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In Pharmacists Mut. Ins. Co. v. Advanced Specialty Pharmacy LLC, No. 1140046, 2016 WL 6819657 (Ala. Nov. 18, 2016), the Alabama Supreme Court reduced an award against a pharmacy’s general liability and umbrella insurer by $3M after finding underlying claims only were subject to the policies’ general aggregate limit, and not also the products/completed work hazard aggregate limit.
The case involved a series of wrongful death and personal injury claims made against an insured pharmacy after it was found to have contaminated IV feeding solutions distributed to hospitals and administered to patients, causing nine deaths. The pharmacy’s insurer filed an interpleader complaint and deposited the $4M general aggregate limit of the liability and umbrella policies with the court for distribution to the claimants. The claimants responded by arguing $7M in limits were available under the policies as both the $4M general aggregate limit and $3M products/completed work hazard limit should apply.
The Circuit Court agreed with the claimants finding their bodily injuries were both included in the products/completed work hazard triggering the $3M limit and, at the same time, not included in the products/completed work hazard triggering the separate $4M general aggregate limit. The Circuit Court reached this conclusion by finding the bodily injuries were caused by multiple, separate and distinct occurrences including “pharmacy services,” which were not included in the products/completed work hazard, and also “manufacturing of defective products”, which were included in the products/completed work hazard.
The Alabama Supreme Court disagreed. The Court applied the general rules of policy construction and focused on the express language of the liability policy. Specifically, the payments provision provided that the general aggregate limit was the most the insurer would pay for the sum of “all ‘damages’…except ‘damages’ due to ‘bodily injury’... included in the ‘products/completed work hazard’”, while the products/completed work hazard aggregate limit was the most the insurer would pay “for ‘damages’ due to ‘bodily injury’... included in the ‘products/completed work hazard.’” The Court found the plain language of the policy was clear that “a bodily injury is either included in the ‘products/completed work hazard,’ or it is not.” The Court continued: “bodily injury cannot simultaneously be and not be included in the ‘products/completed work hazard.’” The Court thus found the Circuit Court’s conclusion that both the general aggregate and products/completed work hazard limits should apply to be “contrary to the plain language of the policy.” The Court held that only the $4M general aggregate limit would apply and reduced the Circuit Court’s judgment accordingly.
The Pharmacists Mut. decision is significant for insurers as it provides support from Alabama’s highest court that only one aggregate policy limit need apply under a liability policy. The decision also demonstrates the Alabama Supreme Court’s focus on the plain language of an insurance policy and its willingness to apply such language as written even when doing so results in lesser coverage for a sympathetic group of claimants.