The SC Supreme Court cut a condo association's defect recovery by $1 million over how a settlement was characterised
The SC Supreme Court cut a condo association's defect recovery by $1 million over how a settlement was characterised
2026-09-19 · South Carolina · Courts
A South Carolina condominium association won a joint-and-several construction-defect verdict and then lost a million dollars of it to a setoff rule about paperwork. The Supreme Court decided Opinion No. 28278 on April 30, 2025, reversing in part, affirming in part and remanding.1
What happened
A townhome and condominium property owners association sued over construction defects and obtained a joint-and-several verdict against the general contractor and the roofing subcontractor. Ten months before trial, the general contractor's insurer had paid the association $1,000,000 for a covenant not to execute.
The roofer sought to set that payment off against the judgment. The Court held it was entitled to do so in full.
The rule
Section 15-38-50 reduces a claim by the greater of the amount stipulated in the release or the consideration paid for it. The association argued the $1 million should be allocated across damage categories so that only part of it reduced the roofer's exposure.
The Court rejected that: the association could not belatedly reallocate a payment to damage categories it never tried to the jury. Where a covenant not to execute is framed as a credit against any judgment, the setoff is the whole of it.
The part the association won
The Court affirmed the trial court's refusal to allow full setoff for four other pretrial settlements, applying Jolly v. Fisher Controls International, 443 S.C. 511 (2024). A non-settling defendant's right to setoff arises by operation of law only where the settlement compensates the same plaintiff for the same injury. Where a settlement covers more than one type of damage, the trial court has discretion to allocate reasonably, reviewed for abuse of discretion, and the party seeking setoff bears the burden.
The case was remanded for recalculation. Chief Justice Kittredge concurred in part and dissented in part.
Why this is an association problem specifically
Construction-defect litigation over common elements is almost always multi-party: a developer, a general contractor, and a series of subcontractors whose work overlaps in the same building envelope. Associations settle with some and try the case against others, because that is how these cases are financed.
The consequence of Palmetto Pointe is that the moment of settlement is the moment that matters. The characterisation the parties give a settlement then — what injuries it compensates, what damage categories it covers — is what a court will respect. An allocation constructed afterwards, once the shape of the verdict is known, is too late.
Two practical distinctions emerge from the two halves of the decision:
- A covenant not to execute framed as a credit against any judgment reduces the judgment by its full amount. There is nothing left to allocate.
- A settlement covering multiple types of damage leaves the trial court room to allocate, and places the burden on the defendant seeking the setoff — but only if the settlement itself supports the distinction.
The interaction with what gets tried
The Court's reasoning ties setoff to the trial record: the association could not reallocate to categories it never tried to the jury. That links two decisions an association makes at different times and usually for different reasons — how to characterise an early settlement, and which damage categories to actually put before the jury.
Where those two choices are not aligned, the gap is recovered by the non-settling defendant.
Where this sits with the rest of South Carolina defect law
The year produced two significant construction-defect decisions for associations, and they address different stages.
Wedgewood Condominium Association v. Centex Homes, published September 24, 2025, addresses whether the claim survives at all — when the three-year discovery clock starts, and how the statute of repose can be defeated by evidence of gross negligence. Palmetto Pointe addresses what the association keeps once it has won.
Both matter more in South Carolina than in states with statutory reserve and inspection regimes, because litigation is a primary mechanism by which defects in ageing common elements are identified and paid for here. The state requires no reserve study, no reserve funding, and no structural inspection.
A bill that would have extended the construction-defect limitations period from eight to ten years, S. 244, passed the Senate in 2025 and died in House Judiciary without a vote.
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