YOU DON’T HAVE TO BE A CONSUMER TO ASSERT A FDUTPA CLAIM

shutterstock_519663268A few years ago, the Fourth District Court of Florida rendered an opinion in Caribbean Cruise Line, Inc. v. Better Business Bureau of Palm Beach County, Inc., 169 So.3d 164 (Fla. 4th DCA 2015) regarding Florida’s Deceptive and Unfair Trade Practices Act (referred as to “FDUTPA”) (Florida Statute s. 501.201 et seq.).   This case held that a party can assert a FDUTPA claim even though the party is NOT a consumer.  The party still has to prove there was an injury to consumers in filing such claim, but again, the party can bring the claim even though it is NOT a consumerCaribbean Cruise Line, 169 So.3d at 169 (“[W]hile the claimant would have to prove that there was an injury or detriment to consumers in order to satisfy all of the elements of a FDUTPA claim, the claimant does not have to be a consumer to bring the claim.”).  See also Cemex Construction Materials Florida, LLC v. Armstrong World Industries, Inc., 2018 WL 905752, *15 (M.D.Fla 2018) (relying on Caribbean Cruise Line to find that even though the plaintiff does not need to be a consumer, the plaintiff still must prove an injury to consumers to satisfy elements of a FDUTPA claim).

 

To state a claim under FDUTPA, a party must allege (1) a deceptive or unfair trade practice; (2) causation; and (3) actual damages.”  Cemex Construction Materials Florida, LLC v. Armstrong World Industries, Inc., 2018 WL 905752, *14 (M.D.Fla 2018).  

 

An unfair practice is one that is unethical, immoral, oppressive, unscrupulous, or substantially injurious to consumersCaribbean Cruise Line, 169 So.3d at 169 quoting PNR, Inc. v. Beacon Prop. Mgmt., Inc., 842 So.2d 773, 777 (Fla. 2003). 

 

A deceptive practice is an omission or representation that is likely to mislead a consumer acting reasonably under the circumstances to the consumer’s detrimentId.   

 

Naturally, both definitions have fairly expansive scopes and applications. And, with the Caribbean Cruise Line’s confirmation that a plaintiff does not actually need to be a consumer to initiate such a claim renders FDUTPA  a powerful vehicle when it comes to unfair or deceptive trade practices.  

 

If you have questions or issues regarding the breadth and application of FDUTPA, and unfair and deceptive trade practices, consult a lawyer that understands the nuances of such claims.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

CONTRACTORS: CONSULT YOUR INSURANCE BROKER REGARDING YOUR CGL POLICY

shutterstock_601853483Contractors:  do yourself a favor and consult your insurance broker regarding your commercial general liability (CGL) policy.   Do this now, especially if you subcontract out work.

 

CGL policies contain a “your work” exclusion.  The CGL policy is written such that it excludes “‘property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.’” This exclusion will be raised in the post-completion latent construction defect scenario. (There are other exclusions that will be raised to a defect discovered during construction.)  Certain policies will contain a subcontractor exception to this “your work” exclusion.  You WANT this exception- no doubt about it so that this exclusion does not apply to work performed by your subcontractors.  Without this subcontractor exception, truth be told, this “your work” exclusion is a total back-breaker to contractors.   It will give your insurer an immediate out for many latent defect property scenarios since excluded from coverage is property damage to your work including work performed by your subcontractors.

 

In a recent opinion, Mid-Continent Casualty Co. v. JWN Construction, Inc., 2018 WL 783102 (S.D.Fla. 2018), an owner discovered water intrusion and damage at his property.  He sued the general contractor and the general contractor’s insurer filed a separate action for declaratory relief claiming it had NO duty to defend or indemnify its insured—the general contractor—in the underlying suit.  The court agreed because the contractor did not have the subcontractor exception to the “your work” exclusion.

 

If work was performed by JWN [contractor] or on JWN’s behalf-here by a subcontractor-then the “your work” exclusion applies.  Historically, insurers could be liable under commercial general liabilities policies resembling the policy in the instant case for certain types of damages caused by subcontractors….Nonetheless, insurers do possess the right to define their coverage as excluding damages arising out of a subcontractor’s defective work by eliminating subcontractor’s exceptions from the policy. An insurer is only liable for a subcontractor’s defective work when the “your work” exclusion does not eliminate coverage for work performed by a subcontractor….In conclusion, the insurance policy in this case excluded coverage for work performed not only by JWN, but also by JWN’s subcontractors.

JWN Construction, Inc., supra, at *4.

 

 

This ruling meant that the general contractor’s CGL insurer had no duty to defend or indemnify its insured—again, the contractor—for the defects or resulting water damage.  A total killer illustrating the absolute importance of the subcontractor exception to the “your work” exclusion in your CGL policy.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

THE INDEMNIFICATION LIMITATION IN SECTION 725.06 DOES NOT APPLY TO UTILITY / HORIZONTAL-TYPE PROJECTS

shutterstock_486800107One of the most important provisions in construction contracts is the indemnification provision.  Appreciating contractual indemnification obligations are critical and certainly should not be overlooked.  Ever!

 

Florida Statute s. 725.06 (written about here and here) contains a limitation on contractual indemnification provisions for personal injury or property damage in construction contracts.   There should always be an indemnification provision in a construction contract that addresses property damage or personal injury.  Always!

 

Section 725.06 pertains to agreements in connection with “any construction, alteration, repair, or demolition of a building, structure, appurtenance, or appliance, including moving and excavating associated therewith…” If the contract requires the indemnitor (party giving the indemnification) to indemnify the indemnitee (party receiving the indemnification) for the indemnitee’s own negligence, the indemnification provision is unenforceable unless it contains a “monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any.”   It is important to read the statute when preparing and dealing with a contractual indemnification provision.

 

A common defense from an indemnitor in a case dealing with contractual indemnification on a construction project is that the provision is unenforceable because it does not comport with s. 725.06.  

 

In a recent case, Blok Builders, LLC v. Katryniok, 43 Fla. L. Weekly D253b (Fla. 4th DCA 2018), the indemnitor argued the indemnification provision was not enforceable. Here, a utility company hired a contractor to improve its telecommunications services. Part of the work required the contractor to provide access to preexisting underground telecommunication lines located in neighborhood easements.  The contractor hired a subcontractor to perform the required excavation to access the preexisting underground lines.   This work resulted in a personal injury action where the injured person sued the contractor, subcontractor, and utility company.

 

The contractor’s subcontract with the subcontractor required the subcontractor to indemnify the contractor and its directors, officers, employees, and agents, from loss caused wholly or partially by the subcontractor.  Thus, the indemnification provision required the subcontractor to indemnify the contractor for losses that were caused partially by the contractor’s own negligence (otherwise, the indemnification provision would be limited to losses solely attributable to the subcontractor). 

 

The contractor and utility owner both claimed that the subcontractor was responsible for contractually indemnifying them for all losses including attorney’s fees.  The subcontractor argued that the indemnification provision should be deemed unenforceable because it did not contain a monetary limitation on the extent of the indemnification. 

 

Indemnification as to the Contractor

 

The appellate court affirmed the trial court that the indemnification provision as to the contractor was enforceable because the statute (s. 725.06) did not apply.  What?  That is right, the statute did not apply because the statute does not apply to utility contracts.  What?  That is right, the appellate court held that the statute applies to “any construction, alteration, repair, or demolition of a building, structure, appurtenance, or appliance” so if the excavation is not connected to a building, structure, appurtenance, or appliance, it does not apply.  Since the project dealt with underground utility lines, s. 725.06 did not apply so the contract did not need to contain a monetary limitation on the indemnification provision.

 

Of course, in my opinion, it is hard to truly reconcile the distinction between a vertical project of a building or structure and a horizontal project, such as the project at-issue.  In other words, why would a limitation on indemnification provisions apply to one type of project but not the other?  I do not know the answer to this other than to say the court reading s. 725.06 noticed that it mentions nothing about applying to horizontal type projects that do not involve a building or structure.

 

Indemnification of Utility Owner

 

The appellate court however reversed the trial court as to the application of the indemnification provision extending to the owner.  The indemnification provision mentioned nothing about the utility owner.   That is true.  The contractor argued that because the prime contract was incorporated into the subcontract, the subcontractor’s duty to indemnify the utility owner arose from the prime contract.  But, the prime contract required the contractor to indemnify the utility owner; it mentioned nothing about subcontractors being required to indemnify the owner.

 

Interestingly, if this contract were governed by s. 725.06, this perhaps would be an issue because s. 725.06 provides that contractors may not require the indemnitor to indemnify the indemnitee for damage to persons or property caused in whole or in part by any person other than the (a) indemnitor, (b) the indemnitor’s contractors, subcontractors, sub-subcontractors, materialmen, agents, or their employees, or (c) the indemnitee’s officers, directors, agents, or employees.   Thus, the indemnification provision would not permissibly authorize the subcontractor to indemnify the owner for the owner’s own negligence. 

 

Ultimately, what this means is that the owner can pursue contractual indemnity from the contractor based on the indemnification provision in the prime contract.  The contractor would owe this indemnification (since any negligence attributable to the subcontractor would be attributable to the contractor that hired the subcontractor). This would get resolved (or play out at trial) and the contractor, based on this loss, would sue the subcontractor for indemnification for the loss connected with the subcontractor’s negligence.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

DOCTRINE OF AVOIDABLE CONSEQUENCES AS AFFIRMATIVE DEFENSE

shutterstock_694657774The doctrine of avoidable consequences is an affirmative defense that can be used in certain property damage lawsuits.  This is a defense that does not go to liability, but it goes to damages.  This doctrine of avoidable consequences defense holds that a plaintiff cannot recover damages caused by a defendant that the plaintiff could have reasonably avoided.  See Media Holdings, LLC v. Orange County, Florida, 43 Fla.L.Weekly D237c (Fla. 5th DCA 2018).  Stated differently, if the plaintiff could have reasonably avoided the consequences of the damages caused by the defendant then the plaintiff cannot recover those damages.  However, the defendant needs to prove this defense — the burden is on the defendant to establish this defense (ideally through expert testimony).  

 

For example, in Media Holdings, a party that was putting on a trade show at a convention center caused the fire sprinkler system to be set off causing substantial water damage.  The owner of the convention center sued the party.  The party argued the doctrine of avoidable consequences, i.e., that the convention center’s damages were caused by or exacerbated by its failure to shut down the sprinkler system as soon as reasonably possible; had the convention center done so, its damages would be much different.  This defense was a question of fact.  Remember, it is not a defense as to liability because the party did cause the sprinkler system to be set off.  Rather, it went directly to the amount of damages the plaintiff was seeking. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.