South Carolina Finds Distinction Between Known and Latent Defects in finding for an Insurer


A United States District Court, interpreting South Carolina law, has found for Builders Mutual in a case where the insurer sought a declaration of no coverage in a construction defect case. This matter involved an insured (R Design) and its subcontractor’s failure to correct defects that were visible during construction.
R Design was the Prime, or General Contractor for the construction of a multi-family project. The framing subcontractor’s work was determined to be defective during construction and, thus, necessitated repair. The framer quit at some point thereafter. The framing work was not corrected or made suitable.
At some point after the framer’s departure, R Design left the job as well. According to information provided and gleaned from the opinion, R Design was not finished with its work at the time it left.
The owner sued R Design and the framing subcontractor for the cost to repair framing related issues. Judgment was entered in favor of the owner against R Design for repairs. Prior to rendering judgment, the trial court determined that there was resulting damage due to the defective work of R Design’s framing subcontractor. It was determined that the deficient work product of the framer caused the floors to sag, a symptom which was not noticed until after the departure of both R Design, as well as the framer.
R Design’s CGL insurer, Builders Mutual, took issue with coverage and filed this action in US District Court. The federal district trial court entered summary judgment in favor the Builders Mutual, holding that there was no “property damage” caused by an “occurrence.” The court determined that since the damage which was the subject matter of the suit was discovered by R Design prior to R Design’s departure, it was not an occurrence since R Design had an opportunity to cure the defective framing while contractor of record.
“Numerous defects were discovered early in the construction process and could have been corrected before the project was completed. [R Design] knew that [Catterson’s framing] did not comply with the plans, and should have known that if left uncorrected, damage could occur. There was nothing accidental or unexpected about what happened to other parts of the structure.”
The author would like to make the following editorial comment. This case is distinguishable from the line of cases which have recently dealt with coverage for a subcontractor’s defective work in South Carolina as the subject matter of the R Design case involved defects which were non-latent. The general contractor had notice of the defects prior to withdrawing from the job which made this a non occurrence in that it the framing issues could not be construed as unexpected.

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