South Carolina Construction Defect Bill
AIA Testifies against South Carolina construction defect bill
Willem Rijksen
April 14, 2011
The American Insurance Association (AIA) today testified against construction defect legislation, S. 431, before the Committee on Labor, Commerce and Industry in the South Carolina House. The legislation, which passed the Senate on March 31, aims to reverse the recent unanimous South Carolina Supreme Court decision in Crossmann Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co. The Crossman decision concluded that a developer’s Commercial General Liability (CGL) insurance policy did not provide coverage for the costs of repairing or replacing the contractor’s faulty work.
“AIA opposes this legislation because it adds supplementary and erroneous liability provisions to CGL policies,” said Thom Salane, AIA’s South Carolina counsel. “CGL policies are meant to cover accidents, not shoddy work. The committee should reject this bill rather than unnecessarily impact construction costs in South Carolina.”
S. 431 effectively reads the word “accident” out of the definition of “occurrence” in the standard CGL policy form. The bill also applies a new statutory coverage term to retroactively resolve disputes on insurance contracts issued prior to the bill’s enactment.
“The retroactive nature of this bill is unacceptable. Insurers never contemplated this type of additional coverage when their current contracts were written,” said Salane. “Twenty-six other states have correctly concluded that the faulty workmanship of a contractor should not be covered by CGL policies. AIA hopes that South Carolina will maintain its current position.”
A petition for rehearing, filed by the appellant in Crossman, was granted on March 9, 2011. Oral arguments are scheduled to be heard before the South Carolina Supreme Court on May 23.
“The South Carolina Legislature should wait for the final outcome in the Crossman case before acting on this bill,” concluded Salane.
http://www.aiadc.org/aiadotnet/docHandler.aspx?DocID=342621