Durham, N.C. — A federal appeals court has ruled that an insurance company has met its obligation in paying for damages resulting from a mix-up that led to thousands of patients being exposed to hydraulic fluid on surgical instruments in 2004.

About 3,800 surgical patients at Durham Regional Hospital and Duke Health Raleigh Hospital were exposed to instruments that had been washed with used hydraulic fluid. The fluid had been drained from hospital elevators and put in empty detergent drums, then was mistakenly shipped back to the hospitals.

Dozens of patients said they suffered health problems ranging from infections to immune system reactions after the exposure. Duke Health officials maintained the instruments were safe because they were sterilized after being washed in the hydraulic fluid, but they settled in May 2008 with 127 patients for $26 million.

Mitsui Sumitomo Insurance Co. of America already paid out $1 million under its liability policy to Automatic Elevator Co. Inc., which put the used hydraulic fluid in mislabeled drums. In an unpublished opinion, a divided 4th U.S. Circuit Court of Appeals said the company is off the hook for further payments.

Duke wanted the insurer to cover more of the settlement.