I rarely employ cursors, but I just discovered one other item that can bite you here, the scope of the cursor name.
If the database CURSOR_DEFAULT is global, you will get the "cursor already exists" error if you declare a cursor in a stored procedure with a particular name (eg "cur"), and while that cursor is open you call another stored procedure which declares and opens a cursor with the same name (eg "cur"). The error will occur in the nested stored procedure when it attempts to open "cur".
Run this bit of sql to see your CURSOR_DEFAULT:
select is_local_cursor_default from sys.databases where name = '[your database name]'
If this value is "0" then how you name your nested cursor matters!