by Matt Long

The South Carolina House is considering a bill that has major consequences for South Carolina’s construction industry, whether it passes or not.

Earlier this year, the state Supreme Court ruled in Crossman Communities v. Harleysville Mutual that $16.8 million in water damage to some Myrtle Beach condominiums caused by “faulty workmanship” did not constitute an “occurrence.” As a result, the court said the contractor could not recover the damages he paid to his clients, although he believed he had purchased insurance to cover his claims.

That caused an uproar in the Senate, which passed legislation to clarify the law in March. Legislators feared the Court’s ruling would cripple South Carolina’s construction industry, since companies would hesitate to build without the full liability coverage.

Rep. Bill Sandifer talks about the changes (2:20)

However, a House committee is changing the legislation again. The Labor, Commerce, and Industry Committee voted Tuesday to require insurance companies to cover any damage that results from “faulty workmanship,” but not the bad construction itself. Chairman Bill Sandifer (R-Oconee) explained.

“If there is damage from poor workmanship, the damaged area is covered… However, the poor workmanship should not be covered. A contractor who does not do proper work should not be rewarded by paying him a second time to do the work.”

The committee based the change on previous case law. It was negotiated with help from the Haley Administration, through the state Department of Insurance. Sandifer said they tried to find a middle ground between developers, contractors, and insurers.

“We have to be cognizant of two things. Number one: we’ve got to make sure that whatever we passed did not run the insurance industry out of our state… Secondly, we had to make sure that we had a policy that was not unfairly weighted to either side.”

Sandifer said he and other representatives did not like the Senate version, as it improperly directed the Court (which is reconsidering the case) how to rule. The House version attempts to lay out what can and cannot be covered more specifically than the Senate.

Almost all legislators are in agreement that the Supreme Court made a mistake. Sandifer says construction companies will not build new projects if they don’t know whether their insurance will cover it or not.
Sandifer admitted the final bill was not perfect.

“Nobody gets everything. Everybody gets something… That’s what compromise is all about.”