Defect suits push Florida builder insurance to 7% of project cost

Owner-controlled and contractor-controlled insurance policies in South Florida have risen from 1% to 2% of project costs to 7%, and the engineers and architects carrying that exposure are now asking Tallahassee for relief. For any developer pricing a South Florida condo tower, that is a cost line that has moved by roughly five points of total project cost.

Why it matters

Seven percent of hard and soft costs is no longer a rounding error inside a contingency. On a $200 million tower it is the difference between a deal and a pass, and it lands before a single defect claim is proven. The pressure traces to Chapter 558 of the Florida Statutes, which lets condominium associations inspect new buildings for defects and demand repairs through a prelawsuit process. Design professionals argue the process routes almost everything toward litigation, which prices their coverage, which prices the job.

“It’s this cycle, which makes it impossible to have insurance,” said Sherri Gutierrez, a principal at Arquitectonica.

The second-order effect is a narrowing bench. When engineering and architecture firms cannot obtain affordable coverage, they decline South Florida condo work, and the developer’s options shrink to the firms that can absorb the premium.

The numbers

The insurance shift is from 1% to 2% of project costs to 7%, per figures cited at a Bisnow South Florida event. The case most often referenced is Aston Martin Residences, the 341-unit, 66-story tower completed in 2024, whose association has sued its developer along with 16 contractors and subcontractors, including DeSimone Consulting Engineering.

The exposure is growing rather than shrinking. Our own reading of Census building permit data puts South Florida authorizations up 37.1% on a trailing-12-month basis, at roughly 1,860 units a month, which means more product entering the same liability pipeline.

What’s next

The ask is specific: a regulatory board to screen Chapter 558 complaints before they become lawsuits, pursued through the legislature and the Florida Bar. Nothing has been filed. Until it is, underwrite the 7% and watch which design firms will still sign. Follow the cost story on our South Florida hub.