The Supreme Court of South Carolina 

Ex Parte: 

Builders Mutual Insurance Company and Nationwide 

Mutual Insurance Company, Appellants, 

In Re: 

Palmetto Pointe at Peas Island Condominium Property 

Owners Association, Inc., and Jack Love, Individually, 

and on behalf of all others similarly situated, Plaintiffs, 

v. 

Island Pointe, LLC; Leonard T. Brown; Complete 

Building Corporation; Tri-County Roofing, Inc.; 

Creekside, Inc.; American Residential Services, LLC 

d/b/a Rescue Rooter Charleston; Andersen Windows, 

Inc.; Atlantic Building Construction Services, Inc. n/k/a 

Atlantic Construction Services, Inc.; Christopher N. 

Union; Builder Services Group, Inc. d/b/a Gale 

Contractor Services; Novus Architects, Inc. f/k/a SGM 

Architects, Inc.; Tallent and Sons, Inc.; WC Services, 

Inc., CRG Engineering, Inc.; Certainteed Corporation; 

Kelly Flooring Products, Inc. d/b/a Carpet Baggers and 

John Doe 1-60, Defendants, 

Tri-County Roofing, Inc., Third-Party Plaintiff, 

v. 

Cornerstone Construction and Mark Malloy d/b/a 

Cornerstone Construction; Gutter Works, Inc. and 

Michael L. Segars d/b/a Gutter Works; Mr. Gutter; 

Litchfield Seamless Gutters & Windows, LLC and 

Thomas Litchfield d/b/a Litchfield Seamless Gutter; 

Miracle Siding, LLC and Wilson Lucas Sales d/b/a 

Miracle Siding, LLC; Mark Palpoint a/k/a Micah 
Palpoint; Elroy Alonzo Vasquez; and Chris a/k/a John 

Doe 61, Third-Party Defendants. 

And 

Complete Building Corporation, Inc., Third-Party 

Plaintiff, 

v. 

Alderman Construction; Stanley's Vinyl Fence Designs; 

Cohen's Drywall; and Mosley Concrete, Third-Party 

Defendants, 

Of Whom Palmetto Pointe at Peas Island Condominium 

Property Owners Association, Inc. and Jack Love, 

Individually, and on behalf of all others similarly 

situated, Tri-County Roofing, Inc., and WC Services, Inc. 

are the Respondents. 

Appellate Case No. 2019-000238 

ORDER 

After careful consideration of Respondents' petition for rehearing, the Court grants 

the petition for rehearing, dispenses with further briefing, and substitutes the 

attached opinion for the opinion previously filed in this matter. 

s/ Donald W. Beatty C.J. 

s/ John W. Kittredge J. 

s/ Kaye G. Hearn J. 

s/ John Cannon Few J. 

s/ George C. James, Jr. J. 
Columbia, South Carolina 

August 12, 2020 
THE STATE OF SOUTH CAROLINA 

In The Supreme Court 

Ex Parte: 

Builders Mutual Insurance Company and Nationwide 

Mutual Insurance Company, Appellants, 

In Re: 

Palmetto Pointe at Peas Island Condominium Property 

Owners Association, Inc., and Jack Love, Individually, 

and on behalf of all others similarly situated, Plaintiffs, 

v. 

Island Pointe, LLC; Leonard T. Brown; Complete 

Building Corporation; Tri-County Roofing, Inc.; 

Creekside, Inc.; American Residential Services, LLC 

d/b/a Rescue Rooter Charleston; Andersen Windows, 

Inc.; Atlantic Building Construction Services, Inc. n/k/a 

Atlantic Construction Services, Inc.; Christopher N. 

Union; Builder Services Group, Inc. d/b/a Gale 

Contractor Services; Novus Architects, Inc. f/k/a SGM 

Architects, Inc.; Tallent and Sons, Inc.; WC Services, 

Inc., CRG Engineering, Inc.; Certainteed Corporation; 

Kelly Flooring Products, Inc. d/b/a Carpet Baggers and 

John Doe 1-60, Defendants, 

Tri-County Roofing, Inc., Third-Party Plaintiff, 

v. 

Cornerstone Construction and Mark Malloy d/b/a 

Cornerstone Construction; Gutter Works, Inc. and 

Michael L. Segars d/b/a Gutter Works; Mr. Gutter; 

Litchfield Seamless Gutters & Windows, LLC and 

Thomas Litchfield d/b/a Litchfield Seamless Gutter; 

Miracle Siding, LLC and Wilson Lucas Sales d/b/a 
Miracle Siding, LLC; Mark Palpoint a/k/a Micah 

Palpoint; Elroy Alonzo Vasquez; and Chris a/k/a John 

Doe 61, Third-Party Defendants. 

And 

Complete Building Corporation, Inc., Third-Party 

Plaintiff, 

v. 

Alderman Construction; Stanley's Vinyl Fence Designs; 

Cohen's Drywall; and Mosley Concrete, Third-Party 

Defendants, 

Of Whom Palmetto Pointe at Peas Island Condominium 

Property Owners Association, Inc. and Jack Love, 

Individually, and on behalf of all others similarly 

situated, Tri-County Roofing, Inc., and WC Services, Inc. 

are the Respondents. 

Appellate Case No. 2019-000238 

Appeal from Charleston County 

Jennifer B. McCoy, Circuit Court Judge 

Opinion No. 27970 

Heard February 11, 2020 – Filed May 13, 2020 

Re-Filed August 12, 2020 

AFFIRMED 

John L. McCants, of Rogers Lewis Jackson Mann & 

Quinn, LLC, of Columbia, for Appellant Builders Mutual 

Insurance Company; and J.R. Murphy and Timothy J. 
Newton, both of Murphy & Grantland, P.A., of 

Columbia, for Appellant Nationwide Mutual Insurance 

Company. 

Justin O. Lucey and Joshua F. Evans, both of Justin 

O'Toole Lucey, P.A., of Mt. Pleasant, for Respondents 

Palmetto Pointe at Peas Island Condominium Property 

Owners Association, Inc. and Jack Love; Steven L. 

Smith, Zachary J. Closser, and Samuel M. Wheeler, all of 

Smith Closser Wheeler P.A., of Charleston, for 

Respondent Tri-County Roofing, Inc.; and James A. 

Atkins, of Clawson & Staubes, LLC of Charleston for 

Respondent WC Services, Inc. 

Mark S. Barrow and Christy E. Mahon, both of Sweeny, 

Wingate & Barrow, P.A., of Columbia, and Steven M. 

Klepper, of Kramon & Graham, P.A., of Baltimore, 

Maryland, all for Amici Curiae Hartford Fire Insurance 

Company, Hartford Casualty Insurance Company, and 

Hartford Underwriters Insurance Company. 

Frank L. Eppes, of Eppes & Plumblee, P.A., of 

Greenville, and Jesse A. Kirchner, Michael A. Timbes, 

and Thomas J. Rode, all of Thurmond Kirchner & 

Timbes, P.A., of Charleston, all for Amicus Curiae South 

Carolina Association for Justice. 

JUSTICE KITTREDGE: In this case, several insurance companies (the Insurers) 

appeal the denial of their motions to intervene in a construction defect action 

between a property owners' association (the Association) and a number of 

construction contractors and subcontractors (the Insureds). The underlying 

construction defect action proceeded to trial, resulting in a verdict for the 

Association. 

We find the Insurers were not entitled to intervene as a matter of right, and, further, 

the trial court did not abuse its discretion in denying them permissive intervention. 

Nonetheless, as we will discuss further, the Insurers most assuredly have a right to 

a determination of which portions of the Association's damages are covered under 

the commercial general liability (CGL) policies between the Insurers and the 
 

 

Insureds. As such, we reaffirm our prior holdings allowing insurance companies to 

contest coverage in a subsequent declaratory judgment action. 

I. 

Palmetto Pointe at Peas Island (Palmetto Pointe) is a condominium development 

located in Charleston County near Folly Beach. Following Palmetto Pointe's 

construction, the Association became aware of damage to the buildings, which they 

attributed to the Insureds. As a result, the Association filed a construction defect 

action against the Insureds for negligence, breach of implied warranties, and unfair 

trade practices and sought $17.5 million in actual and consequential damages to 

repair or replace various components of the condominiums. The Insureds each had 

one or more applicable CGL policies with the Insurers, and, pursuant to the CGL 

policies, the Insurers provided independent counsel to the Insureds to defend them 

in the action, subject to a reservation of rights to later contest whether the damages 

awarded in the action were covered by the CGL policies. The Insurers were not 

made parties to the construction defect action and did not direct the Insureds' 

defense. 

Approximately three years later, at the tail end of the discovery period, the Insurers 

individually motioned to intervene in the action "for the limited purpose of 

participating in the preparation of a special verdict form or a general verdict form 

accompanied by answers to interrogatories for [] submission to the jury during 

trial." The Insurers disavowed any desire to be formally named as a party to the 

action, citing the likely prejudice to themselves and their clients (the Insureds).1 

However, by motioning to intervene, the Insurers essentially sought to force the 

Association and the jury to itemize the damages against each Insured, which was 

not otherwise required. In doing so, the Insurers hoped to ensure the jury would 

determine which portions of the damages were covered by the applicable CGL 

policies, thus obviating the need for the subsequent declaratory judgment action. 

The trial court denied the motions to intervene, and the Insurers appealed to the 

1 See, e.g., Rule 411, SCRE (prohibiting the admission of evidence tending to show 

a person was insured against liability); Crocker v. Weathers, 240 S.C. 412, 424, 

126 S.E.2d 335, 340–41 (1962) ("The long-established rule of our decisions is that 

the fact that a defendant is protected from liability in an action for damages by 

insurance shall not be made known to the jury. The reason of the rule is to avoid 

prejudice in the verdict, which might result from the jury's knowledge that the 

defendant will not have to pay it."). 
court of appeals. We subsequently certified the Insurers' appeals pursuant to Rule 

204(b), SCACR. 

II. 

"The decision to grant or deny a motion to join an action pursuant to Rule 19, 

SCRCP, or intervene in an action pursuant to Rule 24, SCRCP, lies within the 

sound discretion of the trial court." Ex parte Gov't Emps. Ins. Co. (Ex parte 

GEICO), 373 S.C. 132, 135, 644 S.E.2d 699, 701 (2007). On appeal, this Court 

will not disturb the trial court's decision absent a manifest abuse of discretion that 

results in an error of law. Id. (quoting Jeter v. S.C. Dep't of Transp., 369 S.C. 433, 

438, 633 S.E.2d 143, 145 (2006)). Moreover, the error of law must be so opposed 

to the trial court's sound discretion "as to amount to a deprivation of the legal rights 

of the party." Id. (citation omitted). 

III. 

The Insurers sought to intervene as a matter of right under Rule 24(a)(2), SCRCP. 

This Court has explained an entity seeking intervention as a matter of right under 

Rule 24(a)(2) must necessarily: 

(1) establish timely application; (2) assert an interest relating to the 

property or transaction which is the subject of the action; (3) 

demonstrate that it is in a position such that without intervention, 

disposition of the action may impair or impede its ability to protect 

that interest; and (4) demonstrate that its interest is inadequately 

represented by other parties. 

Berkeley Elec. Coop., Inc. v. Town of Mt. Pleasant, 302 S.C. 186, 189, 394 S.E.2d 

712, 714 (1990). With respect to the second element, we have compared having an 

interest in the action with constitutional standing, in that the intervenor must be a 

"real party in interest." See Ex parte GEICO, 373 S.C. at 138–39, 644 S.E.2d at 

702–03 (describing a real party in interest as one who has a real, actual, material, 

or substantial interest in the subject matter of the action, as distinguished from one 

who has only a nominal, formal, or technical interest in, or connection with, the 

action (citing Bailey v. Bailey, 312 S.C. 454, 458, 441 S.E.2d 325, 327 (1994))); 

see also Restor-A-Dent Dental Labs., Inc. v. Certified Alloy Prods., Inc., 725 F.2d 

871, 874 (2d Cir. 1984) (explaining the interest required for intervention as a 

matter of right must be "direct," "immediate," and "significantly protectable," 

rather than "remote or contingent" (citations omitted)). As our precedent makes 

clear, the Insurers are not "real parties in interest" to the construction defect action 
 

and, thus, cannot satisfy the four-part test espoused in Berkeley Electric. See Ex 

parte GEICO, 373 S.C. 136, 138–39, 644 S.E.2d at 701, 702–03.2 

Because the Insurers have not shown they have a direct interest in the construction 

defect litigation for Rule 24(a)(2) purposes, we hold the Insurers have not met the 

requirements to intervene as a matter of right. See Berkeley Elec., 302 S.C. at 189, 

394 S.E.2d at 714 (listing an interest in the action as one of four elements required 

for intervention as a matter of right). As a result, we affirm the trial court's denial 

of the Insurers' motions to intervene as a matter of right. See Restor-A-Dent, 725 

F.2d at 876 ("We are frank to admit that we are also influenced here by practical 

considerations that seem significant. A refusal to find a right under Rule 24(a) still 

leaves open the possibility in an appropriate case of permissive intervention by an 

insurer under Rule 24(b) for the purpose sought here, while a contrary holding 

would open the door wider to such intervention regardless of any unfortunate 

effect on the course of the main action. Moreover, a variety of factors properly 

bear on whether the type of intervention sought here should be allowed, and the 

trial judge's determination should ordinarily be accorded great weight. Application 

of subsection (b) of Rule 24 rather than subsection (a) recognizes these 

considerations, in view of the explicit emphasis in the former on undue delay or 

prejudice in the main action . . . ."). 

IV. 

Turning to permissive intervention, Rule 24(b), SCRCP, provides: 

Upon timely application anyone may be permitted to intervene in an 

action . . . (2) when an applicant's claim or defense and the main 

action have a question of law or fact in common. . . . In exercising its 

discretion the court shall consider whether the intervention will 

unduly delay or prejudice the adjudication of the rights of the original 

2

 A significant number of courts discussing intervention as a matter of right under 

similar factual scenarios found the insurance companies' interests were contingent, 

rather than direct, for similar reasons. See, e.g., Am. Home Prods. Corp. v. Liberty 

Mut. Ins. Co., 748 F.2d 760, 766 (2d Cir. 1984); Nieto v. Kapoor, 61 F. Supp. 2d 

1177, 1194 (D.N.M. 1999); Davila v. Arlasky, 141 F.R.D. 68, 70–73 (N.D. Ill. 

1991); Fid. Bankers Life Ins. Co. v. Wedco, Inc., 102 F.R.D. 41, 44 (D. Nev. 

1984); Universal Underwriters Ins. Co. v. E. Cent. Ala. Ford-Mercury, Inc., 574 

So. 2d 716, 723 (Ala. 1990) (citing U.S. Fid. & Guar. Co. v. Adams, 485 So. 2d 

720, 721–22 (Ala. 1986)); Donna C. v. Kalamaras, 485 A.2d 222, 223 (Me. 1984). 
 

parties. 

An intervenor seeking permissive intervention must: (1) establish timely 

application; (2) assert a claim or defense that has a question of law or fact in 

common with the underlying action; and (3) prove his participation in the 

underlying action will not delay or prejudice the adjudication of the rights of the 

original parties. "A reversal of a denial of permissive intervention has been termed 

'so unusual as to be almost unique.'" S.C. Tax Comm'n v. Union Cty. Treasurer, 

295 S.C. 257, 262, 368 S.E.2d 72, 75 (Ct. App. 1988) (quoting New Orleans Pub. 

Serv., Inc. v. United Gas Pipeline Co., 732 F.2d 452 (5th Cir. 1984)). 

The record is replete with facts rationally supporting the trial court's denial of the 

Insurers' motions for permissive intervention. We therefore conclude the Insurers 

have failed to prove the trial court abused its discretion. See Ex parte GEICO, 373 

S.C. at 135, 644 S.E.2d at 701. In affirming the trial court, we need look no further 

than the third factor—the delay or prejudice to the original parties. There are facts 

in the record supporting the trial court's decision that the Insurers' intervention 

would (1) unnecessarily complicate the construction defect action, including 

altering the Association's burden of proof and possibly delaying the trial, and (2) 

create a conflict of interest for the Insureds' counsel, who were supplied to them by 

the Insurers. 

A. 

As to the complication of the construction defect action, we note that, absent the 

Insurers' intervention, the Association has no need to parse its damages into 

categories corresponding to the coverage provided in a CGL policy.3

 Rather, as 

one of the Insurers conceded, the Association could properly request and receive a 

general verdict against all of the Insureds. However, with the addition of special 

jury interrogatories and verdict forms, the Association—as the plaintiff, with the 

3

 Generally, a CGL policy does not cover the cost of repairing or removing faulty 

workmanship; however, the policy does cover the cost of repairing additional, 

consequential damage caused by the faulty workmanship, such as water intrusion 

caused by negligent construction. See S.C. Code Ann. § 38-61-70(B)(2) (2015); 

Crossman Cmtys. of N.C., Inc. v. Harleysville Mut. Ins. Co., 395 S.C. 40, 49–50, 

717 S.E.2d 589, 593–94 (2011) ("In sum, we clarify that negligent or defective 

construction resulting in damage to otherwise non-defective components [is 

covered under a CGL policy], but the defective construction would not [be 

covered]."). 
burden of proof—would have a heightened burden to itemize its damages into 

Insurer-defined categories which the Association may not have intended to present 

to the jury. The Association's counsel here specifically bemoaned this exact 

problem. According to counsel, at the time the Insurers motioned to intervene 

(three years into the action and at the end of discovery), the parties had conducted 

"in excess of 40 depositions wherein the question[s that would be] relevant to the 

special verdict [or] special interrogatory . . . weren't asked." 

Further, in a subsequent declaratory judgment action, the Insureds and the Insurers 

have the collective burden to show which portions of the general verdict are 

covered under the CGL policies. See Gamble v. Travelers Ins. Co., 251 S.C. 98, 

103, 160 S.E.2d 523, 525 (1968) (explaining the initial burden to prove that a loss 

is covered under an insurance policy is on the insured, and once the insured has 

done so, the burden shifts to the insurer to prove that an exclusion applies to defeat 

coverage); see also Helena Chem. Co. v. Allianz Underwriters Ins. Co., 357 S.C. 

631, 642 n.5, 594 S.E.2d 455, 460 n.5 (2004) (stating that, when relevant, the 

insured bears the burden to prove an exception to the exclusion applies in order to 

restore coverage). Allowing the Insurers to intervene in the construction defect 

action in an attempt to segregate covered and non-covered damages would 

effectively place that burden of proof on the Association. Through the trial court's 

decision to leave all coverage issues to a subsequent declaratory judgment action, 

the burden of proof concerning the coverage dispute will remain with the Insureds 

and the Insurers respectively, where it properly belongs. 

Likewise, even if the Insurers were permitted to intervene, it would only grant 

them the ability to request special jury interrogatories and verdict forms under 

Rule 49(a) and (b), SCRCP. However, it does not require the trial court use the 

requested documents at all, much less without modification. See Thomas v. 

Henderson, 297 F. Supp. 2d 1311, 1325 n.16 (S.D. Ala. 2003); Plough, Inc. v. Int'l 

Flavors & Fragrances, Inc., 96 F.R.D. 136, 137 (W.D. Tenn. 1982). Were the 

Insurers to object to the trial court's failure to submit the proposed interrogatories 

or to the way the interrogatories were framed by the court, they could appeal and 

grind the entire construction defect trial to a halt. See Restor-A-Dent, 725 F.2d at 

877 (noting this complication, and stating, "While it is highly unlikely that such an 

appeal would be successful in view of a [trial] court's broad discretion in this 

context, nevertheless the possibility of this complication of the main action 

remains." (citation omitted)). 

B. 

Additionally, a number of attorneys in this case raised concerns over the conflict of 
 

interest inherent in allowing the Insurers to intervene.4 One of the most common 

worries expressed by the attorneys was that if the trial court permitted a verdict 

form with special interrogatories, it would place the Insureds' counsel in the 

untenable position of essentially conceding liability so as to focus instead on 

damages. In particular, several counsel explained a special verdict form would 

force them to alter their presentation of evidence to shunt as much of the 

Association's damages as possible into covered, consequential damages (e.g., water 

intrusion resulting from faulty workmanship), thereby conceding the Insureds had, 

in fact, created faulty workmanship in the first place. The concerns over the 

possibility—and likelihood—of a conflict of interest in these types of situations are 

echoed by a number of courts across the country. See, e.g., Nat'l Fire Ins. Co. of 

Pitt., P.A. v. Bakker, 917 F.2d 22 (4th Cir. 1990) (per curiam); Restor-A-Dent, 725 

F.2d at 877; Nieto, 61 F. Supp. 2d at 1195 (noting the insured would not only have 

the burden of presenting a defense to the plaintiff's accusations, but were his 

insurance company allowed to intervene, he would also have the additional burden 

of having his insurance company interfere with his defense); High Plains Coop. 

Ass'n v. Mel Jarvis Constr. Co., 137 F.R.D. 285, 290–91 (D. Neb. 1991); Wedco, 

102 F.R.D. at 43; Allstate Ins. Co. v. Keltner, 842 N.E.2d 879, 882–83 (Ind. Ct. 

App. 2006) (noting the insurance company's argument that its insured would not 

want to seek an allocated verdict because it "would automatically expose [the 

insured] to liability on" the non-covered damages portion of the allocated verdict); 

Donna C., 485 A.2d at 225; Harleysville Grp. Ins. v. Heritage Cmtys., Inc., 420 

S.C. 321, 363, 803 S.E.2d 288, 311 (2017) (Pleicones, A.J., dissenting) (opining it 

would be impossible for an insurance company to intervene in a construction 

defect suit and assert a defense against coverage without creating an impermissible 

conflict of interest (citation omitted)); Christopher Lyle McIlwain, Clear as Mud: 

An Insurer's Rights and Duties Where Coverage Under a Liability Policy is 

Questionable, 27 Cumb. L. Rev. 31, 52–53 (1997) (explaining courts frequently 

deny permissive intervention because "requiring the jury to focus on certain issues 

may prejudice the prosecution or defense of the plaintiff's claim, and may force the 

insured to take steps to assure coverage of claims rather than defend all claims"). 

We conclude there are facts in the record that support the trial court's decision that 

permissive intervention here would present conflict of interest concerns and likely 

cause undue delay and prejudice to the Association and the Insureds. Accordingly, 

we hold the trial court did not abuse its discretion in denying the Insurers' motions 

4

 In fact, all counsel provided by the Insurers to the Insureds refused to take 

positions on the motions to intervene for fear of a conflict of interest. 
 

for permissive intervention. See, e.g., Restor-A-Dent, 725 F.2d at 877 ("Under all 

of these circumstances, we cannot say that the district judge abused his discretion 

here [in denying the insurance company's motion for intervention].").5 

V. 

According to the Insurers, their motions to intervene were mandated by our 

decisions in Auto Owners Insurance Co. v. Newman6

 and Harleysville Group 

Insurance v. Heritage Communities, Inc.7

 We respectfully disagree, although the 

Insurers' position is understandable, especially with respect to Newman. 

In Newman, a homeowner sued a construction contractor for the alleged defective 

construction of her home, and, following an arbitration proceeding, an arbitrator 

issued an award in favor of the homeowner. 385 S.C. at 190, 684 S.E.2d at 542. 

In a subsequent declaratory judgment action between the contractor and its 

insurance company, the trial court found the CGL policy covered the damages 

awarded by the arbitrator. Id. at 190–92, 198, 684 S.E.2d at 543, 547. This Court 

affirmed in part and reversed in part, finding the CGL policy covered parts of the 

damages awarded by the arbitrator but did not cover other parts of the damages. 

Id. at 196, 198, 684 S.E.2d at 545–46, 546–47. However, the Court refused to 

review or parse the arbitrator's award, finding that arbitration awards are generally 

conclusive and will not be reviewed on the merits on appeal. Id. at 198, 684 

S.E.2d at 547 (citing Pittman Mortg. Co. v. Edwards, 327 S.C. 72, 76–77, 488 

S.E.2d 335, 337–38 (1997) (stating an appellate court must affirm an arbitration 

award so long as it is "barely colorable")). 

5

 Following the denial of the Insurers' motions to intervene, the trial court 

permitted the construction defect trial to go forward, despite the Insurers' pending 

appeals of those motions. The Insurers thus also raise a question to this Court as to 

whether the trial court erred in allowing the trial to proceed while the appeals were 

still pending. Because we have found the trial court did not abuse its discretion in 

denying the motions to intervene, the Insurers were not improperly excluded from 

participating in the construction defect trial. As a result, this issue is moot, and we 

do not address it. 

6

 385 S.C. 187, 684 S.E.2d 541 (2009). 

7

 420 S.C. 321, 803 S.E.2d 288 (2017). 
It was not the intent in Newman to categorically foreclose a subsequent declaratory 

judgment action to resolve a coverage dispute. To the extent Newman may be read 

to foreclose an insurance company's subsequent declaratory judgment action to 

resolve the coverage dispute, we modify Newman accordingly. South Carolina has 

long recognized the efficacy of declaratory judgment actions in this context. See, 

e.g., Sims v. Nationwide Mut. Ins. Co., 247 S.C. 82, 145 S.E.2d 523 (1965). 

Turning briefly to Harleysville, a condominium property owners' association sued 

a construction contractor for the alleged defective construction of the 

condominium complex, and a jury awarded a general verdict to the property 

owners' association. 420 S.C. at 329–31, 803 S.E.2d at 292–94. In the declaratory 

judgment action between the insurance company and the contractor, the Special 

Referee ordered the insurance company to pay the entirety of the general verdict, 

despite the fact that the verdict included some losses that explicitly were not 

covered under the CGL policy, because he found that "it would be improper and 

purely speculative to attempt to allocate the [] general verdict[] between covered 

and non-covered damages." Id. at 332, 803 S.E.2d at 294. Notably, in the 

alternative, the Special Referee found the insurance company's reservation of rights 

letter to the insured was inadequate and constituted an implied waiver of the 

insurer's right to contest coverage in the declaratory judgment action. See id. at 

336, 338, 803 S.E.2d at 296, 297. It was this latter basis—the inadequate 

reservation of rights letter—that served as the basis of this Court's affirmance of 

the Special Referee. See id. at 336–44, 803 S.E.2d at 296–301 (describing the 

reservation letter as a "generic denial[] of coverage coupled with furnishing the 

insured with a copy of all or most of the policy provisions (through a cut-and-paste 

method)"). The Court concluded the reservation of rights letter was so lacking that 

it was "insufficient to [actually] reserve [the insurance company's] right to contest 

coverage of actual damages," and, therefore, affirmed the Special Referee's 

decision. Id. at 343, 803 S.E.2d at 300. Harleysville neither mandates intervention 

in the underlying construction defect action nor forecloses a declaratory judgment 

action to resolve a coverage dispute. 

VI. 

The parties offer varying approaches on the specifics of how a subsequent 

declaratory judgment action should be tried. It appears a significant point of 

contention is the Insurers' concern that any coverage decisions in the declaratory 

judgment actions will be bound by factual determinations made in the construction 

defect action. This point has been addressed by this Court in Sims v. Nationwide 

Mutual Insurance Co. 
In Sims, the Court explained that, generally, "where an insurance company has 

notice and [an] opportunity to defend an action against its insured, the company is 

bound by pertinent material facts established against its insured, whether it appears 

in the defense of the action or not." 247 S.C. at 84–85, 145 S.E.2d at 524. 

However, the Court reasoned that rule could not apply in situations where the 

insurance company had a conflict of interest with its insured, such as when the 

company claimed the acts being sued over were partially or wholly outside the 

scope of the applicable insurance policy. Id. at 85–89, 145 S.E.2d at 524–26 

(explaining the underlying purpose of the general rule is to obviate the delay and 

expense of two trials upon the same issue between parties whose interests are 

identical; and when a conflict of interest causes the parties' interests to diverge, 

"the judgment against the [insured] does not decide issues as to the existence and 

extent of the duty to indemnify," such that "in a subsequent action the [insurance 

company] may show that the circumstances under which [it] was required to give 

indemnity do not exist" (quoting Farm Bureau Mut. Auto. Ins. Co. v. Hammer, 177 

F.2d 793, 799–801 (4th Cir. 1949) (citing the predecessor to the modern 

Restatement (Second) of Judgments § 58 (2020)))). 

As further explained in section 58 of the Restatement (Second) of Judgments: 

[T]he indemnitor has a right to its day in court on whether the 

indemnitee's liability is within the scope of the indemnity 

obligation. . . . 

. . . [A]n indemnitor who has an independent duty to defend the 

indemnitee in effect has two legal capacities with regard to the 

indemnitee. In his capacity as insurer against the indemnitee's risk of 

being sued on claims that "might be found to be" within the indemnity 

obligation, the indemnitor has a responsibility to provide counsel and 

supporting assistance to defend the indemnitee without regard to the 

indemnitor's interests . . . . In his capacity as indemnitor, he has a 

responsibility to indemnify for such liability as may be within the 

indemnity obligation. In the latter capacity, he should not be bound 

by determinations in an action in which he participated in the former 

capacity if there is a conflict of interest between the two. 

See Restatement (Second) of Judgments § 58 & cmt. a (emphasis added). 

Sims is directly applicable to the parties' dispute here. As explained above, there is 

a conflict of interest between the Insurers and the Insureds as to the proper method 

of calculating damages vis-à-vis what portions of the Association's total damages 
 

are covered under the CGL policies. Thus, the Insureds and the Insurers are not 

precluded from introducing evidence as to which damages are covered (or 

excluded from coverage) by the CGL policies. See, e.g., Universal Underwriters 

Ins. Co., 574 So. 2d at 723 ("Nevertheless, nothing in our law would bar [the 

insurance company] from litigating the coverage issue in a declaratory judgment 

action after the resolution of the underlying cases in this matter."); Donna C., 485 

A.2d at 224. Having said that, the parties would be bound by the total amount of 

any jury verdict in the construction defect action. See Restatement (Second) of 

Judgments § 58(1) (explaining the parties in the declaratory judgment action may 

not dispute the "existence and extent" of the judgment in the first action). 

The Insurers and amici voiced their concerns that, in a declaratory judgment 

action, courts may reject any efforts to allocate a general verdict into covered and 

non-covered damages because that allocation requires some degree of speculation 

as to what the jury may have intended when issuing its verdict. Cf., e.g., 

Harleysville, 420 S.C. at 332, 803 S.E.2d at 294 (explaining the Special Referee 

found "it would be improper and purely speculative to attempt to allocate the [] 

general verdict[] between covered and non-covered damages"). We, too, are 

concerned about the possibility an insurance company may be unjustly forced to 

cover damages that are otherwise properly excluded under a CGL policy.8 

Given that the parties in the declaratory judgment action are bound by the total 

verdict in the construction defect action, how then do we attempt to fairly allocate 

covered damages and non-covered damages? This seems to be the biggest 

challenge to resolve. We begin by noting that we do not oppose the parties coming 

to an agreement on a framework for allocating damages, subject to the approval of 

the court. Failing an agreement of the parties, we set forth a default approach that 

shall serve as the framework for use in declaratory judgment actions for allocating 

covered and non-covered damages. This default framework is utilized in other 

jurisdictions, and it allows litigants in a declaratory judgment action to use 

8

 In fact, the insurance company in Harleysville attempted to use a percentagebased approach described more fully below, but the Special Referee rejected the 

evidence as "irrelevant and speculative." Because the Harleysville majority issued 

its decision on the basis of the insurance company's inadequate reservation of 

rights letter, the Court did not address this finding by the Special Referee. To 

avoid any future confusion, we reject the notion that, in a declaratory judgment 

action, it is "improper and purely speculative" to allocate a general verdict into 

covered and non-covered damages. See Harleysville, 420 S.C. at 332, 803 S.E.2d 

at 294. 
 

percentages, rather than exact dollar amounts, to determine the amount of covered 

and non-covered damages in a general verdict. 

In the declaratory judgment action, the record of the merits trial shall be the 

primary source of evidence concerning matters litigated in that trial, such as the 

extent of the damages. Additional evidence that is relevant to the coverage dispute 

determination may be presented in the declaratory judgment action, including 

expert testimony,9

 but the additional evidence should be narrowly tailored to 

matters that were not actually litigated in the first trial.10 The trier of fact shall then 

make a determination allocating on a percentage basis what portion of the 

underlying verdict constitutes covered damages and what portion constitutes noncovered damages. See, e.g., Duke v. Hoch, 468 F.2d 973, 984 (5th Cir. 1972) 

(explaining that on remand to allocate a general verdict, the "primary source of 

evidence will be, of course, the transcript of the merits trial, containing the 

evidence on which the jury based its verdict. The trial judge, as trier of fact, will 

be in the position of establishing as best he can the allocation which the jury would 

have made had it been tendered the opportunity to do so. If it is impossible for the 

court to make a meaningful allocation based on only the transcript, [the judgment 

creditor, standing in the shoes of the insured,] should have the right to adduce 

additional evidence and [the insurance company] to present evidence in rebuttal."); 

MedMarc Cas. Ins. Co., 199 S.W.3d at 60, 63 (describing in a declaratory 

judgment action the insureds' motion to allocate the general verdict in the 

underlying suit, and remanding the trial court's initial decision to allocate 25% of 

the jury verdict as covered damages because, while permissible to allocate by 

percentage, the trial court did not specify how it arrived at the 25% number); 

Keltner, 842 N.E.2d at 883 (noting the parties seemed to assume that if a general 

9

 For example, in Harleysville, the insurance company proffered expert testimony 

from a general contractor who had prepared an estimate to completely repair the 

damaged condominium buildings. The expert segregated the portion of his 

estimate which constituted the cost to repair damages from water intrusion 

(covered damages) and determined what percentage of his total estimated damages 

that portion constituted. Finally, he took the percentage of the covered damages 

and multiplied it by the jury's verdict, arriving at an amount representing the 

approximate portion of the general verdict constituting the covered damages. 

10 For example, if the underlying merits trial results in a general verdict, the parties 

in the declaratory judgment action should be permitted to introduce evidence 

related to determining which portion of the damages are covered by the policy (or 

policies). 
verdict was entered in the underlying action, there would be no later opportunity to 

distinguish between covered and non-covered damages, but holding that a 

supplemental proceeding in a declaratory judgment action "would offer an 

occasion for presenting evidence and argument regarding a fair approximation of 

the division of damages" (emphasis added)). 

As we have acknowledged in this type of case in the past, perfect precision in 

allocating damages is not always achievable. Where perfect precision is not 

achievable, a fair approximation must suffice. See Crossman, 395 S.C. at 65–66, 

717 S.E.2d at 602 (acknowledging that, after adopting a time-on-the-risk approach 

to progressive damage allocation, the time-on-the-risk "formula is not a perfect 

estimate of the loss attributable to each insurer's time on the risk. Rather, it is a 

default rule that assumes the damage occurred in equal portions during each year 

that it progressed. If proof is available showing that the damage progressed in 

some different way, then the allocation of losses would need to conform to that 

proof. However, absent such proof, assuming an even progression is a logical 

default." (italic emphasis added) (emphasis in original omitted)). Our exhaustive 

research persuades us that the percentage-based approach will best achieve a fair 

allocation of damages. 

VII. 

For the foregoing reasons, we conclude the trial court did not abuse its discretion in 

denying the Insurers' motions to intervene and, therefore, affirm. In doing so, we 

also recognize that the Insurers have the right and ability to contest coverage of the 

jury verdict in a subsequent declaratory judgment action. In that action, the 

Insurers and the Insureds will be bound by the existence and extent of any jury 

verdict in favor of the Association in the construction defect action. However, they 

will not be bound as to any factual matters for which a conflict of interest existed, 

such as determining what portion of the total damages are covered by any 

applicable CGL policies. 

AFFIRMED. 

BEATTY, C.J., HEARN, FEW and JAMES, JJ., concur.