Cincinnati Ins. Co. v. Quorum Mgmt. Corp.

Decision Date13 May 2016
Docket NumberCase No. 5:12-cv-406-Oc-10PRL
Parties The Cincinnati Insurance Company, Plaintiff, v. Quorum Management Corp., a/k/a Quorum Management Company; Juan Martin Nero; Guillermo Caset; Nicholas Espain; Anthony J. Campbell; Diamond State Insurance Company a/s/o Quorum Management Corp., Franck's Pharmacy, Inc., and Franck's Lab, Inc., Defendants.
CourtU.S. District Court — Middle District of Florida

Chris Ballentine, Fisher, Rushmer, Werrenrath, Dickson, Talley & Dunlap, PA, Orlando, FL, David Arthur Glenny, Bice Cole Law Firm, PL, Ocala, FL, for Plaintiff.

Alvaro L. Mejer, Mejer Law, PA, Craig B. Shapiro, Fernando S. Aran, Aran, Correa, Guarch & Shapiro, PA, Coral Gables, FL, Ashley B. Jordan, Christine A. Gudaitis, Richard Hugh Lumpkin, Ver Ploeg & Lumpkin, PA, Joshua Ross Goodman, Cozen O'Connor, Miami, FL, William E. Gericke, Cozen O'Connor, Philadelphia, PA, for Defendants.

ORDER GRANTING SUMMARY JUDGMENT ON DUTY TO DEFEND
WM. TERRELL HODGES, UNITED STATES DISTRICT JUDGE

This is a diversity jurisdiction declaratory judgment insurance coverage action.1 Before the Court are cross-motions for summary judgment concerning Plaintiff, The Cincinnati Insurance Company's ("Cincinnati's"), duty to defend an action brought against its insureds in state court. This is also a tragic case involving the deaths of twenty-one (21) internationally competitive polo horses owned by Defendants Quorum Management Corp. ("Quorum"), Juan Martin Nero, Guillermo Caset, and Nicolas Espain.2 The horses were injected with a nutritional supplement

that was ordered by a licensed veterinarian, and compounded and manufactured by Defendant Franck's Lab, Inc. ("Franck's") and one of its employees, Defendant Anthony J. Campbell. Unfortunately, Franck's and Campbell improperly formulated the compound, which resulted in mixing in a lethal dose of sodium selinite. Shortly after the polo horses were injected with the improperly compounded nutritional supplement, they went into cardiac arrest and died.

On March 29, 2010, Quorum, Nero, Caset, Espain, and Diamond filed a state court action against Franck's, Campbell, and others, seeking to recover damages for the loss of the polo horses.3 Cincinnati had insured Franck's (and Campbell as an employee of Franck's) under a Commercial General Liability Policy and a Commercial Umbrella Policy.4 When Franck's and Campbell asked Cincinnati to undertake their defense in the Underlying Case, Cincinnati refused to do so and denied coverage.

The Underlying Case proceeded to trial, and on March 11, 2016, a jury verdict was rendered in favor of Quorum, Nero, Caset, Espain, and Diamond and against Franck's and Campbell, in the total amount of $2,516,985.78 (Doc. 87-1).

While litigation in the Underlying Case continued, Cincinnati filed the present action in this Court, seeking a declaratory judgment that it had no duty to defend, and no duty to indemnify, Franck's or Campbell in the Underlying Case (Doc. 1). Cincinnati filed an Amended Complaint (Doc. 15),5 and Franck's filed an Amended Counterclaim for breach of contract (Doc. 18). These are the operative pleadings in this case.

On September 17, 2013, the Court granted Franck's and Campbell's motion to stay all proceedings related to the question of whether Cincinnati has a duty to indemnify Franck's and Campbell (Doc. 48). The issue of whether Cincinnati has a duty to defend Franck's and Campbell, and the breach of contract counterclaim, were allowed to proceed.

Presently pending are four motions and cross-motions for summary judgment (Docs. 34, 39, 55, 59) on the issue of Cincinnati's duty to defend Franck's and Campbell in the Underlying Case. Each of the motions has been fully briefed, and is ripe for disposition.

Upon a review of the record and the applicable legal precedent, the Court finds that Cincinnati has successfully demonstrated as a matter of law that it has no duty to defend either Franck's or Campbell in the Underlying Case. The damages claimed against Franck's and Campbell in the state court action are excluded from coverage under both of Cincinnati's policies because they fall within the "products and professional services" exclusion and the "products completed operations hazard" exclusion. Summary judgment will therefore be granted to Cincinnati and denied to the Defendants. Because the duty to defend is broader than the duty to indemnify, seeFun Spree Vacations, Inc. v. Orion Ins. Co., 659 So.2d 419, 421–22 (Fla. 3rd Dist.Ct.App.1995), the Court further finds that there are no remaining claims left to resolve in this case. Final judgment will therefore also be entered accordingly.

Undisputed Material Facts6
I. The Underlying State Lawsuit

On March 29, 2010, Quorum, Nero, Caset, Espain, and Diamond filed a state court action against Franck's, Campbell, and others, seeking to recover damages for the loss of the polo horses in the amount of $4,076,000. See Quorum Management Corp., etc., et al. v. Franck's Pharmacy, Inc., et al., Case No. 50 2010 CA 009112 XXXX MB, Fifteenth Judicial Circuit, In and For Palm Beach County, Florida (the "Underlying Case"). The complaint has been amended twice, and the third amended complaint, dated September 20, 2011, is the operative pleading in the Underlying Case (Doc. 34, Ex. 3).

The third amended complaint alleges that Quorum is a Florida corporation, and was the owner of 12 internationally competitive polo horses. (Doc. 34, Ex. E, ¶ 1). Nero, Caset, and Espain are each citizens of Argentina, internationally known polo players, and were the owners of the other 9 polo horses. (Id., ¶¶ 2-4). Diamond is an insurance company licensed to do business in Florida, and issued a policy to Quorum for its 12 polo horses. (Id., ¶¶ 5, 11-12).

The complaint in the Underlying Case further alleges that Franck's is a Florida corporation located in Ocala, and at all relevant times, was engaged in the business of "designing, formulating, compounding, manufacturing, selling, and distributing veterinary medications and nutritional supplements

." (Doc. 34, Ex. 3, ¶ 7). Campbell was employed by Franck's "to participate in, oversee, manage and supervise the formulation, compounding, manufacturing, and distribution of veterinary medications and nutritional supplements." (Id., ¶ 8).

According to the complaint, on or about April 15, 2009, James S. Belden, a licensed veterinarian practicing in Florida, ordered a mineral and vitamin nutritional supplement

compound from Franck's to be administered to the polo horses. (Doc. 34, Ex. 3, ¶¶ 18, 21). The formula Belden transmitted to Franck's was as follows: Centesimal composition: Selenium (as sodium selenite) 45 mg, Potassium aspartate hemihydrates 1.0g, Magnesium aspartate tetrahydrate 1.5g, Methylparahydroxybenzoate 0.140g, Propyle para-hydroxybenzoate 0.010g, Exc. q.s.q. 100 ml. (Id., ¶ 20).

An error was made by Franck's and Campbell while compounding the formula, and instead of mixing the formula as transmitted, Franck's and Campbell added 10 grams (rather than the prescribed 45 mg) of sodium selenite—a lethal dose. (Doc. 34, Ex. 3, ¶ 23). Franck's and Campbell compounded and manufactured the improper supplement, and sold and distributed it to Belden and the owners of the polo horses. (Id., ¶ 26). The supplement was administered to the polo horses on April 19, 2009; shortly after, the horses went into cardiac arrest

and died. (Id., ¶¶ 26-27).

The Underlying Case asserts state law claims of negligence and strict liability against Franck's and Campbell (Doc. 34, Ex. 3, Counts I-II, V-VI). Each of the claims assert that Franck's and Campbell's negligence and/or strict liability is based, among other things, on their compounding, re-formulating, manufacturing, selling, and/or distributing a dangerously defective nutritional supplement

, failing to properly and adequately inspect and/or test the nutritional supplement and/or failure to warn that the supplement was defective, and failing to adequately hire, train and supervise their agents and employees. (Id.). The third amended complaint nowhere refers to Franck's or Campbell as a pharmacist, or alleges that either engaged in the provision of professional health care services.

II. The Relevant Policy Provisions

Cincinnati issued to Franck's a Commercial General Liability policy, number CPP 081 02 75, which covered the period January 1, 2007 through January 1, 2010, and for which Franck's paid an annual premium of $7,743 (the "CGL Policy") (Doc. 1-4, p. 24, Doc. 61-4, p. 81). The CGL Policy provided a general aggregate coverage limit of $2,000,000, and a limit of $1,000,000 per occurrence. It was an "occurrence" policy, meaning that the insurance covered "bodily injury" or "property damage" that "occurs during the policy period" and is caused by an "occurrence" that takes place within the "coverage territory." Cincinnati also issued to Franck's an occurrence-based Umbrella Policy (also with policy number CPP 081 02 75) covering the same time period, and with the same occurrence and aggregate dollar limits (Doc. 1-4, p. 64). The Umbrella Policy would be triggered when the limits of the CGL Policy were exhausted by payment of claims.

Both Policies define an "insured" to include individuals, partnerships, joint ventures, limited liability companies, corporations, trusts. (Doc. 1-4, pp. 35, 75). "Insured" also includes volunteer workers, employees, and managers, for acts performed within the scope of their duties and/or employment related to the conduct of the insured's business. (Id.)

An "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Doc. 1-4, pp. 43, 83). Both Policies also define "property damage" as: "(a) Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or (b) Loss of use of tangible property that is not...

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