NewsBreak! Articles > May 18, 2011

CAGC SUCCESS: SC GOVERNOR SIGNS LEGISLATION TO RESTORE CGL COVERAGE FOR CONTRACTORS

On May 17, less than four months after filing S. 431, legislation to address the S.C. Supreme Court (Court) ruling on Crossmann Communities vs. Harleysville Mutual (Crossmann), South Carolina Governor Nikki Haley signed the bill into law the minute it reached her desk.

On Jan 7, 2011, the Court issued a ruling in the Crossmann case that stripped contractors, homeowners, and developers of the Commercial General Liability (CGL) coverage our members, and others, have bought for many years to protect against claims and lawsuits that arise from allegations of defective construction. And, for many years, insurance companies have paid to defend construction companies in construction defect lawsuits and help pay the property owners to settle those lawsuits. Contractors have, for years, relied on this long-standing rule of insurance coverage to help them deal with this risk.

However, the Court, in the Crossmann case, reversed its position on this coverage issue and stated that construction defect claims were not covered under the insurance policies, reversing a position it had taken in 2005, 2008, and 2009. Thus, without the passage of S. 431, many companies would have been forced out of business, because they would not have had the available cash to take the place of insurance coverage to pay to defend the lawsuits and resolve the claims.

Carolinas AGC filed S. 431, and two other bills in the House, in mid January and championed the legislation through the Senate, the House, and to the Governors desk over the last four months. Several large insurance companies and associations were fighting the passage of the legislation at every turn, pulling out every procedural block possible to derail the legislation, but Carolinas AGC and our members, who overwhelmingly answered every call to action over the last four months, prevailed with the passage of legislation that restores the CGL coverage our members bargained for in good faith.

"The passage of this legislation was critical in maintaining the livelihood of our members and failing to pass it was not an option," said Leslie Hope, Dir., SC Government Relations & Divisions for Carolinas AGC. "We were up against a powerful insurance lobby, but with the help of our members, our friends in the leigslature, and Gov. Nikki Haley, we were sucessful," said Hope.

S. 431 required several procedural votes, which can be viewed here, but the ones that stand out the most are the 41-2 vote for passage in the Senate and the 104-0 vote for passage in the House. Thanks to Sens. Glenn McConnell, Luke Rankin, Nikki Setzler, and Reps. Herbkersman, Kenny Bingham, and Speaker Bobby Harrell, our members can breathe a little easier knowing the legislation restores the coverage they have bought and paid for and that the legislation is retroactive, which means it also covers projects our members have built over the last 9-13 years, under the statute of repose laws.

CAGC member Allen Amsler, president and CEO of McCrory Construction commented, "We have seen a lot of legislation with substantial impact to our business over the years. However, I would place this in the same level of importance with the original tort reform legislation. The effects of the Supreme Court's ruling could have been catastrophic to our industry in South Carolina had it not been for this bill. Thanks to all those in the House, Senate and the Governor's office who assisted us."

What next? It was imperative that this legislation be passed and the bill signed by the Governor prior to a scheduled re-hearing by the Court on May 23. With this legislation in hand, the attorneys will be addressing the Court at that hearing on Monday. Now, we sit back and see how the Court will respond to what the legislature has passed.