Just last week, the South Carolina Supreme Court issued a significant ruling regarding its state’s occurrence law. In Auto-Owners Ins. Co. v. Rhodes, No. 2009-143546, 2013 WL 5348381 (S.C. Sept. 25, 2013), the Court enlarged South Carolina’s already expansive view of “occurrence” in property damage cases but, at the same time, may have placed limitations for calculating the number of occurrences. To summarize their ruling, the Court held that the expansive view of “occurrence” applies to “progressive” property damage cases where the damage is further removed from the conduct of the insured. The facts of the case help clarify the ruling.
In Rhodes, the insured constructed three outdoor advertising billboards. One billboard fell across Interstate 77 causing significant property damage to a landowner’s property. Shortly thereafter, the insured was ordered by the SCDOT to remove the two remaining billboards. The SCDOT also revoked the landowner’s permit to maintain signs on the property as a result of the accident. As could be expected, the landowner sued the insured for damages resulting from the fallen billboard as well as the removal of the two other billboards and revocation of its permit. The insured tender the complaint to Auto Owners Insurance Company for coverage under a commercial general liability (CGL) policy. Auto Owners filed a declaratory action for a determination of whether there was coverage under the policy.
In the declaratory action, Auto Owners conceded that the fall of the first billboard was an “occurrence” under the policy but argued that the removal of the other two billboards was not since the removal was a separate, unrelated incident. The South Carolina Supreme Court disagreed. The Court used an expansive “but for” test and held that, “but for” the fallen billboard, the SCDOT would not have required that the other two signs be removed. Accordingly, the Court viewed the entire situation as one occurrence with “progressive” damage. Specifically, the Court held that “we view the fallen sign and the removal of the remaining two signs under a continuum of an ‘occurrence,’ as this is analogous to the CGL cases involving ‘continuous or repeated exposure to substantially the same general harmful conditions.’” As a result, Auto Owners was required to indemnify the insured for the entire complaint.
Interestingly, Rhodes will likely have positive effects for both insurers and insureds in South Carolina. The positive effects for insureds is obvious, there will likely be an influx of “progressive” damage type claims where damages are far removed from the original accident. In other words, more alleged damages by insureds will likely be covered.
Conversely, however, there may be a silver lining for insurers from this case. Notably, the Court held that the falling of the first billboard and the subsequent removal of the other two billboards was a “single occurrence” because the signs were simultaneously constructed. As most insurers recognize, insurance policies often have different per occurrence and aggregate policy limits that apply depending on the number of occurrences. Usually, the more occurrences, the higher the limits are. Thus, in situations that involve high-dollar damages with obvious coverage and potential multiple occurrences, insurers will be able to point to Rhodes to argue that subsequent damages are all part of one related incident and, thus, only one occurrence.
You can read the entire case here.
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