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Cincinnati Ins. Co. v. H.D. Smith, L.L.C.

United States Court of Appeals for the Seventh Circuit

April 11, 2016, Argued; July 19, 2016, Decided

No. 15-2825

Opinion

 [*772]  Williams, Circuit Judge. According to West Virginia, it faces an "epidemic of prescription drug abuse" that costs it hundreds of millions of dollars every year. Seeking some relief, the state sued pharmaceutical distributors, asserting a variety of legal claims. One of the distributors, H.D. Smith, asked its insurer, Cincinnati Insurance Company, to defend the suit. Instead Cincinnati filed this suit seeking a declaration that its policy does  [*773]  not cover the suit filed by West Virginia. The district court agreed with Cincinnati and granted its motion for summary judgment. But the plain language of the [**2]  policy requires Cincinnati to defend a suit brought by a plaintiff to recover money paid to care for someone who was injured by H.D. Smith. West Virginia's suit fits that description so we reverse.

I. BACKGROUND

West Virginia sued H.D. Smith and other pharmaceutical distributors, seeking to hold them liable for contributing to the state's epidemic of prescription drug abuse. The complaint alleged that certain pharmacies—pejoratively called "pill mills"—knowingly provided citizens with hydrocodone, oxycodone, codeine, and other prescription drugs, not for legitimate medical uses but to fuel and profit from the citizens' addictions. The pharmacies ordered the drugs from the defendant distributors in huge quantities—quantities so large that West Virginia contends the distributors should have known the drugs would be used for illicit and destructive purposes. West Virginia alleged that the defendant distributors "acted negligently, recklessly, and in contravention of West Virginia law," and cost the state hundreds of millions of dollars every year. Among other things, that money was spent caring for drug-addicted West Virginians who suffer drug-related injuries and cannot pay for their own [**3]  care.

At relevant times, H.D. Smith was covered by a general commercial liability insurance policy issued by Cincinnati Insurance Company. Under the policy, Cincinnati agreed to cover damages that H.D. Smith became legally obligated to pay "because of bodily injury." Cincinnati also agreed to defend H.D. Smith against any suit seeking such damages. 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" include "damages claimed by any person or organization for care, loss of services or death resulting at any time from the bodily injury."2

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829 F.3d 771 *; 2016 U.S. App. LEXIS 13175 **

CINCINNATI INSURANCE COMPANY, Plaintiff-Appellee, v. H.D. SMITH, L.L.C., Defendant-Appellant.

Prior History:  [**1] Appeal from the United States District Court for the Central District of Illinois. No. 3:12-cv-3289 — Richard Mills, Judge.

Cincinnati Ins. Co. v. H.D. Smith Wholesale Drug Co., 2015 U.S. Dist. LEXIS 100823 (C.D. Ill., July 28, 2015)

CORE TERMS

bodily injury, damages, duty to defend, distributors, coverage, prescription drug, injuries, insured, spent

Civil Procedure, Appeals, Standards of Review, De Novo Review, Insurance Law, Policy Interpretation, Ambiguous Terms, Construction Against Insurers, Liability & Performance Standards, Good Faith & Fair Dealing, Duty to Defend, Indemnification, Commercial General Liability Insurance, Coverage, Bodily Injuries