What Constitutes a “Suit” in Commercial General Liability Policy Coverage?

Jun 27, 2018

The Florida Supreme Court provides an expansive meaning for “suit”

Insurance carriers have been arguing with contractors over coverage terms under Commercial General Liability Policies for as long as these policies have been written.

A relatively recent Florida Supreme Court case examines the question of whether the word “suit” in a contract requires the insurer to defend a case. Altman Contractors, Inc. v. Crum & Forster Specialty Ins. Co., 232 So. 3d (Fla. 2017) An article in Shutts CONSTRUCTION LAW BLOG by William C. Matthews outlines the reasoning behind the Court’s findings in this case.

“…Parties that are covered under commercial general liability  (“CGL”) policies must consider whether their carriers will pick up the defense of any claims against the insured, including defense costs, selection of attorney(s), and more. Typically, this duty is triggered by a ‘suit’ against the insured as defined in the subject CGL policy. Does a ‘suit,’ however, commence at the initiation of the notice and repair process set forth in Chapter 558, Florida Statutes, or when a lawsuit is actually filed against the insured?”

Although the insurer, Crum, agreed it would defend Altman against the 558 allegations with a reservation of rights, it eventually argued it did not have a duty to reimburse Altman for its legal fees, because the “Chapter 558 defect notices” received by the contractor did not constitute the filing of a lawsuit required for coverage under its contract with the insured and the matter was settled “before a lawsuit was filed.”

Altman, filed suit against Crum for the recovery of its legal expenses claiming this proceeding did fit under the definition of “suit” in the CGL policy.

The court agreed with Altman. It cited the following policy language as the basis for its ruling:

“’Suit includes: …b. Any other alternative dispute resolution proceeding in which damages are claimed and to which the insured submits with our consent.’”

Mr. Matthews explains that “…the Court held that the Chapter 558 process does fall within the definition set forth in subparagraph (b) because a 558 notice is a required presuit process encouraging the claimant and insured to settle claims for construction defects without resorting to litigation.”

Source—

Does the Chapter 558 Process Constitute a “Suit” Under Commercial General Liability Policies? William C. Matthews, Shutts CONSTRUCTION LAW BLOG, May 7, 2018.