Act’s Definition of “Occurence” Only Applies Prospectively

The South Carolina Supreme Court held unconstitutional the retroactivity clause in S.C. Code Ann. Section 38-61-70, which was made effective on May 17, 2011. The Act defines “occurrence” in a commercial general liability policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions and property damage or¬† bodily injury resulting from faulty workmanship, exclusive of the faulty workmanship itself.”

The Act’s retroactivity clause¬†provides: “This section applies to any pending or future dispute over coverage that would otherwise be affected by this section as to all commercial general liability policies issued in the past, currently in existence, or issued in the future.”

The S.C. Supreme Court held that this clause unconstitutionally violates the Contract Clause of both the U.S. and S.C. Constitutions because retroactive application of this definition would substantially impair existing contractual relationships. The Court addressed whether the Act was reasonable and necessary to effectuate a legitimate legislative purpose and held that it was not.

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