Pharmacists Mutual Insurance v. Scyster , 232 F. App'x 217 ( 2007 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-1334
PHARMACISTS MUTUAL INSURANCE COMPANY,
Plaintiff - Appellant,
versus
G. DAVID SCYSTER, as Administrator of the
Estate of Mary Virginia Scyster and
Individually Estate of Mary Virginia Scyster;
VIRGINIA RAUCH; VIVIAN CONRAD; DONALD M.
BOLES; ANNIE MCGILL,
Defendants - Appellees,
and
R. KEN MASON, JR.; URGENT CARE PHARMACY
INCORPORATED; W. RAY BURNS; EVELYN ARROYO;
DANIEL W. BOWMAN; JAMES HICKMAN; SHIRLEY KUS;
ROBERT BLACK; DEBORAH J. HENSLEY,
Defendants.
Appeal from the United States District Court for the District of
South Carolina, at Spartanburg. Henry M. Herlong, Jr., District
Judge. (7:04-cv-01922-HMH)
Argued: January 30, 2007 Decided: May 7, 2007
Before WILKINSON, GREGORY, and DUNCAN, Circuit Judges.
Affirmed by unpublished opinion. Judge Wilkinson wrote the
opinion, in which Judge Gregory and Judge Duncan joined.
ARGUED: James Dunbar Myrick, BUIST, MOORE, SMYTHE, MCGEE, P.A.,
Charleston, S.C., for Appellant. James B. Maxwell, MAXWELL,
FREEMAN & BOWMAN, P.A., Durham, North Carolina; H. Forest Horne,
Jr., MICHAELS, JONES, MARTIN, PARRIS & TESSNER, Raleigh, North
Carolina, for Appellees. ON BRIEF: Adriane Malanos Belton, BUIST,
MOORE, SMYTHE, MCGEE, P.A., Charleston, S.C., for Appellant.
William M. Grant, Jr., GRANT & LEATHERWOOD, P.A., Greenville, South
Carolina, for Appellees; Joe McLeod, THE MCLEOD LAW FIRM,
Fayetteville, North Carolina, for Appellee Virginia Rauch.
Unpublished opinions are not binding precedent in this circuit.
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WILKINSON, Circuit Judge:
Pharmacists Mutual Insurance Company appeals a decision that
a policy it issued to R. Ken Mason, Jr., covered claims against
Mason for injury and death caused by contaminated medications
produced at the pharmacy where Mason worked. The insurer seeks to
avoid liability on the grounds that its policy excludes damages
from willfully illegal acts and damages from the manufacture of
pharmaceuticals, and on the grounds that some persons fell ill
during the policy period but received their injections of the
medication prior to the policy’s effective date. We find that no
evidence supports an inference that Mason intentionally violated
the law or was engaged in manufacturing, and that under South
Carolina law, damages are covered so long as they arose during the
policy period. We therefore affirm the judgment.
I.
Pharmacists Mutual Insurance Company (“Pharmacists Mutual”)
brought this declaratory judgment action to determine its potential
liability for injuries and deaths from contaminated doses of
methylprednisolone produced at Urgent Care Pharmacy, Inc. (“Urgent
Care”), in Spartanburg, South Carolina. The insured, R. Ken Mason,
was Urgent Care’s pharmacist-in-charge and oversaw the compounding
of medications, although he did not personally compound drugs. W.
Ray Burns owned the pharmacy. The defendant-appellees are a number
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of those who have filed suit against Mason because of the drug
contamination: G. David Scyster, Virginia Rauch, Vivian Conrad,
Donald M. Boles, and Annie McGill.
A.
Urgent Care distributed the contaminated methylprednisolone at
issue in this case to two medical practices in North Carolina, the
Johnston Pain Clinic and Pinehurst Anesthesia Associates. After
the Upjohn pharmaceutical company stopped manufacturing
methylprednisolone, a sterile injectible drug used to treat severe
back and joint pain, Dr. Scott Johnston of the Johnston Pain Clinic
and Dr. Burt Place of Pinehurst Anesthesia Associates each
contacted Urgent Care to ask whether the pharmacy could compound
the drug for them.
Dr. Johnston ultimately bought 525 vials of the drug from
Urgent Care between March 5, 2002 and August 20, 2002, for
administration in his clinic’s offices. Vivian Conrad was treated
with injections of Urgent Care’s methylprednisolone at the Johnston
Pain Clinic and contracted fungal meningitis because the medication
was contaminated. Conrad passed away as a result on November 10,
2003.
Dr. Place’s practice purchased 557 vials from Urgent Care
between May 6, 2002 and June 5, 2002. He and his partners
administered the drug at their practice to defendant-appellees
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Donald Boles, Annie McGill, and Virginia Rauch, and to Mary
Virginia Scyster, whose estate is administered by defendant-
appellee G. David Scyster. Those patients allegedly fell ill with
meningitis because the painkiller was contaminated, and Mary
Virginia Scyster allegedly passed away as a result.
When patients from Johnston Pain Clinic and Pinehurst
Anesthesia Associates became sick in mid-2002, the South Carolina
Board of Pharmacy (“the Board”), began an investigation of Urgent
Care. Government investigators subsequently determined that
methylprednisolone produced by Urgent Care had been contaminated
with wangiella dermatitidis, a fungus mold that is linked to spinal
meningitis.
The Board found multiple apparent violations of the South
Carolina Pharmacy Practice Act. It issued a cease-and-desist order
to Urgent Care, Burns, and Mason on September 27, 2002, stating, in
part, that Urgent Care, Burns and Mason had engaged in
manufacturing because “you have not been adhering to good
compounding practices based on the existence of a
pharmacist/patient/practitioner relationship.” Sheila Young, the
Board’s manager of regulatory compliance, said in a deposition that
the Board made this finding because Urgent Care had been
manufacturing Bimix and Trimix. In contrast, she testified, Urgent
Care had been compounding methylprednisolone, not manufacturing it.
Paul W. Bush, a pharmacy director who reviewed records of Urgent
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Care’s activities, explained in a deposition that the evidence
supported these conclusions. Urgent Care appeared to have
manufactured Bimix and Trimix because it distributed the drugs to
physicians who resold them for use outside their offices, even
though Urgent Care did not know the identity of the patients who
ultimately used the drugs. In contrast, there was no evidence that
Urgent Care’s methylprednisolone was resold or used outside of
physicians’ offices or medical institutions.
The cease-and-desist order also stated that Mason and Urgent
Care appeared to have violated other requirements of the South
Carolina Pharmacy Practice Act, including sterilization standards,
contamination-monitoring procedures, and maintenance rules. The
order demanded that Mason and Urgent Care stop compounding
activities. Mason has since agreed to relinquish his pharmacy
permit, while admitting no wrongdoing.
B.
Pharmacists Mutual filed this action seeking a declaratory
judgment that lawsuits against Mason relating to methylprednisolone
would not be covered by the individual professional liability
policy that Pharmacists Mutual had issued to Mason, and that the
insurer had no duty to defend such lawsuits. Pharmacists Mutual’s
policy covers only Mason, not Urgent Care, and provides only excess
coverage, available for damages not covered by another policy. The
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policy applies to losses from occurrences, personal injuries, and
advertising injuries “arising out of your rendering or failure to
render pharmacy services” for the period between June 19, 2002 and
June 19, 2003.
Under the policy, “pharmacy services” are defined to include
compounding, which in turn includes “the preparation, mixing,
assembling, packaging, or labeling of a drug or device . . . as a
result of a practitioner’s prescription drug order or initiative
based on the practitioner/patient/pharmacist relationship in the
course of professional practice.” Compounding “also includes the
preparation of drugs or devices in anticipation of prescription
drug orders based on routine, regularly observed prescribing
patterns” and “such other practices as are approved as a part of
the practice of pharmacy by the Board of Pharmacy in the state in
which you practice.” The policy does not cover manufacturing,
which it defines to include “the preparation and promotion of
commercially available products from bulk compounds for resale by
pharmacies, practitioners, or other persons” and the “promotion and
marketing” of the drugs that a pharmacy produces.
Pharmacists Mutual sought a declaratory judgment that Mason
and Urgent Care had been engaged in manufacturing of
methylprednisolone and argued that Mason had deliberately broken
the law, triggering an exclusion to the policy for willful
violations of law committed by the policyholder or with his
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knowledge and consent. It also sought a declaratory judgment that
claims concerning the injury or death of three persons -- McGill,
Conrad, and Mary Virginia Scyster -- were not covered because they
involved bodily injury outside the policy period. After cross-
motions for summary judgment, the district court rejected these
arguments and granted summary judgment to the defendants who sought
it, holding that Mason’s conduct did not amount to manufacturing or
trigger the illegality exclusion, and that the claims of the
defendants who sought summary judgment all involved injuries that
occurred during the policy period. Pharmacists Mutual appeals.
II.
Pharmacists Mutual first argues that its policy does not cover
the contaminated drug claims against Mason because the policy
contains an exclusion for “[d]amages caused by your willful
violation of a regulation or statute pertaining to the practice of
pharmacy or any other willful violation of a penal statute or
ordinance committed by you or with your knowledge and consent.”
Under the law of South Carolina that the parties agree applies,
exclusions must be interpreted narrowly, Boggs v. Aetna Cas. & Sur.
Co., 252 S.E.2d 565, 568 (S.C. 1979), and ambiguities interpreted
in favor of the insured, Gaskins v. Blue Cross-Blue Shield of
S.C., 245 S.E.2d 598, 602 (S.C. 1978). When a policy is capable of
more than one reasonable interpretation, courts adopt the
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construction most favorable to the insured. Id. The insurer bears
the burden of establishing that an exclusion applies. Boggs, 252
S.E.2d at 568.
The parties both interpret the exclusion for “willful”
violations to require an intent to violate the law. See Brief of
Appellees at 14; Brief of Appellant at 13 n.8. This reflects South
Carolina decisions that define a willful act as “one done
voluntarily and intentionally with the specific intent to do
something the law forbids, or with the specific intent to fail to
do something the law requires to be done, that is to say, with bad
purpose either to disobey or disregard the law.” In re Diggs, 544
S.E.2d 632, 632 (S.C. 2001) (internal quotations omitted). Since
Mason was the policyholder, Mason must have either intended to
break the law or have known and consented to a willful violation by
another person in order for the exclusion to apply.
Pharmacists Mutual has not presented evidence to avoid summary
judgment on the applicability of this exclusion. In this case,
Pharmacists Mutual presented evidence that Mason violated the South
Carolina Pharmacy Practice Act, but no evidence supporting an
inference that Mason broke the law deliberately. The only evidence
bearing directly upon intent is Mason’s testimony that he believed
Urgent Care had been compounding methylprednisolone, not
manufacturing it, and Mason’s testimony that the pharmacy’s owner,
W. Ray Burns, told Mason and other employees that he wanted the
9
company to be in full legal compliance and held meetings and
briefings to educate his pharmacists about the requirements of law.
No pharmacist, doctor, or investigator suggested that Mason -- or
anyone else at the pharmacy -- knew that he was violating the law,
let alone that he intended to do so.
Mason’s violations of South Carolina’s pharmacy laws are not
by themselves a sufficient basis to find that the violations were
committed “voluntarily and intentionally with the specific intent
to do something the law forbids.” Id. (internal quotations
omitted). The state’s statutory scheme is intricate. The South
Carolina Pharmacy Practice Act regulates matters from alkaloids to
veterinarians. See generally S.C. Code Ann. § 40-43-10 et seq.
(2001). It does not simply require safety and cleanliness, but
dictates hand-washing procedures, id. § 40-43-86(A)(16)(j) (“[A]ll
pharmacists, before compounding prescriptions . . . shall
thoroughly cleanse their fingernails . . . ”), signage, id. § 40-
43-86(A)(14) (stating when pharmacy department is closed or
licensed pharmacist is absent pharmacy must display “a sign stating
‘Pharmacy Department Closed, Pharmacist Not On Duty’”), and scent,
id. § 40-43-86(A)(16)(a) (stating pharmacy must eliminate
“obnoxious odors” in the prescription department). Its numerous,
detailed provisions, some susceptible to multiple interpretations,
create the possibility of violations by mistake or
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misinterpretation, as well as accidental violations by those who
understood the law’s requirements.
Given the ease of inadvertent violation, the leap from a bare
violation to a conclusion of willfulness is too speculative for a
reasonable finder of fact. Such a jump not only threatens to strip
the willfulness limitation of meaning. It also interprets an
exclusion that is written to cover a narrow subset of violations in
a manner that renders uncertain the central protection that
insurance provides, as a shield against liability for negligent
acts. Pharmacists Mutual could write an exclusion applicable to
any illegal act, but it did not do so, and the narrower exclusion
that it wrote covering willful illegal acts should not be treated
as identical to the broader exclusion the insurer chose not to
write.
Pharmacists Mutual would give its narrowly drafted exclusion
even greater scope through its argument that willfulness can be
established from the fact that Urgent Care’s owner, W. Ray Burns,
sought to significantly increase the amount of Urgent Care’s
compounding work, because the sale of compounded medications was
more profitable than the sale of other drugs. This fact by itself
is of limited relevance, because the exclusion requires that Mason,
the policyholder, intended to violate the law or knew of and
consented to a willful violation. But Burns’ desire to foster his
most profitable line of business is unremarkable in any event: It
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would be noteworthy if Burns did not wish to increase his business’
focus on its most profitable line of work. There is no evidence
suggesting Burns sought to serve this end by willfully violating
state statutes, thereby jeopardizing his company’s ability to do
business at all. To the contrary, while Pharmacists Mutual seeks
to place a sinister cast on the fact that Urgent Care “obtained
licenses in 50 states” for its compounding, this evidence hardly
suggests that the company sought to pursue its expansion
unlawfully.
In sum, we find no basis in the record that could adequately
support excluding coverage based upon willful illegal conduct by
Mason. While the district court did not hold a hearing prior to
its grant of summary judgment, “[t]here is no absolute requirement
that a ruling on a motion for summary judgment be preceded by a
hearing.” Cray Commc’ns, Inc. v. Novatel Computer Sys., Inc., 33
F.3d 390, 396 (4th Cir. 1994). The insurer does not suggest that
the company was prevented from putting relevant information into
the record. The company had ample opportunity to offer evidence to
meet its burden, and simply failed to do so.
III.
Pharmacists Mutual next contends that it is not liable for
damages from the contaminated methylprednisolone because the drugs
were manufactured, rather than compounded. Mason’s policy does not
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cover manufacturing, which it defines to include “the preparation
and promotion of commercially available products from bulk
compounds for resale . . .” as well as the “promotion and
marketing” of certain drugs. In contrast, the policy covers the
compounding of medications, including “the preparation, mixing,
assembly, packaging, or labeling of a drug . . . as a result of a
practitioner’s prescription drug order or initiative based on the
practitioner/patient/pharmacist relationship in the course of
professional practice” and “the preparation of drugs or devices in
anticipation of prescription drug orders based on routine,
regularly observed prescribing patterns.” Compounding also
includes “such other practices as are approved as a part of the
practice of pharmacy by the Board of Pharmacy in the state in which
you practice.”
We agree with the district court that Mason and Urgent Care’s
production and distribution of methylprednisolone constituted
permissible compounding under these definitions, rather than
manufacturing. There was evidence that Mason and Urgent Care had
produced two urological drugs -- Bimix and Trimix -- which
physicians resold for use outside their practices, and that this
would constitute manufacturing. But the Board did not find
evidence that Urgent Care’s methylprednisolone was used outside
physicians’ offices and it did not conclude that Mason or Urgent
Care had manufactured the painkiller based upon any other
13
consideration. Pharmacists Mutual has offered no evidence in this
proceeding that methylprednisolone was resold or administered
outside physicians’ offices or medical institutions. And we find
unavailing its arguments that even though the Board made no finding
that Urgent Care manufactured methylprednisolone, this Court should
make such a finding on its own.
A.
Pharmacists Mutual argues that Mason and Urgent Care were
engaged in manufacturing by making drugs “in anticipation of
receiving prescriptions without a historical basis,” S.C. Code Ann.
§ 40-43-86(CC)(2)(f), but it does not offer evidence that the
pharmacy lacked a historical basis for any of its compounding of
methylprednisolone. Under Mason’s policy, compounding includes
both the preparation of drugs “as a result of a practitioner’s
prescription drug order” and “the preparation of drugs or devices
in anticipation of prescription drug orders based on routine,
regularly observed prescribing patterns.” South Carolina law
similarly distinguishes manufacturing, which includes the
preparation of drugs without a historical basis, id., from
compounding, which includes “the preparation of drugs or devices in
anticipation of prescription drug orders based on routine,
regularly observed prescribing patterns,” id. § 40-43-30(7). All
the testimony in this case indicated that Mason and Urgent Care’s
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production of methylprednisolone fit within the compounding
definition. Mason and Sheila Young, the Board’s manager of
regulatory compliance, testified that the doses of
methylprednisolone that Urgent Care compounded were either
supported by a prescription order that the pharmacy had received at
the time of compounding or by historical prescription patterns.
Pharmacists Mutual nevertheless argues that the historical
basis for some compounding was deficient. It notes that when new
customers placed their first orders, Urgent Care sometimes
fulfilled the orders using drugs that had been prepared previously.
For instance, Urgent Care fulfilled an order for methylprednisolone
from the Johnston Pain Clinic on February 25, 2002 using drugs that
were compounded on February 6, 2002, even though the Johnston Pain
Clinic had not previously ordered methylprednisolone from the
pharmacy. Similarly, Urgent Care used drugs from the February 6
lot to fulfill orders from two subsequent new customers, Dr. Robert
Feldman and Dr. Thomas A. Duc. These facts are not relevant,
however, because they do not contradict Mason and Young’s testimony
that Urgent Care’s compounding had a historical basis in
prescription data, even if the historical basis was derived from
different physicians than those who ultimately received the
compounded drugs. Neither the policy nor South Carolina law
require that the historical basis supporting compounding be derived
from the practitioner who ultimately receives the batch in
15
question, and as a result, the acts to which Pharmacists Mutual
points do not indicate that Mason or Urgent Care engaged in
manufacturing.
B.
Pharmacists Mutual claims that even if Mason and Urgent Care
had a historical basis for their production of methylprednisolone,
they engaged in manufacturing because they distributed
methylprednisolone to doctors for in-office or institutional use
without knowing the identities of the patients treated in these
settings. Pharmacists Mutual’s policy states that compounding
includes “practices . . . approved as a part of the practice of
pharmacy by the Board of Pharmacy in the state in which you
practice,” but the insurer argues that South Carolina does not
treat a pharmacy’s production or distribution of drugs as
compounding if the pharmacy does not have a prescription drug order
that identifies a particular patient. The insurer relies upon the
South Carolina Pharmacy Practice Act provision that “[t]he
compounding of drugs in anticipation of receiving prescriptions
without a historical basis or the distribution of compounded
products without a patient/practitioner/pharmacist relationship is
considered manufacturing.” S.C. Code Ann. § 40-43-86(CC)(2)(f).
South Carolina Board of Pharmacy officials explained in
depositions, however, that this provision of state law did not bar
16
the production of methylprednisolone for physicians’ in-office use,
based upon a history of past orders, and we do not read the state’s
statutes to indicate otherwise. While the Pharmacy Practice Act
provides that “the distribution of compounded products without a
patient/practitioner/pharmacist relationship is considered
manufacturing,” id., it does not define the
patient/practitioner/pharmacist relationship. It is by no means
self-evident that this relationship is absent when a physician has
relationships with both a patient and a pharmacist and obtains
medications from the pharmacist for in-office administration, as
Jeffrey Gibbs, a longtime food and drug lawyer who has served as
associate and chief counsel for enforcement at the Food and Drug
Administration, noted in a deposition.
Several specific code provisions suggest, to the contrary,
that state officials were correct that the provision concerning the
“patient/pharmacist/physician relationship” does not require
prescription orders naming individual patients when a pharmacy
produces drugs on the basis of historical data, for physicians’ in-
office administration. South Carolina’s Pharmacy Practice Act
repeatedly indicates that a history of prior orders can be an
adequate basis for the compounding of medications -- and thus
indicates that compounding can occur in the absence of a drug order
for a particular named patient. See S.C. Code Ann. § 40-43-30(7)
(“Compounding also includes the preparation of drugs or devices in
17
anticipation of prescription drug orders based on routine,
regularly observed prescribing patterns.”); id. 40-43-86(CC)(2)(d)
(“Pharmacists may compound drugs before receiving a valid
prescription based on a history of receiving valid prescriptions
that have been generated solely within an established
pharmacist/patient/practitioner relationship.”).
State officials also emphasized a provision that appears to
countenance compounding in the very circumstances of this case.
The Pharmacy Practice Act states that “pharmacists may compound
products based on an order from a practitioner for use by
practitioners for patient use in institutional or office settings.”
Id. § 40-43-86(CC)(2)(e). The Board’s director, Lee Ann Bundrick,
its manager of regulatory compliance, Sheila Young, and the
investigator Eddie Durant each stated that in the context of in-
office or institutional use, a pharmacist may compound drugs based
upon a physician’s order without the pharmacist’s knowing the
identities of the patients for whom the drugs were intended. We
need not decide whether the provision on in-office use is an
independent authorization of the compounding that it describes, as
some Board officials suggested, or simply a confirmation that
production of drugs that already qualified as compounding remains
so. On either reading, we find no basis to dispute the apparent
conclusion of the state officials charged with the Pharmacy
Practice Act’s implementation that Mason and Urgent Care’s
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production of methylprednisolone was compounding under state law.
As a result, Mason and Urgent Care’s production of
methylprednisolone also qualified as compounding under Pharmacists
Mutual’s policy, which incorporated the state’s compounding
definition.
C.
Finally, we find no merit in Pharmacists Mutual’s argument
that drug contamination claims against Mason are not covered
because Urgent Care engaged in promotion or marketing. Promotion
and marketing of certain drugs are not covered activities under
Mason’s policy, because the policy states that manufacturing
includes “the promotion and marketing of such drugs.” The policy
does not define “promotion” or “marketing,” however, or otherwise
illuminate what separates these activities from the communications
between pharmacist and doctor that are necessary to create and
transmit a prescription drug order. Interpreting these ambiguous
terms liberally in Mason’s favor and against Pharmacists Mutual,
Gaskins, 245 S.E.2d at 600, we cannot commit the leaps that would
be necessary to bring Mason’s activities within the “promotion” or
“marketing” categories.
In order to find that Mason’s activities amounted to
“promotion” or “marketing,” we would have to read the undefined
terms to sweep beyond South Carolina law, which differentiates
19
between compounding and manufacturing communications with a
precision absent from the insurer’s policy. The state’s Pharmacy
Practice Act provides, “Compounding pharmacies/pharmacists may
advertise or otherwise promote the fact that they provide
prescription compounding services . . . when requested; however,
they may not solicit business by promoting to compound specific
drug products, e.g., like a manufacturer.” S.C. Code Ann. § 40-43-
86(CC)(2)(e).
The record contains no evidence that Urgent Care’s activities
with respect to methylprednisolone would render them
“manufacturing” under this provision. Urgent Care had a full-time
sales and marketing employee, Douglas Pait, who met with
representatives of the practices that received contaminated drugs.
Pait testified, however, that he did not mention methylprednisolone
to members of those practices until they inquired as to whether
Urgent Care could compound the drug for them. No doctor testified
to the contrary. And while Urgent Care hired a telemarketer, had
a website, paid commissions to affiliated nurses and physicians,
and described the company’s compounding practices and some drugs it
could provide in printed literature, Pharmacists Mutual has
produced no evidence that methylprednisolone was identified in the
printed materials or was compounded pursuant to any telemarketing
promotion or commission agreement. In sum, the record does not
contain evidence that Urgent Care or its employees sought to
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promote the “specific drug product[]” of methylprednisolone,
triggering the definition of manufacturing under South Carolina
law, rather than simply “promot[ing] the fact that they provide
prescription compounding services” in their communications with the
practices. Id.IV.
Lastly, we affirm the district court’s holding that the claims
of all of the defendant-appellees are covered under Pharmacists
Mutual’s policy, even though three defendant-appellees received
methylprednisolone that was compounded and injected before the
policy period of June 19, 2002 to June 19, 2003. The policy states
that the insurer will pay “damages because of an occurrence,
personal injury, or advertising injury to which this insurance
applies, and arising out of your rendering or failure to render
pharmacy services.” “Occurrence” is defined as “an act of rendering
or failure to render pharmacy services which results in bodily
injury or property damage . . . during the policy period” and as
“an accident, including a continuous or repeated exposure to
conditions . . . .”
South Carolina precedent is squarely on point concerning the
interpretation of such an occurrence policy, and establishes that
Pharmacists Mutual’s policy covers all damage that occurred during
the policy period even if the compounding and the injections
21
leading to the damage occurred before the policy took effect. The
South Carolina Supreme Court interpreted virtually identical policy
language in Joe Harden Builders, Inc. v. Aetna Cas. & Sur. Co., 486
S.E.2d 89 (S.C. 1997), and “adopted a modified continuous trigger
theory for determining when coverage is triggered under a standard
occurrence policy,” Century Indem. Co. v. Golden Hill Builders,
Inc., 561 S.E.2d 355, 357 (S.C. 2002). “Under this theory,
coverage is triggered whenever the damage can be shown in fact to
have first occurred . . . and the policy in effect at the time of
the injury-in-fact covers all the ensuing damages.” Joe Harden,
486 S.E.2d at 91. Coverage is triggered continuously while damage
progresses thereafter, id., because an occurrence policy “clearly
focuses on the time the damage occurs and not on the time of the
underlying event that eventually caused the damage,” id. at 90. It
is undisputed that all of those who received injections fell ill
and suffered damages during the policy period. Their claims are
therefore covered by Pharmacists Mutual’s policy.
Pharmacists Mutual seeks to distinguish Joe Harden and Century
Indemnity, but these attempts are unpersuasive. The insurer argues
that “the facts in the case at hand are quite distinct from the
situation facing the court” in Joe Harden and Century Indemnity,
because those cases involved property damage rather than bodily
injury and because the time of the harm-causing act in those cases
was more difficult to ascertain than in the case at hand. Brief of
22
Appellant at 43. Neither Joe Harden nor Century Indemnity relied
on the facts upon which Pharmacists Mutual focuses, however. Joe
Harden framed its subject broadly, as “coverage under an occurrence
policy when there is progressive damage that is not apparent at the
time of the underlying injury-causing event,” 486 S.E.2d at 90, and
it cited approvingly a case involving a policy covering bodily
injury from asbestos, rather than merely property damage, id. at 91
(citing Abex Corp. v. Md. Cas. Co., 790 F.2d 119 (D.C. Cir. 1986)).
In addition, Joe Harden stated that one reason underlying its
continuous-trigger rule was that “this theory of coverage will
allow the allocation of risk among insurers when more than one
insurance policy is in effect during the progressive damage,” id.,a rationale that applies with equal force to progressive injuries
caused by compounded medications. Under South Carolina case law,
Pharmacists Mutual’s policy covers claims based upon progressive
damage that occurred during the policy period even if the actions
causing the harm occurred before the policy took effect, and we
therefore find the claims of all the defendant-appellees to be
covered.
V.
For the foregoing reasons, the judgment of the district court
is
AFFIRMED.
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