AGC intends to include “sureties” as part of the Chapter 558 statutory cure process in Florida. While some may view the benefits of an additional statutory notice requirement, the proposed amendment may require sureties to take action under Chapter 558 without any legal obligation to act under its performance bond.
Associated General Contractors of America (“AGC”) is actively seeking to amend Chapter 558, Florida Statutes, which provides a statutory cure notice before construction claims may be filed in court. If passed, House Bill 87 will require, among other things, that the “insurer” of contractors, subcontractors, suppliers and design professionals be notified of and, arguably, take part in the Chapter 558 process. House Bill 87 was introduced on December 9, 2014, and the Florida Legislature committee meetings are being held in January and February 2015.
It is not clear whether the AGC intended to include “sureties” as part of the Chapter 558 process; however, as a “surety” is included in the definition of an “insurer” under Florida’s Insurance Code, we can anticipate that Florida’s construction bar will argue that sureties are required to participate in the Chapter 558 process, even in the absence of a proper performance bond claim. Although it depends upon the circumstances, many sureties in Florida take the position that they are not required to participate in the Chapter 558 process until and unless the obligee satisfies the conditions precedent under the bond (i.e. declaration of default, termination, and/or other requirements). While some may view the benefits of the additional statutory notice requirement, please keep in mind that the proposed amendment may require sureties to take action under the Chapter 558 process without any legal obligation to act under its performance bond.
Due to our pro-active involvement, both Surety and Fidelity Association of America (“SFAA”) and Florida Surety Association are now actively monitoring the proposed legislation. It is our understanding that the SFAA and Florida lobbyist(s) for the surety industry have been in contact with the AGC to discuss the ramifications of and proposed clarifying amendment to House Bill 87 to either exclude or limit the sureties’ involvement in the Chapter 558 process. Stay tuned for more information about this important topic.
Additional information about the proposed House Bill 87, including the text of the proposed amendment, can be viewed on the Florida State Senate site.