Crossmann Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co., 26909.

Citation395 S.C. 40,717 S.E.2d 589
Decision Date22 August 2011
Docket NumberNo. 26909.,26909.
PartiesCROSSMANN COMMUNITIES OF NORTH CAROLINA, INC., Beazer Homes Investment Corp., and Daniel Rogers, Respondents/Appellants, v. HARLEYSVILLE MUTUAL INSURANCE COMPANY, Cincinnati Insurance Company, and Associated Insurors, Inc., of Myrtle Beach, Defendants,of whom Harleysville Mutual Insurance Company is, Appellant/Respondent.
CourtUnited States State Supreme Court of South Carolina


C. Mitchell Brown, William C. Wood, Jr., Matthew D. Patterson, and A. Mattison Bogan, of Nelson Mullins Riley & Scarborough, of Columbia; Clifford Leon Welsh, of Welsh & Hughes, of North Myrtle Beach; David L. Brown, of Pinto Coates Kyre & Brown, PLLC, of Greensboro, North Carolina; Robert Curt Calamari, of McAngus Goudelock & Courie, LLC, of Myrtle Beach, for Appellant/Respondent.

David B. Miller, of Bellamy, Rutenberg, Copeland, Epps, Gravely & Bowers, P.A., of Myrtle Beach; Martin M. McNerney, Emily R. Sweet, and Zachary D. Tripp, of King & Spalding, LLP, of Washington, D.C., for Respondents/Appellants.

Stephen P. Groves, Sr., of Nexsen Pruet, LLC, of Charleston, and John J. Piegore, of Sanchez, Daniels & Hoffman, of Chicago, Illinois, for Amicus Curiae Property Casualty Insurers Association of America.James L. Bruner, William D. Britt, Jr., Benjamin C. Bruner, and Matthew H. Stabler, of Bruner Powell Wall & Mullins, LLC, of Columbia, for Amici Curiae Associated General Contractors of America, Inc., and Carolinas AGC, Inc.N. Ward Lambert and R. Patrick Smith, of Harper, Lambert & Brown, P.A., of Greenville, for Amici Curiae Associated Builders and Contractors of the Carolinas, Inc., and the School District of Greenville County.Edwin Russell Jeter, Jr., of Jeter & Williams, P.A., of Columbia, for Amicus Curiae Leading Builders of America.Charles H. McDonald and Daniel T. Brailsford, of Robinson, McFadden & Moore, PC, of Columbia, for Amici Curiae American Subcontractors Association of the Carolinas and Mechanical Contractors Association of South Carolina.Robert L. Widener, Benjamin E. Nicholson, V, and A. Victor Rawl, of McNair Law Firm, P.A., of Columbia, for Amici Curiae Home Builders Association of South Carolina and the National Association of Home Builders.J. Cameron Halford, of Halford, Niemiec & Freeman, L.L.P., of Fort Mill, for Amicus Curiae Ledgestone Court Residents of York County.John P. Henry, of Thompson & Henry, P.A., of Conway, for Amicus Curiae Riverwalk at Arrowhead Country Club Property Owners Association, Inc., et al.

Justin Lucey, of Justin O'Toole Lucey, P.A., of Mt. Pleasant, for Amicus Curiae Medical University of South Carolina.George E. Mullen, of Mullen Wylie, LLC, of Hilton Head Island, for Amicus Curiae Coastal Carolina University Student Housing Foundation.W. Jefferson Leath, Jr., and Michael S. Seekings, of Leath, Bouch & Seekings, LLP, of Charleston, for Amici Curiae Community Associations Institute and the South Carolina Chapter of the Community Associations Institute.H. Brewton Hagood, of Rosen Rosen & Hagood, LLC, of Charleston, for Amicus Curiae Charleston County School District.Justice KITTREDGE.

In this commercial general liability (“CGL”) policy dispute, we issued an opinion on January 7, 2011, finding no coverage. We subsequently granted a rehearing petition and received numerous amici briefs. Today, we withdraw our initial opinion and issue this opinion, finding the CGL policies provide coverage for the stipulated progressive property damages.

Appellant/Respondent Harleysville Mutual Insurance Company (Harleysville) issued a series of standard CGL policies to the Respondent developers or their predecessors (collectively Crossmann) for a series of condominium projects in the Myrtle Beach area of South Carolina. The exterior components of the condominium projects were negligently constructed, which resulted in water penetration and progressive damage to otherwise nondefective components of the condominium projects. The homeowners settled their lawsuits against Respondents. Crossmann then filed this declaratory judgment action to determine coverage under Harleysville's policies. Prior to trial, several of Crossmann's other insurers settled with Crossmann, providing coverage for the homeowners' claims. Based on the remaining parties' stipulations and our suggestion in L–J, Inc. v. Bituminous Fire & Marine Insurance Co., 366 S.C. 117, 123 n. 4, 621 S.E.2d 33, 36 n. 4 (2005), that a “CGL policy may ... provide coverage in cases where faulty workmanship causes ... damage to other property,” the trial court determined the homeowners' claims were covered by Harleysville's policies.1 We affirm the finding of coverage.

The finding of coverage requires that we address a matter not reached in our initial and now withdrawn opinion. Harleysville appeals from the trial court's determination that its liability to Crossmann is joint and several with Crossmann's other CGL insurers. We reverse the finding of joint and several liability and find the scope of Harleysville's liability is limited to damages accrued during its “time on the risk.” In so ruling, we adhere to our holding in Joe Harden Builders, Inc. v. Aetna Casualty & Surety Co., 326 S.C. 231, 486 S.E.2d 89 (1997), but overrule Century Indemnity Co. v. Golden Hills Builders, Inc., 348 S.C. 559, 561 S.E.2d 355 (2002). Using our “time on risk” framework, the allocation of the damage award against Crossmann must conform to the actual distribution of property damage across the progressive damage period. Where proof of the actual property damage distribution is not available, the allocation formula adopted herein will serve as an appropriate default method for dividing the loss among Crossmann's insurers. We remand to the trial court for further consideration of the “time on risk” allocation.


Crossmann constructed multiple condominium projects from 1992 through 1999, which are at issue in this case. Crossmann utilized subcontractors to construct the condominium projects. In 2001, the homeowners filed suit against Crossmann after they discovered construction defects and resulting problems with the units. The homeowners alleged Crossmann defectively constructed the units, and as a result, the units experienced substantial decay and deterioration. Crossmann settled with the homeowners for approximately $16.8 million.

Following the settlement, Crossmann sought coverage for damages arising out of the lawsuit pursuant to their CGL policies issued by Harleysville, but Harleysville denied that coverage was triggered. Crossmann filed a declaratory judgment action to determine whether the policies covered the homeowners' damages. The parties stipulated to the facts and amount of damages and only presented the coverage and allocation questions to the trial court.

The parties' stipulations presented the coverage question on the basis of the presence or absence of an “occurrence.” The parties stipulated to, among other things, the amount of damages, that the damage resulting from water intrusion constituted “property damage,” that the damage began within thirty days after the certificate of occupancy was issued for each building, that the damage progressed until repaired or until Beazer Homes paid to settle the homeowners' claims, and that the parties would not argue the applicability of any policy exclusions.

Relying on L–J, Inc. v. Bituminous Fire & Marine Insurance Co., 366 S.C. 117, 123 n. 4, 621 S.E.2d 33, 36 n. 4 (2005), and the ambiguity in the language of the CGL policies, the trial court ruled that the progressive damage “that resulted from, and was in addition to, the subcontractors' negligent work itself” was caused by an “occurrence.” The trial court issued its order prior to our recent decision in Auto Owners Insurance Co. v. Newman (“ Newman ”), 385 S.C. 187, 684 S.E.2d 541 (2009). However, as discussed below, Newman further supports this result. The trial court also ruled that Harleysville was jointly and severally liable and was not entitled to a set-off based on other insurers' pre-trial settlements with Crossmann.2 Additionally, the trial court found that Crossmann was entitled to an award of post-judgment interest but not prejudgment interest. Both parties have appealed the trial court's order.


“A declaratory judgment action is neither legal nor equitable, and therefore, the standard of review is determined by the nature of the underlying issue.” Newman, 385 S.C. at 191, 684 S.E.2d at 543. “When the purpose of the underlying dispute is to determine whether coverage exists under an insurance policy, the action is one at law.” Id. “In an action at law tried without a jury, the appellate court will not disturb the trial court's findings of fact unless there is no evidence to reasonably support them.” Id. In this case, the parties have stipulated to the facts, and thus we are presented with a question of law. Where the action presents a question of law, as does this declaratory action, this Court's review is plenary and without deference to the trial court. J.K. Constr., Inc. v. W. Carolina Reg'l Sewer Authority, 336 S.C. 162, 166, 519 S.E.2d 561, 563 (1999).


Commercial General Liability Policies and the Coverage Question in a Progressive Damage Case


We affirm the trial court's finding of coverage based on an “occurrence.” An occurrence was once simply defined as an “accident.” However, in 1966, the occurrence definition was expanded to include “continuous or repeated exposure to substantially the same general harmful conditions.” 3 This Court, among others, has struggled to discern the meaning of the expanded occurrence definition in the context of progressive damage cases. The lack of a clear meaning, we believe, leaves us with an ambiguity, which we must construe against the insurer. See Super Duper Inc. v. Pennsylvania Nat'l Mut. Cas. Ins. Co., 385 S.C. 201, 210, 683 S.E.2d 792, 796 (2009) ( “Ambiguous terms must be construed in favor of the insured.”)...

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