Construction Defect and Contractor Liability in Florida

Florida contractors and developers face personal asset exposure from two directions: defective work claims that outlast insurance coverage, and personal guarantees on financing and bonds that bypass entity protection entirely. Construction defect lawsuits can surface years after project completion. The insurance structures that contractors rely on contain exclusions that leave large portions of these claims uninsured.

A contractor whose personal assets exceed Florida’s statutory exemptions needs to understand where the liability comes from, what insurance will and will not cover, and which assets are reachable after a judgment.

How Construction Claims Create Personal Liability

Construction defect claims in Florida arise under breach of contract, breach of implied warranty, negligence, and Building Code violations (§ 553.84). A single project can produce all four claims at once, each with different damage measures.

A construction defect claim must be filed within four years. For a defect the owner can see, the clock starts when the building is finished, not when the problem is noticed. Section 95.11(3)(b) picks whichever comes first among a temporary certificate of occupancy, a full certificate of occupancy, a certificate of completion, and abandonment. For latent defects that are not immediately visible, the four-year clock starts when the defect is discovered or reasonably should have been discovered.

SB 360, signed in April 2023, shortened the absolute deadline. Florida’s construction statute of repose dropped from ten years to seven. Once the repose period expires, no claim can be filed regardless of when the defect surfaced.

The seven-year repose window means a contractor who completes a project today faces potential claims through 2033. For contractors who complete multiple projects each year, overlapping repose periods create a continuous exposure window that never fully closes during active years.

Florida’s Chapter 558, the Right to Repair Act, requires property owners to provide pre-suit notice before filing a construction defect lawsuit. The contractor then has an opportunity to inspect the defect and offer repairs. This process gives contractors time to respond, but it does not eliminate liability. If the repair offer is rejected or inadequate, the owner proceeds to litigation.

Jobsite Injury Claims

Construction defect is the property damage side. The injury side is separate and often larger. When someone is injured on a construction site, the general contractor faces premises liability and negligence claims. Workers’ compensation covers the contractor’s own employees. A contractor who sublets part of its own contract work also has to cover the subcontractor’s employees, unless that subcontractor secured that coverage itself. Neither rule protects the contractor from a claim by an injured member of the public.

A crane collapse, scaffolding failure, or trench cave-in can produce wrongful death or catastrophic injury verdicts that dwarf the typical defect claim. These cases involve the same insurance and asset exposure analysis as other injury claims, with more at stake because construction work is inherently dangerous.

Insurance Exclusions That Leave Contractors Exposed

Commercial general liability insurance is the foundation of every contractor’s risk management. CGL policies cover bodily injury and property damage caused by the contractor’s operations, both during construction and after project completion. But CGL policies contain exclusions that create serious uninsured exposure in construction defect cases.

The “Your Work” Exclusion

CGL Exclusion L eliminates coverage for property damage to the insured’s own completed work. The insurer’s position is that CGL is a liability policy, not a warranty on workmanship. If a contractor self-performs roofing work and the roof leaks two years later, the CGL policy will not cover the cost of replacing the defective roof.

General contractors rely on the subcontractor exception. When the policy includes this exception, the “your work” exclusion does not apply to damage arising from work performed by subcontractors. A general contractor whose subcontractor installed a defective roof may have CGL coverage for the resulting property damage. Without the subcontractor exception, the exclusion eliminates coverage for all completed-operations defect claims.

Self-performing contractors who do not subcontract the defective work have no exception to invoke. The “your work” exclusion applies in full, leaving the contractor personally responsible for damages to the completed project.

Endorsement CG 22 94 is the trap that many contractors miss. This standard endorsement eliminates the subcontractor exception entirely. When a CGL policy includes CG 22 94, property damage to the contractor’s completed work is excluded even when a subcontractor caused the defect. Insurers add this endorsement to shift defective-work risk back to the contractor. Contractors who do not read the endorsement schedule on their policy may not realize they lost the exception until a claim is denied.

The “Expected or Intended” Exclusion

CGL policies exclude bodily injury or property damage that is expected or intended from the standpoint of the insured. If a contractor knowingly cuts corners on structural work to save costs, and the resulting defect was foreseeable, the insurer may deny coverage on the grounds that the damage was expected. This exclusion is fact-intensive and heavily litigated, but a contractor who cut corners on purpose can lose coverage under it.

The Professional Services Exclusion in Design-Build Work

Contractors performing design-build work face an additional exclusion. CGL policies typically exclude claims arising from professional services, including design, engineering, and project management. When a contractor value-engineers a building system and the redesign fails, the contractor needs professional liability coverage, not CGL. Many contractors do not carry separate professional liability policies, leaving design-related defect claims entirely uninsured.

Personal Guarantees and Surety Bond Indemnity

Insurance exclusions create uninsured liability for defect claims. Personal guarantees create a separate category of personal exposure that has nothing to do with construction defects.

Personal Guarantees

Contractors routinely sign personal guarantees to obtain equipment financing, lines of credit, material supply accounts, and project loans. A general contractor operating through an LLC has entity-level protection against the LLC’s contractual obligations, but a personal guarantee makes the contractor individually liable for the debt regardless of the entity structure.

A contractor who guarantees a $500,000 equipment lease and a $1 million line of credit has $1.5 million in contingent personal liability that no amount of LLC structuring can eliminate. When the business fails or a project collapses, the lender pursues the personal guarantee directly against the contractor’s personal assets.

Surety Bond Indemnity

Performance and payment bonds are standard requirements on public projects and many private commercial projects. The surety company that issues the bond requires the contractor’s principals to sign a general indemnity agreement. That agreement gives the surety the right to seek reimbursement from the individual owners if the surety pays a claim under the bond.

Surety bond indemnity creates personal liability that mirrors a personal guarantee but is less visible to most contractors. The indemnity obligation is joint and several, so the surety can pursue any individual signer for the full amount. A contractor whose company defaults on a bonded project faces personal liability to the surety for the entire cost of completing the project or paying the bond claim.

What a Construction Judgment Can Reach in Florida

A construction defect claim, a personal guarantee, and a surety indemnity claim all produce civil money judgments. The creditor can use Florida’s post-judgment collection tools to reach the contractor’s personal assets.

Protected Assets

Florida’s homestead exemption protects the contractor’s primary residence. The exemption has no dollar limit and covers up to half an acre in a municipality or 160 acres in an unincorporated area. A construction judgment creditor cannot force the sale of the homestead.

Qualified retirement accounts are exempt from creditor claims under ERISA and Florida law. The contractor’s 401(k), SEP-IRA, or defined benefit plan remains protected. Life insurance cash values and annuity proceeds are exempt under § 222.14. Tenancy by the entirety protects jointly held marital assets when only one spouse is the judgment debtor.

Exposed Assets

Non-exempt assets are reachable through standard post-judgment collection. For contractors and developers, the exposed categories often include:

• Bank accounts holding project draws and operating cash
• Investment properties and undeveloped land
• Non-retirement brokerage accounts
• Equipment owned personally rather than through an entity
• Vehicles beyond the $5,000 motor vehicle exemption

Developers face additional exposure because their personal net worth is often concentrated in real estate holdings. A developer with ten investment properties and $3 million in equity has substantial assets that Florida’s exemption structure does not protect.

Asset Protection Planning for Contractors and Developers

Construction liability is perpetual for active contractors. Every new project restarts the seven-year repose clock. Combined with personal guarantee exposure and surety indemnity obligations, a contractor’s aggregate liability grows with every project, every lease, and every bond.

Entity Structure

Holding each project in a separate single-member LLC or multi-member LLC isolates project-level liability. A defect claim against one project entity is that entity’s debt, and the contractor does not owe it merely by owning or managing the company. An owner still answers personally for the work he did and for any obligation he signed.

The entity structure fails when the contractor personally guarantees the entity’s obligations. Every personal guarantee punches through the LLC’s protection for that specific debt.

A single-member LLC in Florida loses the exclusivity of charging order protection but still gets the charging order itself. A creditor who convinces the court that charging order payments will take too long to pay off the judgment can ask under § 605.0503(4) for a forced sale of the interest. At that sale the buyer takes over the membership outright, and the judgment debtor is no longer part of the company. Multi-member LLCs are protected from that sale by subsection (6). Contractors holding investment properties or equipment should consider multi-member structures.

Maximizing Exempt Assets

Contractors can reduce exposed wealth by moving cash into exempt assets. Paying down a homestead mortgage converts non-exempt cash into exempt home equity. Funding retirement accounts to the annual contribution limit shifts cash into a category most judgment creditors cannot touch. That move carries a risk the homestead paydown does not. Under § 222.30 a creditor can attack a shift into an exempt asset made with intent to hinder, delay, or defraud him. He can then levy on what the money bought. Florida homestead sits outside that section, because its exemption is constitutional.

Offshore Planning for Liquid Assets

Some contractors and developers hold more non-exempt liquid assets than domestic exemptions can protect. They face the same analysis as any high-net-worth defendant. Funding an offshore trust puts the assets in a foreign trustee’s name, and a U.S. judgment does not by itself compel that trustee to hand them over.

Cook Islands trusts are the preferred offshore choice, because the islands carry the longest litigation record, the most developed trust case law, and a trustee market built around this work. Where the islands’ own trust statute governs, their courts do not act on a U.S. judgment, and the creditor must sue anew under Cook Islands law. A creditor who attacks the trust there has to prove its fraudulent purpose beyond a reasonable doubt. The practical effect is that most creditors negotiate a settlement rather than pursue enforcement in a foreign jurisdiction.

An active contractor always has some background exposure from open repose periods and outstanding guarantees. That background exposure does not prevent planning. Fraudulent transfer exposure turns on more than timing. Section 726.105 reaches a transfer whether the claim came before it or after. One route needs actual intent to hinder, delay, or defraud a creditor, and a suit already filed or threatened is one badge of it. The other needs no intent but does need a transfer for less than fair value.

Cook Islands trusts can be established during active litigation. The trust deed includes a Jones clause authorizing the trustee to pay the specific existing creditor under defined conditions. Post-claim planning carries higher contempt risk and a weaker negotiating position, but the settlement pressure still applies.

Construction liability touches every category of exposure that Florida’s asset protection laws address: tort claims, contract claims, personal guarantees, and surety obligations.