- CROSSMANN SIGNED (Click for Signed PDF of Legislation)
We have not covered the Crossman decision with as much vigor as one might expect here at the South Carolina Construction Defect Blog. This decision has been widely reported across state lines and, to many, it represented one of the most significant court decisions affecting the construction industry and Commercial General Liability policies of insurance. http://www.judicial.state.sc.us/opinions/advSheets/no12011.pdf The question presented in Crossman sought to address an issue we thought to be fully decided. Specifically, when faulty workmanship directly causes further damage to non-defective materials or areas of an insured’s project (non “your work”) (work of others), is this an occurrence. Moreover, in a situation where the faulty work of a contractor causes damage to the work or materials of another trade, is the first prong (“occurrence”) of an insuring agreement satisfied such that the second prong (“Property Damage or Bodily Injury”) may be considered. The Crossman decision was a deviation from “occurrence friendly” decisions in South Carolina (“Auto Owners v. Newman”) and other states (“ Lamar Homes v. Mid-Continent Cas. Co., 242 S.W.3d 1, 8 (Tex. 2007). In Auto Owners v. Newman, the court followed the Lamar Homes logic which reasoned that faulty work is not “intentional”, and must be an accident which, therefore, constitutes an occurrence.
Most construction lawyers thought defective work and the damage caused to the work product of others was a moot point. Crossman surprised some, while shocking many into action as the decision appeared to come out of left field.
At the beginning of this week, the South Carolina general assembly (legislature), in conjunction with Governor Haley, enacted a bill which effectively seeks to take the interpretation(s) of insurance coverage away from the courts.
Officially, Section 38-61-70 defines “Commercial General Liability” policies of insurance as these relate to construction professionals. Actually, the law does everything but define an “occurrence”, as it places the burden on the draftor of such policy to define an occurrence so that the purchaser and underwriter know the limits and scope of a policy. While the legislation is a victory for contractors facing defect suits, one could argue that it is a victory for all in that it seeks to end the speculation created by constant waffling over the limits of insurance coverage pertaining to contractors in South Carolina.
Further details state that the term “occurrence” must be either defined or, if not, deemed defined as follows:
(1) an accident, including continuous or repeated exposure to substantially the same general harmful conditions; and
(2) property damage or bodily injury resulting from faulty workmanship, exclusive of the faulty workmanship itself.
Quite possibly the most significant aspect of the bill allows for retroactivity. “”This act takes effect upon approval by the Governor and applies to any pending or future dispute over coverage that would otherwise be affected by this section as to commercial general liability insurance policies issued in the past, currently in existence, or issued in the future.”