If you have built or participated in the building of a community or a structure and have received the dreaded Chapter 558 Notice of Construction Defects, your first instinct is to contact your insurance agent and insurer immediately. You provide them the Notice to trigger insurance coverage and gain assistance from your insurer. Your insurer should assign an adjuster and one or more construction consultants to investigate the claims on your behalf in the hopes of resolving them without litigation. However, winds of change are once again upon the construction industry, and this time those winds strike at the very essence of the insurance policy you purchased to protect yourself.
Chapter 558 Notice of Construction Defects: What Your First Steps Should Be, Misteps to Avoid, and Actions You can Take Now to Protect Yourself Long Before a Defect is Claimed
First Thing We Do, Let’s Kill All the Lawyers (Think Shakespeare)
Does this lawyer have your attention? Allow me to set the stage. You meet an interesting fellow at a social event. He asks you what you do and what brought you to the event. Intrigued, you then ask him the same, at which point he responds that he is a lawyer. You remember Shakespeare’s admonition, shake hands, and walk away, thinking or hoping that you seldom need that or any other lawyer’s assistance. Was Shakespeare onto something? You bet he was, but perhaps not for the reason you think.
Don’t Hire Unlicensed Contractors or Subcontractors-The Newest Reason Why
You awake in your blaze orange jumpsuit to yelling and stagnant air, unsure what time it is because your room has no doors or windows. In case you had not guessed, you are in prison for violating the law. It is a felony to engage in construction activities without holding a license if one is required by the state. It is also a crime if you, a licensed trade contractor or general contractor, intentionally hire or assist an unlicensed contractor. If you hire someone who later acquires the license you have still violated the law. In addition to facing jail time, you can also be fined up to $10,000, and your license can be suspended or revoked for assisting unlicensed contractors by contracting with them.
Tampa Bay Builders Association members are well trained professionals at the forefront of the construction and development industry and would never intentionally hire unlicensed contractors. Yet there are many complicated traps one can fall into.
It is basic knowledge that installation of plumbing, roofing, and complex electric circuits requires licensing. But not all work fits neatly into the license needed or license not needed boxes. For example, a state electrical license is required for the installation of residential digital satellite equipment, but is not required for the installation of audio entertainment systems. Even if you are confident no state license is required, state licensed contractors are prohibited from disregarding or violating any city or county ordinance concerning local licensing. If you willfully disregard or violate those requirements by hiring a trade contractor who does not have a required local license, you may be committing a misdemeanor.
Perhaps today you are intimately familiar with the state licensing categories, as well as the 47+ local licensing categories in Pasco county and 31+ categories in Hillsborough county. But laws change, and they can sometimes be applied retroactively, such as in the case of construction licensing and unlicensed contractors, so great care must be taken.
The newest reason to be wary is that in a ruling last month in Brock v. Garner Window & Door, one of Florida’s appellate courts indicated that even though an unlicensed contractor may not be entitled to enforce its contract provisions in defense of a claim, that same unlicensed contractor is still entitled to assert other defenses when sued for defective work. Before Brock the courts were clear that public policy strongly weighed against unlicensed contractors having many, if any rights. The Brock court has now seemingly softened this public policy. While the defense at issue in Brock was that the lawsuit was filed too late and was therefore barred by the statute of limitations, the principal espoused by the court would seem to have no limits. Perhaps now an unlicensed contractor or subcontractor can assert the defense that someone else is to blame for the defect, or that the defect claim as been waived by virtue of some prior agreed repair which was completed. Unlicensed contractors and subcontractors may now leave you, the licensed contractor, stuck holding the financial loss.
The only time you should be caught wearing blaze orange is during hunting season, so for all of these reasons and so many more, do not hire unlicensed contractors. Take great care in determining whether a state or local license is required, and verify that a license is valid. State licenses can be verified through the Department of Business and Professional Regulation’s website, and local licenses can generally be verified through each city or county’s website or by calling.
Justin R. Zinzow is Florida Bar Board Certified in Construction law and is one of the attorneys at Zinzow Law. For more information you may email him at firstname.lastname@example.org or visit www.zinzowlaw.com
How to Review Contracts and Specifications LIKE an ATTORNEY and WITHOUT an ATTORNEY
If lawyers are being honest with themselves, they will acknowledge that contractors can often be successful without attorneys in their back pocket on every issue and project. These successful contractors have learned from bad experiences and from their attorneys, how to approach a contract and specification review like an attorney and without an attorney. This brief article is designed to outline a few tips and tricks that, if used correctly, will leave you looking like a wise old sage. Is there a role, then, for attorneys? Absolutely! We would no more pretend to know how to build every component of a building from the ground up, than you would profess to know several hundred years of legal precedent that must be considered when reviewing contract documents. So let us just start with some basics.
New Laws to Live By
Someone once said that laws are like sausages; it is better not to see them being made. As a sportsman who makes a mean wild-game sausage I disagree. But this is not a cook book, so I should say that as a lawyer, a statesman, and a patriot I also disagree. Laws, their application, and their origination, are a unique thing. They often come into being without our knowing, or have broader impact than we ever expected. Following are some of 2015’s sausages, and what they should mean to you.
Preserving Your Right to Insurance Coverage
No architect, engineer, or other design professional wants to think about liability (error and omissions) insurance coverage for design defects. However, in today’s business climate, ensuring that such coverage exists should be one of the professional’s top goals. All too often, design professionals are dragged into lengthy and expensive lawsuits brought by owners, notwithstanding the lack of design defects or the lack of a causal relationship between defects and damages, because design professionals are an easy target. In the balance of equities, juries are more likely to find the professional responsible than not. Defending even the smallest claim against a design professional can prove to be very costly, with figures in excess of six figures due to the myriad complex legal issues in the construction process. Accordingly, it is important to take all action possible to preserve and protect insurance coverage.
In Florida, two types of liability insurance policies exist: (1) A claims-made policy, and (2) An occurrence policy. With a claims-made policy, the insured should have coverage for events that occurred prior to the insurance coverage period provided a claim was not prior to the insurance coverage period. Under an occurrence policy, coverage exists for an event that occurred during the coverage period regardless of when a claim was made.
Every insurance policy requires that the insured timely report all claims regardless of whether it is a claims made or an occurrence policy. Failure to timely report claims can cause a denial of insurance coverage. The significant and often debated issue is what types of events constitute a claim that must be reported. There is no hard and fast rule. Insurance policies will typically define the term claim. Definitions vary from the initiation of a lawsuit to an event which may cause the insured to believe a demand may be asserted in the future. In considering whether to report a claim, the size and scope of the claim is insignificant. The design professional should review the insurance policy very closely, and consult his or her insurance agent and a legal professional whenever an event occurs that might result in a claim. The professional should understand that simply knowledge of events that could be the basis of a claim may create a duty to report. To prevent a denial of coverage, it is generally better to err on the side of reporting a claim than to err on the side of not reporting.
As mentioned above, the failure to timely disclose a claim may cause the insurance company to deny coverage. If the denial of coverage is due to a coverage defense, as opposed to a complete lack of coverage, the insurance company, by statute, must notify the insured within 30 days after it learned of, or should have learned of, the coverage defense. Thereafter, within 60 days of receipt of a lawsuit naming the design professional as a defendant, or in no case, later than 30 days before trial, the insurer must also give written notice to the insured refusing to provide coverage. If the insurer fails to comply with these requirements, notwithstanding the failure to timely report a claim, the design professional may be entitled to coverage. Additionally, if the design professional can prove that the insurer was not prejudiced by the delay in reporting a claim, the design professional may have coverage. While the design professional may have a right to coverage in the absence of a timely reported claim, the litigation costs which will be incurred in pursuit of such coverage will often be substantial. Accordingly, as addressed above, it is in the design professional’s best interest to over, rather than under report.
Upon occurrence of an event which may be a claim, the design professional should notify its agent in writing immediately. While telephone conferences regarding the claim are certainly warranted, all such conferences should be reduced to writing and transmitted to the insurance agent. To the extent possible, the design professional should encourage the agent to communicate in writing as well to preserve a record in the event of a later dispute over coverage. It is also wise to provide notice of the claim to the insurer directly. A review of the insurance policy is warranted at this stage to determine whether any specific requirements are imposed regarding the form, time, or place of notification. The insured should strictly comply with those requirements.
It is also incumbent upon design professionals, in completing either an initial or renewal application for insurance, to be as accurate and truthful as possible. Insurance applications will always request the disclosure of problematic events. The applications will often require disclosure of items that may not constitute a claim. Read the language in the applications carefully and consult an appropriate professional before deciding to withhold information. The failure to disclose known information on an application may lead to a denial of insurance coverage when a lawsuit is filed concerning matters that were known but not disclosed. One of the trickiest disclosure issues pertains to whether the design professional must disclose licensing complaints and the design professional’s involvement in discovery or other investigative efforts in a lawsuit to which the design professional is not a party.
In the unlikely event the design professional has purchased insurance and the insurance company dissolves, some level of coverage may still exist. Depending on the type of policy obtained, the Florida Insurance Guaranty Association may assume all or a portion of the coverage that would have existed under the insured’s policy. Receivership and liquidation proceedings, which are similar to bankruptcies, may also provide a source of indemnity coverage, to the extent an indemnity requirement exists.
While the inclination for most professionals is not to disclose events for fear that insurance premiums will increase, an ounce of prevention can save a great many headaches in the future. When considering whether to report a claim or other similar occurrence, the design professional should consult the insurance agent and a legal professional before making a conclusion. The time and money spent in making such an inquiry could save the design professional hundreds of hours and many thousands of dollars in the event coverage later becomes an issue.
Justin Zinzow, Esq. is an attorney in the Construction Law and Litigation Practice Groups of the Ruden McClosky Law Firm and is resident in the firm’s St. Petersburg, Florida office, (727) 502-8295, Justin. zinzow@ruden. com.
Professionalism: The Lawyer’s Duty to Mediate
New lawsuit filing has continued to steadily increase in this state in the last decade.2 While the state court system is certainly doing its part to timely administer justice/ the increasing case loads can create a very unfortunate impact on the timely resolution of our clients’ matters and their view of our profession. As professionals, we have an obligation to ensure that our profes sion and our esteemed judges are viewed with respect. Perhaps one of the best ways to earn this respect is to alter the “pit bull” image the public has conjured about the profession. All lawyers have a duty to conduct themselves in a manner that “assurejs] the just, speedy and inexpensive determination of every action and resolution of every controversy.”4 Simply stated, all lawyers have a duty to mediate every dispute; not mediation in the formal sense, but rather, through good faith consistent communications with our opponents concerning the “heart” of the case.
Professionalism: The Three Duties
Education, dedication, and discipline: these are the core values of every professional. Over the past decade, the word, “professionalism” has seemingly become a meaningless concept. Some commentators argue that this is especially true in the legal profession. Florida has recently added several law schools, and with the number of new lawyers on the rise, it has become increasingly important to revitalize the concept of professionalism. Professionalism consists of three related duties: the duty to teach, the duty to serve, and the duty to improve. This article will be published in two parts, the first of which discusses the concept of professionalism and teaching the concept of professionalism. The second part will discuss the duty to engage in pro bono services and the duty to advocate for improvement of the law.