UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-2057
MITSUI SUMITOMO INSURANCE COMPANY OF AMERICA,
Plaintiff - Appellee,
v.
DUKE UNIVERSITY HEALTH SYSTEM, INC.,
Defendant - Appellant,
and
AUTOMATIC ELEVATOR COMPANY, INC.,
Defendant.
Appeal from the United States District Court for the Middle
District of North Carolina, at Greensboro. L. Patrick Auld,
Magistrate Judge. (1:09-cv-00480-LPA-LPA)
Argued: October 25, 2012 Decided: February 11, 2013
Before KING and FLOYD, Circuit Judges, and R. Bryan HARWELL,
United States District Judge for the District of South Carolina,
sitting by designation.
Affirmed by unpublished opinion. Judge Floyd wrote the majority
opinion, in which Judge Harwell joined. Judge King wrote a
dissenting opinion.
ARGUED: Charles Holton, WOMBLE CARLYLE SANDRIDGE & RICE, PLLC,
Durham, North Carolina, for Appellant. Richard H. Nicolaides,
Jr., BATES CAREY NICOLAIDES, LLP, Chicago, Illinois, for
Appellee. ON BRIEF: Julie B. Bradburn, WOMBLE CARLYLE SANDRIDGE
& RICE, PLLC, Raleigh, North Carolina; Hada de Varona Haulsee,
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC, Winston-Salem, North
Carolina, for Appellant. Barbara I. Michaelides, Paula M.
Carstensen, BATES CAREY NICOLAIDES, LLP, Chicago, Illinois, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
FLOYD, Circuit Judge:
In 2004, Appellant Duke University Health System, Inc.,
engaged Automatic Elevator Company to renovate two elevators in
a hospital’s parking deck. After Automatic Elevator completed
its work, it placed barrels full of used hydraulic fluid in its
designated storage area at the hospital. Duke employees saw the
barrels, mistakenly thought they contained surgical detergents
and lubricants, and ultimately used the hydraulic fluid to wash
hundreds of surgical instruments. Approximately 127 patients
who may have come into contact with the tainted instruments sued
Duke, who settled the claims for over $6 million. Duke then
sued Automatic Elevator. Thereafter, Appellee Mitsui Sumitomo
Insurance Company of America—Automatic Elevator’s insurer—
brought this action seeking a declaratory judgment that it owed
no further obligation to Automatic Elevator. Mitsui Sumitomo
argued that the hydraulic fluid mistake constituted one
“occurrence,” obligating it to pay $1 million under the
applicable insurance policy, which it had already paid to settle
the surgical patients’ claims against Automatic Elevator. The
district court agreed, and we now affirm.
3
I.
A.
We draw the following facts from Duke and Mitsui Sumitomo’s
stipulations of fact, dated June 15, 2010. From 1978 to 2004,
Automatic Elevator worked with Duke on various elevator
projects. In keeping with this arrangement, Duke engaged
Automatic Elevator to renovate two elevators in Duke Health
Raleigh Hospital’s (DHRH) parking deck. Automatic Elevator
began its work on the first elevator (Elevator 1) in April 2004,
and the North Carolina Department of Labor inspected and
approved its work on June 24, 2004. In July 2004, Automatic
Elevator commenced its renovation of the second elevator
(Elevator 2). The North Carolina Department of Labor approved
its work on Elevator 2 on September 15, 2004.
During Automatic Elevator’s work on Elevator 1, Duke made
available several empty fifteen-gallon plastic barrels. These
barrels previously contained surgical detergents called “Mon
Klenz” and “Klenzyme” and a surgical lubricant known as “Hinge
Free,” which Duke had purchased from Cardinal Health 200, Inc.
As part of Automatic Elevator’s renovation of Elevator 1, it
removed hydraulic fluid from the elevator and stored it in the
plastic barrels. Automatic Elevator’s employees then disposed
of the hydraulic fluid at a waste disposal site. During the
course of Automatic Elevator’s work on Elevator 2, it used the
4
same plastic barrels to store hydraulic fluid from that
elevator.
When Automatic Elevator completed its renovation of
Elevator 2, it left the barrels containing hydraulic fluid in
its designated storage area at DHRH’s parking deck. A DHRH
employee saw the barrels and mistakenly thought that they
contained surgical detergents and lubricants. The employee
therefore contacted Cardinal and asked it to return the barrels
to Cardinal’s warehouse, and Cardinal complied with the request.
On November 4, 2004, Cardinal sold the barrels to DHRH, Durham
Regional Hospital (DRH), and two other hospitals, believing that
they contained surgical detergents and lubricants rather than
hydraulic fluid. The barrels that Cardinal delivered to DHRH
and DRH were labeled “Mon Klenz.”
After receiving the deliveries from Cardinal, employees at
DHRH and DRH mistakenly used the hydraulic fluid to clean
surgical instruments. At DRH, hundreds of surgical instruments
came into contact with the hydraulic fluid when employees used
hydraulic fluid in three different washing machines in December
2004. Hundreds of surgical instruments were also exposed to
hydraulic fluid at DHRH, where employees used hydraulic fluid in
two different washing machines in November and December 2004.
Duke employees discovered the error in late December 2004 and
sent letters explaining the situation to 3,650 surgical patients
5
who may have come into contact with the affected instruments.
Approximately 150 of these patients asserted claims against
Duke, Cardinal, and Automatic Elevator, alleging negligence,
negligent infliction of emotional distress, and loss of
consortium. By May 2008, Automatic Elevator had settled with
every individual who brought a claim against it. Duke entered
into settlement agreements with approximately 127 claimants,
resolving its liability for over $6 million.
B.
Mitsui Sumitomo issued two insurance policies to Automatic
Elevator that coincide with the time periods when Automatic
Elevator worked on the two DHRH elevators: the 2003-2004
policy, which was effective from August 1, 2003, to August 1,
2004, and the 2004-2005 policy, which was effective from August
1, 2004, to August 1, 2005. Both policies include a $1 million
limit for “any one occurrence.” The policies define
“occurrence” as “an accident, including the continuous repeated
exposure to substantially the same harmful condition,” but
neither policy defines “accident.” The policies include a $3
million aggregate limit, and both policies contain a “per
elevator” endorsement that applies the aggregate limit to “each
and every elevator . . . that is either serviced, repaired,
installed, renovated, refurbished or worked upon by [Automatic
6
Elevator] during the policy period.” Thus, if the hydraulic
fluid mistake involved at least three occurrences and the “per
elevator” endorsement applies, Mitsui Sumitomo is obligated to
pay $6 million on Automatic Elevator’s behalf.
After settling the tort claims against it, Duke sued
Automatic Elevator for breach of contract, indemnity, and
negligence in the General Court of Justice, Superior Court
Division, in Wake County, North Carolina, in a case styled Duke
University Health System, Inc. v. Automatic Elevator Co., Inc.,
Case No. 08 CVS 011270. That court stayed the case, which
remains pending. Mitsui Sumitomo then brought this suit against
Automatic Elevator and Duke, seeking a declaratory judgment that
it owed no further defense or indemnity obligation to Automatic
Elevator because the insurance policy set a $1 million per
occurrence limit, which Mitsui Sumitomo satisfied when it paid
$1 million to settle the claims that surgical patients brought
against Automatic Elevator. To support its contention, Mitsui
Sumitomo argued that Automatic Elevator’s alleged negligence in
storing the barrels was a single “occurrence” under the policy.
Mitsui Sumitomo also contended that the “per elevator”
endorsement did not apply because Automatic Elevator serviced
only one elevator—Elevator 2—during the 2004-2005 policy year.
Mitsui Sumitomo and Duke each moved for summary judgment.
7
The district court entered judgment in favor of Mitsui
Sumitomo, finding that Automatic Elevator’s negligence
constituted one occurrence and the “per elevator” endorsement
did not apply. Mitsui Sumitomo Ins. Co. of Am. v. Automatic
Elevator Co., No. 1:09-CV-00480, 2011 WL 4103752, at *14
(M.D.N.C. Sept. 13, 2011). The district court also held that
this case involves only the 2004-2005 policy, a finding that
Duke does not dispute. Id. Duke timely appealed, and we have
jurisdiction pursuant to 28 U.S.C. § 1291. Automatic Elevator
has been administratively dissolved by the North Carolina
Secretary of State and is not a party to this appeal.
II.
Pursuant to Rule 56(a) of the Federal Rules of Civil
Procedure, summary judgment is appropriate only if “there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” A district court
considering a summary judgment motion must view the facts in the
light most favorable to the non-moving party. United States v.
Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam). Because
we review de novo the district court’s decision to grant Mitsui
Sumitomo’s motion for summary judgment, we must use the same
standard that applies at the district court level. Shaw v.
Stoud, 13 F.3d 791, 798 (4th Cir. 1994).
8
We are sitting in diversity, so the choice of law rules of
the state in which the district court sat—North Carolina—apply
in this case. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
487, 496-97 (1941). Under North Carolina law, the law of the
place where the contract was made governs a contract dispute.
Fast v. Gulley, 155 S.E.2d 507, 509-10 (N.C. 1967). Automatic
Elevator and Mitsui Sumitomo executed the insurance contract at
issue in this case in North Carolina. Consequently, North
Carolina law applies, and “our role is to apply the governing
state law, or, if necessary, predict how the state’s highest
court would rule on an unsettled issue.” BP Prods. N. Am., Inc.
v. Stanley, 669 F.3d 184, 188 (4th Cir. 2012) (quoting Horace
Mann Ins. Co. v. Gen. Star Nat’l Ins. Co., 514 F.3d 327, 329
(4th Cir. 2008)) (internal quotation marks omitted).
III.
Duke alleges that the hydraulic fluid mistake involved
multiple occurrences, entitling Automatic Elevator to more than
$1 million under the 2004-2005 policy. Specifically, Duke
argues that (1) Automatic Elevator’s decision to leave the
barrels in its designated storage area at DHRH cannot constitute
an occurrence in and of itself because that choice was a
“volitional act” rather than an “accident” and (2) the district
court should have looked to the “most immediate cause” of the
9
injury—such as each surgery or each use of hydraulic fluid to
wash surgical instruments—to determine the number of
occurrences. For the reasons we outline below, the district
court correctly determined that the hydraulic fluid incident
involved a single occurrence.
A.
Automatic Elevator’s insurance policy defines an
“occurrence” as an “accident.” Duke therefore contends that the
“question of how many occurrences there are is answered in the
most straight-forward fashion by counting how many accidents, or
unforeseen events, occurred and resulted in injury.” To support
its argument that this case involves multiple accidents and
hence multiple occurrences, Duke looks to two definitions of the
word “accident.” First, Black’s Law Dictionary defines
“accident” as “[a]n unintended and unforeseen injurious
occurrence; something that does not occur in the usual course of
events or that could not be reasonably anticipated.” Black’s
Law Dictionary 15 (8th ed. 2004). Second, in Gaston County
Dyeing Machine Co. v. Northfield Insurance Co., the Supreme
Court of North Carolina defined “accident” as an “unplanned and
unforeseen happening or event, usually with unfortunate
consequences.” 524 S.E.2d 558, 564 (N.C. 2000). Duke then
juxtaposes these definitions with Black’s Law Dictionary’s
10
definition of “volition”—“[t]he ability to make a choice or
determine something; . . . the act of making a choice or
determining something”—and concludes that Automatic Elevator’s
volitional act of leaving the barrels in its storage space could
not be an accident. Black’s Law Dictionary 1605 (8th ed. 2004).
Although this semantic argument is intriguing, it lacks merit.
Contrary to Duke’s assertions, North Carolina precedent
indicates that the definition of “accident” has no bearing on
the number of occurrences. Instead, the cases that Duke cites
prove that the definition of “accident” is relevant when
determining whether the insurance company must provide coverage
at all or pinpointing the date an event triggered coverage. See
Gaston Cnty., 524 S.E.2d at 564-65 (considering whether there
was an occurrence and the trigger of coverage date); Waste Mgmt.
of Carolinas, Inc. v. Peerless Ins. Co., 340 S.E.2d 374, 379-380
(N.C. 1986) (whether there was an occurrence); Alliance Mut.
Ins. Co. v. Guilford Ins. Co., 711 S.E.2d 207 (N.C. Ct. App.
2011) (unpublished table decision) (trigger of coverage date);
Davis v. Dibartolo, 625 S.E.2d 877, 880-83 (N.C. Ct. App. 2006)
(whether there was an occurrence); McCoy v. Coker, 620 S.E.2d
691, 694-95 (N.C. Ct. App. 2005) (same); Wash. Hous. Auth. v.
N.C. Hous. Auths. Risk Retention Pool, 502 S.E.2d 626, 630 (N.C.
Ct. App. 1998) (same); City of Wilmington v. Pigott, 307 S.E.2d
857, 859 (N.C. Ct. App. 1983) (same). Because Mitsui Sumitomo
11
does not dispute the trigger of coverage date or whether the
hydraulic fluid mistake constituted an occurrence, Duke’s
definitional argument is misplaced. As discussed below, the
Supreme Court of North Carolina has adopted a specific test for
calculating the number of occurrences.
B.
North Carolina courts have adopted a cause test to
determine how many occurrences an event encompassed. See Gaston
Cnty., 524 S.E.2d at 565. Under this type of test, the number
of occurrences “is determined by the cause or causes of the
resulting injury.” Appalachian Ins. Co. v. Liberty Mut. Ins.
Co., 676 F.2d 56, 61 (3d Cir. 1982). The cause test stands in
opposition to the effect test, which treats each injury as a
separate occurrence. Michael Murray, Note, The Law of
Describing Accidents: A New Proposal for Determining the Number
of Occurrences in Insurance, 118 Yale L.J. 1484, 1499 (2009).
Therefore, to determine how many occurrences stemmed from the
hydraulic fluid mistake, we must evaluate the cause or causes of
the incident rather than its effects.
Courts have adopted various formulations of the cause test.
Under the “proximate cause theory,” courts consider an event to
constitute one occurrence when “there was but one proximate,
uninterrupted, and continuing cause which resulted in all of the
12
injuries and damage.” Id. at 1496 (quoting Appalachian Ins.
Co., 676 F.2d at 61) (internal quotation marks omitted). In
contrast, courts employing the “liability event theory” look to
the immediate event or events that gave rise to liability to
determine the number of occurrences. Id. at 1497. For example,
in Michigan Chemical Corp. v. American Home Assurance Co., the
Sixth Circuit held that each shipment of toxic flame retardant
that had been mislabeled as animal feed supplement qualified as
a separate occurrence, even though the problem arose from a
single event: the mislabeling itself. 728 F.2d 374, 383 (6th
Cir. 1984). Duke implies that North Carolina’s courts have
adopted the liability event theory because it argues that they
look to “the most immediate cause of the injury” to calculate
the number of occurrences. The district court rejected this
approach and employed the proximate cause theory, finding that
the “proper application of the cause approach . . . requires
asking which negligent act, or continuum of negligent acts, on
the part of the insured gave rise to liability.” Mitsui
Sumitomo, 2011 WL 4103752, at *13. As discussed below, the
district court did not err in making this determination.
Duke argues extensively that Gaston County Dyeing Machine
Co. v. Northfield Insurance Co. supports its argument that the
Supreme Court of North Carolina determines the number of
occurrences by pinpointing the most immediate cause or causes of
13
the harm. In Gaston County, the Supreme Court of North Carolina
considered whether the rupture of a pressure vessel and the
resulting contamination of multiple lots of medical imaging dye
qualified as a single occurrence or multiple occurrences.
However, rather than engaging in this inquiry to determine how
much the policy obligated the insurer to pay, the court was
evaluating whether the incident had triggered one insurance
policy or multiple policies. 524 S.E.2d at 565. Duke contends
that Gaston County supports its position that the Supreme Court
of North Carolina looks to the most immediate cause of the
injury to determine the number of occurrences because the court
considered the valve rupture—not more remote causes, such as the
vessel’s defective design or manufacturing—to be the accident.
Duke’s reliance on Gaston County is inappropriate for at
least two reasons. First, as noted above, Duke implies that the
Gaston County court actively considered whether it was the valve
rupture or the product defects that constituted the occurrence.
However, the court never analyzed this issue, instead
considering only whether the valve rupture was an occurrence at
all and, if so, when it happened. 524 S.E.2d at 564-65.
Second, Duke overlooks the Gaston County court’s conclusion that
the incident involved a single occurrence because, when “all
subsequent damages flow from the single event, there is but a
single occurrence.” Id. at 565. This statement evokes the
14
proximate cause theory. Consequently, even if Gaston County
applies to this case—which is debatable in light of its focus on
the trigger of coverage issue—it does not support Duke’s
argument.
Both the district court and Mitsui Sumitomo relied on
Christ Lutheran Church v. State Farm Fire & Casualty Co. as an
indication that North Carolina’s courts have adopted the
proximate cause theory. 471 S.E.2d 124 (N.C. Ct. App. 1996).
In Christ Lutheran, a North Carolina appeals court concluded
that multiple acts of embezzlement constituted a single
occurrence. Id. at 126. However, the insurance policy at issue
in that case defined an “occurrence” as “[a]ll loss involving a
single act, or series of related acts, caused by one or more
persons,” and the court was specifically concerned with whether
the acts of embezzlement were a “series of related acts.” Id.
at 125-26 (internal quotation marks omitted). The insurance
policy at issue in this case contains no similar grouping
language, so the district court erred in using Christ Lutheran
to determine the number of occurrences in this case.
In light of the distinctions between Gaston County’s and
Christ Lutheran’s holdings and this case, North Carolina
precedent does not strongly favor either Duke or Mitsui
Sumitomo. However, we believe the Supreme Court of North
Carolina would find that this case involves one occurrence for
15
three reasons. First, there is no reason to suspect that the
Supreme Court of North Carolina would not apply the test that it
enunciated in Gaston County to determine the number of
occurrences in contexts other than trigger of coverage.
Numerous other courts have applied a similar test to determine
the number of occurrences in cases analogous to this one,
including the United States District Court for the Eastern
District of North Carolina in a case interpreting North Carolina
law. See W. World Ins. Co. v. Wilkie, No. 5:06-CV-64-H, 2007 WL
3256947, at *4-5 (E.D.N.C. Nov. 2, 2007); see also, e.g.,
Fireman’s Fund Ins. Co. v. Scottsdale Ins. Co., 968 F. Supp.
444, 448 (E.D. Ark. 1997) (concluding that preparation of
contaminated food was one occurrence despite multiple sales of
that food); Doria v. Ins. Co. of N. Am., 509 A.2d 220, 224-25
(N.J. Super. Ct. App. Div. 1986) (holding that insureds’ failure
to properly fence their pool was one occurrence regardless of
the number of resulting injuries). Second, Koikos v. Travelers
Insurance Co., 849 So.2d 263 (Fla. 2003)—the primary case that
Duke relies on to support its contention than an occurrence is
the “most immediate cause of the injury”—has been discredited by
other courts. See Wilkie, 2007 WL 3256947, at *3-4 (declining
to apply Koikos in part because it was inconsistent with Gaston
County); Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 295
(Pa. 2007). There is no indication that the Supreme Court of
16
North Carolina would adopt the rule that the Florida Supreme
Court developed in Koikos rather than turning to the standard it
enunciated in Gaston County.
Third, looking to the number of surgeries or instances of
using hydraulic fluid to wash surgical instruments to determine
the number of occurrences would turn the focus in this case from
Automatic Elevator’s alleged negligence to Duke’s actions.
Because Automatic Elevator is the insured party, calculating the
number of occurrences based on Duke’s conduct would contradict
other courts’ conclusions that it is more appropriate to “focus
on the act of the insured that gave rise to their liability.”
Donegal, 938 A.2d at 295; see also RLI Ins. Co. v. Simon’s Rock
Early Coll., 765 N.E.2d 247, 251 (Mass. App. Ct. 2002) (“[W]e
must look to the ‘cause’ of the injury by reference to the
conduct of the insured for which coverage is afforded.”); Bomba
v. State Farm Fire & Cas. Co., 879 A.2d 1252, 1255-56 (N.J.
Super. Ct. App. Div. 2005) (holding that the insureds’
negligence in storing their firearms was the appropriate focus
in calculating number of occurrences, not the gunman’s
intervening acts). The only action that Automatic Elevator took
in this case was placing the barrels of hydraulic fluid in its
designated storage area at DHRH. Consequently, although we
recognize that these out-of-state holdings are not binding
precedent in North Carolina, the consensus among these courts
17
suggests that the Supreme Court of North Carolina would find
that the hydraulic fluid mistake involved one occurrence because
it would similarly look to Automatic Elevator’s single act of
negligence rather than Duke’s intervening actions.
C.
Duke correctly points out that we should resolve any
ambiguity in the policy’s definition of “occurrence” in Duke’s
favor and that we should interpret the policy in favor of
coverage as long as Duke’s argument is reasonable. Wachovia
Bank & Trust Co. v. Westchester Fire Ins. Co., 172 S.E.2d 518,
522-23 (N.C. 1970). However, even in light of these rules of
construction, Duke cannot prevail. As explained above, Duke’s
contention that the hydraulic fluid incident involved multiple
occurrences is unreasonable. First, Duke makes an unfounded
semantic argument that this case involved more than one
occurrence because an accident cannot be a volitional act.
Second, Duke mischaracterizes Gaston County’s holding in a way
that obscures that case’s support of the proximate cause theory.
And finally, Duke suggests that the Supreme Court of North
Carolina is likely to adopt a controversial standard from a
Florida Supreme Court case rather than extending its own holding
in Gaston County. Because Duke’s interpretation is
unreasonable, we believe that Gaston County controls this case.
18
Therefore, we hold that Automatic Elevator’s alleged negligence
in leaving the barrels in its storage area constituted a single
occurrence.
IV.
Finally, Duke contends that the policy’s “per elevator”
endorsement applies in this case because Automatic Elevator
serviced two elevators during the project that culminated in the
hydraulic fluid mistake. However, we need not consider this
issue because the endorsement specifies that the policy’s $3
million aggregate limit—not its $1 million per occurrence limit—
applies to each elevator that Automatic Elevator serviced during
the policy period. Because we hold that this case involves only
one occurrence and does not trigger the policy’s aggregate
limit, the “per elevator” endorsement cannot apply here.
V.
For the foregoing reasons, we affirm.
AFFIRMED
19
KING, Circuit Judge, dissenting:
I respectfully dissent from the opinion of the panel
majority, because I believe that it has incorrectly determined
the amount of insurance coverage available from Mitsui Sumitomo.
Each instance of a waste-laden medical instrument being used to
operate on an unsuspecting patient at the Duke Hospitals gave
rise to an “occurrence.” Duke’s argument to that effect is not
simply “intriguing,” ante at 11, it is plainly correct.
An occurrence is defined in the Mitsui Sumitomo policy as
an accident (“‘Occurrence’ means an accident”). North Carolina
precedent counsels that to the extent possible, “every word and
every provision [of an insurance policy] is to be given effect,”
and this principle instructs us to analyze the word “accident”
within the context of the policy’s definition of an occurrence.
Gaston Cnty. Dyeing Mach. Co. v. Northfield Ins. Co., 524 S.E.2d
558, 563 (N.C. 2000) (internal quotation marks omitted). Mitsui
Sumitomo agreed by its policy to provide coverage to Automatic
Elevator for “bodily injury or property damage” up to $1,000,000
for “any one occurrence” (which means “an accident”), and an
aggregate limit of $3,000,000 per elevator. Giving effect to
the policy’s definition of an “occurrence,” the term “accident”
means an “unplanned and unforeseen happening or event.” Gaston
Cnty., 524 S.E.2d at 564. North Carolina precedent also
dictates that “[w]hether events are ‘accidental’ and constitute
20
an ‘occurrence’ depends upon whether they were expected or
intended from the point of view of the insured.” Waste Mgmt. of
Carolinas, Inc. v. Peerless Ins. Co., 340 S.E.2d 374, 380 (N.C.
1986). An “occurrence” is therefore not a volitional act, such
as leaving barrels in the Duke Health parking lot. An
occurrence, or accident, must instead be an unplanned or
unforeseen happening or event from the perspective of Automatic
Elevator. The district court thus erred in concluding that the
volitional decision of leaving the barrels of used hydraulic
fluid in the parking lot gave rise to Automatic Elevator’s
liability.
In addition to the requirement that an accident be an
unplanned happening or event, the presence of injuries or
damages is a prerequisite to coverage. This proposition makes
sense, inasmuch as there is nothing for the insurer to
compensate until injuries or damages have arisen. For example,
if an elevator repairman intentionally leaves his tools in a
public walkway for easy access and no one uses the walkway,
there can be no accident because an unforeseen event will not
have occurred. Moreover, there is yet no need for coverage
because no damages or injuries have been suffered. If a person
uses the obstructed walkway, however, and injures himself
falling over the tools, an accident has occurred and the
resultant damages are compensable under the policy.
21
In the foregoing example, the “occurrence” was the fall and
the resulting injuries. The repairman’s placing of the tools
was an act of volition, but the resulting injuries were
unintended by the repairman and his employer and, thus,
accidental. The facts of this case present a materially similar
scenario. Automatic Elevator, after servicing the Duke Health
parking garage, intentionally left the barrels of used hydraulic
fluid in the parking lot. Those actions do not satisfy the
definition of an accident and thus, at that point, there had
been no occurrence. When scores of surgeries were conducted
using instruments that had been “cleaned” with the contents of
those barrels, however, there were multiple occurrences, as each
of the surgeries caused severe injury and damage. Insurance
coverage for such injuries is what the policy is all about.
The Supreme Court of North Carolina’s decision in North
Carolina Farm Bureau Mutual Insurance Co. v. Stox, 412 S.E.2d
318 (N.C. 1992), exemplifies the foregoing. In that case, Stox
suffered injuries from a fall after she was pushed by Gordon
Owens. The insurer had issued a homeowners liability policy to
Owens, under which Owens sought indemnification for Stox’s
injuries. The state court of appeals ruled that the policy did
not cover Stox’s injuries because those injuries were subject to
an exclusion as “expected or intended.” Id. at 321. The state
supreme court reversed, ruling that the court of appeals had
22
improperly focused on the intentional nature of Owen’s act in
pushing Stox, rather than on the resulting injury. Id. at 322.
The supreme court decided that, because Stox’s injuries were
unintentional, the occurrence was not subject to the policy
exclusion. Id.
The Stox court also assessed whether Owen’s act was a
covered “occurrence,” which — as in this case — was defined in
the policy as “an accident.” Id. at 324. Since an “accident”
was not defined in the policy, the court gave the term the
dictionary definition similarly applicable here — “‘an event
that takes place without one’s foresight or expectation; [an]
undesigned, sudden, and unexpected event; chance; contingency.’”
Id. at 325 (quoting Iowa Mut. Ins. Co. v. Fred M. Simmons, Inc.,
128 S.E.2d 19, 22 (N.C. 1962)). Guided by the settled rule that
insurance policy provisions “which extend coverage must be
construed liberally so as to provide coverage, whenever possible
by reasonable construction,” the state supreme court concluded
that the injury resulting from Owen’s intentional act of pushing
Stox was itself an unintended injury covered by the homeowners
policy. Stox, 412 S.E.2d at 324-35. As the court explained:
where the term “accident” is not specifically defined
in an insurance policy, that term does include injury
resulting from an intentional act . . . . Competent
evidence supported the trial court’s finding in the
case sub judice that the injury to Stox was an
unintended injury resulting from Owens’ intentional
act. Therefore, the trial court correctly concluded
23
from that finding that Owens’ liability, if any, for
that injury was covered under the policy as an
“occurrence” or “accident[.”]
Id. at 325. Put simply, the accident (i.e., the occurrence) in
that case, according to the high court of North Carolina, was
the unintended injury to Stox, rather than the intentional
conduct of Owen.
Pursuant to the foregoing, I am convinced that North
Carolina law defines an “accident” as an unplanned or unforeseen
happening or event that carries unfortunate consequences.
Furthermore, the ordinary meaning of the term “accident” is an
event that was not anticipated. As a result, an intentional or
volitional act of the insured simply cannot be an “accident.”
Accidents, however, may be unexpected harmful events (i.e.,
multiple surgeries with contaminated instruments) that flow from
volitional acts such as leaving mislabeled barrels in the Duke
Health parking lot. This interpretation of the word “accident”
is entirely reasonable, and would prevail under North Carolina
law even if “accident,” as used in the policy, could somehow be
deemed ambiguous.
From the perspective of Automatic Elevator, its abandonment
of barrels of hydraulic fluid could not have been an accident,
let alone an accident covered by the policy, in that the
abandonment was volitional, that is, actually intended, and the
abandonment did not itself result in any injuries or damages.
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The accidents (i.e., the occurrences) took place when the
damages arose — when, unintended by Automatic Elevator,
surgeries were performed on unsuspecting Duke hospital patients
with contaminated medical instruments that had been unknowingly
“cleaned” with used elevator hydraulic fluid. Such occurrences
were repeated on at least 127 occasions, and Mitsui Sumitomo, as
the insurer, is responsible for those occurrences, up to the
aggregate limits of its coverage. *
Because there were two elevators being repaired at the Duke
Hospital, and because the hydraulic fluid came from repair work
that was performed on both of them, I would rule that Mitsui
Sumitomo is liable to its insured for coverage up to $6,000,000.
I respectfully dissent.
*
The majority primarily rests its decision on North
Carolina’s adoption of a “cause test” to determine which event
constituted the occurrence. I am not convinced, however, that
North Carolina has ever adopted such a test. The only North
Carolina decision that the majority relies on for this test is
Gaston County, yet the opinion states that “Duke’s reliance on
Gaston County is inappropriate.” Ante at 14. In Gaston County,
the court gave weight to the term “accident,” and the accident
there was the “sudden, unexpected leakage” of a pressure vessel,
causing property damage. “Sudden, unexpected leakage” readily
fits the definition of an accident because it was unplanned and
unintentional. In my view, Gaston County did not adopt a “cause
test,” it simply applied the definition of “accident” to the
facts of the case to determine which incident qualified as an
occurrence.
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