Let builders, insurers work out coverage issue

Builders say they were dealt a serious blow by a recent state Supreme Court ruling over insurance coverage.

The court ruled a "comprehensive general liability" policy did not protect a general contractor when damages arose from faulty workmanship. That holds true for work done by subcontractors, too.

The key point, the court states, is that this type of policy is "not intended to insure risks that the business can and should control or manage."

Suffice it to say that the legal analysis in this particular case, a lawsuit filed over the construction of five condominium buildings in Myrtle Beach, is mind-numbing. The ruling points out that courts across the country have struggled with whether these types of policies cover damage to property caused by faulty workmanship.

But the conclusion to be drawn from this particular case is this: South Carolina's high court has determined that if the damage was a direct result of faulty workmanship, it is not covered by a general liability policy.

The reaction from some builders is to call for a legislative fix. But that doesn't necessarily follow.

Builders should be looking to insurers for a different type of policy if the comprehensive general liability policy doesn't do what they want it to do.

Builders already enjoy legislative protections when it comes to lawsuits.

The state's "statute of repose" prohibits legal actions over "improvements to real estate" more than eight years after a project is deemed completed. The law was changed in 2005. Previously, the limit was 13 years. There is a one-year time limit on suing someone for their contribution to a problem once an action has been settled and that has to come within that same period of "repose," according to a 2006 state Supreme Court ruling.

The state also has a "Right to Cure Act," which aims to encourage settling disputes over construction outside the courtroom.

The law requires a homeowner to give 90 days notice of the intent to file a lawsuit over construction and lays out a timeline for a contractor or subcontractor to assess the situation and offer a solution.

If the dispute can't be settled, the homeowner can proceed with a lawsuit "or other remedy provided by contract or by law."

The law states that if a lawsuit is filed without that notice, the court must stay the lawsuit until the contractor has had a chance to fix the problem.

Do builders need more statutory protections? Do they need a law compelling insurers to cover faulty workmanship by a contractor or the firms the contractor hires?

Isn't that a private contract to be worked out between the insurance company and the builder?

It's unfortunate builders purchased insurance only to learn now that it doesn't protect them in the way they thought. Insurance policies can be as clear as mud, and insurance companies tend to interpret them in ways that best suit them.

But this seems to be an issue for builders and their insurance providers to work out, not the legislature.