Congress Passes Terrorism Risk Insurance Bill

In one of the first acts of the new Congress, the House and Senate this week approved NAHB-supported legislation that reauthorizes the Terrorism Risk Insurance Act (TRIA) for six years through 2020. TRIA expired on Jan. 1 and its reauthorization offers stability for NAHB’s multifamily and commercial real estate members by providing affordable and reliable terrorism risk insurance.

In a letter to lawmakers, your Home Builders Association urged Congress to address unfinished business from its previous session by acting swiftly to pass a long-term reauthorization of the program to avoid disruptions to the nation’s recovering real estate markets.

H.R. 26, the Terrorism Risk Insurance Program Reauthorization Act, will ensure that terrorism risk insurance remains available and predictable, thereby allowing the financing and construction for multifamily and commercial buildings to continue.

The legislation was initially enacted in 2002 to provide a federal backstop for insurance companies in the event of a major terrorist attack after many insurers started excluding terrorism events from their policies following the Sept. 11, 2001 terror attacks. The measure was extended for two years in 2005 and for another seven years in 2007.

HBASC: 2011 Legislative Report (Julian Barton Reports)

By: Julian Barton, Government Affairs Director, HBA of South Carolina

We are sometimes asked by members, “What did the Home Builders Association do for home builders at the General Assembly this year?”  Well, this year there is no doubt that the HBA Government Relations Program generated a high rate of return for the home builders of our state – $225 million – that was a return of $4,500 annually per builder (a 9 to 1 return on the dues investment).  The following bills will have a positive impact on the home building industry, reduce legal/regulatory barriers for home builders and put more money in home builders’ pockets:

Construction General Liability Insurance Case:   Early in the year the SC Supreme Court passed down a decision (Crossmann vs. Harleysville Mutual) that reversed the interpretation of contractor’s general liability insurance policy.  The decision put contractors across the state a great financial risk!

In record time a bill was introduced (S.431) and passed into law.  The bill returns the construction industry essentially to where it was prior to the Crossmann court decision.   First, it makes it crystal clear what an “occurrence” (the trigger for insurance coverage) is.   Secondly, it applies these insurance coverage decisions retroactively to address our statute of repose (8 year) concerns.  Builders in litigation now will not have to fear that their insurance company will walk out the door leaving them fully exposed to faulty construction claims.  After the General Assembly adjourned, the SC Supreme Court reversed its decision on the Crossmann case!

Annual Benefit: $100 million

Tort Reform II:  The last week of the session Governor Nikki Haley signed the tort reform bill (H. 3375).  The bill builds on the 2005 tort reform bill.  The bill’s key provisions include:

1. A cap on punitive damages modeled after Florida’s tiered financial cap.
2. A cap on the amount a defendant has to put up for an appeal bond.
3. A tightening of the statute of repose for construction cases.
4. Requires the attorney general to approve civil actions by circuit solicitors.
5. Requires disclosure of insurance policy limits on auto policies in accident cases.

The new law makes it easier to do business in South Carolina and strengthens the construction statute of repose.   Plaintiff lawyers were successfully arguing that one or more building codes violations equated to gross negligence, and therefore the case was exempt from the construction statute of repose (8 year) protection.  This bill closes that loophole in the law!

Annual Benefit: $30 million

Unemployment Insurance Premiums:  Due to the severe recession South Carolina’s unemployment insurance fund went broke and had to borrow almost $1 billion from the federal government in recent years.  When the bills to pay back the federal loans went out in January most employers saw significantly higher unemployment insurance premiums.  To address the “sticker shock” the General Assembly passed an unemployment insurance reform bill (H. 3762) late in the session.

The legislation includes a reduction in state benefit weeks from 26 to 20 and restrictions of benefits for seasonal workers, and includes $146 million in the state budget to subsidize unemployment insurance.  These two measures combined will provide approximately 25% insurance premium relief to all employers in the state for this year.

Annual Benefit: $15 million

Copper Theft Bill:   Thieves and drug addicts in search of quick cash have been causing millions of dollars worth of damage ripping out copper from plumbing and air-conditioning units at homes and businesses.   A bill (H. 3660) that should stop the scourge of copper and metal theft in the state received final approval in the General Assembly this session.

The bill sets up a permit system for people who want to sell copper to recyclers.   Individuals selling less than 10 pounds of the metal would be allowed to obtain a free, 48-hour permit up to twice a year by calling their local sheriff’s office.

Those wanting to sell more than 10 pounds of copper would be required to apply in person at a sheriff’s office for a free, long-term permit.   The bill covers copper products, catalytic converters and stainless steel beer kegs to the list of permit-required items.

The bill would also require the metal recyclers to apply for a purchasing permit at their local sheriff’s office at a cost of up to $200.  Also, most importantly instead of giving out cash, recyclers would only be allowed to pay customers with checks for their copper and metal purchases.

Annual Benefit:  $5 million

Amazon Sales Tax Exemption:   The final chapter in the Amazon vs. Walmart saga ended on a happy note. An agreement was finally reached granting Amazon the five year sales tax exemption it had sought.   However, the bill (S.36) requires Amazon to also provide a link to the Department of Revenue website where the online South Carolina purchaser can obtain information to calculate the state taxes owed on internet purchases.

In addition, the purchaser will receive by email an annual summary of their aggregated internet purchases from Amazon.   This will allow the purchaser to calculate the sales tax owed so they can pay the tax on their state income tax return.  However, there are no provisions to force sales tax payment by SC residents.

The construction industry will reap a large part of the initial $125 million investment. In addition, the 2,000 new jobs created will increase the demand for housing in the Midlands of South Carolina initially and spread to other parts of the state in coming years.   SC was able to secure a 21st century growing company that should continue to expand and grow our state’s economy in the future!

Annual Benefit: $10 million

SC Building Code:   After legislative delay of the IRC 2009 last year, the building code started moving through the regulatory process this year.  However, it didn’t move forward very far.  The House LLR Committee asked SC Building Code Council to withdraw their regulations to implement the IRC 2009, and requested that the Council move forward in implementing the IRC 2012.  The adoption process for the IRC 2012 is beginning with the target date for implementation is January 2014.  The onerous residential sprinkler provision of the IRC 2009 was not implemented this year.

Annual Benefit: $50 million

Point of Sale – Second Homes Sales:   One of the last bills to pass the General Assembly this year was the “point of sale” bill (H. 3713).   The bill addressed the problem in the commercial real estate market where significantly higher “point of sale” property tax valuations were discouraging investment in SC commercial and second home properties.   The point of sale legislation is applicable only to non-primary residential properties, which are assessed at the six percent (6%) property tax rate.

With this new tax relief, it will make it easier to sell the existing backlog of second homes that are depressing the residential market, encourage the construction of new second homes, and make SC a more attractive location to locate businesses.

Annual Benefit: $15 million


As a result of the pro-active initiatives of the Home Builders Association with the SC General Assembly, the home building industry received over $225 million in benefits!  In addition, to the bills outlined above, the HBA Government Relations Department reviewed over 800 bills and closely monitored over 150 bills during the 2011 legislative session.


Illegal Immigration Bill:   As expected the Arizona-style illegal immigration bill (S.20) passed the General Assembly and was signed by the Governor.   However, a coalition of several immigrant advocates is now threatening to challenge the new law in court.   In addition, LLR has suspended LLR’s employer audit program until January 2012 because South Carolina’s current immigration law (passed in 2009) is unconstitutional.  The new state law does not go into effect until January 2012.

The new law deals primarily with law enforcement, but does contain provisions to tweak South Carolina’s existing employer immigration law.  The new state law will require mandatory e-verify screening of new employees, but an employer who was inspected and doesn’t have his employees e-verified would have 72 hours to bring them into compliance.   LLR would assist the employer in the e-verify process.

If the employees can’t be e-verified within three days of employment they must be terminated.   If the employer refuses to e-verify his new employees, or becomes a habitual offender LLR ultimately has the power to cancel his business licenses.  Under the new law e-verify is the only way to go – employers are held harmless, if they e-verify their new employees!

Multiple-lot Property Tax Discount:   Because of the current housing recession, it is taking longer to build out subdivisions.  The current law gives residential developers a multiple-lot discount on property taxes for up to five years on vacant subdivision lots. Unfortunately, it is now taking more than five years to complete lot sales and developers are ill suited to pay dramatically higher property taxes.

A bill was introduced and passed in the House that would temporarily extend the discount for an additional three years.  However, the SC Senate version of the bill (S. 447) remains on the Senate contested calendar.   As a result, the bill will be carried over to the 2012 legislative session.

Legislature passes legislation that reverses ruling in Crossman Communities v. Harleysville Insurance

UPDATE: Governor Nikki Haley signed S.431, “the Crossman Bill,” into law on Tuesday, May 17. The new law is meant to take away the ability of the South Carolina Supreme Court now, and insurers in the future, to read a fortuity requirement into the definition of occurrence in the 1986 CLG policy form.

The South Carolina General Assembly this week gave final approval to legislation that reverses the South Carolina Supreme Court decision in Crossman Communities v. Harleysville Insurance. The decision effectively rendered useless most Home Builders’ general liability insurance policies.

Governor Nikki Haley took an active role in brokering a compromise between the insurance and construction industries.

The legislation now heads to the Governor’s desk for her signature.

You can read more about the legislation at GSA Business by clicking here.

Crossman Communities v. Harleysville Mutual Insurance Company

By Scott Bradley, Esq., Gallivan White & Boyd

On January 7, 2011 the SC Supreme Court issued its opinion in the matter of Crossmann Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co., Op. No. 26909 (S.C.Sup.Ct. filed Jan. 7, 2011). As you may be aware, the ruling created a significant change in the law with respect to the potential obligations of insurance companies to provide a legal defense and indemnity to builders and contractors for construction defects under a commercial general liability (CGL) policy of insurance. The Crossmann case involved alleged property damage to a condominium project resulting from ongoing and continuous water intrusion caused by allegedly improper siding installation.

In plain terms, the Court in Crossmann ruled that where the property damage at issue “is no more than the natural and probable consequence” of the faulty workmanship, it does not constitute an “occurrence” necessary to trigger coverage under a CGL policy. The Court reasoned that water intrusion is just such a consequence of faulty siding installation, thus, it did not constitute an occurrence. No occurrence means no coverage, whether the faulty workmanship was performed by you or a sub-contractor. The Court’s opinion is not limited to water intrusion.

While faulty construction was not considered an occurrence under the pre-Crossmann law, the resulting damage to non-defective components of the construction was. Under the previous caselaw, using the facts of Crossmann, there would have been no occurrence/no coverage for the faulty siding installation, but the damage to the remaining parts of the structure from the resulting water intrusion would constitute an occurrence and trigger coverage. That was significant in that it would not only provide coverage for the policyholder for the resulting water damage, but would also trigger the duty of the carrier to provide a legal defense. In the vast majority of the construction defect scenarios, however, that is no longer the case. In most construction defect situations, the builder or contractor will be left totally exposed, as the insurance carriers should be able to rely on the Crossmann decision to conclude that the defective work and any resulting damage no longer constitutes an occurrence under the law in SC. As noted above, when there is no occurrence there is no coverage or duty to defend.

It should be noted that the final word on Crossmann has not yet been written. There will be a re-hearing of the case in front of the SC Supreme Court. Additionally, there have been bills introduced in both the SC Senate and the House of Representatives seeking to legislatively define “occurrence” in a manner that would provide coverage to builders and contractors for construction defects in certain situations. The ultimate success or failure of the re-hearing or legislative process is unknown.

To register for a briefing on this issue, click here.
To read an article in Charleston Regional Business Journal providing further details of this issue, click here.

Briefing on changes to general liability insurance policies

HBA members Scott Bradley, Esq., Gallivan White & Boyd, Howard Cox, Palmetto Insurance, and Jason Freeman, ChFC, J. Freeman and Associates, will brief members on the implications of a recent Supreme Court ruling that impacts contractor general liability insurance. Refreshments will be provided. Sponsored by Gallivan White & Boyd.

When: February 22, 4 p.m. until 5 p.m.
Where: HBA of Greenville Office

To register for the briefing, click here.

To read more about this issue, click on this link to read the article “Crossman Communities v. Harleysville Mutual Insurance Company.”