Florida Construction Law: How we do it down here
Contributors: Timothy D. Woodward, Esq. and John H. Dannecker, Esq.
Shutts
Construction law generally varies from state to state, however, the laws governing construction contracts and claims in Florida can, in at least some instances, vary significantly from other jurisdictions. As a result, legal practitioners from other jurisdictions and/or Florida lawyers who do not specialize in construction law, routinely misinterpret or overlook some key distinctions. The points below illustrate several critical legal considerations in Florida construction claims, which when overlooked, can trigger prolonged disputes or defeat.
Daubert Standards
Following a brief stint for the Frye standard of admissibility for expert testimony, the Florida Supreme Court formally re-adopted the broader and more flexible Daubert standard in May 2019. Scientific, technical, or other specialized opinion testimony is admissible so long as it is based on sufficient facts or data that are applied to reliable principles and methods. Exclusion of expert testimony is a drastic, but not uncommon, remedy. This creates a practical consideration for litigants as to which experts they retain and how they manage them because the majority of construction cases involve a battle of competing expert testimony and losing an expert can oftentimes mean losing a case.
Economic Loss Rule
Despite the tenured history of the economic loss rule, which precludes a tort claim for purely economic losses, Florida law now limits the breadth of the doctrine to products liability cases. Florida is grappling with its departure from the traditional rule, including whether a claimant is required to plead and prove a duty separate from any contractual duties in order to validly state a tort claim. In the meantime, construction and related professionals should beware potential liability under both contract and tort law for any construction or design defects.
Pre-Suit 558 Process
In an effort to encourage alternative methods of dispute resolution, thereby theoretically reducing the strain on the court system, Florida requires a claimant to comply with certain statutory pre-suit requirements before filing a lawsuit against a contractor, subcontractor, supplier or design professional for a construction defect. This includes providing notice of the alleged defect to the potential defendant and an opportunity for that party to inspect the allegedly defective conditions and cure the defect. Contractors and design professionals must include certain statutory notices in their agreements so that owners are aware of the statutory pre-suit procedures, although parties may agree in writing to opt out of the pre-suit procedures.
Indemnity Scope
Pursuant to Florida law, indemnity provisions in construction contracts may be void and unenforceable if the indemnitor is required to indemnify the indemnitee for the indemnitee’s own negligence, unless the contract includes a monetary limitation that bears a reasonable commercial relationship to the contract. The standards are also different depending on whether the project involves a public or private owner, with indemnification on public projects being more severely restricted; it is considered against public policy to indemnify another for the other’s own negligence in connection with public projects. Otherwise, however, because Florida has adopted comparative negligence, many construction agreements in Florida tend to include some form of indemnification for an owner’s, developer’s, contractor’s, or design professional’s own negligence and, therefore, must include a monetary limitation and otherwise comply with statutory limitations.
Federal Summary Judgment Standard
In order to “secure the just, speedy, and inexpensive determination of every action”, Florida has adopted the federal summary judgment standard, effective May 1, 2021. A motion for summary judgment is considered against the same standard as a motion for directed verdict: is there a sufficient factual dispute that requires the case to be submitted to a jury, or are the facts so one-sided that one party must prevail as a matter of law. A party could previously thwart summary judgment by establishing the existence of any issue of fact—no matter how small. Under the federal standard now adopted in Florida, the party defending summary judgment must do more than merely show doubt as to some material fact—the defending party must establish evidence that a reasonable jury could return a verdict for the non-moving party. Perhaps most significantly under the new standard, a party moving for summary judgment is no longer required to disprove the other party’s case—the moving party may simply point out the absence of evidence supporting the non-moving party’s case, thereby shifting the burden of evidence to the non-moving party.
Construction Liens
Chapter 713, Florida Statutes, entitles certain persons or entities, defined as “Lienors”, to record construction liens on real property into which the Lienor’s labor, materials or services were incorporated, assuming the property has not been exempted from liens by a statutory payment bond. A construction lien, once recorded, is an encumbrance on the real property for a period of one (1) year from the date of its recordation in the public records of the county in which the property is located. If a lawsuit to foreclose the lien is not filed in the one (1) year period, the lien will be automatically discharged of record. There are ways to shorten the one (1) year period, however, including a complaint to show cause why the lien should not be discharged and a Notice of Contest of Lien.
Bonds
Pursuant to the Little Miller Act (Fla. Stat. §255.05), when the State of Florida or local governments contract for improvements to a public building, the governmental entities, subject to certain monetary thresholds, are required to secure payment and performance bonds from their contractors. In the instance of payment bonds, their purpose is to provide a form of security for payment to a defined class of persons or entities that furnish labor, materials or services for the improvement of the public building. This is important because public buildings are not subject to construction liens.
Statute of Repose
Florida also has a specific statute (Fla. Stat. §95.11(3)(c)) containing both a statute of limitations and a statute of repose for claims arising from the design, planning or construction of improvements. Unlike the statute of limitations, which for latent defects requires that suit be brought within four (4) years of the date a claimant knew or should have known of the defect, the statute of repose imposes an absolute deadline of ten (10) years from the latest of the following events: the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion of the contract or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer.
Construction Damages
A frequent battleground involving Daubert challenges and statistics, most often argued in the context of residential or commercial communities involving detached structures with common design and construction materials, is the extent to which experts can extrapolate their findings from testing and analyses performed on one building to others which were not similarly tested or analyzed. Although these challenges are too fact specific to announce a hard and fast rule, an appellate court discussed this issue in some detail and provides helpful insight to counsel to illustrate circumstances when a quantitative or statistically valid sampling need not occur.
It is also important to consider consequential damages in Florida. Whether the economic environment at a given point in time is good or bad, the question of whether consequential damages are recoverable in disputes where the timely completion of construction is at issue is frequently a topic of debate. Even when the well-known mutual waiver of consequential damages is not contained in a contract, there are still considerable hurdles in successfully pleading and recovering damages considered by a court to be “consequential”.
Additionally, proof of damages in a given dispute is often a minefield for combatants and their counsel. It is not uncommon for litigants to focus on establishing liability while paying insufficient attention to the damages recoverable as a result of a breach of contract. Florida law has adopted the Restatement (First) of Contracts, so damages for breach of contract arising from defective or incomplete construction are the cost of repair or completion, measured as of the date of breach of the contract. If, however, the repair or completion costs would result in economic waste, the measure of damages will be the diminution in value of the improvement caused by the breach.
Conclusion
The state-specific laws governing Florida’s construction industry are well developed when compared to many other jurisdictions, sometimes complex and always ever-evolving. The above considerations are not by any means an exhaustive list of legal issues that make Florida construction law distinct, but rather they highlight some of the more significant current issues. Consulting with a Florida Bar Board Certified Construction Law Specialist is recommended for those wishing to do business in Florida’s thriving construction industry.