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Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Co.

Supreme Court of Florida

December 14, 2017

ALTMAN CONTRACTORS, INC., Appellant,
v.
CRUM & FORSTER SPECIALTY INSURANCE COMPANY, Appellee.

         NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED.

         Certified Question of Law from the United States Court of Appeals for the Eleventh Circuit - Case No. 15-12816

          Adam P. Handfinger and Meredith N. Reynolds of Peckar & Abramson, P.C., Miami, Florida, for Appellant

          Kimberly A. Ashby of Foley & Lardner, LLP, Orlando, Florida; and Holly S. Harvey of Clyde & Co., Miami, Florida, for Appellee

          Gregory D. Podolak of Saxe Doernberger & Vita, P.C., Naples, Florida, and Brian J. Clifford of Saxe Doernberger & Vita, P.C., Trumbull, Connecticut, Amicus Curiae United Policyholders

          Mark A. Boyle, Molly Chafe Brockmeyer, and Alexander A. Brockmeyer of Boyle & Leonard, P.A., Fort Myers, Florida; Christine A. Gudaitis and Ashley B. Jordan of Ver Ploeg & Lumpkin, P.A., Miami, Florida, Amici Curiae Construction Association of South Florida, South Florida Associated General Contractors, Leading Builders of America, Florida Homebuilders Association, and National Association of Home Builders

          W. Gray Dunlap, Jr. of W. Gray Dunlap, Jr., P.A., St. Petersburg, Florida; and Steven M. Klepper of Kramon & Graham, P.A., Baltimore, Maryland, Amici Curiae American Insurance Association, Florida Insurance Council, and Property Casualty Insurers Association of America

          POLSTON, J.

         Altman Contractors, Inc., the general contractor for the construction of a condominium, was insured by Crum & Forster Specialty Insurance Company ("C&F") on a general liability policy. C&F had a duty to defend Altman in any "suit, " as defined by the policy, arising from the project.

         Altman claims that this duty to defend was invoked when the property owner served it with several notices under chapter 558, Florida Statutes, a statutory process for resolving construction defect claims that is a condition precedent to filing a lawsuit. There are no issues presented to us that would bring into question whether there is underlying coverage under the policy for at least some of the claims.

         We review the following question of law certified by the United States Court of Appeals for the Eleventh Circuit (rephrased only to match references within this opinion):

Is the notice and repair process set forth in chapter 558, Florida Statutes, a "suit" within the meaning of the commercial general liability policy issued by C&F to Altman?

Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 832 F.3d 1318, 1326 (11th Cir. 2016).[1] We answer this question in the affirmative because the chapter 558 presuit process is an "alternative dispute resolution proceeding" as included in the policy's definition of "suit." However, we do not address whether, in this case, C&F consented to Altman's participation in the chapter 558 process, thereby giving rise to its duty to defend, because it is outside the scope of the certified question and an issue of fact disputed by the parties.

         BACKGROUND

         Altman was the general contractor for the construction of a high-rise residential condominium in Broward County, Florida, Sapphire Condominium ("Sapphire"). Altman was insured by C&F for the Sapphire project through seven consecutive one-year commercial general liability (CGL) insurance policies, all of which were materially the same ("the policy"). These policies were in effect from February 1, 2005, through February 1, 2012.

The policy provided in pertinent part:
We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result.

(Emphasis added.) The policy defined the term "suit" as follows:

"Suit" means a civil proceeding in which damages because of "bodily injury, " "property damage" or "personal and advertising injury" to which this insurance applies are alleged. "Suit" includes:
a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

         The policy did not provide further definitions for "civil proceeding" or "alternative dispute resolution proceeding" as used within this definition of "suit."

         Between April 2012 and November 2012, Sapphire served Altman with several chapter 558 notices of claim, which cumulatively claimed over 800 construction defects in the Sapphire project. On or about January 14, 2013, Altman notified C&F of Sapphire's claims and demanded, pursuant to the policy, that C&F defend and indemnify Altman as to Sapphire's claims. C&F denied that Sapphire's notices of claim invoked its duty to defend because the notices did not constitute a "suit." When C&F refused to defend Altman, it retained counsel to defend the notices of claim.

         On May 28, 2013, Sapphire served Altman with a supplement to the November 2012 notice, claiming thirteen additional deficiencies in the Sapphire project. Sapphire demanded that Altman "take all measures necessary to correct the identified construction and/or design defects."

         On August 5, 2013, C&F, maintaining its position that Sapphire's notices of claim did not invoke its duty to defend Altman under the policy, hired counsel to defend the claims. According to C&F, it retained counsel for Altman under a reservation of rights in anticipation of possible litigation. Altman objected to C&F's selection of counsel, demanded that its original counsel be paid to continue defending, and requested reimbursement from C&F for the fees and expenses incurred since notifying C&F of Sapphire's notices of claim. C&F denied Altman's requests. Ultimately, Altman settled all of Sapphire's claimed construction defects without any lawsuit being filed and without C&F's involvement.

         Altman filed a declaratory judgment action in the United States District Court for the Southern District of Florida seeking a declaration that C&F owed a duty to defend and to indemnify it under the policy. Altman moved for partial summary judgment "solely on the issue of whether [C&F's] duty to defend its insured, [Altman], was triggered when [Altman] demanded a defense to the" notices of claim. Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 124 F.Supp.3d 1272, 1275 (S.D. Fla. 2015). C&F also moved for summary judgment. Id.

         The federal district court concluded that nothing in chapter 558 precludes coverage during the chapter 558 presuit process "if the policy otherwise would provide for coverage." Id. at 1278. Looking to the terms of the policy, the federal district court found "no ambiguity in the policy provisions at issue" and concluded that "[n]othing about the Chapter 558 process satisfies th[e] definition" of "civil proceeding." Id. at 1279. Thus, the federal district court denied Altman's motion for partial summary judgment and granted summary judgment for C&F. Id. at 1282-83.

         Altman appealed to the United States Circuit Court of Appeals for the Eleventh Circuit, and the Eleventh Circuit certified the legal issue before us. 832 F.3d at 1326.

         ANALYSIS

          Whether C&F has a duty to defend Altman during the chapter 558 process is determined by whether the process is a "suit" as defined by the policy. "[I]nsurance policy interpretation . . . is a question of law, subject to de novo review." Penzer v. Transp. Ins. Co., 29 So.3d 1000, 1005 (Fla. 2010). We construe insurance contracts according to their plain language. Fayad v. Clarendon Nat'l Ins. Co., 899 So.2d 1082, 1086 (Fla. 2005). And the parties do not dispute that Florida law controls.

         A. ...


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