NU Online News Service, April 1, 1:43 p.m. EDT
A South Carolina bill that would define an "occurrence" in construction general liability insurance contracts in a way opposed by the insurance industry passed the Senate, and an insurer group is seeking to delay action in the House until the courts weigh in again.
The bill (S 431) states that the relevant laws will be amended "so as to provide that a liability insurance policy issued by an insurer and covering a construction professional in this state must be broadly construed in favor of coverage, and to provide that work of a construction professional resulting in property damage in certain circumstances constitutes an occurrence as commonly defined in liability insurance and is not the intended or expected consequence of the work of the construction professional."
Insurers groups say the legislation would reverse a Jan. 7 South Carolina Supreme Court decision, Crossmann Communities of North Carolina v. Harleysville Mutual Ins. Co., which held that property damage as a result of faulty workmanship by a contractor or subcontractor is not an occurrence under a standard commercial general liability policy.
A Property Casualty Insurers Association of America (PCI) statement says courts in 26 other states all have reached a similar conclusion as the South Carolina Supreme Court.
PCI is asking the South Carolina House of Representatives to delay any action on the bill pending a rehearing in the courts. PCI says Crossmann, the appellant in the case, filed a Petition for Rehearing, which was granted on March 9. The court has scheduled oral arguments for May 23, PCI says.
In a previous interview, Thomas C. Salane, South Carolina counsel for the American Insurance Association (AIA), said the original court ruling was correct because the policies in question define "accident" as an occurrence and should not respond to shoddy workmanship unless it results in an accident.
Ray Farmer, AIA Southeast region vice president, says in a statement, "This bill aims to provide insurance coverage that CGL policies are simply not meant to cover. CGL policies were never meant to cover faulty workmanship by the contractor."
He adds, "AIA will continue to oppose this bill as it heads to the House for consideration. The bill's supplementary and erroneous liability provisions will only serve to unnecessarily impact construction costs in South Carolina."
Micaela Isler, Southeast regional manager for PCI, said in a previous interview that the legislature reversing the court's decision would set "a bad precedent for the business community in South Carolina," because it could be interpreted as not having a stable judicial environment. Contracts, and courts' opinions on them, could be construed as worthless if the legislature attempts a "one size fits all" approach to all contracts.
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