7th Circuit: Insurer must defend against pill mill lawsuit

An insurance company will have to defend its client pharmaceutical distributor in fending off a West Virginia lawsuit seeking restitution for the epidemic of prescription drug abuse.

The 7th Circuit Court of Appeals recently reversed a ruling from the U.S. District Court for the Central District of Illinois and found the policy from Cincinnati Insurance Co. does require covering distributor H.D. Smith in the lawsuit filed by the Mountain State.

“On its face, West Virginia’s suit appears to be covered by Cincinnati’s policy,” Judge Ann Claire Williams wrote for the court last week in Cincinnati Insurance Co. v. H.D. Smith, L.L.C., 15-2825. “Cincinnati argues to the contrary, stressing that West Virginia seeks its own damages, not damages on behalf of its citizens. But so what? Cincinnati’s argument is untethered to any language in the policy.”

This case arises from the 2012 lawsuit, State of West Virginia v. AmerisourceBergen Drug Corp, et al., 2:12-CV-03760. The state is suing pharmaceutical distributors, including H.D. Smith, alleging they knew the huge quantities of opioid drugs they were supplying to certain pharmacies were being used for illicit and destructive purposes. 

West Virginia argued the distributors “acted negligently, recklessly, and in contravention” of the state’s law,” and cost the state hundreds of millions of dollars annually in caring for drug-addicted residents.   

The 7th Circuit found the plain language of the policy requires the insurance company to defend H.D. Smith in the West Virginia lawsuit. In particular, the policy states it covers suits seeking damages “because of bodily injury.”  This encompasses a broader duty to defend and indemnify than is covered by the language “for bodily injury.”

West Virginia is seeking reimbursement of damages and losses sustained providing care and treatment to people with addictions to the prescription drugs H.D. Smith delivered. The 7th Circuit did not comment on the merits of West Virginia’s lawsuit but held Cincinnati Insurance Co. has a duty to defend its client.

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