Court Opinion

ID: 8294884
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:01:00.437283+00
Date Added: 2024-06-11T16:43:59.928691
License: Public Domain

Justice BEATTY
(concurring in part and dissenting in part):
I agree with the majority’s findings that Act No. 26 does not violate the separation of powers doctrine, is not unconstitutional special legislation, and does not deprive Petitioner of equal protection. Furthermore, I agree with the majority’s resolution of Petitioner’s arguments regarding the principles of federalism and the Commerce Clause. I, however, respectfully dissent as to the majority’s holding that the retroactivity provision of Act No. 26 violates the state and federal Contract Clauses. I find no violation and would declare Act No. 26 constitutional in both substance and application.
*32I. Contract Clauses
Petitioner urges this Court to declare Act No. 26 invalid as the state and federal Contract Clauses render it unconstitutional. Petitioner is primarily concerned with the provision of the statute that states, “This section applies to any pending or future dispute over coverage that would otherwise be affected by this section as to all commercial general liability insurance policies issued in the past, currently in existence, or issued in the future.” S.C.Code Ann. § 38-61-70(E) (Supp.2011).
Petitioner asserts the Act substantially impairs the contractual rights of the parties to existing contracts because Act No. 26 expands the meaning of the term “occurrence” and increases the risk that insurers previously agreed to insure. Petitioner further contends this interference with private contracts was not a justified exercise of legislative authority as there was no legitimate public purpose for the Act. Instead, Petitioner avers that Act No. 26 was “passed merely to suit the needs of a particularized sub-section of an industry by retroactively changing the bargain for which those particular insureds originally contracted.”
At least facially, Petitioner’s claim seems meritorious as Act No. 26 expressly provides for its retroactive application, which is generally disfavored due to the potential unfairness to the contracting parties. However, as will be discussed, I find that Act No. 26 is not an unconstitutional “retrospective law” as it constitutes a clarification, through codification, of extant law.
a. Retrospective Legislation
Retrospective laws have been analyzed as follows:
One modern definition of a “retrospective law,” often cited, is that every statute which takes away or impairs vested rights acquired under existing laws or creates a new obligation, imposes a new duty, or attaches a new disability in respect to transactions or considerations already passed is a retrospective statute. Legislation is considered retroactive if its application determines the legal significance of acts or events that occurred prior to the statute’s effective date. A statute does not operate “retrospectively” merely because it is applied in a case arising from conduct antedating the statute’s enactment or upsets expectations based in *33prior law; instead, a court must ask whether the new provision attaches new legal consequences to events completed before its enactment.
The mere fact that a statute has a retrospective application does not necessarily render it unconstitutional. For instance, a statute that merely clarifies rather than changes existing law does not operate retrospectively even if it is applied to transactions predating its enactment. The retroactive nature of clarifying legislation has limits and must not operate in a manner that would unjustly abrogate “vested rights.” However, retroactive legislation presents problems of unfairness that are more serious than those posed by prospective legislation because it can deprive citizens of legitimate expectations and upset settled transactions.
16B Am.Jur.2d Constitutional Law § 735 (2009) (footnotes omitted) (emphasis added).
Applying the above-definitions, I find that Act No. 26 merely: (1) clarified this Court’s decisions in L-J, Inc. v. Bituminous Fire and Marine Insurance Company, 366 S.C. 117, 621 S.E.2d 33 (2005) and Auto Owners Insurance Company v. Newman, 385 S.C. 187, 684 S.E.2d 541 (2009); and (2) preemptively codified Crossmann.
In analyzing the definition of “occurrence” in a CGL policy, this Court in L-J adhered to the majority rule that “faulty workmanship standing alone, resulting in damage only to the work product itself, does not constitute an occurrence under a CGL policy.” L-J, Inc., 366 S.C. at 121, 621 S.E.2d at 35. The Court reasoned that “faulty workmanship is not something that is typically caused by an accident or by exposure to the same general harmful conditions.” Id. at 123, 621 S.E.2d at 36. The Court noted that a “CGL policy may, however, provide coverage in cases where faulty workmanship causes a third party bodily injury or damage to other property, not in cases where faulty workmanship damages the work product alone.” Id. at 123 n. 4, 621 S.E.2d at 36 n. 4.
Four years later, the Court decided Newman wherein it relied on the analysis in L-J and found that a “subcontractor’s negligence resulted in an ‘occurrence’ falling within the CGL policy’s initial grant of coverage for the resulting ‘property damage’ to the [home].” Newman, 385 S.C. at 194, 684 S.E.2d at 545. In so ruling, the Court gave effect to the subcontrac*34tor exception to the “your work” exclusion in the standard CGL policy and recognized that this exclusion did not apply “if the damaged work or the work out of which the damage arises was performed on [policyholder’s behalf] by a subcontractor.” Id. at 195, 684 S.E.2d at 545.
As noted by the majority, the Court in Crossmann reaffirmed its decision in Newman and clarified that “negligent or defective construction resulting in damage to otherwise non-defective components may constitute ‘property damage,’ but the defective construction would not.” Crossmann, 395 S.C. at 50, 717 S.E.2d at 594.
In comparison, Act No. 26 defines “occurrence,” to include “property damage or bodily injury resulting from faulty workmanship, exclusive of the faulty workmanship itself.” Thus, I find the definition in Act No. 26 is indistinguishable from those espoused by this Court in L-J, Newman, and Crossmann. Because Act No. 26 merely clarifies rather than changes existing law, it does not operate retrospectively even though it is applied to transactions predating its enactment. Thus, I conclude the retroactive application of the Act does not render it unconstitutional as a retrospective law. See Segars v. Gomez, 360 F.Supp. 50, 53 (D.S.C.1972) (discussing retroactivity and recognizing that the General Assembly “may ratify and validate any past act which it could originally have authorized provided it still has the power to authorize it, and its authorization does not impair vested rights”); Moore v. Stills, 307 S.W.3d 71, 81 (Ky.2010) (recognizing that statutory amendments that clarify existing law or codify judicial precedent do not come within the rule against retroactive legislation as “such amendments do not impair rights a party possessed when he or she acted or give past conduct or transactions new substantive legal consequences”).5
b. Existing Contracts
Even if Act No. 26 is deemed clarifying legislation, Petitioner claims the express retroactivity provision of Act No. 26 operates to abrogate the parties’ vested rights. Thus, Peti*35tioner advocates for this Court to sever the provision from the Act. In analyzing Petitioner’s argument that Act No. 26 impermissibly impairs existing contracts, I turn to a discussion of our state and federal Contract Clauses.
In restricting powers of the states, the United States Constitution provides that, “No state shall ... pass any ... law impairing the obligation of contracts.” U.S. Const, art. I, § 10, cl. 1. Our state constitution contains a similar provision. S.C. Const, art. I, § 4. Accordingly, this Court has followed federal precedent construing the federal Contract Clause in analyzing the Contract Clause of the South Carolina Constitution. Ken Moorhead Oil Co. v. Federated Mut. Ins. Co., 323 S.C. 532, 476 S.E.2d 481 (1996).
“The general purpose of the Contract Clause is to encourage trade and credit by promoting confidence in the stability of contractual obligations. While the Clause prohibits the government from arbitrarily impairing the obligations of contract, there must be a careful balancing of the competing interests involved.” Citizens for Lee County, Inc. v. Lee County, 308 S.C. 23, 30, 416 S.E.2d 641, 645 (1992).
In discussing the Contract Clause, the United States Supreme Court stated, “Although the Contract Clause appears literally to proscribe ‘any’ impairment, ... ‘the prohibition is not an absolute one and is not to be read with literal exactness like a mathematical formula.’ ” U.S. Trust Co. of N.Y. v. N.J., 431 U.S. 1, 21, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977) (quoting Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 428, 54 S.Ct. 231, 78 L.Ed. 413 (1934)). “As with laws impairing the obligations of private contracts, an impairment may be consti*36tutional if it is reasonable and necessary to serve an important public purpose.” Id. at 25, 97 S.Ct. 1505.
However, “[b]y attaching new and perhaps unanticipated legal consequences to past conduct, retroactive legislation threatens to ‘deprive citizens of legitimate expectations and upset settled transactions.’ ” Ward v. Dixie Nat’l Life Ins. Co., 595 F.3d 164, 176 (4th Cir.2010) (quoting Gen. Motors Corp. v. Romein, 503 U.S. 181, 191, 112 S.Ct. 1105, 117 L.Ed.2d 328 (1992)).
To establish a Contract Clause violation, Petitioner must show: (1) the existence of a contract; (2) the law changed actually impaired the contract and the impairment was substantial; and (3) the law was not reasonable and necessary to carry out a legitimate government purpose. Hodges v. Rainey, 341 S.C. 79, 93, 533 S.E.2d 578, 585 (2000).
In view of my conclusion that Act No. 26 merely clarifies existing law, I would find that Petitioner has failed to satisfy the second prong of the above-outlined test as Petitioner cannot establish that Act No. 26 impaired existing CGL insurance contracts. Because the implicated term “occurrence” is part of the standard-form CGL policy, these contracts have not been impermissibly impaired as this term has been consistently defined and interpreted by this state’s appellate courts and now codified by the General Assembly.6 Accordingly, I would decline to sever the express retroactivity provision of Act No. 26.7
II. Conclusion
Although Petitioner raises multiple challenges attacking the constitutionality of Act No. 26, I find that none warrant the *37invalidation of the enacted statute. In contrast to the majority, I do not believe Act No. 26 violates the state and federal Contract Clauses as the General Assembly enacted this provision to clarify existing law. Accordingly, I would declare Act No. 26 and, in turn, section 38-61-70 constitutional.

. Because the definition of "occurrence” in section 38-61-70 clearly gives effect to our decisions in L-J and Newman and preemptively codified our decision in Crossmann, I believe the majority mischaracterizes the General Assembly’s enactment of section 38-61-70 as a "fundamental change” in the definition of occurrence in standard CGL poli*35cies as there is no evidence to support such a conclusion. It is evident the General Assembly was cognizant of the litigious history surrounding standard CGL policies and sought to rectify these problems through a statutory pronouncement that was entirely consistent with this Court's interpretation of these policies. Interestingly, Newman chronicled the history of CGL policies and stated that "interpreting 'occurrence' as we do in this case gives effect to the subcontractor exception to the 'your work' exclusion in the standard CGL policy.” Newman, 385 S.C. at 195, 684 S.E.2d at 545. Thus, section 38-61-70 precisely codifies what Chief Justice Toal espoused in Newman. Simply stated, section 38-61-70 does nothing more than define occurrence without any discernable distinction from this Court’s prior decisions, particularly Newman. In my opinion, the majority ignores the visible overlay of this Court’s decisions with the statutory language of section 38-61-70.

. Furthermore, given that insurance is a highly-regulated industry, Petitioner’s contractual rights could not have been substantially impaired as Petitioner was undoubtedly aware of the existing case law and the potential for regulation. See Ken Moorhead Oil Co. v. Federated Mut. Ins. Co., 323 S.C. 532, 540, 476 S.E.2d 481, 486 (1996) ("In determining the extent of impairment to a contract, one must 'consider whether the industry the complaining party has entered has been regulated in the past.’ ” (quoting Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983))).

. The only contracts that could arguably be impaired would be those that were altered after January 7, 2011 in response to Crossmann and *37entered into prior to May 17, 2011, the effective date of Act No. 26. The existence of such contracts appears unlikely as Petitioner notes that “[sjince 1966, CGL insurance contracts, including contracts issued by Harleysville, have defined 'occurrence' as 'an accident, including continuous or repeated exposure to substantially the same general harmful conditions.' ” Thus, the existing CGL contracts would have retained the standard-form definition of “occurrence."