The South Carolina Court of Appeals recently held that an excess insurer had no obligation to cover an excess judgment. Crossmann Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co., 2015 WL 340772 (S.C. App. Jan. 28, 2015).
After settling multiple construction defect claims, two developers sued their insurers, seeking coverage for the settlements. Most of the insurers settled, but one primary carrier and one excess carrier pressed forward with litigation. In the landmark Crossmann decision (Crossmann Communities of North Carolina, Inc. v. Harleysville Mut. Ins. Co., 395 S.C. 40, 717 S.E.2d 589 (Aug. 2011)), the South Carolina Supreme Court held a primary insurer’s liability is limited to itspro rata share of the losses based upon “time on risk.” On remand, the trial court in Crossmanndetermined, inter alia, that the excess insurer’s policies were not triggered because the underlying CGL policies had not been exhausted. The trial court calculated the pro rata allocation on a daily loss (rather than a pro rata annual calculation, because certain carriers had coverage for less than a full year), and determined that the daily underlying coverage available from the primary insurers was greater than the total loss per day such that the excess insurer’s policy was not implicated. The insureds appealed.
On appeal, the insureds sought to apply payments made in courts outside of South Carolina to trigger excess coverage. The South Carolina Court of Appeals rejected this argument, noting that the parties had stipulated to the amount of damages at issue and that such a stipulation was binding. Further, the court noted that the settlements from the other jurisdictions had not been segregated between progressive property damage versus the costs of repairing defective work (the latter of which was not covered), such that it could not consider it. The court also found no error in the trial court calculating pro rata damage on a daily (rather than annual) basis, noting that the Supreme Court decision in Crossmann specifically gave courts the discretion to deviate from an annual time on risk calculation where appropriate.