Under Florida law, time is of the essence in construction defect subro lawsuits

Florida Senate Bill 360 took effect on April 13, 2023. It significantly shortened the statute of limitations and curtailment periods in Florida that plaintiffs, including subrogation insurers, are allowed to file civil lawsuits concerning the design, planning, or construction of improvements to real property.

The law provided a grace period for filing claims under the previous statute of limitations and rest periods. However, that grace period ends today, July 1. This means that insurers must now increase their efficiency in investigating and paying claims related to construction defects in order to be able to file their claims within these new and shorter statutory time limits.

To explain, a statute of limitations closes the window for the right to file a civil action after a defendant’s last act or omission, whether harm occurred or was later discovered. The purpose of such a statute is to permanently end a defendant’s potential liability and ensure that they are not subject to perpetual legal claims. This statute is an absolute barrier to filing claims after the specified time limit has passed, and immune to attempts to circumvent or extend it.

A statute of limitations, on the other hand, sets the maximum time within which one can initiate legal proceedings from the date of an alleged crime or harm. The law limits the exposure of civil claims by setting a fixed time limit within which civil actions must be filed after a claim-giving act occurs. Its main purpose is to ensure that legal claims are filed and pursued in court while the evidence is still fresh. It also serves to encourage prompt investigation and resolution of disputes.

Before SB 360 took effect, the construction statute of limitations set forth in Florida Statute Section 95.11(3)(c) gave plaintiffs 10 years to file a civil suit:

“…with time from the date of actual transfer of possession by the owner, the date of issuance of an occupancy permit, the date of abandonment of construction if not completed, or the date of execution or termination of the contract between the professional engineer, registered architect or licensed building contractor and his employer, the latest date; except that, if the claim concerns a hidden defect, the period begins with the discovery of the defect or with the time within which it should have been discovered if due care had been exercised.” — Florida Statute Section 95.11(3)(c) (emphasis added).

However, from 1 July 2024, the recourse insurers will only have seven years from the earlier of the above-mentioned events. In addition, the limitation period has also been shortened and begins earlier of the above mentioned events.

In addition, SB 360 provides:

• When a newly constructed single-family home is used as a model home, the time period for filing a construction defect suit begins on the date of the first recording of a deed transferring title to another party.
• If a project involves the construction of multiple buildings, each building must be considered a separate improvement for the purpose of determining the limitation period in the bill; and
• A definition of “material violations” in connection with statutory civil actions against building contractors for alleged violations of the Florida Building Code, and an amendment to existing law to limit damages to material violations only.

This change also affects subrogation insurers. From a purely financial perspective, they must pay for damages caused not by innocent insureds, but by negligent contractors and product manufacturers who produced defective products for construction, if those damages occur after seven years. To limit the negative impact of this newer, shorter statute of limitations, subrogation insurers whose insureds have been injured by defective construction work and construction-related products must act quickly to perfect their rights so that they can make claims when a construction defect is discovered.

Insurers must conduct subrogation assessments immediately after receiving the first claim notification to determine the age of the property and products. They must secure the accident scene and all evidence. Experts experienced in investigating the type of failure modes that occurred must be engaged to conduct investigations that are consistent with Daubert Standards. Target companies must be identified, notified and provided with the opportunity to investigate in order to prevent objections to allegations of destruction of evidence.

All contracts and warranties related to the construction of the property must be reviewed and analyzed to determine contractual rights, duties and obligations, limitations of liability, waivers of subrogation and other warranty provisions under Florida law. Insurers must also evaluate, adjust and pay claims as quickly as possible so that the right of subrogation arises and they can pursue the claims against third parties.

When it comes to recovering under this new Florida law for defects related to the design, planning or execution of improvements to real property, TIME is of the essence!

Miami attorney Joshua Goodman is chairman of the Southeastern region of the subrogation and recovery law firm Cozen O’Connor.

Related: Subrogation of Defects Just Got Harder in Florida

subjects
Construction companies in Florida