What Insurers Need to Know about Florida’s Statute of Repose for Construction Defects
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When can a construction CGL insurer finally breathe easy? The answer can be found in Fla. Stat. § 95.11(3)(c), Florida’s statute of limitations and repose for construction defects. The statute of limitations prohibits construction defect claims 4 years after the claim accrues. For not-readily-observable defects (“latent defects”), the claim does not accrue until the defect is discovered or should have been discovered. Therefore, a plaintiff’s ability to bring such a claim could theoretically continue in perpetuity.
At some point, however, claims become stale. “As time passes, memories fade, documents are destroyed or lost, and witnesses disappear.” Nehme v. Smithkline Beecham Clinical Labs., Inc., 863 So. 2d 201, 208–09 (Fla. 2003). That’s where the statute of repose comes in, cutting off liability for latent construction defects after 10 years regardless of when the claim accrues.
In recent years, the statute of repose has been heavily litigated and revised by the legislature. One provision was added to the statute in 2017, two provisions were added in 2018, and one issue was addressed by a revision to an ancillary statute in 2019. This article explains how these amendments have changed the statute of repose and considers what may lie in the future.
The Statute of Repose: The Black Letter Law
The statute of repose prohibits a plaintiff from bringing a claim for a latent construction defect 10 years after the latest of the following events:
- the owner’s actual possession;
- the issuance of a certificate of occupancy;
- the abandonment of the construction, if not completed; or
- the completion or termination of the contract between the engineer, registered architect, or licensed contractor and his or her employer.
Cypress Fairway and Contract Completion
In 2017, the legislature clarified when a contract is completed in response to Cypress Fairway Condominium v. Bergeron Construction Co., 164 So. 3d 706, 707–08 (Fla. 5th DCA 2015). In Cypress Fairway, the Fifth District considered whether a construction contract was completed when the owner made the final payment or when the construction company made the final application for payment. The court held that the contract was completed when both parties completed their obligations, i.e. when the owner made the final payment.
This meant that owners could withhold payment to extend the commencement of the repose period. In 2017, the legislature addressed this concern by adding the following provision to Fla. Stat. § 95.11(3)(c): “Completion of the contract means the later of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment is made.” See Fla. H. Judiciary Comm., Staff Analysis, SB 536, at 3 n.7 (2017) (citing Cypress Fairway, 164 So. 3d at 707–08).
Warranty or Repair Work and Contract Completion
In 2018, the legislature added two provisions to Fla. Stat. § 95.11(3)(c). The first was in response to Busch v. Lennar Homes, LLC, 219 So. 3d 93, 95 (Fla. 5th DCA 2017). In Busch, the plaintiff filed a construction defect lawsuit just over 10 years after closing on the home. The trial court held that the contract was completed at closing despite a provision contained therein that allowed Lennar to make certain repairs after closing. The Fifth District reversed, holding that the complaint did not conclusively establish that the contract was completed at closing.
The legislature preferred the trial court’s decision, however, and it added the following provision to the statute of repose to clarify that warranty or repair work does not prevent contract completion:
With respect to actions founded on the design, planning, or construction of an improvement to real property, if such construction is performed pursuant to a duly issued building permit and if a local enforcement agency, state enforcement agency, or special inspector, as those terms are defined in s. 553.71, has issued a final certificate of occupancy or certificate of completion, then as to the construction which is within the scope of such building permit and certificate, the correction of defects to completed work or repair of completed work, whether performed under warranty or otherwise, does not extend the period of time within which an action must be commenced.
See Fla. S. Comm. on Community Affairs, Bill Analysis and Fiscal Impact Statement, SB 536, at 3 n.4 (2018) (citing Busch, 219 So. 3d at 95).
Extension for Counterclaims, Crossclaims, and Third-Party Claims
The second provision the legislature added in 2018 was meant to fix a problem that arose when a plaintiff filed a claim close to the expiration of the 10-year repose period. Let’s say a plaintiff filed suit on the day before the period expired. The plaintiff named the general contractor as a defendant, but not the subcontractor. If the general contractor had a claim against the subcontractor, it would only have one day to investigate and commence the third-party claim.
To address this obvious unfairness, the legislature added the following provision to Fla. Stat. § 95.11(3)(c) in 2018:
Counterclaims, cross-claims, and third-party claims that arise out of the conduct, transaction, or occurrence set out or attempted to be set out in a pleading may be commenced up to 1 year after the pleading to which such claims relate is served, even if such claims would otherwise be time barred.
Tolling the Statute of Repose: The Chapter 558 Notice
In 2019, the legislature sought to fix a loophole in the statute created by Gindel v. Centex Homes, 267 So. 3d 403, 406–07 (Fla. 4th DCA 2018). In Gindel, the Fourth District held that the statute of repose is tolled by the service of a pre-suit notice under chapter 558. This meant that if a plaintiff served a pre-suit notice under chapter 558 before the expiration of the 10-year repose period, the plaintiff could potentially bring a claim 20, 30, or 100 years later.
In response, the legislature added the following provision to chapter 558: “A notice of claim served pursuant to this chapter shall not toll any statute of repose period under chapter 95.” Fla. Stat. § 558.004(1)(d); see also Fla. S. Comm. on Community Affairs, Summary of Legislation Passed, HB 447, at 1–2 (2019) (citing Gindel, 267 So. 3d at 406–07).
Although a chapter 558 notice no longer tolls the statute of repose, construction CGL insurers should be aware that the notice likely triggers the duty to defend, depending on the contract language. See Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 232 So. 3d 273, 276–79 (Fla. 2017) (finding that a chapter 558 notice triggered the duty to defend because a “suit” was defined as including an “alternative dispute resolution proceeding”).
The Future of the Statute of Repose
As you can see, the statute of repose for construction defect claims has been through many changes. Although many issues have been put to rest, the statute will likely continue to generate litigation and evolve through caselaw and legislative action. For one, it is unclear if the legislative revisions detailed above have truly resolved the ambiguity involved in determining the date of contract completion.
Another issue that may generate future litigation is determining what claims are “founded on the design, planning, or construction of an improvement to real property.” See Manney v. MBV Eng’g, Inc., 273 So. 3d 214, 217 (Fla. 5th DCA 2019) (finding that a claim for negligently inspecting newly completed construction was not “founded on the design, planning, or construction of an improvement to real property”); Harrell v. Ryland Grp., 277 So. 3d 292, 298 (Fla. 1st DCA 2019) (finding that a claim based on a defectively installed attic ladder was “founded on the construction of an improvement to real property” despite the fact that the ladder was pre-assembled); see also Dominguez v. Hayward Indus., Inc., 201 So. 3d 100, 103 (Fla. 3d DCA 2015) (finding that a pool filter, a component part of a swimming pool, did not constitute an “improvement to real property” within the meaning of the products liability statute of repose).
Of course, there will also be issues yet unforeseen. Any case with sympathetic or slightly ambiguous facts is likely to prove fertile ground for litigation. See Allan & Conrad, Inc. v. Univ. of Cent. Fla., 961 So. 2d 1083, 1087 (Fla. 5th DCA 2007) (stating that limitations defenses, including the statute of repose, “are not favored defenses in Florida” and that “when there is a reasonable doubt as to legislative intent, the preference is to allow the longer period of time”); see also Hess v. Philip Morris USA, Inc., 175 So. 3d 687, 694–95 (Fla. 2015) (stating that the statute of repose is an affirmative defense and thus the defendant has the burden of proof).
The statute of repose is a powerful defense. As explained, however, it is a rapidly evolving area of the law and can be quite nuanced. Therefore, when asserting a defense based on the statute of repose, good advocacy can make all the difference.
 Construction CGL insurers should note that, although the underlying claim may have a 10-year statute of repose, declaratory judgment actions to resolve coverage issues or actions for bad faith have a 5-year statute of limitations and no statute of repose. See Baranowski v. Geico Gen. Ins. Co., 719 F. App’x 933, 934 (11th Cir. 2018) (finding that bad faith claims are contract claims under Florida law); see also Fla. Stat. § 95.11(2)(b) (providing a 5-year statute of limitations for actions based on a written contract).