Mitsui Sumitomo Insurance Co. v. Duke University Health System

Filing

UNPUBLISHED AUTHORED OPINION filed. Originating case number: 1:09-cv-00480-LPA-LPA Copies to all parties and the district court/agency. [999040678].. [11-2057]

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UNPUBLISHED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Affirmed by unpublished opinion.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,

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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Unpublished opinions are not binding precedent in this circuit.

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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.
sued Automatic Elevator.
Insurance

Company

of

Duke then

Thereafter, Appellee Mitsui Sumitomo
America—Automatic

Elevator’s

insurer—

brought this action seeking a declaratory judgment that it owed
no further obligation to Automatic Elevator.
argued

that

“occurrence,”

the

hydraulic

obligating

it

fluid
to

mistake

pay

$1

Mitsui Sumitomo
constituted

million

under

one
the

applicable insurance policy, which it had already paid to settle
the surgical patients’ claims against Automatic Elevator.
district court agreed, and we now affirm.

3

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I.
A.
We draw the following facts from Duke and Mitsui Sumitomo’s
stipulations of fact, dated June 15, 2010.
Automatic
projects.
Automatic
Raleigh

Elevator
In

worked

keeping

Elevator

Hospital’s

to

with

with

this

renovate

(DHRH)

Duke

on

various

arrangement,

two

parking

From 1978 to 2004,

elevators
deck.

elevator

Duke

in

engaged

Duke

Automatic

Health

Elevator

began its work on the first elevator (Elevator 1) in April 2004,
and

the

North

Carolina

Department

of

approved its work on June 24, 2004.
Elevator

commenced

(Elevator 2).

its

renovation

Labor

inspected

and

In July 2004, Automatic
of

the

second

elevator

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.
barrels

previously

contained

surgical

detergents

called

These
“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
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barrels

to

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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.
employee

saw

contained

the

surgical

barrels

and

detergents

mistakenly
and

thought

lubricants.

A DHRH

that

The

they

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

surgical instruments.

used

the

hydraulic

fluid

to

clean

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
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who may have come into contact with the affected instruments.
Approximately
Duke,

150

Cardinal,

negligent

of

and

these

Automatic

infliction

consortium.

patients

of

asserted

Elevator,

emotional

claims

alleging

distress,

negligence,

and

loss

of

By May 2008, Automatic Elevator had settled with

every individual who brought a claim against it.
into

against

settlement

agreements

with

approximately

Duke entered
127

claimants,

resolving its liability for over $6 million.

B.
Mitsui Sumitomo issued two insurance policies to Automatic
Elevator

that

coincide

Elevator

worked

on

with

the

the

two

time

DHRH

periods

elevators:

when

Automatic

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.
limit

for

“any

one

Both policies include a $1 million

occurrence.”

The

policies

define

“occurrence” as “an accident, including the continuous repeated
exposure

to

substantially

the

same

neither policy defines “accident.”
million

aggregate

limit,

and

both

harmful

condition,”

but

The policies include a $3
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
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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
Automatic

settling
Elevator

negligence

in

the

the
for

tort

claims

breach

of

General

Court

against

contract,

of

Justice,

it,

Duke

sued

indemnity,
Superior

and
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.
remains pending.

That court stayed the case, which

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.

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court

judgment

district

Sumitomo,

finding

entered

that

Automatic

in

favor

of

Elevator’s

Mitsui

negligence

constituted one occurrence and the “per elevator” endorsement
did not apply.
Elevator

Co.,

Mitsui Sumitomo Ins. Co. of Am. v. Automatic
No.

1:09-CV-00480,

(M.D.N.C. Sept. 13, 2011).

2011

WL

4103752,

at

*14

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,

jurisdiction pursuant to 28 U.S.C. § 1291.
has

been

administratively

dissolved

by

and we have

Automatic Elevator
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

entitled to judgment as a matter of law.”

the

movant

is

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.
Stoud, 13 F.3d 791, 798 (4th Cir. 1994).
8

Shaw v.

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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

argues

that

under
(1)

the

2004-2005

Automatic

policy.

Elevator’s

Specifically,

decision

to

leave

Duke
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
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injury—such as each surgery or each use of hydraulic fluid to
wash

surgical

occurrences.
court

instruments—to

determine

the

number

of

For the reasons we outline below, the district

correctly

determined

that

the

hydraulic

fluid

incident

involved a single occurrence.

A.
Automatic

Elevator’s

insurance

“occurrence” as an “accident.”

policy

defines

an

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.”
its

argument

that

this

case

involves

multiple

To support

accidents

and

hence multiple occurrences, Duke looks to two definitions of the
word

“accident.”

“accident”

as

First,

“[a]n

Black’s

unintended

Law

and

Dictionary
unforeseen

defines
injurious

occurrence; something that does not occur in the usual course of
events or that could not be reasonably anticipated.”
Law Dictionary 15 (8th ed. 2004).
Dyeing

Machine

Co.

v.

Northfield

Black’s

Second, in Gaston County
Insurance

Co.,

the

Supreme

Court of North Carolina defined “accident” as an “unplanned and
unforeseen

happening

consequences.”
juxtaposes

these

or

event,

usually

with

524 S.E.2d 558, 564 (N.C. 2000).
definitions

with
10

Black’s

Law

unfortunate
Duke then
Dictionary’s

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definition

of

“volition”—“[t]he

determine

something; . . . the

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ability
act

of

to

make

making

a
a

choice

or

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.
prove

that

the

definition

Instead, the cases that Duke cites
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).
11

Because Mitsui Sumitomo

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does not dispute the trigger of coverage date or whether the
hydraulic

fluid

mistake

constituted

definitional argument is misplaced.

an

occurrence,

Duke’s

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

determine how many occurrences an event encompassed.
Cnty., 524 S.E.2d at 565.

test

to

See Gaston

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
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injuries and damage.”

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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,

single event:
Cir.

1984).

even

though

the

the mislabeling itself.
Duke

implies

that

North

problem

arose

from

a

728 F.2d 374, 383 (6th
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

Sumitomo, 2011 WL 4103752, at *13.

to

liability.”

Mitsui

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
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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

policy or multiple policies.

had

triggered

one

524 S.E.2d at 565.

insurance

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.
14

This statement evokes the

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proximate cause theory.

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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

proximate cause theory.

courts

have

adopted

the

471 S.E.2d 124 (N.C. Ct. App. 1996).

In Christ Lutheran, a North Carolina appeals court concluded
that

multiple

occurrence.

acts

of

Id. at 126.

embezzlement

constituted

a

single

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.”
at 125-26 (internal quotation marks omitted).
policy

at

issue

in

this

case

contains

no

Id.

The insurance

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

precedent
Sumitomo.

does

holdings

not

However,

strongly
we

and

this

favor

believe

the

case,
either
Supreme

North
Duke
Court

Carolina
or
of

Mitsui
North

Carolina would find that this case involves one occurrence for
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three reasons.

Pg: 16 of 25

First, there is no reason to suspect that the

Supreme Court of North Carolina would not apply the test that it
enunciated

in

occurrences

Gaston

in

County

contexts

to

other

determine
than

the

trigger

number

of

of

coverage.

Numerous other courts have applied a similar test to determine
the

number

including

of

the

occurrences
United

in

States

cases

District

analogous
Court

to

for

this

the

one,

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
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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

intervening acts).

of

occurrences,

not

the

gunman’s

The only action that Automatic Elevator took

in this case was placing the barrels of hydraulic fluid in its
designated
recognize

storage
that

area

these

at

DHRH.

out-of-state

Consequently,

although

holdings

not

are

we

binding

precedent in North Carolina, the consensus among these courts
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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

coverage as long as Duke’s argument is reasonable.

of

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

case

argument

occurrence

because

that
an

this
accident

involved

cannot

be

a

more

than

one

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,

Carolina

is

Duke

suggests

likely

to

adopt

that
a

the

Supreme

controversial

Court

of

standard

North
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.
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Therefore, we hold that Automatic Elevator’s alleged negligence
in leaving the barrels in its storage area constituted a single
occurrence.

IV.
Finally,
endorsement

Duke

applies

contends
in

that

this

case

the

policy’s

because

“per

Automatic

elevator”
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.
one

occurrence

and

Because we hold that this case involves only
does

not

trigger

the

policy’s

aggregate

limit, the “per elevator” endorsement cannot apply here.

V.
For the foregoing reasons, we affirm.
AFFIRMED

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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.”
Cnty.,

524

S.E.2d

at

564.

North

Carolina

precedent

Gaston
also

dictates that “[w]hether events are ‘accidental’ and constitute
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‘occurrence’

depends

Pg: 21 of 25

upon

whether

they

were

intended from the point of view of the insured.”

expected

or

Waste Mgmt. of

Carolinas, Inc. v. Peerless Ins. Co., 340 S.E.2d 374, 380 (N.C.
1986).
as

An “occurrence” is therefore not a volitional act, such

leaving

barrels

occurrence,

or

in

the

accident,

Duke

must

Health

instead

parking
be

an

lot.

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

unplanned

to

happening

the
or

requirement
event,

the

that

presence

damages is a prerequisite to coverage.
sense,

inasmuch

as

there

is

an

nothing

accident
of

be

an

injuries

or

This proposition makes
for

the

compensate until injuries or damages have arisen.

insurer

to

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.
uses

the

falling

obstructed

over

the

walkway,

tools,

an

however,
accident

and
has

injures
occurred

resultant damages are compensable under the policy.
21

If a person
himself
and

the

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In the foregoing example, the “occurrence” was the fall and
the resulting injuries.
was

an

act

unintended

of
by

accidental.
scenario.

The repairman’s placing of the tools

volition,
the

but

repairman

the
and

resulting
his

injuries

employer

and,

were
thus,

The facts of this case present a materially similar
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

injuries.

which

Owens

sought

indemnification

for

Stox’s

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
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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,
exclusion.
The

the

occurrence

was

not

subject

to

the

policy

Owen’s

act

was

Id.

Stox

court

also

assessed

whether

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)).
insurance

policy

provisions

Guided by the settled rule that

“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
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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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damages

arose

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(i.e.,
—

the

when,

Pg: 25 of 25

occurrences)
unintended

by

took

place

Automatic

when

the

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.

25