On January 7, 2011, the South Carolina Supreme Court issued a decision, Crossmann Communities, which overruled previous cases and found that water intrusion resulting from faulty workmanship does not qualify as an occurrence.  In response to this decision, legislation was quickly introduced in both the House and Senate (H. 3449 and S. 431) in an attempt to overrule Crossmann Communities by clarifying the definition of "occurrence" (among other language).  On May 5, 2011, S. 431 passed in the House with certain amendments and on May 12, 2011, the Senate voted unanimously in favor of  S. 431.  On May 17, 2011, the Legislation was signed into law by Governor Nikki Haley.   

The legislation specifically states provides that

Commercial general liability policies shall contain or be deemed to contain a definition of 'occurrence' that includes:

(1) an accident, including continuous or repeated exposure to substantially the same general harmful conditions; and

(2) property damage or bodily injury resulting from faulty workmanship, exclusive of faulty workmanship itself.

The proposed legislation applies to "any pending or future dispute over coverage that would otherwise be affected by this section as to all commercial general liability insurance policies issued in the past, currently in existence, or issued in the future."  Therefore, the signed legislation contains a retroactive component.

The definition of occurrence in this signed legislation is similar to the South Carolina Supreme Court's definition of occurrence contained the earlier case of Auto Owners, Inc. v. Newman where the Court held that while the defective application of stucco did not constitute an occurrence, the continuous moisture intrusion resulting from the subcontractor’s defective application was an occurrence.

The Supreme Court's rehearing on Crossmann Communities is still scheduled for May 23, 2011.  The Supreme Court's decision at the rehearing will likely have a significant impact on the interpretation of the legislation and how it will be applied by the lower courts.  In addition, there may be constitutional challenges to the legislation at the rehearing or sometime in the future on a number of grounds including separation of powers and infringement of private parties' right to contract.