Florida Construction Liens: Insurance Proceeds and Construction Liens

When an improvement covered by property damage insurance is damaged or destroyed and the owner, contractor, or subcontractor is paid for the destroyed improvement, the person or entity receiving the insurance proceeds holds those funds in trust for the lienors holding liens related to the destroyed or damaged improvement. The named insured who receives the policy proceeds is considered a trustee of the policy proceeds and such funds are deemed trust funds for the purposes of Fla. Stat. § 713.32 for one year from the date of receipt. Holders of liens perfected before the recording of a notice of commencement are specifically excluded from liability under this provision of Florida’s Construction Lien law.

While the provisions of Florida’s construction lien law relating to insurance proceeds are somewhat obscure, these provisions have seldom been litigated. As such, to the extent that an owner, contractor or subcontractor receives insurance proceeds that may be considered trust fund under this provision, caution should be taken with regard to use or distribution of the trust funds.

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com.