Insights on Florida Construction Defect Claims
Defect claims may be prosecuted under various legal theories such as: breach of express or implied obligations of a contract; contractual indemnity; breach of warranty; common law claims such as strict liability, negligence, indemnification, contribution, fraud, fraudulent misrepresentation, fraudulent inducement, negligence misrepresentation, nondisclosure under Johnson v. Davis; and statutory claims such as violation of the Florida Building Code pursuant to section 553.84, Florida Statutes, breach of implied warranties pursuant to section 718.203, Florida Statutes (involving condominiums), breach of implied warranties under the Uniform Commercial Code pursuant to sections 672.714 and 672.715, Florida Statutes (involving the sale of “goods” as defined by the statute), breach of express and implied warranties under the Magnuson-Moss Federal Trade Commission Improvement Act pursuant to 15 USC § 2301, et seq. (involving the sale of “consumer products” to “consumers” as defined by the statute), violation of the Florida Deceptive and Unfair Trade Practices Act pursuant to section 501.211(1), Florida Statutes, and violation of the Home Warranty Association statute pursuant to section 634.3284(1), Florida Statutes.
Defect claims may be defended under various legal defenses that arise under common law such as: the economic loss rule/independent tort doctrine; the Slavin doctrine; the Spearin doctrine; waiver; estoppel; variation or “cardinal change” doctrine; failure to mitigate, lack or failure of consideration; prior material breach; laches, and “first costs”/betterment. Defect claims may also be defended under various legal defenses that arise under statute such as: apportionment of fault pursuant to section 768.81(3), Florida Statutes, statute of frauds pursuant to sections 725.01 and 672.201, Florida Statutes, unenforceability of indemnity provisions pursuant to sections 725.06 and 725.08, Florida Statutes, and statute of limitation pursuant to section 95.11(3)(c), Florida Statutes.
Cases involving construction or design defects invariably require the assistance of one or more experts for the proper investigation and proof or defense of a claim such as identifying the cause of a defect, how to appropriately remediate it, and the cost of doing so. These determinations will necessarily involve use of knowledge across multiple disciplines such as architecture, engineering, cost estimating, and related specialized fields, making the use of experts essential. The timing of retention is also important. The needs of a case will determine when an expert should be retained. A claimant may wish to retain an expert early on, and to share its expert’s opinions with the other side, including their insurer, to encourage early settlement of the claim. A claimant may also need to lock in an expert early on if there are limited experts in a particular field or for the issue at hand. The party defending the claim will likewise wish to retain an expert early on to determine whether the claimant’s position, including any expert opinions, has merit and warrants early resolution of the claim.
Once litigation ensues, the timing of retaining and disclosing experts will be governed by court order or applicable procedural rules. Once an expert has been retained, any communications should largely be done verbally through in-person meetings where possible or telephone/video conferences since written materials and communications from the expert may be discoverable if he or she is ultimately disclosed as a testifying expert in litigation. Any preliminary reports should always be designated as “draft” until finalized to protect them from disclosure. On the other hand, a prior report from an expert may be discoverable. Where an expert will be disclosed, the format and content of the expert’s report is paramount. The report should be written in a persuasive, easy-to-understand manner with opinions well-articulated and supported. Whether an expert’s report will be used in settlement negotiations early on, or in the litigation such as with motion practice or at trial, a poorly drafted report could be devastating to a party’s case. Counsel’s participation in the process is key, and should ensure that all necessary aspects of the expert’s opinions are addressed and properly conveyed.
Prior to initiating a defect action, a claimant should determine whether Florida’s Construction Defect Statute (chapter 558, Florida Statutes) governs. Unless a “claimant” (as defined in the statute) and a potential defendant have agreed in writing to opt out of the requirements of the statute, its provisions apply to any claim for legal relief for which the basis of the claim is a “construction defect” (as defined in the statute) that has arisen after completion of a building or improvement. Prior to initiating a defect action, the claimant must serve a written notice under the statute. For parcels involving less than 20 units, the notice must be served at least 60 days prior to filing suit. For parcels involving more than 20 units, the notice must be served at least 120 days prior to filing suit. Where the claimant fails to serve the required notice, or otherwise prematurely files suit, then, upon motion of a party, the action must be stayed pending compliance with the statute.
The notice of claim must describe in reasonable detail the nature of each alleged construction defect and, if known, the damage or loss resulting from the defect. Based upon at least a visual inspection by the claimant or its agents, the notice of claim must identify the location of each alleged construction defect sufficiently to enable the responding parties to locate the alleged defect without undue burden. However, the claimant has no obligation to perform destructive or other testing for purposes of this notice. It should be noted that a 558 notice is not required to be served by a contractor, subcontractor, supplier, or design professional as a prerequisite to filing a defect action since these parties are not defined as a “claimant” under the statute. It should also be noted that where a claimant is both an owner and contactor of a project, the statute does not apply, and therefore, the notice is not required.
Once the initial notice is served, the party receiving the notice typically sends a “down-stream” notice to subcontractors, subconsultants, and vendors working under the contractor or design professional who may be responsible for the alleged defect. The statute contemplates that those receiving the initial or “down-stream” notice will respond stating whether they dispute the claim, or instead wish to make an offer to repair the defect, offer money for the defect, or a combination of both. If a responding party disputes the claim, the claimant may thereafter proceed without further notice with an action for the defects listed in the notice. If a responding party provides an offer to remedy the defect or pay money, the claimant is not required to accept the offer, but must reject it in writing, and may thereafter proceed with an action for the defects listed in the notice. If the claimant accepts the offer, it must do so in writing. If an offer is accepted and the party making the offer fails to make repairs or pay money as agreed, the claimant may thereafter proceed without further notice with an action regarding the defects listed in the notice. If that party provides the repairs or pays the money stated in the offer, the claimant is not permitted to proceed with an action concerning the defects listed in the notice or otherwise provided for in the accepted offer. Further, if the party receiving the notice does not respond within the applicable time period set forth in the statute, the claimant may thereafter proceed with an action for the defects listed in the notice.
Those receiving a notice are entitled to a reasonable inspection of the property which may include destructive testing under certain circumstances. If the claimant improperly refuses to allow destructive testing, the claimant shall not have a claim for damages which could have been avoided or mitigated had destructive testing been allowed when requested and had a feasible remedy been promptly implemented. The party receiving a notice may also request that the claimant furnish certain pre-suit discovery (as listed in the statute) including any available expert reports.
While the statute does not bar, limit or create any other rights, actions, or theories upon which liability may be based, nor any defenses, the failure to include a defect in a notice will preclude a claimant from raising the defect at trial.
To learn more about Florida Construction defect claims, contact Florida construction mediator and lawyer Gary L. Brown at (954) 370-9970.