Yesterday, South Carolina joined Colorado and Arkansas as the third state in the nation to pass pro-policyholder legislation aimed at combating restrictive interpretations of what constitutes an “occurrence” under standard CGL policies.  The bill, which will be codified as S.C. CODE ANN. § 38-61-70, was introduced earlier this year a mere two weeks after the decision in Crossman Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co., No. 26909, 2011 W.L. 93716 (S.C. Jan. 7, 2011) was handed down by the state Supreme Court.

The Crossman decision represented a change in course for the South Carolina Supreme Court, which only a year prior had ruled that defective construction was an “occurrence” under standard CGL policies.  The court ruled that damages resulting from faulty workmanship were the “natural and probable cause” of the faulty work and, as such, did not qualify as an “occurrence.”  

In response to this judicial pronouncement, the Senate introduced a bill, which was signed by the Governor on May 17, 2011, setting forth a definition of “occurrence” that is more in line with policyholder expectations.  The statute provides:

                Commercial general liability insurance policies shall contain or be deemed
                to contain a definition of “occurrence” that includes:

                    (1)    an accident, including continuous or repeated exposure to substantially
                            the same general harmful conditions; and

                    (2)  property damage or bodily injury resulting from faulty workmanship,                           exclusive of the faulty workmanship itself.

(emphasis added).  As such, the statute makes clear that any damages flowing from faulty workmanship constitutes a covered “occurrence” under standard CGL policies.  The statute took effect immediately upon the Governor’s signing, and will apply to any pending or future coverage dispute.

For full text of the statutes and bills discussed herein, click here.