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Florida court ruling sheds light on insurance involvement in Chapter 558 construction defect process

For property owners facing the headache of construction defects, Florida law establishes an early opportunity to resolve the dispute. Instead of going straight to court, owners must first provide the contractor (or other responsible parties) with written notice of the defects and damages, and give them an opportunity to perform repairs.

This process - outlined in Chapter 558 of the Florida Statutes - is mandatory for property owners. However, construction professionals aren't required to respond, in which case the owners can move forward with litigation.

But what about the construction company's insurance? Should this pre-litigation process trigger the insurance company's involvement, or are they entitled to wait on the sidelines until a formal lawsuit is filed?

The state high court weighs in

The Florida Supreme Court recently addressed this question in a high-stakes construction defect case. The case involved allegations of 800-plus construction defects stemming from a luxury high-rise condo development. After receiving the Chapter 558 notice of defects, the general contractor tried to seek coverage under a commercial general liability policy. The insurance company argued that it didn't have any duty to step in, since no formal lawsuit had been filed.

Examining the policy's language - which is standard for the industry - the Supreme Court found that its definitions were broad enough to include Chapter 558 as an alternative dispute resolution process. This means Chapter 558 process can trigger an insurance company's early involvement in these claims.

What it means for property owners (and owners associations)

The decision reinforces the importance of Chapter 558 as a threshold process to resolve disputes before taking on the expense and hassle of litigation. With insurance coverage available, construction professionals have a greater ability to perform repairs and cover damages at this stage.

However, as always, the success of the Chapter 558 process depends on thorough preparation. Detailed, well-substantiated documentation of all defects is critical for owners seeking a favorable outcome.

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