On May 17, 2011, South Carolina passed legislation to combat the restrictive interpretation of what constitutes an "occurrence" under CGL policies. S.C. Code Ann. sec. 38-61-70.
The legislation reversed a decision by the state's Supreme Court issued earlier this year. See Crossman Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co., 2011 W.L. 93716 (S.C. Jan. 7, 2011). Crossman had overruled an earlier decision by the South Carolina Supreme Court that holding that defective construction was an "occurrence." Crossman, however, reversed course, holding that damages resulting from faulty workmanship were the "natural and probable cause" of the faulty work and, as such, did not qualify as an "occurrence."
The new South Carolina statute provides,
Commercial general liability insurance policies shall contain or be deemed to contain a definition of "occurrence" that includes:
(1) an accident, including continuous re repeated exposure to substantially the same general harmful conditions; and
(2) property damage or bodily injury resulting from faulty workmanship, exclusive of the faulty workmanship itself.
S.C. Code Ann. sec. 38-61-70. Therefore, the statute makes clear that any damage flowing from faulty workmanship constitutes a covered "occurrence" under CGL policies. The statutes applies to any pending or future coverage dispute.
Hawaii's legislature recently passed HB 924, which awaits the Governor's signature [see post here]. The Hawaii statute differs from the South Carolinia statute in that it attempts to preserve the meaning of "occurrence" that existed prior to the Intermediate Court of Appeals decision in Group Builders v. Admiral Ins. Co., 123 Haw. 142, 231 P.3d 67 (Haw. Ct. App. 2010). If enacted, the Hawaii statute would read,
For purpose of a liability insurance policy that covers occurrences of damage or injury during the policy period and insures a construction professional for liability arising from construction related work, the meaning of the term "occurrence" shall be construed in accordance with the law as it existed at the time that the insurance policy was issued.
Other states that have recently adopted legislation ensuring coverage under CGL policies for construction defects are Colorado and Arkansas.