Insurer Must Defend W.Va. Pill-Mill Lawsuit

CHICAGO (CN) - An insurance company must defend a pharmaceutical distributor accused of contributing to prescription drug abuse in West Virginia, the Seventh Circuit ruled.

The Cincinnati Insurance Company asked the Chicago-based appeals court to uphold a lower court's ruling that its insurance policy with Illinois based company H.D. Smith did not extend to a lawsuit brought by the state of West Virginia.

In the 2012 complaint, West Virginia claimed that several pharmaceutical distributors were liable for the state's prescription drug abuse problem, an issue it labeled as an "epidemic."

West Virginia, a state with a population of about 1.8 million, received combined distributions of over 220 million oxycodone and hydrocodone pills from pharmaceutical companies between 2007 and 2012, according to the Charleston Gazette-Mail.

A seven-page opinion authored by Seventh Circuit Judge Ann Claire Williams states that West Virginia "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."

H.D. Smith LLC, insured under Cincinnati's policy, appealed to the Seventh Circuit after the lower court determined the policy did not provide coverage against West Virginia's lawsuit.

H.D. Smith argued that the policy was valid, as it covered "damages claimed by any person or organization for care...resulting... from the bodily injury."

In its lawsuit, West Virginia sought damages for the cost of care and treatment for drug addicts who could not afford the treatment themselves.

Cincinnati Insurance used a technicality to argue the opposite, claiming that there was no coverage because West Virginia sought damages for itself and not for citizens.

However, the Seventh Circuit disagreed Tuesday, finding that the damages sought by West Virginia included those caused by "bodily injury" and "the plain language of the policy requires Cincinnati to defend" H.D. Smith.

"Cincinnati agreed to cover damages that H.D. Smith became legally obligated to pay 'because of bodily injury,'" Williams wrote for a three-judge panel. "The duty to defend arises 'even if only one of several theories is within the potential coverage of the policy.'"

A spokeswoman for Cincinnati Insurance declined to comment on the ruling Thursday.

H.D. Smith also declined to comment.

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