NU Online News Service, Feb. 10, 2:29 p.m. EST
Insurance groups are opposing a bill under consideration in South Carolina that would reverse a recent court ruling on what is considered an “occurrence” in construction general liability insurance contracts.
The bill, S 431, which was passed out of the Senate Insurance and Banking Committee and will be considered by the entire Senate soon, 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.”
Micaela Isler, Southeast regional manager for the Property Casualty Insurers Association of America, said the legislation essentially reverses 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.
Thomas C. Salane, South Carolina counsel for the American Insurance Association (AIA) said the 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.
He said there has been a lot of confusion over how to apply occurrence CGL policies to contractors. Contractors, he explained, maintain that shoddy work is accident because they don’t attempt to do shoddy work, especially if it is done by their subcontractors.
Ms. Isler said she believes the legislature reversing the court’s decision “sets 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” to all contracts, Ms. Isler said.
In a statement, Mr. Salane said, “AIA opposes this legislation because it aims to provide coverage that these policies simply aren’t meant to cover. The majority of state jurisdictions are in alignment with the South Carolina Crossman decision and this legislation will put our state’s contractors at a disadvantage.”
Speaking to unintended consequences the bill may have, Mr. Salane said some insurers may choose not to write contractors on a CGL basis, or could write them at a higher premium or become very selective in who they write. This would be due to the significantly greater risks in policies, he said.
He also noted that the bill does not clearly define who is considered a “construction professional.’
The bill is sponsored by Senate President Pro Tempore Glenn F. McConnell, R-Charlston.