In an article appearing in Law360, Hunton & Williams LLP’s insurance coverage practice group head, Walter Andrews, weighs in on the Florida Supreme Court’s recent opinion in Altman Contractors, Inc. v. Crum and Forster Specialty Insurance Co. As I discussed in my previous blog post on the Altman Contractors case, available here, the Florida Supreme Court held that a Chapter 558 notice of construction defect constitutes a “alternative dispute resolution proceeding” under the definition of “suit” in a commercial general liability (“CGL”) policy so as to possibly trigger the insurer’s duty to defend. There, the policy defined “suit” as including “[a]ny other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.”
As Mr. Andrews points out, however, the Court’s holding may create problems for construction industry policyholders because policyholders may nonetheless have to wait and see if the insurer will agree to grant consent to and become involved in the Chapter 558 process. As Mr. Andrews suggests, the majority’s narrow reading of the definition of “suit” vis-à-vis the Chapter 558 process “means that the insured won’t know if it will have a defense provided (which makes it even less likely that it will respond and attempt to reach a resolution) and the claimant won’t know if there is going to be a meaningful process undertaken, at all.” Indeed, Mr. Andrews’ comments echo the sentiment of Justice Pariente who, in her dissent, suggests that the majority’s holding incentivizes insureds to “not participate in the Chapter 558 process and instead opt out of the chapter 558 process in favor of subjecting itself to a lawsuit, which would undoubtedly constitute a ‘suit’ that invokes the insurer’s duty to defend… Creating such disincentives undermines the Legislature’s intent in enacting chapter 558 to ‘reduce the need for litigation.’”