I previously wrote here about Judge Marra’s decision in the Southern District of Florida in Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., No. 13-80831-CIV, 2015 WL 3539755, 2015 U.S. Dist. LEXIS 72466 (S.D. Fla. June 4, 2015). The question in that case was whether a Florida 558 proceeding constitutes a “suit” that triggers a defense obligation under a general liability policy. A 558 proceeding is an administrative proceeding under Florida law in which a claimant provides notice that it intends to file a construction defect lawsuit, and the contractor has an opportunity to inspect and cure the problem before a lawsuit is filed.

The question of whether a 558 notice triggers an insurer’s duty to defend is important because the 558 process can be expensive. A contractor can spend tens of thousands of dollars before a lawsuit is even filed.  If an insurer’s defense obligation is not triggered by the 558 notice then the contractor has to pay those attorneys’ fees out of pocket. In the Southern District of Florida case, Judge Marra agreed with the insurance company that a 558 proceeding did not meet the definition of a “suit” in the policy. In Judge Marra’s view, a 558 proceeding is neither a “civil proceeding” nor an “alternative dispute resolution proceeding,” either of which would constitute a suit triggering a defense obligation under the policy.

The district court’s decision was appealed to the 11th Circuit Court of Appeals. The 11th Circuit ultimately decided to let the Florida Supreme Court answer the question, rather than try to predict how the Florida Supreme Court would rule. The 11th Circuit correctly observed that this was an important issue of Florida insurance law best addressed by Florida’s highest court. In the process, the 11th Circuit summarized the arguments on both sides, as well as Judge Marra’s conclusions, and made it known that, if the appellate court had not certified the case, it would have reversed the decision.

In the 11th Circuit’s opinion, Altman Contractors, Inc. v. Crum & Forster Specialty Insurance Company, No. 15-12816 (11th Cir. Aug. 2, 2016), the court noted that the district court had concluded the terms “suit” and “civil proceeding” were not ambiguous, but the appellate court was “not as sure.” The court concluded that there were reasonable arguments presented by both sides as to whether a 558 proceeding constitutes a “suit” or “civil proceeding” within the meaning of a general liability policy. Although the court stopped short of making an ultimate conclusion on the merits of the arguments, it is clear under Florida insurance law that if both sides provide reasonable interpretations of an insurance policy provision, then the provision is ambiguous as a matter of law. And an ambiguous policy provision is read against the insurer and in favor of coverage. So while the appellate court was trying to be polite in stating that it was not so sure Judge Marra got it right, the appellate court clearly indicated that he was wrong.

Hopefully the Florida Supreme Court will see the issue similar to the way the 11th Circuit saw it, and will answer the certified question before the end of the year. I will provide an update when the decision comes down.