SOUTH CAROLINA CONSTRUCTION CLAIMS RESOURCES

Construction Claims

Limitations & Repose Periods

Breach of contract and negligence actions must be brought within three years following discovery of the cause of action. S.C. Code Ann. § 15-3-550 (1), (5).

An action accrues on the date the injured party either discovered the breach or should have discovered the breach through the exercise of reasonable diligence. RWE NUKEM Corp., v. ENSR Corp., 373 S.C. 190, 196, 644 S.E.2d 730, 733 (2007).

It is immaterial whether the plaintiff appreciates the full extent of damage until later; the limitations period runs at the point in time when the plaintiff either discovers or reasonably should have discovered it had a serious problem. Dillon Cty. Sch. Dist. No. Two v. Lewis Sheet Metal Works, Inc. 286 207, 215, 332 S.E.2d 555, 559 (Ct. App. 1985), overruled on other grounds by Atlas Food Sys. & Servs., Inc. v. Crane Nat. Vendors Div. of Unidynamics Corp., 319 S.C. 556, 462 S.E.2d 858 (1995).

For actions arising after July 1, 2005, South Carolina provides for an 8-year statute of repose that runs from the date of substantial completion of the project. S.C. Code Ann. § 15-3-640. The statute defines substantial completion as follows:

[S]ubstantial completion shall mean that degree of completion of a project, improvement, or a specified area or portion thereof (in accordance with the contract documents, as modified by any change orders agreed to by the parties) upon attainment of which the owner can use the same for the purpose for which it was intended; the date of substantial completion may be established by written agreement between the contractor and owner.

S.C. Code Ann. § 15-3-630.

Right to Repair Laws and/or Pre-Suit Statutory Procedures

The South Carolina Notice and Opportunity to Cure Nonresidential Construction Defects Act states a claimant must serve a written notice of claim on the subcontractor, supplier, or design professional. The notice of claim must contain the following: (1) a statement that the claimant asserts a construction defect; (2) a description of the claim or claims in reasonable detail sufficient to determine the general nature of the construction defect; and (3) a description of the results of the defect, if known. S.C. Code Ann. § 40-11-530. If the claimant files a civil action or initiates an arbitration before first complying with the requirements of this article, on motion of a party to the action, the court or arbitrator shall stay the action until the claimant has complied with the requirements of this article. S.C. Code Ann., § 40-11-520.

The South Carolina Notice and Opportunity to Cure Construction Dwelling Defects Act (for residential structures) states that in an action brought against a contractor or subcontractor arising out of the construction of a dwelling, the claimant must, no later than ninety before filing the action, serve a written notice of the claim on the contractor. The notice of claim must contain the following: (1) as statement that the claimant asserts a construction defect; (2) a description of the claim or claims in reasonable detail sufficient to determine the general nature of the construction defect; and (3) a description of any results of the defect, if known. S.C. Code Ann., § 40-59-830. If the claimant files a civil action or initiates an arbitration before first complying with the requirements of this article, on motion of a party to the action, the court or arbitrator shall stay the action until the claimant has complied with the requirements of this article. S.C. Code Ann., § 40-59-830.

Indemnity and Contribution

Joint tortfeasors are barred from seeking equitable indemnity from one another. Jourdan v. Boggs/Vaughn Contracting, Inc., 324 S.C. 309, 476 S.E.2d 708 (Ct. App. 1996). One who seeks indemnity in equity must have clean hands and have a special relationship with the party from whom they seek indemnity. South Carolina courts have held that the relationship of general contractor-subcontractor, employer/employee, and landlord/tenant create such a special relationship. Toomer v. Norfolk Southern Ry. Co., 344 S.C. 486, 491, 544 S.E.2d 634, 636 Ct. App. 2001); Vermeer Carolina’s, Inc. v. Wood/Chuck Chipper Corp., 336 S.C. 53, 63, 518 S.E.2d 301, 307 (Ct. App. 1999).

Cross-claims sounding in negligence, breach of contract, and breach of warranty are not independent causes of action from cross-claimants’ equitable indemnity and should be dismissed. Stoneledge at Lake Keowee Owners’ Ass’n v. Builders FirstSource-Southeast Grp., 413 S.C. 630, 636-39, 776 S.E.2d 434,438-439 (Ct. App. 2015).

Cross-claims for contractual indemnity must be based on a valid, binding contract, which is construed in accordance with the rules for construction of contracts general. Campbell v. Beacon Mfg. Co., 313 S.C. 451, 453, 438 S.E.2d 271, 272 (Ct. App. 1993). Therefore, South Carolina courts allow, but strictly construe, contractual indemnity clauses. Our courts look with disfavor on clauses that require a party to indemnify someone else for the other party’s own or sole negligence.

Contractual indemnification involves a transfer of risk for consideration. Rock Hill Tel. Co., Inc. v. Globe Communications, Inc., 363 S.C. 385, 389, 611 S.E.2d 235, 237 (S.C. 2005). When there is an indemnification agreement, the contract determines the relationship between the parties. Id.

Contractual indemnification provisions which protect the general contractor from the subcontractor’s negligence are permitted in South Carolina. Town of Winnsboro, 303 S.C. at 56-57, 398 S.E.2d at 502-03. Indemnity agreements often provide that the general contractor is entitled to indemnity for claims “arising out of” the subcontractor’s work. The phrase “arising out of,” when included in a clause of inclusion, has been broadly construed to mean more than causation, and to connote “incident to,” “flowing from,”, “having connection with, or “causal relation to.” McPherson v. Michigan Mut. Ins. Co., 310 S.C. 316, 320, 426 S.E.2d 770, 771 (S.C. 1993). The phrases “resulting from” and “caused by” would most likely be read to have the same effect.

South Carolina courts also allow contractual indemnification agreements which protect the indemnitee from his own negligence in concurrent negligence situations. Campbell v. Beacon Mfg. Co., Inc., 313 S.C. 451, 455, 438 S.E.2d 271, 273 (S.C. Ct. App. 1993). The parties’ intent to indemnify the indemnitee from his own negligence must be expressed in clear and unequivocal terms, and the indemnification agreement will be strictly construed against the indemnitee. Fed. Pacific Elec. v. Carolina Prod. Enters., 298 S.C. 23, 26, 378 S.E.2d 56, 57 (S.C. Ct. App. 1989); Laurens Emergency Med. Specialists, PA v. M.S. Bailey & Sons Bankers, 355 S.C. 104, 111, 584 S.E.2d 375, 378-79 (S.C. 2003); S.C. Elec. & Gas. Co. v. Combustion Eng’g, Inc., 283 S.C. 182, 191, 22 S.E.2d 453, 458 (S.C. Ct. App. 1984).

An indemnity agreement in which the indemnitor agrees to provide indemnification for “any and all claims” is not sufficient to require indemnification for the indemnitee’s own negligence. Federal Pacific, 298 S.C. at 29, 378 S.E.2d at 58-59. Seemingly broad language in an indemnification agreement alone is insufficient to require indemnification for the indemnitee’s own negligence—such an intent must be set forth in clear and express terms. 41 Am. Jur. 2d Indemnity § 18 (2012).

Some indemnity agreements limit indemnification to damages caused in whole or in part by the indemnitor’s negligence. This phrase limits the subcontractor’s indemnification obligation to damage caused by the subcontractor’s sole or concurrent negligence. Campbell, 313 S.C. at 455, 438 S.E.2d at 273. Thus, contractual indemnification provisions in favor of the general contractor for negligence arising out of the subcontractor’s negligence, in whole or in part, are valid, and their effect is to require the subcontractor to “pick up the tab” for the claims against both the subcontractor and the general contractor.

On the other hand, most states, including South Carolina, have statutes that prohibit indemnification of a general contractor by a subcontractor for the general contractor’s own negligence. S.C. Code Ann. § 32-2-10 (2011); N.C. G.S. Ann. § 22B-1 (2011); Ga. Code Ann. § 13-8-2(b) (2011); 41 Am. Jur. 2d Indemnity § 17 (2012). Thus, contractual indemnification provisions that purport to provide indemnification for the sole negligence of the general contractor are invalid.

It is difficult, but not impossible, to envision a situation in which the general contractor is solely at fault in a construction defect situation. Cases sometimes arise in which the general contractor instructed a subcontractor to leave its work incomplete so another trade could perform its work, and then forgot to have the subcontractor return and complete its work. The homeowner might still be able to recover from both the subcontractor and the general contractor, but as between the contractors the general contractor’s indemnification claim would be barred because the defect was due to its sole negligence.

Certificate of Merit – Experts

Section 15-36-100 of the South Carolina Code involves Complaints in actions for damages alleging professional negligence and the requirement for a contemporaneous affidavit of an expert specifying the alleged negligent act or omission and states as follows:

(A) As used in this section, “expert witness” means an expert who is qualified as to the acceptable conduct of the professional whose conduct is at issue and who:

(1) is licensed by an appropriate regulatory agency to practice his or her profession in the location in which the expert practices or teaches; and

(2)(a) is board certified by a national or international association or academy which administers written and oral examinations for certification in the area of practice or specialty about which the opinion on the standard of care is offered; or

(b) has actual professional knowledge and experience in the area of practice or specialty in which the opinion is to be given as the result of having been regularly engaged in:

(i) the active practice of the area of specialty of his or her profession for at least three of the last five years immediately preceding the opinion;

(ii) the teaching of the area of practice or specialty of his or her profession for at least half of his or her professional time as an employed member of the faculty of an educational institution which is accredited in the teaching of his or her profession for at least three of the last five years immediately preceding the opinion; or

(iii) any combination of the active practice or the teaching of his or her profession in a manner which meets the requirements of subitems (i) and (ii) for at least three of the last five years immediately preceding the opinion;

(3) is an individual not covered by subsections (A)(1) or (2), that has scientific, technical, or other specialized knowledge which may assist the trier of fact in understanding the evidence and determining a fact or issue in the case, by reason of the individual's study, experience, or both. However, an affidavit filed pursuant to subsection (B) by an expert qualified under this subsection must contain an explanation of the expert's credentials and why the expert is qualified to conduct the review required by subsection (B). The defendant is entitled to challenge the sufficiency of the expert's credentials pursuant to subsection (E).

(B) Except as provided in Section 15-79-125, in an action for damages alleging professional negligence against a professional licensed by or registered with the State of South Carolina and listed in subsection (G) or against any licensed health care facility alleged to be liable based upon the action or inaction of a health care professional licensed by the State of South Carolina and listed in subsection (G), the plaintiff must file as part of the complaint an affidavit of an expert witness which must specify at least one negligent act or omission claimed to exist and the factual basis for each claim based on the available evidence at the time of the filing of the affidavit.

(C)(1) The contemporaneous filing requirement of subsection (B) does not apply to any case in which the period of limitation will expire, or there is a good faith basis to believe it will expire on a claim stated in the complaint, within ten days of the date of filing and, because of the time constraints, the plaintiff alleges that an affidavit of an expert could not be prepared. In such a case, the plaintiff has forty-five days after the filing of the complaint to supplement the pleadings with the affidavit. Upon motion, the trial court, after hearing and for good cause, may extend the time as the court determines justice requires. If an affidavit is not filed within the period specified in this subsection or as extended by the trial court and the defendant against whom an affidavit should have been filed alleges, by motion to dismiss filed contemporaneously with its initial responsive pleading that the plaintiff has failed to file the requisite affidavit, the complaint is subject to dismissal for failure to state a claim. The filing of a motion to dismiss pursuant to this section, shall alter the period for filing an answer to the complaint in accordance with Rule 12(a), South Carolina Rules of Civil Procedure.

(2) The contemporaneous filing requirement of subsection (B) is not required to support a pleaded specification of negligence involving subject matter that lies within the ambit of common knowledge and experience, so that no special learning is needed to evaluate the conduct of the defendant.

(D) This section does not extend an applicable period of limitation, except that, if the affidavit is filed within the period specified in this section, the filing of the affidavit after the expiration of the statute of limitations is considered timely and provides no basis for a statute of limitations defense.

(E) If a plaintiff files an affidavit which is allegedly defective, and the defendant to whom it pertains alleges, with specificity, by motion to dismiss filed contemporaneously with its initial responsive pleading, that the affidavit is defective, the plaintiff's complaint is subject to dismissal for failure to state a claim, except that the plaintiff may cure the alleged defect by amendment within thirty days of service of the motion alleging that the affidavit is defective. The trial court may, in the exercise of its discretion, extend the time for filing an amendment or response to the motion, or both, as the trial court determines justice requires. The filing of a motion to dismiss pursuant to this section shall alter the period for filing an answer to the complaint in accordance with Rule 12(a), South Carolina Rules of Civil Procedure.

(F) If a plaintiff fails to file an affidavit as required by this section, and the defendant raises the failure to file an affidavit by motion to dismiss filed contemporaneously with its initial responsive pleading, the complaint is not subject to renewal after the expiration of the applicable period of limitation unless a court determines that the plaintiff had the requisite affidavit within the time required pursuant to this section and the failure to file the affidavit is the result of a mistake. The filing of a motion to dismiss pursuant to this section shall alter the period for filing an answer to the complaint in accordance with Rule 12(a), South Carolina Rules of Civil Procedure.

(G) This section applies to the following professions:

(1) architects;

(2) attorneys at law;

(3) certified public accountants;

(4) chiropractors;

(5) dentists;

(6) land surveyors;

(7) medical doctors;

(8) marriage and family therapists;

(9) nurses;

(10) occupational therapists;

(11) optometrists;

(12) osteopathic physicians;

(13) pharmacists;

(14) physical therapists;

(15) physicians' assistants;

(16) professional counselors;

(17) professional engineers;

(18) podiatrists;

(19) psychologists;

(20) radiological technicians;

(21) respiratory therapists; and

(22) veterinarians.

Economic Loss Doctrine

In Sapp v. Ford Motor Company, 386 S.C. 143, 687 S.E.2d 47,(2009), the Supreme Court of S.C. heard two cases arising on appeal from two buyers of the same truck who brought products liability actions against the manufacturer, seeking damages incurred as result of an alleged design defect. In the first trial court, the presiding Judge entered summary judgment in the manufacturer's favor, finding that the economic loss rule precluded the buyer's tort claims. In the second action, the Circuit Court, York County, S. Jackson Kimball, III, J., entered summary judgment on the same grounds. Buyers' appeals were consolidated for review. The Supreme Court, Toal, C.J., held that buyers could not recover damages in tort for purely economic losses, overruling Colleton Preparatory Academy, Inc. v. Hoover Universal, Inc., 379 S.C. 181, 666 S.E.2d 247.

The Sapp court reasoned that the economic loss rule is a creation of the modern law of products liability. Under the rule, there is no tort liability for a product defect if the damage suffered by the plaintiff is only to the product itself. Kennedy v. Columbia Lumber & Mfg. Co., 299 S.C. 335, 341, 384 S.E.2d 730, 734 (1989). In other words, tort liability only lies where there is damage done to other property or personal injury. Id.

The Sapp court explained that in the Kennedy case it held the economic loss rule did not preclude a homebuyer from recovering in tort against the developer or builder where the builder violated an applicable building code, deviated from industry standards, or constructed a house knowing or that the builder should have known posed a serious risk of physical harm. The court preserved this exception to the economic loss rule to protect homeowners. The rule announced in Kennedy followed a long line of South Carolina cases directed toward protecting consumers only in the residential home building context.

In Colleton Preparatory Academy, Inc. v. Hoover Universal, Inc., 379 S.C. 181, 666 S.E.2d 247 (2008), the Supreme Court was faced with the issue of whether to expand the Kennedy exception to the economic loss rule beyond the residential home building context to all manufacturers. The majority held that the economic loss rule would not preclude a plaintiff from filing a products liability suit in tort where only the product itself is injured when the plaintiff alleges breach of duty accompanied by a clear, serious, and unreasonable risk of bodily injury or death. The dissent argued that this decision not only broadly expanded the exception to the economic loss rule, but also completely altered the law on products liability in South Carolina.

The Sapp court, however, overruled Colleton Prep. to the extent it expanded the narrow exception to the economic loss rule beyond the residential builder context. Like the dissent in Colleton Prep., the Sapp majority was reluctant to permit negligence actions where there is neither personal injury nor other property damage. The court reasoned that imposing liability merely for the creation of risk when there are no actual damages drastically changes the fundamental elements of a tort action, makes any amount of damages entirely speculative, and holds the manufacturer as an insurer against all possible risk of harm. Carolina Winds Owners' Ass'n, Inc. v. Joe Harden Builder, Inc., 297 S.C. 74, 87, 374 S.E.2d 897, 905 (Ct.App.1988). At the time of its decision in Kennedy, the court explained that it had no intention of the exception extending beyond residential real estate construction and into commercial real estate construction.

Contractor Licensing Requirements

Under section 40-11-240 of the South Carolina Code, the following constitute the qualifications for a contractor’s license.

(A) To qualify for licensure, an entity must:

(1) be organized or registered under applicable South Carolina law as a sole proprietorship, partnership, limited liability partnership, limited liability company, or a domestic or foreign corporation;

(2) have a certified qualifying party in full-time employment in a responsible management position; and

(3) meet all requirements for licensure as provided in this chapter.

(B) To qualify for a license, an entity must submit:

(1) a completed application on a form approved by the board;

(2) all required fees;

(3) a detailed statement of current financial condition as required by this chapter;

(4) reference from a bank or other financial institution on a form as prescribed by the department;

(5) the name and certificate number of the primary qualifying party for each classification or subclassification for which a license is desired;

(6) proof that the entity's primary qualifying party in each classification or subclassification is an employee in a responsible management position; and

(7) all documentation required by the department pursuant to the requirements of this chapter.

(D) A change of an entity's name, organizational status, or federal employer identification number must be reported to the department within fifteen days. Failure to do so results in license cancellation fifteen days from the date of change and requires the new entity to submit an initial application and meet all requirements for licensure.

S.C. Code Ann. § 40-11-240.

Common Law & Statutory Claims

South Carolina has a Mechanic’s Lien Statute located at sections 29-5-10 to 29-5-440 of the South Carolina Code.

Construction Damages

Cost of Repair

In Scott v. Fort Roofing and Sheet Metal Works, Inc. 299 S.C. 449, 385 S.E.2d 826 (1989), the South Carolina Supreme Court held that a competent estimate of the cost of repair to a building creates a factual issue regarding damages. Kincaid v. Landing Development Corp., 289 S.C. 89, 344 S.E.2d 869 (Ct.App.1986); cf. Joyner v. St. Matthews Builders, 263 S.C. 136, 208 S.E.2d 48 (1974) (in absence of evidence of specific damages, measure of damages to real property is diminution in value). In general, the cost of repair or restoration is a valid measure of damages for injury to a building although compensation may be limited to the value of the building before the damage was inflicted. See 25 C.J.S. Damages § 85 (1966); see, e.g., “L” Investments, Ltd. v. Lynch, 212 Neb. 319, 322 N.W.2d 651 (1982); cf. Board of County Commissioners v. Slovek, 723 P.2d 1309 (Col.1986) (reasonable cost of repair exceeding value of building allowed as measure of damages where property has personal or special value).

Diminution in Value

In Vaught v. A.O. Hardee & Sons, Inc., 366 S.C. 475, (2005), the Supreme Court of South Carolina stated that actual damages are properly called compensatory damages, meaning to compensate, to make the injured party whole, to put him in the same position he was in prior to the damages received insofar as this is monetarily possible. See Clark v. Cantrell, 339 S.C. 369, 529 S.E.2d 528 (2000). The goal is to restore the injured party, as nearly as possible through the payment of money, to the same position he was in before the wrongful injury occurred. Id. at 378, 529 S.E.2d at 533.

In Hall v. Seaboard Airline Railway Co., 126 S.C. 330, 332–33, 119 S.E. 910, 910–11 (1923), the Court identified two classes of property damaged by fire: (1) That which is essentially connected with the premises and has value only by reason of that connection, such as fruit trees, ornamental and shade trees and shrubs, the young growth of a forest, hedge, grass, and the like; (2) that which has a value independent and separate from the premises as such, such as buildings, fences, merchantable timber, corded or cut wood, and the like, the loss or damage to which is capable of practically exact estimation. In evaluating damages to the first category, the court noted two general rules of damages have been applied to this type of property: diminution in value and restoration costs. See 2 Am.Jur.2d Damages § 276 (2003) (noting courts generally use the diminution in value rule for damage to shade or ornamental trees but under certain facts and circumstances replacement costs may be the proper measure of damages). To fully compensate the injured party, a court may allow the jury to consider more than one measure of damages, but damages may be awarded under only one theory. Id.

The Court further cited with favor The Restatement (Second) Torts § 929 (1979), which supports restoration costs as the proper measure of damages for injury to real property in certain circumstances. Section 929 provides in part, (1) If one is entitled to a judgment for harm to land resulting from a past invasion and not amounting to a total destruction of value, the damages include compensation for (a) the difference between the value of the land before the harm and the value after the harm, or at his election in an appropriate case, the cost of restoration that has been or may be reasonably incurred....

Comment (b) to § 929 further states:

Even in the absence of value arising from personal use, the reasonable cost of replacing the land in its original position is ordinarily allowable as the measure of recovery.... If, however, the cost of replacing the land in its original condition is disproportionate to the diminution in the value of the land caused by the trespass, unless there is a reason personal to the owner for restoring the original condition, damages are measured only by the difference between the value of the land before and after the harm.

Punitive Damages

Case Law

In Mitchell, Jr. v. Fortis Ins. Co., 385 S.C. 570, 686 S.E.2d 176 (2009), the South Carolina Supreme Court set forth a comprehensive explanation of the law on punitive damages applicable in South Carolina.

As a preliminary matter, the Mitchell court restated the standard of review appellate courts should apply to a trial court's post judgment due process review of a punitive damages award. Appellate courts typically applied an abuse of discretion standard in reviewing a trial court's post judgment review of a punitive damages award. See Gamble v. Stevenson, 305 S.C. 104, 112, 406 S.E.2d 350, 355 (1991) (“[O]nly when the trial court's discretion is abused, amounting to an error of law, does it become the duty of this Court to set aside the award.”); Hundley v. Rite Aid of South Carolina, Inc., 339 S.C. 285, 314, 529 S.E.2d 45, 61 (Ct.App.2000) (evaluating the trial court's post-judgment review and finding “no abuse of discretion in the trial court's conclusions following its review of the jury verdict.”). However, changes in the federal case law persuaded the Mitchell court to instead adopt a de novo standard for the review of trial court determinations of the constitutionality of punitive damages awards. Citing Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001)

Next the Mitchell court went on to apply a de novo review of the $15,000,000 punitive damages award before it, in which the appellant argued that the sum was so excessive as to violate its constitutional right to due process under the standards set forth in Gamble v. Stevenson, 305 S.C. 104, 406 S.E.2d 350 (1991) and BMW of North America v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). The court agreed and went on to explain those due process limitations.

The practice of awarding punitive damages originated in principles of common law “to deter the wrongdoer and others from committing like offenses in the future.” Laird v. Nationwide Ins. Co., 243 S.C. 388, 393, 134 S.E.2d 206, 210 (1964). “Punitive damages may properly be imposed to further a state's legitimate interests in punishing unlawful conduct and deterring its repetition.” Gore, 517 U.S. at 568, 116 S.Ct. 1589. The state's interests in awarding punitive damages must remain consistent with the principle of penal theory that “the punishment should fit the crime.” Atkinson v. Orkin Exterminating Co., Inc., 361 S.C. 156, 164, 604 S.E.2d 385, 389 (2004). Nevertheless, “while states possess discretion over the imposition of punitive damages, it is well established that there are procedural and substantive constitutional limitations on these awards.” State Farm v. Campbell, 538 U.S. 408, 416, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). “To the extent an award is grossly excessive, it furthers no legitimate purpose and constitutes an arbitrary deprivation of property.” Id. at 417, 123 S.Ct. 1513.

Citing and explaining Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991) and its progeny, the Mitchell court then recited the development of the law on due process limitations for punitive damages awards. In particular, it cited with favor the United States Supreme Court holding in BMW of North America v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), which adopted a specific test by which to conduct a due process analysis. The Court established three guideposts that indicate whether the due process requirement of fair notice has been met. In determining the constitutionality of a punitive damages award, Gore directed that courts consider: (1) the degree of reprehensibility of the defendant's conduct; (2) the disparity between the actual and potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. Id. at 575, 116 S.Ct. 1589.

Subsequent Supreme Court cases expounded upon the elements of the review and what evidence was permissible to consider under each guidepost. For example, in Campbell, the Supreme Court held that punitive damages awards may not be based on out-of-state conduct and must be related to the plaintiff's injury or damage. Furthermore, in Philip Morris USA v. Williams, 549 U.S. 346, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007), the Court held that a punitive damages award that is based on evidence of harm to persons other than the plaintiff or plaintiffs will violate due process. The Court noted that harm to others may be considered to help show that the conduct that caused the plaintiff's harm also posed a risk to the public, but the jury may go no further to base a punitive damages award on that evidence.

The Mitchell court then noted that South Carolina’s own law on punitive damages essentially followed the Supreme Court's constitutional pronouncements, beginning with the Gamble opinion. In Gamble, the South Carolina supreme court identified eight considerations that trial courts should apply in conducting a post-judgment due process review of any punitive damages award. These considerations are: (1) the defendant's degree of culpability; (2) the duration of the conduct; (3) the defendant's awareness or concealment; (4) the existence of similar past conduct; (5) the likelihood the award will deter the defendant or others from like conduct; (6) whether the award is reasonably related to the harm likely to result from such conduct; (7) the defendant's ability to pay; and (8) any other factors deemed appropriate. Gamble, 305 S.C. at 111–12, 406 S.E.2d at 354.

Additionally, while the South Carolina court has ruled that trial courts must consider both the Gamble and the Gore factors, James v. Horace Mann Ins. Co., 371 S.C. 187, 195, 638 S.E.2d 667, 671 (2006), the Mitchell court decided to employ a less burdensome and duplicative analysis, and in doing so held that the following considerations, which combined elements of both Gamble and Gore, would become the relevant post-judgement test:

1. Reprehensibility

First, any court reviewing a punitive damages award should consider the degree of reprehensibility of the defendant's conduct. In considering reprehensibility, a court should consider whether: (i) the harm caused was physical as opposed to economic; (ii) the tortious conduct evinced an indifference to or a reckless disregard for the health or safety of others; (iii) the target of the conduct had financial vulnerability; (iv) the conduct involved repeated actions or was an isolated incident; and (v) the harm was the result of intentional malice, trickery, or deceit, rather than mere accident.

2. Ratio

Second, the court should consider the disparity between the actual or potential harm suffered by the plaintiff and the amount of the punitive damages award. A court, when determining the reasonableness of a particular ratio of actual or potential harm to a punitive damages award, may consider: the likelihood that the award will deter the defendant from like conduct; whether the award is reasonably related to the harm likely to result from such conduct; and the defendant's ability to pay. Nevertheless, a court may not rely upon these considerations to justify an otherwise excessive punitive damages award.

3. Comparative Penalty Awards

Third, the court should consider the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. When identifying “comparable cases” a court may consider: the type of harm suffered by the plaintiff or plaintiffs; the reprehensibility of the defendant's conduct; the ratio of actual or potential harm to the punitive damages award; the size of the award; and any other factors the court may deem relevant.

Statutory Law

In addition to the legal analysis above, South Carolina has attempted to codify the process of determining punitive damages. For example, punitive damages must be alleged in the complaint but a specific amount need not be pled. S.C. Code Ann. § 15-32-510.

Section 15-32-520 of the South Carolina Code also allows for bifurcated trials to determine punitive damages and reiterates that punitive damages must be proven by clear and convincing evidence.

(A) All actions tried before a jury involving punitive damages, if requested by any defendant against whom punitive damages are sought, must be conducted in a bifurcated manner before the same jury.

(B) In the first stage of a bifurcated trial, the jury shall determine liability for compensatory damages and the amount of compensatory or nominal damages. Evidence relevant only to the issues of punitive damages is not admissible at this stage.

(C) Punitive damages may be considered if compensatory or nominal damages have been awarded in the first stage of the trial.

(D) Punitive damages may be awarded only if the plaintiff proves by clear and convincing evidence that his harm was the result of the defendant's willful, wanton, or reckless conduct.

(E) In the second stage of a bifurcated trial, the jury shall determine if a defendant is liable for punitive damages and, if determined to be liable, the amount of punitive damages. In determining the amount of punitive damages, the jury may consider all relevant evidence, including, but not limited to:

(1) the defendant's degree of culpability;

(2) the severity of the harm caused by the defendant;

(3) the extent to which the plaintiff's own conduct contributed to the harm;

(4) the duration of the conduct, the defendant's awareness, and any concealment by the defendant;

(5) the existence of similar past conduct;

(6) the profitability of the conduct to the defendant;

(7) the defendant's ability to pay;

(8) the likelihood the award will deter the defendant or others from like conduct;

(9) the awards of punitive damages against the defendant in any state or federal court action alleging harm from the same act or course of conduct complained of by the plaintiff;

(10) any criminal penalties imposed on the defendant as a result of the same act or course of conduct complained of by the plaintiff; and

(11) the amount of any civil fines assessed against the defendant as a result of the same act or course of conduct complained of by the plaintiff.

(F) If punitive damages are awarded, the trial court shall review the jury's decision, considering all relevant evidence, including the factors identified in subsection (E), to ensure that the award is not excessive or the result of passion or prejudice.

(G) In an action with multiple defendants, a punitive damages award must be specific to each defendant, and each defendant is liable only for the amount of the award made against that defendant.

In addition, section 15-32-530 of the code sets forth limits on the size of the award.

(A) Except as provided in subsections (B) and (C), an award of punitive damages may not exceed the greater of three times the amount of compensatory damages awarded to each claimant entitled thereto or the sum of five hundred thousand dollars.

(B) The limitation provided in subsection (A) may not be disclosed to the jury. If the jury returns a verdict for punitive damages in excess of the maximum amount specified in subsection (A), the trial court should first determine whether:

(1) the wrongful conduct proven under this section was motivated primarily by unreasonable financial gain and determines that the unreasonably dangerous nature of the conduct, together with the high likelihood of injury resulting from the conduct, was known or approved by the managing agent, director, officer, or the person responsible for making policy decisions on behalf of the defendant; or

(2) the defendant's actions could subject the defendant to conviction of a felony and that act or course of conduct is a proximate cause of the plaintiff's damages;

If the trial court determines that either item (1) or (2) apply, then punitive damages must not exceed the greater of four times the amount of compensatory damages awarded to each claimant entitled thereto or the sum of two million dollars and, if necessary, the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by this subsection. If the trial court determines that neither item (1) or (2) apply, then the award of punitive damages shall be subject to the maximum amount provided by subsection (A) and the trial court shall reduce the award and enter judgment for punitive damages in the maximum amount allowed by subsection (A).

(1) at the time of injury, the defendant had an intent to harm and determines that the defendant's conduct did in fact harm the claimant; or

(2) the defendant has pled guilty to or been convicted of a felony arising out of the same act or course of conduct complained of by the plaintiff and that act or course of conduct is a proximate cause of the plaintiff's damages; or

(3) the defendant acted or failed to act while under the influence of alcohol, drugs, other than lawfully prescribed drugs administered in accordance with a prescription, or any intentionally consumed glue, aerosol, or other toxic vapor to the degree that the defendant's judgment is substantially impaired.

(D) At the end of each calendar year, the Revenue and Fiscal Affairs Office must determine the increase or decrease in the ratio of the Consumer Price Index to the index as of December thirty-one, of the previous year, and the maximum amount recoverable for punitive damages pursuant to subsection (A) must be increased or decreased accordingly. As soon as practicable after this adjustment is calculated, the Executive Director of the Revenue and Fiscal Affairs Office shall submit the revised maximum amount recoverable for punitive damages to the State Register for publication, pursuant to Section 1-23-40(2), and the revised maximum amount recoverable for punitive damages becomes effective upon publication in the State Register. For purposes of this subsection, “Consumer Price Index” means the Consumer Price Index for All Urban Consumers as published by the United States Department of Labor, Bureau of Labor Statistics.

General Case Law

In Clark v. Cantrell, 339 S.C. 369, 529 S.E.2d 528 (2000) the court held that Punitive damages are not reduced by the proportion of the plaintiff's negligence under comparative negligence.

In Kennedy v. Columbia Lumber and Mfg. Co., Inc., 299 S.C. 335 384 S.E.2d 730 (1989), the court held that when a builder's actions are grossly negligent, punitive damages may be sought.

Attorney’s Fees

Attorney’s fees are allowed where authorized by statute or in contract. Plaintiffs will often allege an unfair trade practices cause of action in part because it allows for recovery of treble damages and attorneys’ fees.

Attorney’s fees also become relevant in claims for contractual indemnity and claims for additional insured status.

Joint and Several Liability (specific to construction)

For claims arising after July 1, 2005, South Carolina applies a modified allocation of liability rule. Specifically, section 15-38-15 of the S.C. Code states the liability of defendant responsible for less than fifty per cent of total fault; apportionment of percentages; willful, wanton, or grossly negligent defendant and alcoholic beverage or drug exceptions.

(A) In an action to recover damages resulting from personal injury, wrongful death, or damage to property or to recover damages for economic loss or for noneconomic loss such as mental distress, loss of enjoyment, pain, suffering, loss of reputation, or loss of companionship resulting from tortious conduct, if indivisible damages are determined to be proximately caused by more than one defendant, joint and several liability does not apply to any defendant whose conduct is determined to be less than fifty percent of the total fault for the indivisible damages as compared with the total of: (i) the fault of all the defendants; and (ii) the fault (comparative negligence), if any, of plaintiff. A defendant whose conduct is determined to be less than fifty percent of the total fault shall only be liable for that percentage of the indivisible damages determined by the jury or trier of fact.

(B) Apportionment of percentages of fault among defendants is to be determined as specified in subsection (C).

(1) specify the amount of damages;

(2) determine the percentage of fault, if any, of plaintiff and the amount of recoverable damages under applicable rules concerning “comparative negligence”; and

(3) upon a motion by at least one defendant, where there is a verdict under items (1) and (2) above for damages against two or more defendants for the same indivisible injury, death, or damage to property, specify in a separate verdict under the procedures described at subitem (b) below the percentage of liability that proximately caused the indivisible injury, death, damage to property, or economic loss from tortious conduct, as determined by item (1) above, that is attributable to each defendant whose actions are a proximate cause of the indivisible injury, death, or damage to property. In determining the percentage attributable to each defendant, any fault of the plaintiff, as determined by item (2) above, will be included so that the total of the percentages of fault attributed to the plaintiff and to the defendants must be one hundred percent. In calculating the percentage of fault attributable to each defendant, inclusion of any percentage of fault of the plaintiff (as determined in item (2) above) shall not reduce the amount of plaintiff's recoverable damages (as determined under item (2) above).

(a) For this purpose, the court may determine that two or more persons are to be treated as a single party. Such treatment must be used where two or more defendants acted in concert or where, by reason of agency, employment, or other legal relationship, a defendant is vicariously responsible for the conduct of another defendant.

(b) After the initial verdict awarding damages is entered and before the special verdict on percentages of liability is rendered, the parties shall be allowed oral argument, with the length of such argument subject to the discretion of the trial judge, on the determination of the percentage attributable to each defendant. However, no additional evidence shall be allowed.

(D) A defendant shall retain the right to assert that another potential tortfeasor, whether or not a party, contributed to the alleged injury or damages and/or may be liable for any or all of the damages alleged by any other party.

(E) Notwithstanding the application of this section, setoff from any settlement received from any potential tortfeasor prior to the verdict shall be applied in proportion to each defendant's percentage of liability as determined pursuant to subsection (C).

(F) This section does not apply to a defendant whose conduct is determined to be willful, wanton, reckless, grossly negligent, or intentional or conduct involving the use, sale, or possession of alcohol or the illegal or illicit use, sale, or possession of drugs.

Cost Incurred to Access Repair Areas

In Auto Owners Insurance Co. v. Newman, 385 S.C. 187, 684 S.E.2d 541 (2009), the South Carolina Supreme Court ruled that a subcontractor’s negligent application of stucco, which allowed water to intrude into the plaintiff’s home thereby causing damage to the home’s framing and exterior sheathing, constituted an “occurrence” under the builder’s CGL policy. Although the Court found the damages caused by the continuous moisture intrusion resulting from this negligent construction were covered by the CGL policy, the Court recognized that the costs of removing and replacing the defective stucco itself amounted to faulty workmanship, which was not covered. Id. at 194, 684 S.E.2d at 544–45.

Consequential Damages

In an action for breach of warranty, a buyer of goods may recover consequential damages for “any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know . . ..” S.C. Code Ann. § 36-2-715(2); See s 36-2-714(3).

Coverage Trigger of Coverage

Definition of an Occurrence

Although specialized construction defect coverage exists, most contractors rely on commercial general liability (CGL) insurance for liability coverage. CGL policies generally limit coverage to liability for “property damage” caused by an “occurrence.” South Carolina courts read the phrases “property damage” and “occurrence” together to mean that coverage does not exist for defective workmanship in and of itself. Crossmann Cmties. of N.C., Inc. v. Harleysville Mut. Ins. Co., 395 S.C. 40, 717 S.E.2d 589 (2011). However, coverage exists for damage caused by the insured’s defective work to the property or work of a third party. Id. Additionally, when the insured uses subcontractors, damage caused by defective work on one building component to otherwise non-defective building components installed by other subcontractors is considered “property damage” caused by an “occurrence.” Id. By statute, “occurrence” is now defined to include “property damage” . . . resulting from faulty workmanship, exclusive of the faulty workmanship itself.” S.C. Code Ann. § 38-61-70(B)(2).

Crossmann did not address the applicability of policy exclusions. Crossmann, 395 S.C. at 46, 717 S.E.2d at 592. Under South Carolina law, exclusions are generally enforced according to their terms unless they violate statute or public policy. B.L.G. Enters., Inc. v. First Fin. Ins. Co., 334 S.C. 529, 514 S.E.2d 327 (1999).

Duty to Defend

A liability insurer’s duty to defend is generally determined by the allegations in the complaint against the insured. Isle of Palms Pest Control Co. v. Monticello Ins. Co., 319 S.C. 12, 15, 459 S.E.2d 318, 319 (Ct. App. 1994). If the alleged facts create the possibility of coverage, an insurer must defend. Id. Facts outside the pleadings that are known to the insurer and that could trigger coverage must also be considered. City of Hartsville v. S.C. Mun. Ins. & Risk Fin. Fund, 382 S.C. 535, 544, 677 S.E.2d 574, 578-79 (2009).

i. Contractual Indemnity

CGL policies generally cover “insured contracts,” which include indemnity agreements. This coverage does not make the indemnitee an additional insured under the policy. However, it does cover liability assumed by the insured in indemnity agreements. For purposes of this coverage, defense costs and damages owed by the insured under the indemnity agreement are both treated as damages under the insurer’s duty to indemnify.

Indemnification Agreements

A. Separate liability of general contractors and subcontractors

By way of background, in Kennedy v. Columbia Lumber & Mfg. Co., Inc., 299 S.C. 335, 384 S.E.2d 730 (S.C. 1989), the Supreme Court of South Carolina created a cause of action in tort through which homeowners could sue builders and developers for construction defects. Since the court did not expressly create a direct cause of action against subcontractors, the general contractor often brings its subcontractors into the litigation through a third-party complaint. South Carolina courts allow general contractors to seek redress from subcontractors through contractual indemnification. Town of Winnsboro v. Wiedeman-Singleton, Inc., 303 S.C. 52, 56-57, 398 S.E.2d 500, 502-03 (S.C. Ct. App. 1990) aff’d, 307 S.C. 128, 414 S.E.2d 118 (S.C. 1992). The general contractor’s contractual indemnity claim is based on the negligence of the subcontractor.

Therefore, general contractors have separate duties from subcontractors. General contractors owe direct duties in contract, warranty, and tort to homeowners, and therefore have a separate and independent duty to supervise subcontractors to ensure the house is built in accordance with building codes and industry standards. Claims against subcontractors are for defects in the construction work itself. Claims by homeowners against subcontractors will almost always be for concurrent negligence, i.e., negligence of the subcontractor for the defective work and negligence of the general contractor for inadequate supervision of the work.

B. Indemnification for the subcontractor’s negligence (“Type I”)

Suppose a general contractor and subcontractor are sued for construction defects which have caused water damage, but the general contractor is able to prove at trial that he was not at fault. The general contractor could be entitled to indemnification from the subcontractor through either contractual or equitable indemnification. S.C. Elec. & Gas Co. v. Utilities Constr. Co., 244 S.C. 79, 87, 135 S.E.2d 613, 616 (S.C. 1964); Town of Winnsboro, 307 S.C. at 131, 414 S.E.2d at 120.

First Gen. Servs. of Charleston, Inc. v. Miller, 314 S.C. 439, 443, 445 S.E.2d 446, 448 (S.C. 1994)

Addy v. Bolton, 257 S.C. 28, 34, 183 S.E.2d 708, 710 (S.C. 1971)

Winnsboro, 303 S.C. at 57-58, 398 S.E.2d at 503

Winnsboro, 307 S.C. at 131, 414 S.E.2d at 120

2. Contractual indemnification

Contractual indemnification provisions which protect the general contractor from the subcontractor’s negligence are permitted in South Carolina. Town of Winnsboro, 303 S.C. at 56-57, 398 S.E.2d at 502-03. The general contractor’s entitlement to indemnification stems from the phrase “arising out of” in the indemnification agreement, which has been construed in South Carolina to mean “caused by.” McPherson v. Michigan Mut. Ins. Co., 310 S.C. 316, 320, 426 S.E.2d 770, 771 (S.C. 1993). Through this phrase, the general contractor is entitled to indemnification only for damage caused by the insured subcontractor’s work. The phrases “resulting from” and “caused by” would most likely be read to have the same effect.

C. Indemnification for concurrent negligence (“Type II”)

A contractual indemnification in which the indemnitor agrees to provide indemnification for “any and all claims” is not sufficient to require indemnification for the indemnitee’s own negligence. Federal Pacific, 298 S.C. at 29, 378 S.E.2d at 58-59. Seemingly broad language in an indemnification agreement alone is insufficient to require indemnification for the indemnitee’s own negligence—such an intent must be set forth in clear and express terms. 41 Am. Jur. 2d Indemnity § 18 (2012).

On the other hand, a contractual indemnification provision providing for indemnification for damages arising “in whole or in part” from the indemnitor’s negligence has been held sufficient to shift liability for the indemnitee’s negligence. Campbell, 313 S.C. at 455, 438 S.E.2d at 273. Thus, contractual indemnification provisions in favor of the general contractor for negligence arising out of the subcontractor’s negligence, in whole or in part, are valid, and their effect is to require the subcontractor to “pick up the tab” for the claims against both the subcontractor and the general contractor.

D. Indemnification for the sole negligence of the general contractor (“Type III”)

Most states, including South Carolina, have statutes that prohibit indemnification of a general contractor by a subcontractor for the general contractor’s own negligence. S.C. Code Ann. § 32-2-10 (2011); N.C. G.S. Ann. § 22B-1 (2011); Ga. Code Ann. § 13-8-2(b) (2011); 41 Am. Jur. 2d Indemnity § 17 (2012). Thus, contractual indemnification provisions that purport to provide indemnification for the sole negligence of the general contractor are invalid.

However, the South Carolina statute expressly allows contractual indemnity provisions in favor of the general contractor for concurrent negligence. S.C. Code Ann. § 32-2-10 (“Nothing contained in this section shall affect a promise or agreement whereby the promisor shall indemnify or hold harmless the promise . . . against liability for damages resulting from the negligence, in whole or in part, of the promisor . . ..”). Even though the general contractor has a separate and independent duty to a homeowner, its negligence can be shifted to the subcontractor if the subcontractor was also negligent because the negligence of both contractors contributed to the homeowner’s injuries.

But this is a rare situation. Section 32-2-10 does not prevent general contractors from seeking indemnification in full from subcontractors in the vast majority of cases, including the Beazer Homes cases, so long as concurrent negligence is proved by the plaintiff.

South Carolina permits both equitable and contractual indemnification. Contractual indemnification of the general contractor for the general contractor’s negligence is allowed, so long as the subcontractor was also negligent. Contractual indemnification for the sole negligence of the general contractor is not allowed, but as a practical matter, such situations are rare.

Indemnification provisions are often open-ended temporally (as you put it, “to the extinction of mankind and the end of the world”). However, indemnification agreements generally apply only to the insured subcontractor’s work under the subcontract at issue, unless they are not properly drafted. Thus, the time limitation comes from the statutes of limitation and repose.

E. Intentional or criminal acts

Indemnification for the intentional or criminal acts of the indemnitee is generally prohibited as against public policy. 41 Am. Jur. 2d Indemnity § 12 (2012); see also Holmes v. McKay, 334 S.C. 433, 443-44, 513 S.E.2d 851, 856-57 (S.C. Ct. App. 1999) (accepting the public policy rationale on principle but finding a question of fact as to whether such a violation occurred under the facts of that case).

ii. Anti-Indemnity Statutes

South Carolina has a statute that prohibits indemnification of a general contractor by a subcontractor for the general contractor’s own negligence. S.C. Code Ann. § 32-2-10 (2011).

iii. Additional Insureds

The South Carolina statute that prohibits contractors from obtaining indemnification for their sole negligence has an exception for insurance contracts. S.C. Code Ann. 32-2-10. Therefore, additional insured coverage may apply to an additional insured’s sole negligence. However, policy provisions may exclude such coverage.

2. Determining Primary and Non-Contributory vs. Excess Position

The determination as to which policy is primary or excess is generally driven by the “Other Insurance” provisions in each policy. If both policies purport to make themselves excess, then they cancel each other out and they both become co-primary. The “Other Insurance” provisions also generally contain language that determines allocation when coverage exists under more than one policy.

General contractors and developers often require in subcontracts that the subcontractor’s coverage be “primary and non-contributory.” Standard liability policies generally provide that the general contractor’s coverage is excess to the subcontractor’s coverage. Thus, the subcontractor’s policy is made primary, and the subcontractor’s carrier cannot demand contribution from the upstream contractor’s policy. However, this determination is generally made by reference to the policy provisions.

3. AI carrier’s rights to reimbursement for defense expenses from other, co-primary carriers

Under South Carolina law, liability insurers do not have a right of equitable contribution for defense costs. The rationale is that each insurer has a duty to fully defend the insured. As a result, the insured suffers no damages if one of the insurers that has coverage refuses to defend.

In recent federal district court cases applying South Carolina law this principle has been extended to additional insured situations, in which the subcontractor’s policy would normally be primary. There is no guidance from South Carolina state courts yet as to rights of equitable contribution of an excess insurer from a primary insurer.

Insurers do have a right of equitable contribution with respect to monies paid to indemnify the insured for a settlement or judgment. Allocation is generally driven by the “Other Insurance” provisions in the policies, as discussed above.

iv. Insureds Right to Independent Counsel and Consequences of Rejecting a Defense

At the present time, South Carolina law does not allow an insured to demand independent counsel merely because the insurer defends under reservation of rights. Federal courts interpreting South Carolina law reasoned that courts will not presume that defense counsel will act unethically by breaching their duty of loyalty to the insured.

However, it should be noted that a recent Supreme Court opinion may affect this analysis. In Harleysville Group Insurance v. Heritage Communities, Inc., 2017 WL 105021 (S.C. filed Jan. 11, 2017), the court held that an insurer must put the insured on notice and require defense counsel to file special interrogatories to obtain jury findings as to covered versus non-covered damages. This opinion is not yet final, but if it stands it could drastically alter the rights and duties of defense counsel with respect to their clients in insurance cases. The court’s holding that the insurer controls the defense and must notify the insured of the resulting conflict of interest may lead to a new rule regarding an insured’s right to select independent counsel.

Coverage Defenses

Policy exclusions are construed according to their terms unless they are ambiguous. B.L.G. Enters., Inc. v. First Fin. Ins. Co., 334 S.C. 529, 514 S.E.2d 327 (1999). Exclusions are construed narrowly in favor of coverage. McPherson v. Michigan Mut. Ins. Co., 310 S.C. 316, 320, 426 S.E.2d 770, 771 (S.C. 1993).

Intentional act exclusions exclude coverage only when the insured intended both the act and the resulting harm. Vermont Mut. Inc. Co. v. Singleton, 316 S.C. 5, 9, 446 S.E.2d 417, 420 (1994).

Policy conditions such as the requirement that the insured forward the pleadings to the insurer only void coverage when the insurer can demonstrate substantial prejudice as a result. Vermont Mut. Inc. Co. v. Singleton, 316 S.C. 5, 12, 446 S.E.2d 417, 421 (1994).

Choice of Law (Forum Selection Clauses)

South Carolina’s choice of law statute for insurance issues provides that all contracts of insurance on “property, lives, or interests” in South Carolina are deemed to be made in South Carolina and governed by South Carolina law. S.C. Code Ann. § 38-61-10. Although it could be argued from the language of the statute that it was intended to apply to only life or property insurance, section 38-61-10 has been held to control in disputes involving CGL coverage. Sangamo Weston, Inc. v. National Sur. Corp., 307 S.C. 143, 148-49, 414 S.E.2d 127, 130-31 (S.C. 1992). Sangamo Weston involved coverage for environmental contamination, an issue which has a close nexus with the interests of South Carolina. But a recent federal court decision applied South Carolina law in interpreting a CGL policy for a construction defect claim in South Carolina. Okatie Hotel Group, LLC v. Amerisure Ins. Co., 2006 WL 91577 at *3-5 (D.S.C. 2006).

Forum selection clauses are generally enforceable unless unreasonable or in violation of public policy. Stanley Smith & Sons v. D.M.R., Inc., 307 S.C. 413, 417, 415 S.E.2d 428, 430 (Ct. App. 1992).

Targeted Tenders

South Carolina does not follow the targeted tender doctrine, which allows the insured to submit an entire claim to only one of multiple insurers whose policies may be triggered. However, South Carolina courts have held that when an insurer owes a duty to defend, the insurer must defend the entire claim. Sloan Constr. Co., Inc. v. Central Nat’l Ins. Co. of Omaha, 269 S.C. 183, 236 S.E.2d 818 (1977). For purposes of indemnification, the claim must be submitted to each carrier on the risk while the damage continued, and each carrier is responsible for only the “property damage” that occurred during its policy period. Crossmann Cmties. of N.C., Inc. v. Harleysville Mut. Ins. Co., 395 S.C. 40, 66-67, 717 S.E.2d 589, 603 (2011).

Consent Judgments

Under South Carolina law, consent judgments that the insured never expects to pay are not enforceable against the insurer. St. Paul Travelers v. Payne, 444 F. Supp. 2d 519 (D.S.C. 2006).

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