Split ruling goes against Duke in hydraulic-fluid case

Feb. 11, 2013 @ 05:39 PM

A divided 4th U.S. Circuit Court of Appeals panel sided Monday with an insurance company against Duke University in a lawsuit spawned by a surgical-sterilization mix-up.

The 2-1 ruling brushed aside Duke’s contention that insurer Mitsui Sumitomo should pay up to $6 million to cover settlement costs the university incurred after personnel at two Duke-controlled hospitals used hydraulic fluid to wash surgical instruments.

Mitsui has paid $1 million to cover claims filed by former Duke patients against a now-defunct elevator-repair company that had drained the fluid from lifts at Duke Health Raleigh Hospital in 2004.

The insurer contended that the incident was one accident or “occurrence” for purposes of calculating coverage limits. Upholding a lower-court ruling, judges Henry Floyd and Bryan Harwell agreed.

Floyd, author of the majority opinion, said that while the common law in North Carolina “does not strongly favor either side,” the state’s courts would have to take their lead from a “discredited” Florida case to side for Duke.

The university’s lawyers argued that each surgery was an accident, whereas Mitsui argued that events stemmed from Automatic Elevator Co. Inc.’s leaving containers of old hydraulic fluid in a loading area.

Courts generally look to the actions of the person or company that’s covered by an insurance policy when they decide coverage questions, Floyd said.

“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 from [the elevator company’s] alleged negligence to Duke’s actions,” he said.

Judge Robert King disagreed.

Automatic Elevator’s actions did “not satisfy the definition of an accident,” until the fluid made its way on to the instruments doctors at Durham Regional Hospital and Duke Health Raleigh Hospital used in at least 127 surgeries, King said.

King added that the N.C. Supreme Court, the arbiter of common-law questions in North Carolina, hasn’t settled the fundamental question of when for purposes of calculating insurance liability an accident-causing chain of events begins.

Floyd and King are 4th Circuit judges, appointed by President Barack Obama and former President Bill Clinton, respectively. Harwell is a U.S. District Court judge in South Carolina appointed to the bench by former President George W. Bush.

Federal appellate courts sometimes ask District Court judges to join panels to decide cases, using them as pinch-hitters to spread workload.

The hydraulic fluid made its way onto Duke’s surgical instruments through what university lawyer Charles Holton has termed “a somewhat unbelievable chain of events.”

Automatic Elevator drained the fluid from two lifts it was servicing at Duke Health Raleigh and stored it in plastic buckets provided by Duke. The buckets came to Duke from a sterilization-products vendor and were marked as containing its wares.

Workers at Duke Health Raleigh spotted them in a storage area and, thinking they’d been delivered to the hospital by the sterilization-product vendor by mistake, called it and had them picked up.

The sterilization company eventually sold the buckets and their contents back to Duke.

Duke has sued the elevator company in state court. That lawsuit has been on hold since Mitsui Sumitomo, headquartered in Tokyo, sought a federal-court ruling on the limits of its liability as Automatic Elevator’s insurer.

The university has also settled with former patients its doctors operated on with tainted instruments, and is now trying to recover some of its costs.