Cincinnati Ins. Co. v. Urgent Care Pharmacy, Inc., C.A. No. 7:04-1057-HMH.
| Decision Date | 07 February 2006 |
| Docket Number | C.A. No. 7:04-1057-HMH. |
| Citation | 413 F.Supp.2d 644 |
| Court | U.S. District Court — District of South Carolina |
| Parties | CINCINNATI INSURANCE COMPANY, Plaintiff, v. URGENT CARE PHARMACY, INC., W. Ray Burns, R. Ken Mason, Jr., G. David Scyster as Administrator of the Estate of Mary Virginia Scyster and Individually, Virginia Rauch, Robert Conrad, as Administrator of the Estate of Vivian Conrad and Individually, Donald M. Boles, Annie McGill, Evelyn Arroyo, Daniel Bowman, James Hickman, Shirley Kus, Robert D. Black, and Deborah J. Hensley, Defendants. |
Mark Steven Barrow, Esq. and Martin S. Driggers, Jr., Esq., Columbia, SC, for Plaintiff.
H. Forest Home, Esq., Raleigh, NC, William W Aycock, Esq., Fayetteville, NC, William Marvin Grant, Jr., Esq., Greenville, SC, for Defendants.
This matter is before the court on cross motions for summary judgment. After a review of the law and the facts of this case, the court denies Cincinnati Insurance Company's ("Cincinnati") motion for summary judgment and grants G. David Scyster ("Scyster"), Virginia Rauch ("Rauch"), Robert Conrad, as Administrator of the Estate of Vivian Conrad and Individually ("Conrad"), Annie McGill ("McGill"), and Donald M. Boles' ("Boles") (collectively "Movants") motion for summary judgment.1
Cincinnati filed a declaratory judgment action to determine whether Urgent Care Pharmacy, Inc. ("Urgent Care") was covered under Businessowners Package Policy number BOP1769962 ("the Policy") for the period of November 21, 1999, to November 21, 2002. (Compl. Ex. 1 (Policy).) R. Ken Mason, Jr. ("Mason"), the pharmacist-in-charge at Urgent Care, and W. Ray Burns ("Burns"), the owner of Urgent Care, are insureds under the Policy. The underlying facts are as follows. Urgent Care was a compounding pharmacy in Spartanburg, South Carolina. Urgent Care had the capability to make methylprednisolone (hereinafter "Drug"), a sterile injectable drug that is typically injected into the lower back to treat pain. (Movants' Mem. Supp. ,Summ. J. 9.) During the first part of 2002, this Drug became commercially unavailable because the manufacturer, UpJohn, ceased manufacturing it. (Id.) As such, health care providers sought an alternate source for the Drug. (Id.)
In mid-2002, patients who had been injected with the Drug made by Urgent Care began to get sick. (Id. 12.) It was later determined that the Drug was contaminated with a fungus. (P1' s. Mem. Supp. Summ. J. 3 Ex. 11 (Burns Dep. 36).) As a result, the South Carolina Board of Pharmacy ("Board") investigated Urgent Care. The Board issued a Cease and Desist Order on September 27, 2002, closing Urgent Care. (Pl.'s Mem. Supp. Summ. J. 4 Ex. 4 (Cease and Desist Order).) The Movants are persons who were injured or killed as a result of receiving injections of the Drug. (Movants' Mem. Supp. Summ. J. 4-5.)
In its motion for summary judgment, Cincinnati seeks a declaration that the Movants' claims are not covered because Urgent Care was manufacturing the Drug in violation of exclusion j ("Exclusion j") set forth in Policy section II.B. (Pl.'s Mem. Supp. Summ. J. 13-14.). In the alternative, Cincinnati alleges that the Policy does not cover the Movants' claims because Urgent Care was compounding the Drug in bulk, which is not covered pursuant to Exclusion j. (Id.)
The Movants' motion for summary judgment on their counterclaim requests a declaration that (1) "Cincinnati's policy does provide coverage to Urgent Care, Burns, and Mason for liability arising out of the [Drug]"; and (2) because no policy limits are indicated in the Policy, the Policy "provides coverage to the full extent" of each Movant's claim. (Movants' Mem. Supp. Summ. J. 5.)
Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). Rule 56(c) mandates entry of summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
In deciding whether there is a genuine issue of material fact, the evidence of the non-moving party is to be believed and all justifiable inferences must be drawn in the non-movant's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). However, Id. at 248, 106 S.Ct. 2505.
"Insurance policies are subject to general rules of contract construction." State Farm Mut. Auto. Ins. Co. v. Calcutt, 340 S.C. 231, 530 S.E.2d 896, 897 (App. 2000) (internal quotation marks omitted). Courts must "give policy language its plain, ordinary and popular meaning." Id. "When the contract is unambiguous, clear, and explicit, it must be construed according to the, terms used by the parties." Myers v. Nat'l States Co., 362 S.C. 41, 606 S.E.2d 486, 488 (App.2004). "The judicial function of a court of law is to enforce an insurance contract as made by the parties, and not to rewrite or to distort, under the guise of judicial construction, contracts, the terms of which are plain and unambiguous." Stewart v. State Farm Mut. Auto. Ins. Co., 341 S.C. 143, 533 S.E.2d 597, 601 (App.2000). "Where language used in an insurance contract is ambiguous, or where it is capable of two reasonable interpretations, that construction which is most favorable to the insured will be adopted." Poston v. Nat'l Fid. Life Ins. Co., 303 S.C. 182, 399 S.E.2d 770, 772 (1990) (internal quotation marks omitted). In other words, "when an insurance policy ... is susceptible to more than one reasonable interpretation, one of which would provide coverage, th[e] Court must hold as a matter of law in favor of coverage." Gaskins v. Blue Cross-Blue Shield of South Carolina, 271 S.C. 101, 245 S.E.2d 598, 602 (1978).
Cincinnati alleges that the Policy excludes coverage for Urgent Care because it was manufacturing the Drug or compounding the Drug in bulk, activities which are excluded from coverage under Exclusion j. (Pl.'s Mem. Supp. Summ. J. 13-14.). The Movants contend that Exclusion j does not apply to the professional liability coverage because the Policy specifically states that the exclusion applies only to business liability coverage.
The Policy is a Businessowners Package Policy with four sections: and (Compl. Ex. 1 (Policy p. 1 of 40).) The Policy declarations state under the title "OPTIONAL COVERAGES" that "[t]he following optional coverages, if any, are provided under this policy, only if indicated by X." (Id. (Policy Declarations).) The box for optional professional liability coverage contains an X. (Id.) The declarations further provide that professional liability coverage is "Per attached form." (Id.) No additional form has been provided by Cincinnati outlining the professional liability coverage. Instead, Cincinnati alleges that no additional form exists, and that professional liability coverage is provided within the business liability coverage. (Pl.'s Mem. Opp'n Movants' Summ. J. 3.) There is no Policy section dealing specifically with professional liability coverage. In fact, professional liability coverage is referenced in only two places in the Policy: in Exclusion j and in a Policy endorsement.
Exclusion j appears in the Policy, in pertinent part, as follows:
B. Exclusions
1. Applicable to Business Liability Coverage.
This insurance does not apply to:
....
j. "Bodily injury", "property damage", "personal injury" or "advertising injury" due to rendering or failure to render professional services unless professional liability coverage has been endorsed hereon or stated in the declarations.
This includes but is not limited to:
....
9) Services in the practice of pharmacy.
However, this exclusion does not apply to an insured whose operations include those of a retail druggist, retail drug store or any retail drug store which the insured has discontinued using providing there is not willful violation of a penal statute or ordinance relating to the sale of pharmaceuticals by or with the knowledge or consent of any insured.
This coverage does not apply to "property damage" arising out of:
Any goods or products (including drugs or medicines) or containers prepared, sold, handled, or distributed by the insured.
This policy does not provide coverage for "Bodily Injury" or "Property Damage" arising out of products manufactured or compounded in bulk for sale by the insured to others.
(Compl. Ex. 1 () (emphasis in original).)
Cincinnati submits that (Pl.'s Reply Supp. Summ. J. 3.) Cincinnati essentially contends that Exclusion j sets forth the extent of the professional liability coverage because that is the only place it is addressed in the Policy. The court disagrees. "The meaning of a particular word or phrase is not determined by considering the word or phrase by itself, but by reading the policy as a whole and considering the context...
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