Alabama Pharmacy, Not Agent, at Fault for Not Reading Policy Before $5M Judgment

An Alabama insurance agent is in the clear after years of litigation that contended he had failed to secure professional liability coverage for a pharmacy that was sued over a compounded medication error. The reason: Alabama courts, more than some states’ courts, have endorsed the concept of contributory negligence in many cases. The Alabama pharmacy owner had contributed to the oversight by failing to carefully read his own insurance policy, the Alabama Supreme Court said in a recent opinion in OMS Pharmacy v. Nationwide and Baldo-Downs Insurance agency and Roger Downs. “Alabama has a very favorable standard for agents and brokers,” said Robert Ronnlund, the attorney for the insurance agency in the appeal. “Unquestionably, there could be other states that would not find this as favorably as Alabama was compelled to do, given these circumstances.” The belladonna plant with toxic fruit “…We agree with the trial court that OMS did not offer substantial evidence demonstrating that Downs or the agency defendants acted or failed to act while being conscious that injury to OMS would likely or probably result,” the court’s Oct. 9 opinion concluded. The suit against Nationwide and Baldo-Downs Insurance, a Tuscaloosa agency, and Roger Downs, the head of the predecessor agency, stemmed from a nearly $5 million judgment against OMS Pharmacy. Customer Hannah Browne said she was severely injured in 2013 after the pharmacy produced a prescribed drug cocktail for stomach pain. The compounded pink liquid included belladonna, also known as deadly nightshade, a poisonous plant. In small doses, the substance can treat a number of conditions, including stomach pain. Unfortunately, the court noted, a technician at the Tuscaloosa pharmacy had entered grams instead of milligrams into the store’s computer system, resulting in a formulation that was 1,000 stronger and more toxic than what the doctor had prescribed. After one tablespoon, Browne suffered belladonna poisoning, with nausea, hallucinations, and convulsions. She became unresponsive and was rushed to intensive care at a local hospital. A few months later, she filed suit against OMS Pharmacy and owner Timothy Wright, claiming negligence and product liability. A jury awarded Browne $4.75 million in damages. Roger Downs, the insurance agent and head of Roger Downs Inc. insurance agency at the time, in 2008 had obtained a general liability policy for the pharmacy through Nationwide Property and Casualty Insurance, switching the store from its previous policy with Zurich American Insurance. After the belladonna injury, Nationwide declined to defend the pharmacy in the lawsuit, pointing out that it had written only a general liability policy, not professional liability coverage. The GL policy, in fact, contained an exclusion for injuries caused by professional services. The previous Zurich policy was also general liability but did contain a clause that provided coverage for “pharmacological services.” Wright, the pharmacy owner, then sued Nationwide and the agency. Wright and his lawyers argued that the insurance agent should have known that Wright was left exposed without explicit professional liability coverage. Roger Downs has insisted that he was told unequivocally that the store had, in fact, secured PL coverage from another source, Downs’ attorney, Ronnlund, told Insurance Journal. Wright’s attorneys argued in court that the pharmacy owner had read parts of the policy “on occasion.” Ronnlund (Hall Booth Smith law firm) “OMS argues that it was not contributorily negligent as a matter of law because, it says, even if Wright had read the entire Nationwide policy, it would not have been clear to him that the policy did not provide coverage for product-liability claims,” Supreme Court Chief Justice Sarah Stewart wrote in the opinion. Browne, the injured plaintiff in the underlying suit, also argued that the computer error was not really a professional services action by the pharmacy. But the high court disagreed, noting that it was the pharmacist’s professional responsibility to check compounded formulations. The justices also focused on Wright’s failure to read his policy. “It is undisputed that Wright did not read the coverage-exclusions portion of the Nationwide policy,” the court opinion reads. “Had he done so, he and OMS would have discovered that the policy did not provide coverage for bodily injury or property damage that ‘arises out of or is a result of the rendering of, or failure to render, any professional service.'” By failing to fully read the policy, Wright was contributorily negligent and placed his pharmacy in harm’s way. A number of previous appellate court decisions have upheld the notion that insureds who do not apprehend their insurance policies are at fault, the justices noted. Roger Downs “met the standard of care for an insurance agent when, after receiving the policy declarations for his client’s prior insurance policy, replaced that policy with facially similar coverage,” Ronnlund wrote in his appeals brief to the Supreme Court. Ronnlund noted that insurance agents’ errors and omissions policy premiums can be affected by lawsuits. Agents’ Liability: Relief But Questions on Agents’ Duties to Insureds After Florida Court Ruling Georgia Brokers and Agents Alarmed After Court Ruling Expands Liability for Them Topics Agencies Alabama