Case Briefs

The South Carolina Supreme Court has withdrawn its prior decision in Crossmann Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co., No. 26909, 2011 WL 93716 (S.C. Jan. 7, 2011), issuing a new opinion concluding that negligent or defective construction resulting in damage to otherwise non-defective components may constitute “property damage,” and thus, an “occurrence” under a commercial general liability policy. Crossmann Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co., No. 26909 (S.C. Aug. 22, 2011). The court also held that a pro rata allocation was appropriate under South Carolina law, and in so doing, overruled its previous decision in Century Indemnity Co. v. Golden Hills Builders, Inc., 348 S.C. 559, 561 S.E.2d 355 (2002).

The policyholder, a condominium developer, negligently constructed certain condominiums, resulting in water penetration and progressive damage to otherwise non-defective components of the condominiums. The policyholder sought coverage for damages arising out of the lawsuit, and the insurer denied coverage. The policyholder then filed a declaratory judgment action against the insurer to determine coverage. The trial court determined that the homeowners' lawsuit was covered under the policy, finding that the progressive damage “that resulted from, and was in addition to, the subcontractors' negligent work itself” was caused by an “occurrence.” In addition, the trial court held that the insurer was jointly and severally liable and was not entitled to a set-off based on the settlements of other insurers. The insurer appealed the court's decision, and the Supreme Court of South Carolina initially held that there was no coverage. The policyholder filed a petition for rehearing, which the Supreme Court granted.