Constitutional Challenge to the South Carolina Legislation Defining Occurrence

On May 23, 2011, Harleysville Mutual Insurance Company filed a Complaint in the South Carolina Supreme Court alleging that the Legislation defining occurrence which was recently signed into law by the Governor is unconstitutional.  The constitutional arguments raised by Harleysville include the following:

  1. Violation of Separation of Powers between the Judiciary and the Legislature
    • To the extent the statute is applied retroactively, it violates the separation of powers doctrine set forth in Article I, § 8 of the South Carolina Constitution.
    • Article I, § 8 “prohibits the legislature from overruling a decision by the Supreme Court.”
    • “The Statute was drafted to expressly overrule the holding and interpretation of occurrence set forth in the Crossmann opinion by the South Carolina Supreme Court and/or to control and dictate the result of the South Carolina Supreme Court’s rehearing decision in Crossmann.”
  2.  Violation of the Contracts Clause of the United States Constitution
    • Article I,  § 10 provides that “No . . . law impairing the obligation of contracts . . . shall be passed . . . .”
    • The “Statute purports to retroactively alter and impair CGL insurance contracts already in existence prior to the enactment of the bill.”
    • The definition of occurrence contained in the Statute “alters the reasonable expectations of the contracting parties and increases the insured risk under CGL policies.”
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