Applying North Carolina law, the Fourth Circuit ruled that numerous personal injury claims against an elevator repair company constituted a single occurrence, thus warranting only one per occurrence payment under the policy. Mitsui Sumitomo Ins. Co. of Am. v. Duke Univ. Health Sys., Inc., 2013 WL 491942 (4th Cir. Feb. 11, 2013) (unpublished opinion).

The coverage dispute arose out of an incident in which hospital employees mistakenly believed that barrels containing hydraulic fluid used in connection with elevator repair were surgical detergent. Duke Hospital had provided empty barrels, still labeled as containing surgical detergent, to the elevator repair company for disposal of hydraulic fluid. The elevator repair company filled the barrels with hydraulic fluid and left them at the hospital following repair work. The mislabeled barrels were subsequently returned to the surgical detergent supplier’s warehouse and re-sold to several other hospitals. Before the error was realized, more than three thousand patients had potentially been affected by tainted surgical instruments. Approximately 150 patients sued Duke, the repair company, and the detergent company. The repair company ultimately settled all claims. Its insurer, Mitsui Sumitomo, contributed $1 million, the per occurrence limit under the policy. When the repair company was sued in a separate action by Duke, Mitsui Sumitomo filed a declaratory judgment action seeking a ruling that it had no further obligations because it had already paid the $1 million per occurrence limit. The district court granted the insurer’s summary judgment motion, finding that the elevator repair company’s negligence constituted one occurrence.

On appeal, Duke argued that the number of occurrences should be determined by the number of tainted surgeries or each use of hydraulic fluid to wash the instruments. The Fourth Circuit disagreed, finding that under North Carolina law, the court must look to the negligent act or continuum of acts that gave rise to the insured’s liability. Under this standard, the court concluded that the relevant negligent act was the use of the barrels at the hospital – a single occurrence. A majority of jurisdictions have endorsed a cause-based test in determining the number of occurrences.