconforming work.  When it comes to construction defects and nonconforming work, EVERYTHING starts with your measure of damages.  How are you going to prove your damages?  Next, what evidence are you going to use to prove your damages?  Or, what are the defenses and how do you prove those defenses to a construction defect and nonconforming work claim including the economic waste doctrine?

If you are interested in learning more, the below presentation can shed detail.  However, don’t rely on the presentation in a vacuum.  Work with knowledgeable construction counsel (like me!) that can best position your case whether you are the one proving construction defects and nonconforming work or the one defending against such a claim. This way, if you are arguing economic waste, you are not just throwing it out there, but you are arguing it to actually mean it!

To view Economic Waste presentation.

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.

No Coverage for Damages Caused by Contractor’s ‘Wanton’ Negligence, 11th Circuit Rules

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Jim Sams | Claims Journal

An Alabama judge awarded Robert and Mindy Barton $900,000 for actual damages and emotional distress caused by the botched construction of their custom home, but they won’t be able to collect that judgment from the homebuilder’s general liability insurer.

The Barton’s own pleadings in the lawsuit against their contractor doomed their effort to win a payout from Nationwide Mutual Fire Insurance Co., a panel of the 11th Circuit Court of Appeals ruled Monday.

The civil complaint alleged that Stacy Alliston Design and Building was “wanton” in its negligence, which means the company knew its actions or omissions would cause damage. While there was one exception that might have applied, the policy issued by Nationwide excluded damages unless they were caused by an accident, the court decided in an unpublished decision.

“The Bartons had the burden to establish that coverage applied,” the panel opinion says. “And coverage applied only if the damages resulted from an accident — from something unusual that Alliston didn’t foresee or expect — and not from something that Alliston was ‘fully aware’ was ‘likely to result.’”

The Bartons hired Alliston to build a home in Hoover, Alabama, an upscale suburb of Birmingham. They paid $697,125 when they closed on the transaction on Oct. 27, 2006.

The Bartons handed Alliston a punch list of items that needed repair when they finalized the purchase, but other problems emerged after they moved in. Water leaked through the roof and windows, staining the drywall and providing sustenance for molds. Doors were askew. Flashing was missing. Windows weren’t sealed. Downspouts pointed in the wrong direction.

The Alabama Builders Recovery Fund, which pays compensation to homeowners who are damaged by a homebuilder’s misconduct, paid the Bartons $20,000 toward repairs. They replaced part of the roof, but that did not solve all of their problems.

In 2011, the couple filed suit against the company claiming $450,000 in property damage and $450,000 in damage caused by emotional distress. They filed a motion for summary judgment. Alliston did not oppose the motion. A Jefferson County Circuit Court judge awarded the Bartons everything they asked for in a short judgment that did not delineate the specific damages.

Next, the Bartons filed a lawsuit against Nationwide, using Alabama’s direct action statute. The law allows parties who have been awarded damages to file suit directly against the tortfeasor’s insurer.

A US District Court Judge found that the Alliston’s general liability policy did not provide coverage for the company’s “own work,” with one exception: property damage caused by work done by subcontractors. The Alabama Supreme Court has ruled that defective construction in itself is not an “occurrence” — or accident — that merits insurance coverage, unless the faulty workmanship causes damage elsewhere, such as when flooring is ruined because of a leaky roof.

That left a door open for coverage for some of the damages to the Barton’s house under the Nationwide policy. The Bartons had alleged some damage was caused by subcontractors’ shoddy work. But the county judge’s terse judgment closed that door: It did not specify which damages were caused by the subcontractors and which were caused by Alliston’s wanton negligence, or how much of the award was for property damage and how much was for emotional distress.

The District Court found that it was the Bartons’ burden to prove that coverage was available for their claims. Damages caused by the contractor’s “wanton negligence” were clearly not covered, but no concrete evidence was presented to show which damages were caused by subcontractors.

The appellate panel said the trial court made the right call when it granted summary judgment in Nationwide’s favor and affirmed the ruling.

“Like the district court, we cannot determine how much the state court awarded the Bartons damages for Alliston’s negligence (potentially covered) versus its wantonness (not covered),” the opinion says.

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.

Your Contractor Messed Up. Can you Fire Them?

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Mordy Mednick | Dickinson Wright

Suppose you own a commercial building and intend to lease it to various tenants. But before you do, you need to make a number of improvements, so you hire a contractor.

The contract between you and the contractor is expected to last approximately one year. However, about seven months into the contract, you notice multiple issues with the contractor’s work:

  • Numerous water leaks;
  • The exterior painting is sloppy, incomplete, and incorrectly applied; and,
  • There are multiple cracks in the flooring.

These errors – known as deficiencies in the construction industry – can range between severe (leaks in a roof) and less severe (the painting is incorrect). Many times, an owner in this situation will become extremely frustrated with the contractor and consider terminating the contract. The question is – is this legally permissible?

Right-to-Repair

Generally, a contractor will always have the right-to-repair a deficiency. In other words, an owner cannot terminate a contract without giving the contractor a reasonable opportunity to correct the deficiency. Suppose the owner terminates the contract without doing so. In that case, if the owner hires another contractor to repair the original contractor’s work, that owner cannot seek costs from the original contractor for the costs it incurred to make the repairs.

An Exception to the Rule

There is one major exception to this rule: if a deficiency is so serious that it prevents an owner from substantially receiving the whole benefit of the contract, known in the legal industry as a ‘fundamental breach,’ then an owner is (1) entitled to terminate the contract without allowing the contractor to repair the deficiency, and; (2) can sue that contractor for all of the costs it incurred to correct the deficiency.

In Conclusion

Whether something is considered a fundamental breach is a judgment call based on the facts of the particular case. For example, although painting the exterior of a commercial building may not be essential to the construction of the building as a whole, the opposite may be true if an owner hired the painter directly, and it was the painter’s only job to paint the exterior wall. Therefore, before terminating a contract because of a deficiency, always consider whether the deficiency is so fundamental that it entitles you to terminate the contract without giving the contractor a reasonable opportunity to repair.

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.

Contractor Owed a Defense

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Tred R. Eyerly | Insurance Law Hawaii

    The Illinois Appellate Court reversed the lower court and found that the insured contractor was entitled to a defense for alleged construction defects. Acuity v. M/I Homes of Chicago, LLC, 2022 Ill. App. LEXIS 393 (Ill. Ct. App. Sept. 9, 2022).

    The owners association (AOAO) sued M/I Homes for breach of contract and the implied warranty of habitability due to alleged defects. The AOAO alleged that the defects caused physical injury to the townhomes. There was resulting property damage such as damage to other building materials, windows and patio doors, and water damage to the interior of units. M/I Homes requested a defense from Acuity, but the request was denied. 

   Acuity filed a complaint for declaratory judgment against M/I Homes and the AOAO, seeking a declaration that it had no duty to defend. Cross-motion for summary judgment were filed. Acuity argued that the actual property the insured was working on did not constitute covered property damage caused by an occurrence. M/I Homes contended that there was damage to other property that was beyond repair and replacement of the construction work. 

    The trial court granted summary judgment to Acuity and denied M/I Homes’ motion. M/I Homes appealed. M/I Homes argued that the allegations of damage to “other property” in the underlying complaint referred to “property other than the townhomes themselves (i.e. property other than the contractor’s work product)” and was sufficient to qualify as property damage. This was also an occurrence because the underlying complaint alleged that damage was an accident caused by the defective work of the subcontractor and was neither expected nor intended by M/I Homes. 

    Acuity argued that the allegations of damage to “other property” were not enough to trigger its duty to defend. The allegations were unconnected to a theory of recovery and the underlying complaint failed to both identify the owner of the “other property’ and explain how the AOAO had standing to sue for the damage to that property. 

    The court noted that the underlying complaint simply alleged, in the broadest possible terms, that there was damage to “other property.” These allegations were sufficient to trigger Acuity’s duty to defend. The case was remanded to enter summary judgment in favor of M/I Homes on the duty to defend. 

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.