NU Online News Service, Feb. 10, 2:29 p.m.EST

Insurance groups are opposing a bill under consideration inSouth Carolina that would reverse a recent court ruling on what isconsidered an "occurrence" in construction general liabilityinsurance contracts.

The bill, S 431, which was passed out of the Senate Insuranceand Banking Committee and will be considered by the entire Senatesoon, states that the relevant laws will be amended "so as toprovide that a liability insurance policy issued by an insurer andcovering a construction professional in this state must be broadlyconstrued in favor of coverage, and to provide that work of aconstruction professional resulting in property damage in certaincircumstances constitutes an occurrence as commonly defined inliability insurance and is not the intended or expected consequenceof the work of the construction professional."

Micaela Isler, Southeast regional manager for the PropertyCasualty Insurers Association of America, said the legislationessentially reverses a Jan. 7 South Carolina Supreme Courtdecision, Crossmann Communities of North Carolina v. HarleysvilleMutual Ins. Co., which held that property damage as a result offaulty workmanship by a contractor or subcontractor is not anoccurrence under a standard commercial general liabilitypolicy.

Thomas C. Salane, South Carolina counsel for the AmericanInsurance Association (AIA) said the ruling was correct because thepolicies in question define "accident" as an occurrence and shouldnot respond to shoddy workmanship unless it results in anaccident.

He said there has been a lot of confusion over how to applyoccurrence CGL policies to contractors. Contractors, he explained,maintain that shoddy work is accident because they don't attempt todo shoddy work, especially if it is done by theirsubcontractors.

Ms. Isler said she believes the legislature reversing thecourt's decision "sets a bad precedent for the business communityin South Carolina," because it could be interpreted as not having astable judicial environment. Contracts, and courts' opinions onthem, could be construed as worthless if the legislature attempts a"one size fits all" to all contracts, Ms. Isler said.

In a statement, Mr. Salane said, "AIA opposes thislegislation because it aims to provide coverage that these policiessimply aren't meant to cover. The majority of statejurisdictions are in alignment with the South Carolina Crossmandecision and this legislation will put our state's contractors at adisadvantage."

Speaking to unintended consequences the bill may have, Mr.Salane said some insurers may choose not to write contractors on aCGL basis, or could write them at a higher premium or become veryselective in who they write. This would be due to the significantlygreater risks in policies, he said. 

He also noted that the bill does not clearly define who isconsidered a "construction professional.'

The bill is sponsored by Senate President Pro Tempore Glenn F.McConnell, R-Charlston.