Though right-to-repair statutes have long been a part of the construction-law landscape for contractors and subcontractors and are well understood, in the approximately 30 states that have enacted statutes based on the concept—such as California, Colorado, South Carolina, and others—the best practices for the design professional receiving such a right-to-repair notice have been less studied and addressed.
This article seeks to fill that void. We do so by focusing on the Florida right-to-repair statute, Section 558, which requires that a claimant must serve notice of a claim on a target contractor or design professional before filing a lawsuit. Our Florida-centric focus is not a comment that the state’s statute is better or more evolved than other states’ right-to-repair laws, but it is certainly a representative law.
Notice of Claim
In Florida, the notice of claim is mandatory in construction-defect claims, even when design professionals are a target. When evaluating how to handle a construction- or design-defect claim in Florida as the designer of record for a project, the starting point is the Florida Statutes Section 558 notice of claim that the design professional will receive at its inception. Though some Florida construction attorneys have never read Section 558, it is probably the most important statute they will deal with besides Statutes Section 725.06, Florida’s indemnity statute.
We will walk through the most relevant portions of Section 558, dealing with the handling of a potential construction claim, immediate steps the design professional should take, and what the design professional must provide to its attorney. There are two specific portions of this statute section that need the attention of the design professional and the attorney handling the potential litigation. These are Sections 558.003 and 558.004.
Section 558.003 addresses the requirement that a potential plaintiff must issue a notice of claim to all potential defendants prior to filing any complaint. If the potential plaintiff does not comply with this section, the potential defendant can stay any subsequent formal claim. This section reinforces that the requirements in 558, and specifically the requirement to issue a notice of claim, were designed to promote judicial efficiency and to streamline the court system by eliminating claims that can be rectified prior to litigation. The notice should list the defects, the amount of damages attached to each defect, if known, and give the entity in receipt the opportunity to rectify the defects relevant to their scope of work prior to any litigation. The notice requirement protects the rights of the construction professional and also leads to a more efficiently handled dispute.
Section 558.004 requires the potential plaintiff to send the notice of claim detailing the defects involved to all potential defendants at least 60 days prior to filing any action, and also gives the potential defendant 30 days to inspect the property in question if it so chooses. The first issue that the design professional receiving such a notice—and its counsel—needs to address is what action to take in response.
While a contractor or subcontractor can obviously fulfill a goal of the statute and effect repairs or other remedies, a design professional may have little to lend to that effort. Plans and specifications are, of course, needed for original work, but likely have far less utility for any restoration or “fix” project.
Nevertheless, it is not recommended that a design professional ignore a Section 558 notice and fail to inspect the site in dispute. There may be identifiable construction defects separate from the architect’s design plans that need to be evaluated for rebutting the allegations. In addition, counsel should use the inspection opportunity to gauge their client’s liability and damage exposure. Lastly, it is in the designer’s interest to identify defects at the property that may lead to the proper allocation of responsibility to another involved party.
The next question before attending any Section 558 inspection is whether to retain an expert at this early point in the dispute. Consideration of that question should focus on an early assessment of the likely amount in controversy, the extent to which the design professional is at risk to the claims, and the complexity of the claims. Though it is typically a good idea to retain an expert as early as possible, especially when the design or construction issues are complex, the better course in Section 558 claims is to wait on retaining an expert to evaluate the defects involved at the site inspection, initially relying on the client design professional’s assessment.
Now that the design professional and its attorney have attended an inspection, the design professional needs to issue its response to the claimants. Though Section 558 requires that the target of a notice respond to that notice, there is no prescribed sanction for not doing so. Some Florida construction law practitioners report that the trial court may take an “inference of disinterest” against notice recipients that do not send a response. Further, the opportunity to respond should especially not be ignored where it is clear—or can be made clear by a compelling and logical statement—that defects are entirely due to construction or materials deficiencies as opposed to design errors or omissions. Counsel should seize that forum to argue that further pursuit of the design professional for construction-based defects will be fully resisted.
Deciding on Settlement
Not surprisingly, Section 558 also does not require that the design professional, or any Section 558 target, respond to the notice with an offer of settlement. That analysis, of course, will be governed by the typical considerations involved in that decision: risk and exposure.
It is important to note a relevant rule related to proposals for settlement in Florida that should be considered, however. If an eventual plaintiff offers a proposal for settlement and it is rejected, but a subsequent judgment is given at 25% more than the proposal, the plaintiff is awarded its attorney’s fees. This rule also provides that if a defendant issues a proposal for settlement to plaintiff that is rejected, and the follow-on judgment is 25% less than the amount proposed, defendant is awarded its attorney’s fees.
The consideration of settlement before the claim results in formal and expensive litigation should be approached soberly. While an evaluation of the design professional’s exposure should focus on the extent to which the designer comported with the standard of care, counsel also needs to consider the complexities of the claim, the number of parties and issues, and the cost to successfully defend the case. That cost-of-defense analysis may not form the primary basis for an exposure evaluation, but the attorney needs to arm the client and insurer with the expected costs, which often constitute an outsized share of the design professional’s exposure to such claims.
If there is no settlement, then litigation likely will be initiated. The architect must then provide all necessary documentation related to the project involved in the lawsuit. This is the single most important task that the design professional must perform to assist the attorney representing it. One document out of 20,000 may make a design professional’s defense. There is no need for the design professional to review all of its documents to determine what is relevant. Rather, turning over the design professional’s file is generally most efficient. The design professional must, however, also give the attorney relevant facts related to its scope of work to guide counsel’s determination of which documents need be produced.
If the design professional and attorney representing it follow these guidelines for the design professional’s response to a potential construction-defect lawsuit, they will have accomplished the goal of diligently evaluating the potential liability and given themselves the best opportunity to successfully end or defend it.