Last month, Florida lawmakers passed tort reform legislation by extending COVID-19 liability protection to businesses and health care providers, but Florida’s construction industry says they’re facing a form of lawsuit abuse that lawmakers failed to address. Florida’s homebuilders say lawmakers missed a crucial opportunity to boost the construction industry by adopting House Bill 21 or its companion, Senate Bill 270, both of which died in committee late in the session.
The bills, sponsored by State Representative Alex Andrade and State Senator Keith Perry, died in committee, thanks in part to a massive lobbying effort by trial lawyers to kill the bills.
The proposed legislation was targeted toward fixing a loophole that allows opportunistic trial attorneys to broadly target subcontractors that worked on the specific areas of the home through a so-called “558” claim. When a contractor receives an overly broad 558 claim, that contractor is required under the loophole to pass the claim to every subcontractor that worked in the immediate area of a construction project. Florida law firms view the current status quo as a potential gold mine, and have written extensively on the subject to attract potential plaintiffs.
“The process…worked until the trial lawyers got involved,” said Florida Home Builders Association CEO Rusty Payton. “Lately, what we’re finding is the trial bar coming in and finding ways to demand huge settlements, settlements coming out of insurance claims – and frankly, the properties aren’t getting fixed.”
The loophole creates a chain reaction when subcontractors begin to incur insurance and bonding costs when offers to repair alleged or potential defects in their work are rejected by attorneys looking to settle claims with the subcontractor’s insurance company. The end result of having unscrupulous attorneys exploiting this loophole for monetary gain is higher costs for homeowners and potential home buyers, at a time when affordable housing is getting harder to come by.
While the Florida Legislature tried to address the issue of building defects in 2003 by requiring that the first step to resolve a building defect complaint be between the contractor and owner outside the courtroom, frivilous lawsuits are resulting in protracted litigation that is tying up courtrooms and causing general liability insurance premiums to skyrocket. Those increased costs are ultimately borne by homebuyers, including lower-income families who need affordable housing.
The proposed legislation aimed to address the issue by limiting civil actions to “material violations,” such as those that could result in harm to a person or significant damage to the completed structure. The proposals would have forced potential plaintiffs to describe in “specific” detail each alleged construction defect. The previous standard only required a “reasonable” description of the alleged defect, a lower standard.
Plaintiffs also would have been required to Include at least one photograph of the alleged defect or evidence of the defect if it is visible, include any repair estimates or expert reports relating to the alleged defect, and include a description of the damage or loss that results from the alleged defect if that information is known.
Finally, plaintiffs would be required to identify the specific location of each alleged construction defect, which would help reduce the number of subcontractors impacted by wide-reaching lawsuits trying to exploit the loophole. And plaintiffs would also be required affirm personal knowledge of the alleged construction defect and acknowledge that a false statement is subject to penalties of perjury.
Florida’s Home Builder’s Association believes those fixes will go a long way toward reducing the number of frivolous suits while still keeping adequate protection in place for home buyers.