Source: https://www.palmbeachbar.org/construction-law-committee/
Timestamp: 2019-04-20 06:28:34+00:00

Document:
To provide a collaborative forum for construction lawyers, provide education to attorneys as part of an annual CLE program, and promote awareness of this area of the law. For more information, contact William J. Cea, Esq. at (561) 655-5444 or wcea@bplegal.com.
Roger C. Brown (Morgan & Morgan); Richard Cartlidge (Mrachek, Fitzgerald, et. al); Richard Chaves (Ciklin Lubitz); Jared S. Gillman (Arnstein & Lehr); Maura Krause; Daniel E. Levin (Cole, Scott & Kissane); Mark J. Stempler (Becker & Poliakoff); Stephen E. Walker; Olivia D. Soden; Ashley Williams and Craig Distel.
When preparing to mediate a construction case, it is important to recognize the distinction between named parties, and insurance carriers. Unlike trial, the success of mediation may be contingent on available insurance to fund a settlement. Generally, insurance is not a substitute for a performance bond or guarantee for a contractor’s work. However, liability insurance may provide coverage for defective work that causes property damage and/or necessitates rip and tear to remedy damaged property.
So if you are representing the plaintiff, recognizing whether there are insurance companies providing a defense for any of the contractors, subcontractors or design professionals is crucial. Assessing coverage, limits of liability, and which policies may have the most exposure should be done as early in the case as possible. Florida Statutes provide a mechanism to demand relevant insurance disclosure, in addition to traditional discovery methods. Plaintiffs will sometimes voice concerns to me when I serve as mediator that they don’t understand why insurance matters if the contractor is the defendant. Plaintiff’s counsel will be well served by reviewing these issues with the client in advance of the mediation in order that they understand the distinction between the parties and insurance carriers and coverage issues.
On the defense side, general counsel needs to determine whether the client has insurance coverage which may provide a defense. If so, it is important to ensure that that insurers are put on notice as soon as possible. If defense counsel is appointed, the client may still want general counsel to interface with the insurer on coverage issues, and assist with the mediation. If the carrier is not notified early on, they may claim prejudice. There is also a duty to cooperate with the insurance company, including provision of relevant information and documents. Generally, carriers will want at least a month prior to mediation to assess available information, discovery, etc., in order to value the case. It is in all parties’ interest that the adjuster comes to the mediation with actual authority to negotiate and settle a claim. It generates frustration for all involved when the adjuster advises that more information or discovery is needed.
The moral of the story is that mediating a construction case requires knowledge of the distinctions between liability of the defendants, and whether and to what extent there is insurance coverage for the claim itself. Ergo why there is a “case within a case” when it comes to mediating a construction case.
William J. Cea, Esq. is a Board Certified Construction Lawyer and Circuit Civil Certified Mediator. He is the present Chair of the Construction Law Committee, and can be reached at (561) 820-2888 or wcea@beckerlawyers.com.
Americaribe-Moriarty Joint Venture (“AMJV”), a general contractor, appealed the federal district court’s award of attorney’s fees to International Fidelity Insurance Company and Allegheny Casualty Company (“Fidelity”), the sureties on a performance bond issued for a construction subcontract between AMJV and the subcontractor Certified Pool Mechanics 1, Inc. (“CPM”). After careful review of the record, and with the benefit of oral argument by Mr. Chaves, the Eleventh Circuit Court of Appeals reversed and held that Fidelity was not entitled to recover the attorney’s fees it incurred in this litigation because neither the performance bond nor the subcontract provided for such an award of prevailing party attorney’s fees.
In the underlying lawsuit, Fidelity sought a declaratory judgment that AMJV was not entitled to assert a claim against Fidelity’s performance bond. The Eleventh Circuit had previously affirmed summary judgment and decided that Fidelity had no liability under its performance bond. Int’l Fidelity Ins. Co. v. Americaribe-Moriarty JV, 681 F. App’x 771 (11th Cir. 2017)(unpublished). Subsequently, the district court awarded attorney’s fees to Fidelity against AMJV under a provision of the bond and pursuant to an indemnity provision in the underlying subcontract with the reciprocal fee provisions of Fla. Stat. §57.105(7). The unchecked effect of the district court’s decision would impact not just AMJV, but contractors and subcontractors across the State of Florida. Contractors and subcontractor routinely enter into bonded contracts which contain prevailing party attorneys’ fee provisions and/or separate indemnity provisions, and have asserted (and likely will assert in the future) claims against performance bonds which are typically challenged by the issuing surety. Fidelity’s position that – despite not having performed their surety obligations under their performance bond– they were entitled to prevailing party attorneys’ fees from AMJV under the indemnity provision of the underlying subcontract (to which Fidelity was not a party) is contrary to Florida’s public policy and, if made into legal precedent, would have turned the construction industry on its head.
Accordingly, AMJV appealed the attorneys’ fees judgment. AMJV argued that the district court erred in interpreting section 7 of the Bond as entitling Fidelity to recover their attorneys’ fees from AMJV. Section 7 provides for only “legal … costs” (not attorneys’ fees). After AMJV’s initial brief, prepared by Mr. Chaves and Mr. Charles L. Pickett, Fidelity withdrew their argument as to section 7 of the bond.
AMJV also argued that the district court erred in its interpretation of the indemnification provision of the subcontract. First, the indemnification provision by its plain terms is not a prevailing party attorneys’ fee provision. It does not provide for attorneys’ fees to AMJV for prevailing in litigation with CPM. Instead, its terms provide for CPM to indemnify AMJV for any damage (including attorneys’ fees) arising out of the subcontract. The Indemnification provision does not apply to suits between AMJV and CPM (or, by extension, to Fidelity), but rather, applies to claims by third parties against AMJV arising out of the Subcontract Work. Second, Fidelity was not a party to the Subcontract. § 57.105(7), Florida Statutes, applies only when the party seeking fees both prevails and is a party to the contract containing the fee provision.
Ultimately, the Eleventh Circuit Court of Appeals agreed with AMJV’s written and oral arguments. The Eleventh Circuit concluded that the indemnity provision of the subcontract was a general indemnity clause that on its face applies only to third party claims, not to suits between a contractor and its subcontractor. The indemnity provision did not authorize AMJV as a contracting party to recover attorney’s fees when AMJV was required to take legal action against CPM to enforce the subcontract. The appellate court decided that the indemnity provision was not a unilateral attorney’s fees provision and the reciprocal effect of Fla. Stat. § 57.105 was inapplicable.
In Gindel, the Plaintiffs asserted claims for damages arising from allegedly improperly constructed townhomes. The Plaintiffs (Homeowners) took possession of the townhomes on March 31, 2004, provided the Defendants with a Fla. Stat. Chapter 558 Notice of Claim on February 6, 2014, and filed suit on May 2, 2014 (More than 10 years from the last of the trigger dates codified by Fla. Stat. § 95.11(3)(c). The Defendants moved for summary judgment on grounds that the 10-year period provided by the Statute of Repose had expired on March 31, 2014. The Trial Court granted the Defendants’ Motion and entered a Final Judgment in their favor.
The Homeowners appealed the judgment, and the 4th District Court of Appeal reversed the trial court and issued an opinion providing that the Statute of Repose was satisfied and that the “action” was commenced when the Homeowners provided the Defendants with the Notice of Claim pursuant to Fla. Stat. Chapter 558. Relying on the Florida Supreme Court’s opinion in Raymond James Financial Services, Inc. v. Phillips, 126 So. 3d 186 (Fla. 2013), the 4th DCA reasoned that because “proceedings” and “actions” are distinct concepts, the definition of “action” in Chapter 95 included non-judicial proceedings like the mandatory pre-suit notice provisions of Chapter 558. The 4th DCA also reasoned that but for the pre-suit requirements of Chapter 558, Florida Statutes, the Homeowners would have filed suit within the 10-year period provided by the Statute of Repose.
The Court’s broad definition of “action” as it applies to the application of the Statute of Repose could provide a shelter for delayed actions if the Plaintiff provides timely pre-suit notice. Defendants seeking to assert the Statute of Repose defense for construction defect actions can no longer simply look at the date that the Plaintiffs file suit to determine if the 10-year period has expired.
The date of completion or termination of the contract between the professional engineer, registered architect or licensed contractor and his or her employer.
If, however, a construction lawsuit involves a latent (hidden) defect, the statute of limitations runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. This allows an owner, for example, time to discover a contractor’s shoddy workmanship that might not be immediately obvious to the naked eye.
However, the right to file a lawsuit related to hidden defects does not last forever. Florida also has what is known as a statute of repose, i.e., an absolute, outside limit on when a construction lawsuit may be commenced. In no event can a construction defect claim be filed more than ten (10) years after the latest of above-referenced dates – regardless of whether the owner knows of the defective condition or not.
Due to a recent change in Florida law – effective July 1, 2018 – there is one exception to the ten (10) year bar. Now, counterclaims, cross-claims or 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 one (1) year after the pleading to which such claims relate is served, even if such claims would otherwise be time-barred. This gives a fair opportunity for a general contractor, for example, who is sued on the last day of the ninth year, to include any subcontractors in the lawsuit who may be at fault.
Notably, assuming the construction work was performed pursuant to a building permit, properly inspected and a final certificate of occupancy or completion was issued, then any related repair work or warranty work performed after the date of completion would not extend the limitations period. Fla. Stat. § 95.11(3)(c). In other words, owners should be cautioned that if a contractor performs repair work several years after the original date of completion, presumably even if attempted repairs cause even more problems, then the owner does not gain additional time to file a lawsuit.
The author, Roger C. Brown, Esq., practices with Morgan & Morgan’s Business Trial Group in West Palm Beach, Florida, and can be reached at rbrown@forthepeople.com or (561) 227-5858.
 Completion of the contract means the later of the 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 is made. See Fla. Stat. § 95.11(3)(c). This definition was added to the statute to avoid the situation, for example, where an owner could withhold a small portion of the payment due the contractor, thereby claiming the contract was not “complete,” to effectively create an indefinite statute of limitations period.

References: v. 
 §57
 § 57
 § 57
 § 95
 v. 
 § 95
 § 95