SC Supreme Court Stikes Again

The South Carolina Supreme Court has made a few disturbing rulings over the past several years that have been detrimental to small businesses in the construction industry. Here is an alert just received from the American Subcontractors Association of the Carolinas. If you think your Comprehensive General Liability Insurance protects you from damages due to faulty installation, you could be wrong.

For your Information:

The SC Supreme Court recently rendered a decision with Crossmann Communities vs. Harleyville that will have a major impact on general liability insurance coverage.

At issue in this case was whether a typical Commercial General Liability insurance policy provides insurance coverage for damages arising from faulty workmanship or defective construction. The SC Supreme Court held that any damages which are the “natural and probable” result of faulty or defective workmanship are NOT covered by CGL Policy. Applying that holding to the CGL policy in the Crossmann Communities case, the SC Supreme Court held that damages relating to water intrusion, which occurred because of improperly installed siding, are not covered by insurance since water intrusion is a natural and probable result of faulty or defective siding work. This is true whether or not the developer or contractor or subcontractor was aware of the faulty work or the actual water intrusion.

This decision very likely will have a major impact on your business, and your exposure to risk, since it applies to all similar CGL policies and applies whether the faulty or defective work is done now, in the future, and even in the past. In other words, if you, or a contractor or subcontractor you employed, performed faulty or defective work, you are not covered by a typical CGL policy for the “natural and probable” damages caused by that work, whatever those damages may be (this opinion is not limited to cases involving water intrusion). Obviously, as you seek new work, you should be aware that, in light of Crossmann Communities, you may not have any coverage for damages caused by faulty or defective work performed by you or someone you employ. You should also expect owners who are knowledgeable about the Crossmann Communities case to want to discuss their recourse in the event of building problems, now or in the future. Note: This summary was provided by the CTHBA Watchdog Report.
ASAC, in conjunction with the MCASC, is filing an Amicus Brief in Crossmann Communities case.
 
What this means is if you are a subcontractor, you better make sure your job is properly installed or you could be paying the damages, your insurance won't protect you. For a general contractor or owner, you better make sure your contractors are well financed as their insurance policy you made them furnish you may not protect you.