Pharmacists Mut. Ins. Co. v. Cincinnati Ins. Co., C.A. No. 7:08-3631-HMH.

• Decision Date: 02 October 2009
• Docket Number: C.A. No. 7:08-3631-HMH.
• Citation: 658 F.Supp.2d 745
• Court: U.S. District Court — District of South Carolina
• Parties: PHARMACISTS MUTUAL INSURANCE COMPANY, Plaintiff, v. CINCINNATI INSURANCE COMPANY, Defendant.

658 F.Supp.2d 745

PHARMACISTS MUTUAL INSURANCE COMPANY, Plaintiff, v. CINCINNATI INSURANCE COMPANY, Defendant.

C.A. No. 7:08-3631-HMH.

United States District Court, D. South Carolina, Spartanburg Division.

October 2, 2009.

Adriane Malanos Belton, Esquire, James Dunbar Myrick, Esquire, Charleston, SC, for Plaintiff/Petitioner.

Mark Stevens Barrow, Esquire, William Roberts Calhoun, Jr., Esquire, Columbia, SC, for Defendant/Respondent.

OPINION AND ORDER

HENRY M. HERLONG, JR., Senior District Judge.

This matter is before the court on the parties' cross-motions for summary judgment. Plaintiff Pharmacists Mutual Insurance Company ("Pharmacists Mutual") filed this action alleging that it is entitled to recover certain prejudgment and post-judgment interest from Defendant Cincinnati Insurance Company ("Cincinnati"). After consideration, the court grants Cincinnati's motion for summary judgment and denies Pharmacists Mutual's motion for summary judgment as moot.

I. FACTUAL AND PROCEDURAL BACKGROUND

This case is related to a previous declaratory judgment action, civil action number 7:04-1057-HMH, Cincinnati Ins. Co. v. Urgent Care Pharmacy, et al. (hereinafter "2004 action"), wherein this court determined the extent and limits of liability insurance coverage provided under Cincinnati's insurance policy number BOP 176 99 62 ("Policy") for the claims of G. David Scyster, Administrator of the Estate of Mary Virginia Scyster, Virginia Rauch, Robert Conrad, Administrator of the Estate of Vivian Conrad (hereinafter "Conrad"), David Boles, and Annie McGill (collectively "injured parties"). The injured parties were personally injured or a family member died as a result of receiving contaminated injections of methylprednisolone (hereinafter "Drug").¹ Cincinnati provided primary insurance coverage to R. Ken Mason, Jr. ("Mason"), the pharmacist that compounded the Drug, and Urgent Care Pharmacy, the pharmacy that employed Mason and sold the Drug. In addition, Pharmacists Mutual provided individual professional liability insurance coverage to Mason under another policy, policy number PHL 0055751. In the 2004 action, the court granted Cincinnati's motion for partial summary judgment on August 10, 2007, finding that the liability limit under the Policy was $1,005,000 (hereinafter "August 10, 2007 Order").

The court concluded

as a matter of law that: 1) Cincinnati's aggregate limit of liability coverage under the Policy for the occurrences of bodily injury suffered by Defendants or Defendants' decedents is $1,005,000, and 2) Cincinnati shall pay its $1,005,000 liability limits within 60 days of the entry of this Order, and 3) upon such payment, Cincinnati's liability coverage will have been exhausted under the Policy and this case will be dismissed.

(August 10, 2007 Order 3.)

On October 3, 2007, the court granted Cincinnati's motion to deposit the $1,005,000 with the court in an interest-bearing account. In addition, on November 26, 2007, the court granted the injured parties' motion for an order of disbursement of the funds. As noted above, Conrad was one of the injured parties. The funds were disbursed pro rata according to the injured parties' specifications, which included interest on Conrad's April 14, 2005 state court judgment. The November 26, 2007 disbursement order stated in pertinent part that "[h]aving paid its limits of coverage, Cincinnati Insurance Company's duty to defend Urgent Care Pharmacy or its employees regarding other claims based on the compounding and distribution of methylprednisolone acetate is hereby extinguished, as provided in Section II, Paragraph A.1.a.(2) of its policy." (November 26, 2007 Order 2.) Mason was a party in the 2004 action and never responded to Cincinnati's motion for partial summary judgment. No appeal was taken in the 2004 action.

On October 29, 2008, Pharmacists Mutual filed the instant action alleging that Cincinnati is liable to Pharmacists Mutual "on the grounds of equitable subrogation/reimbursement/indemnity for $245,234.74, consisting of certain pre and post judgment interest due by Cincinnati [on the April 15, 2005 Conrad state court judgment²] pursuant to a policy of insurance issued by Cincinnati." (Pharmacists Mutual Mem. Supp. Summ. J. 1.)

Pharmacists Mutual alleges that "the inclusion of interest in the [disbursement] calculation was incorrect because the Cincinnati Policy clearly provides that Cincinnati is obligated to pay certain pre and post judgment interest in addition to the policy limits of $1,005,000." (Id. 3.) The Policy provides for prejudgment and postjudgment interest in a section entitled "Coverage Extension—Supplementary Payments" which states in pertinent part that

[i]n addition to the Limit of Insurance, we will pay, with respect to any claim or `suit' we defend:

. . . .

(6) Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the Limit of Insurance, we will not pay any prejudgment interest based on that period of time after the offer.

(7) All interest on the full amount of any judgment that accrues after entry of judgment and before we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance.

(Id. Ex. 2 (Policy, Sec.II.A.1.e).) Cincinnati filed a motion for summary judgment on September 1, 2009. Pharmacists Mutual filed a motion for summary judgment on September 3, 2009. The parties have filed responses and replies to the motions. Therefore, both motions are ripe for decision.

II. DISCUSSION OF THE LAW

A. Summary Judgment Standard

Summary judgment is appropriate only "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c)(2). 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, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Id. at 248, 106 S.Ct. 2505.

Moreover, "[w]hen a motion for summary judgment is properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading; rather its response must—by affidavits or as otherwise provided in this rule—set out specific facts showing a genuine issue for trial." Fed.R.Civ.P. 56(e)(2).

B. Cincinnati's Motion for Summary Judgment

Cincinnati moves for summary judgment on Pharmacists Mutual's claim alleging, in part, that res judicata bars this action. "Res judicata is the branch of the law that defines the effect a valid judgment may have on subsequent litigation between the same parties and their privies. Res judicata ends litigation, promotes judicial economy and avoids the harassment of relitigation of the same issues." Plum Creek Dev. Co. v. City of Conway, 334 S.C. 30, 512 S.E.2d 106, 108 (1999). "Res judicata bars subsequent actions by the same parties when the claims arise out of the same transaction or occurrence that was the subject of a prior action between those parties." Id. at 109. "To establish res judicata, the defendant must prove the following three elements: (1) identity of the parties; (2) identity of the subject matter; and (3) adjudication of the issue in the former suit." Id.

First, Conrad and Mason were parties to the 2004 action. Pharmacists Mutual seeks to recover the interest that it paid on the Conrad judgment from Cincinnati arguing that the Policy obligated Cincinnati to pay the interest. Conrad "assigned all of its rights as against Cincinnati for this interest to Pharmacist[s] Mutual." (Compl. ¶ 28.) Pharmacists Mutual has no greater rights than its assignor. Brendle's Stores, Inc. v. OTR on Behalf of Bd. of Trustees, 978 F.2d 150, 154 (4th Cir.1992). Further, Pharmacists Mutual stated in its complaint that it "is subrogated to the rights of its insured, Mason." (Compl. ¶ 29.) With respect to its claim, Pharmacists Mutual's rights are no greater than its insured, Mason. Brendle's Stores, Inc., 978 F.2d at 154 (citing W.M. Kirkland, Inc. v. Providence Washington Ins. Co., 264 S.C. 573, 216 S.E.2d 518, 521 (1975) (assignee has no higher rights than assignor and subrogee has no higher rights than subrogor)).

Pharmacists Mutual alleges that it is not a privy of Conrad and Mason because it was not a party in the 2004 action and did not have the same interests as Conrad and Mason in that action. (Pharmacists Mutual Mem. Opp'n Summ. J. 3-4.) However, Pharmacists Mutual overlooks the fact that Conrad and Mason were parties in the 2004 action and that Pharmacists Mutual's "equitable subrogation/reimbursement/indemnity"³ claim in the instant suit arises from an assignment of rights from Conrad and as subrogee for Mason. Pharmacists Mutual has stepped into the shoes of Conrad and Mason to assert that the interest should have been paid under the Policy. The claim for interest under the Policy belonged to Conrad. Conrad assigned all rights to the interest to Pharmacists Mutual. Therefore, privity is not an issue in the instant action because Conrad and Mason were parties in the 2004 action.

Second, the subject matter in the 2004 action concerned whether the Policy covered the claims of the injured parties and if so, the extent and limits of coverage that Cincinnati was obligated to...