“Because of Bodily Injury” language broad enough to encompass legal theories pled by the State of West Virginia reversing Summary Judgment for Insurer.

The Seventh Circuit, applying Illinois law, reversed the District Court and held that Cincinnati Insurance Company (“Cincinnati”) must defend H.D. Smith, L.L.C. (“H.D. Smith”) in a lawsuit brought by the state of West Virginia in which it is alleged that H.D. Smith helped facilitate an “epidemic of prescription drug abuse.”

West Virginia sued H.D. Smith and other pharmaceutical distributors, seeking to hold them liable for contributing to the state’s prescription drug abuse problem.  The complaint alleged that certain pharmacies, “pill mills”, knowingly provided citizens with hydrocodone, oxycodone, codeine, and other prescription drugs – not for legitimate medical uses, but to earn profits from the citizens’ addictions.  The suit alleges that the pill mills order the drugs from the defendant distributors in huge quantities – quantities so large that according to West Virginia, the distributors should have known the drugs would be used for illicit and destructive purposes.  West Virginia alleges that the defendant distributors acted negligently, recklessly, and in violation of West Virginia law, and costs the state hundreds of millions of dollars every year.

During the relevant time period, Cincinnati issued a general commercial liability insurance policy to H.D. Smith.  Under the policy, Cincinnati agreed to cover damages that H.D. Smith became legally obligated to pay “because of bodily injury” and also agreed to defend against any suit seeking “damages because of bodily injury”.   The policy defines “bodily injury” as “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time” and “damages because of bodily injury” as “damages claimed by a person or organization for care, loss of services or death resulting at any time from the bodily injury.”  H.D. Smith tendered the defense of the West Virginia case to Cincinnati.  Cincinnati denied coverage and filed suit in federal court seeking a declaration that its policy did not cover the claims.  The District Court granted a motion for summary judgment brought by Cincinnati and held that Cincinnati had no duty to defend because West Virginia’s suit did not seek damages “because of bodily injury.”

On appeal, the Seventh Circuit noted that “[t]he Cincinnati policy issued to H.D. Smith covers suits seeking damages ‘because of bodily injury’.  Such a policy provides broader coverage than one that covers only damages ‘for bodily injury.’”  Moreover, the duty to defend is much broader than the duty to indemnify and, under Illinois law, a duty to defend exists “unless it is clear from the face of the underlying complaint” that the case is not “within or potentially within the insured’s policy coverage.”   West Virginia alleged that its citizens suffered bodily injuries and that the state spent money caring for those injuries.  According to West Virginia, it had incurred “excessive costs related to diagnosis, treatment and cure of addiction,” and has “provide[d] necessary medical care, facilities, and services for treatment of citizens” who cannot afford their own care.  As such, West Virginia sought reimbursement of such “damages and losses sustained as the proximate result of H.D. Smith’s negligence.”  Based on the allegations and the plain language of the policy, the Seventh Circuit held that Cincinnati has a duty to defend H.D. Smith.   The court noted that West Virginia pursued numerous legal theories and types of relief, but that it did not matter because the duty to defend is triggered “even if only one of the theories is within the potential coverage of the policy.”   Cincinnati Ins. Co. v. H.D. Smith, L.L.C., No. 3:12-cv-3289 (7th Cir. July 19, 2016).