Allocation of Liability Among Insurers in South Carolina: The Legacy of Crossman

The Court has spoken on Crossman, once again, this time deciding that………………………..Auto Owners II is still the prevailing measure of an “occurrence” and the January opinion which was discussed in detail is no longer relevant as to the “occurrence ” discussion.  There was some significant law to be made, however, as South Carolina’s Supreme Court relied on Keene Corporation v. Insurance Company of North America, 667 F.2d 1034 (D.C. Cir. 1981) to justify the revocation of joint and several treatment.

South Carolina has decided to deviate from precedent, once again, overruling the famous Century Indemnity opinion which placed a multiple progressive stream of insurers jointly and severally liable for damages alleged in a “continuous trigger” environment.  Construction defect cases thrive on legal fiction such as that which was advanced by the Joe Harden case immediately preceding Century Indemnity.  There are other theories of apportionment, of course, and the court has now decided that allocation among the insuring parties on a “pro-rata” basis is the proper method.

The approach taken by the court actually seeks to make each insurer liable for its portion of the damage occurring during the policy year.  Therefore, each insurer is liable for the actual damages that occurred during its policy period, and nothing more or less. Since the exact measure of damages is not provable in most progressive damages cases, each insurer will typically be required to cover a portion of the insured’s liability directly proportionate to the length of that insurer’s policy in relation to the total period over which damages occurred.

“We overrule Century Indemnity and impose a “time on risk” approach to defining the scope of each CGL insurer’s obligation to its insured in a progressive damage case.  This equitable approach best harmonizes with policy language limiting coverage to the “policy period.”  Moreover, the “time on risk” framework lends itself to a logical default formula that is easily applied when the actual quantum of damage incurred during each policy period is not known. “


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