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Wiley Rein’s Laura Foggan Discusses South Carolina Ruling on Builder Coverage

Law360
November 30, 2012

Laura Foggan, chair of Wiley Rein’s Insurance Appellate Group, was interviewed by Insurance Law360 for a November 28 article about a South Carolina Supreme Court ruling that limited the effect of a state builder-coverage law. The South Carolina high court ruled that the statute couldn’t rewrite insurance contracts that were in place before the law took effect.

While the court last week rejected other challenges to the law, which specifies that liability insurance policies must cover property damage and injuries from faulty construction, the court ruled that the law cannot apply retroactively to policies issued to construction companies before May 2011, according to the article.

The decision reinforced that state legislatures cannot introduce different language to insurance policies than what has already been negotiated, Ms. Foggan told Law360. Ms. Foggan represented the American Insurance Association (AIA) and the Complex Insurance Claims Litigation Association (CICLA) as amici curiae in the state supreme court case.

"The way it was crafted provided a new definition of occurrence that would be written into the policy language," Ms. Foggan said of the South Carolina law. "The legislature can't just change their terms without providing an insurer opportunity to decide whether it wants to underwrite a particular risk."

An open issue that the court did not reach is whether the South Carolina law, and similar statutes in other states, violate the Commerce Clause of the U.S. Constitution, because they could affect insurance policies issued in other states, Ms. Foggan told Law360.

"It's very clear that there are open constitutional questions that will likely be litigated in other jurisdictions," Ms. Foggan said. The ruling by South Carolina’s high court "doesn't resolve going forward the constitutionality of the other statutes."