Decision tackles progressive property damage under successive carriers
We’ve posted several articles about the South Carolina Supreme Court’s terrible decision in Crossmann v. Harleysville and the resulting involvement of the South Carolina Legislature in enacting a statute to overturn this decision. Now, the South Carolina Supreme Court has come to its senses, rendering a new decision effective August 22, 2011 and overturning its prior opinion. Therefore, the Newman vs. Auto Owners case still stands and contractor General Liability carriers can no longer use the no occurrence claim denial strategy, which is positive for builders.
However, the new Crossmann decision expands the scope of its prior decision by overturning Century Indemnity to delve into the sharing of liability between successive insurance carriers in progressive property damage situations. First, the court upheld the “modified continuous trigger theory” under Joe Hardin where the period of damage was defined as the term in which the actual injuries occurred. Next, the court turned its attention to Century Indemnity.
Under Century Indemnity, liability among successive general liability insurers in progressive property damage situations was determined by a “joint and several” approach where each carrier was responsible for full indemnity for all damages. Crossmann reasoned that the “joint and several” approach under Century Indemnity allowed policyholders to take advantage of the system by choosing a single carrier with the broadest coverage form and by allowing coverage for periods of policy lapse. On the other hand, the approach adopted by Crossmann, the pro rata allocation method, corrects these abuses by assigning each triggered insurer a pro rata portion of the loss based on that insurer’s time on the risk.
Furthermore, Crossmann provides a basic formula for estimating time on the risk with a numerator that represents the number of years that an insurer provided coverage and a denominator that represents the total number of years during which the damage progressed. This fraction is multiplied by the total policyholder liability to the injured party in a progressive property damage situation to determine the liability of any carrier. This formula results in the fair allocation between the respective insurance carriers based on their proportionate time on the risk.
Overall, the new Crossmann decision is a victory for builders due to the defeat of the no occurrence claim denial strategy. However, even the court now points out in the footnotes that carriers have the right to use various exclusions (ex: CG 2294) to escape responsibility for covering construction defect claims. The overturning of Century Indemnity does represent a minor defeat for builders, since they are now out of pocket during periods where a carrier has an exclusion that applies or where there has been a lapse of coverage. But, this decision at least is consistent with the intent of the drafters of the General Liability policy form.
See the Crossmann Decision