South Carolina “occurrence” and allocation

In Crossman Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co., No. 26909 (S.C. Aug. 22, 2011), insured Crossman was the developer and general contractor of several condominium projects constructed by Crossman’s subcontractors over multiple years. After completion, Crossman was sued by homeowners alleging negligent construction of exterior components resulting in moisture penetration property damage to non-defective components occurring during multiple years.  Crossman settled the underlying lawsuit and then filed suit against its CGL insurers to recover the settlement amount.  Crossman settled with all of the insurers except for Harleysville.  Crossman and Harleysville stipulated that the only coverage issue was whether there was an “occurrence.”  The trial court subsequently entered judgment in favor of Crossman, determining that there was an “occurrence.” The trial court also ruled that Harleysville was liable for the entire settlement amount without offset for the amounts paid by the other insurers.   On appeal, the Supreme Court of South Carolina affirmed the determination of coverage but reversed as to the amount allocated to Harleysville.    The court first held that, while negligent or defective construction does not constitute “property damage,” physical injury to non-defective components resulting from negligent or defective construction constitutes “property damage” caused by an “occurrence.”  The court expressly states that, pursuant to the parties’ stipulation, it does not address whether any of the “property damage” falls within any exclusions.  The court then held that, while an injury in fact continuous trigger applies, those policies that are triggered are only liable for those damages attributable to the property damage that occurred during the policy period.  Specifically, the court held that:

the proper method for allocating damages in a progressive property damage case is to assign each triggered insurer a pro rata portion of the loss based on that insurer’s time on the risk.

In so holding, the court expressly overruled its prior decision in Century Indemnity. Co. v. Golden Hills Builders, Inc., 561 S.E.2d 355 (S.C. 2002).    The court also states that the insured would be responsible for amounts for property damage occurring during an uninsured period as well as for amounts in excess of the available limits for any insured periods.  The court remanded to the trial court for a determination of the time on risk allocation to the Harleysville policy.