Aia opposes south carolina construction defect legislation

[mark handler]

WASHINGTON, DC, February 10, 2011 - The American Insurance Association (AIA) testified against S. 431 and S. 432, legislation seeking to reverse the recent unanimous South Carolina Supreme Court decision in Crossmann Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co. The Court ruled that a developer’s Commercial General Liability (“CGL”) insurance policy did not provide coverage for the costs of repairing or replacing the contractor’s shoddy or faulty work. The bills were the subject of yesterday’s Senate Banking and Insurance Committee hearing in the South Carolina Senate.

“AIA opposes this legislation because it aims to provide coverage that these policies simply aren’t meant to cover,” said Thomas C. Salane, AIA’s South Carolina counsel. “The majority of state jurisdictions are in alignment with the South Carolina Crossman decision and this legislation will put our state’s contractors at a disadvantage.

S. 431 is patterned after Colorado HB 10-1394 that was enacted in May 2010 in response to a similar Colorado decision. It effectively reads the word “accident” out of the definition of “occurrence” in the standard CGL policy form. S. 431 would also prohibit and render void any CGL policy provision that excludes or limits coverage for personal injury, death or property damage arising out of pre-policy defective workmanship unless the insured had knowledge of the defect prior to the policy’s inception date.

“Enacting this legislation will undermine the fundamental concepts in the business of insurance,” concluded Salane.

The Senate Banking and Insurance Committee combined both pieces of legislation into one bill, S. 431, at yesterday’s hearing. S. 431 was reported out of committee and will now proceed to the full Senate for consideration.

http://www.aiadc.org/AIAdotNET/docHandler.aspx?DocID=340980

 

[KZQuixote]

WASHINGTON, DC, February 10, 2011 - The American Insurance Association (AIA) testified against S. 431 and S. 432, legislation seeking to reverse the recent unanimous South Carolina Supreme Court decision in Crossmann Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co. The Court ruled that a developer’s Commercial General Liability (“CGL”) insurance policy did not provide coverage for the costs of repairing or replacing the contractor’s shoddy or faulty work. The bills were the subject of yesterday’s Senate Banking and Insurance Committee hearing in the South Carolina Senate. “AIA opposes this legislation because it aims to provide coverage that these policies simply aren’t meant to cover,” said Thomas C. Salane, AIA’s South Carolina counsel. “The majority of state jurisdictions are in alignment with the South Carolina Crossman decision and this legislation will put our state’s contractors at a disadvantage.

S. 431 is patterned after Colorado HB 10-1394 that was enacted in May 2010 in response to a similar Colorado decision. It effectively reads the word “accident” out of the definition of “occurrence” in the standard CGL policy form. S. 431 would also prohibit and render void any CGL policy provision that excludes or limits coverage for personal injury, death or property damage arising out of pre-policy defective workmanship unless the insured had knowledge of the defect prior to the policy’s inception date.

“Enacting this legislation will undermine the fundamental concepts in the business of insurance,” concluded Salane.

The Senate Banking and Insurance Committee combined both pieces of legislation into one bill, S. 431, at yesterday’s hearing. S. 431 was reported out of committee and will now proceed to the full Senate for consideration.

http://www.aiadc.org/AIAdotNET/docHandler.aspx?DocID=340980

From my perspective, this is another of those level playing field issues.

Is it prudent for a contractor to pay for coverage for "completed operations"? Perhaps so, but why should a contractor take on this additional expense when other similarly licensed contractors can get by without it?

In California it's illegal to advertise "bonded and insured" if the bond or insurance is state mandated. How 'bout this "insured for completed operations"? Would the consumer be better informed?

Most every state is busy writing laws about lead paint, asbestos and mold but not one, to my knowledge, is requiring their contractors to carry insurance for any of the above. The end result is that state legislators are congratulating each other for accomplishing not much.

Back on topic:

The State of South Carolina Supreme Court was right on to not allow a back door reinterpretation of every insurance policy ever previously issued and paid for so as to twist them to cover "completed operations", a coverage for which no premium was ever paid.

Rather that twisting the language to remove the word "accident" from any interpretation of "occurrence" the state legislature ought to just step up and accept the responsibility for mandating coverages for "completed operations" for all licensed contractors. If that is what the citizens will support.

Bill