West Virginia alleged that the distributors had “acted negligently, recklessly, and in contravention of West Virginia law” and had cost the state hundreds of millions of dollars every year. Among other things, that money was spent caring for drug-addicted West Virginians who suffered drug-related injuries and could not pay for their own care, according to the West Virginia complaint.

H.D. Smith sought a defense to the state action from Cincinnati Insurance Company, from which it had acquired a commercial general liability insurance policy.

Cincinnati declined, and went to federal court for a declaration that its policy did not cover West Virginia's suit.

The district court granted Cincinnati's motion for summary judgment, ruling that West Virginia's suit did not seek damages “because of bodily injury.”

H.D. Smith appealed to the Seventh Circuit.

The Cincinnati Insurance Policy

Cincinnati agreed to cover damages that H.D. Smith became legally obligated to pay:

because of bodily injury

, defined as:

bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

It also provided that:

damages because of bodily injury

included:

damages claimed by any person or organization for care, loss of services or death resulting at any time from the bodily injury.

The circuit court reversed, ruling that Cincinnati had a duty to defend H.D. Smith.

In its decision, the Seventh Circuit explained that the policy that Cincinnati issued to H.D. Smith covered suits seeking damages “because of bodily injury” – which provided “broader coverage” than one that covered only damages “for bodily injury.”

The circuit court reasoned that West Virginia alleged that its citizens had suffered bodily injuries and that the state had spent money caring for those injuries – money that the state sought in damages. On its face, the Seventh Circuit said, West Virginia's suit “appear[ed] to be covered by Cincinnati's policy.”

It was not persuaded by Cincinnati's argument that there was no coverage because West Virginia was seeking its own damages, not damages on behalf of its citizens, asking, “so what?”

The circuit court noted that West Virginia alleged that H.D. Smith had negligently distributed drugs that were “consumed by persons then residing in West Virginia” and that, in so doing, H.D. Smith had “interfered with the right of West Virginians to be free from unwarranted injuries, addictions, diseases and sicknesses.” The state's complaint alleged that H.D. Smith's actions had caused West Virginia to spend money “addressing and combating the prescription drug abuse epidemic” and that, in particular, “[h]ospital services … [were] being consumed by persons with prescription drug abuse issues,” many of whom had “no medical insurance coverage.”

Simply put, the Seventh Circuit concluded, West Virginia sought reimbursement of such “damages and losses sustained as the proximate result” of H.D. Smith's alleged negligence.

The case is Cincinnati Ins. Co. v. H.D. Smith, L.L.C., No. 15-2825 (7th Cir. July 19, 2016). Attorneys involved include: Daniel Patrick Johnston, Attorney, Brian M. Reid, Attorney, Litchfield Cavo LLP, Chicago, IL, for Plaintiff–Appellee; Christian P. Jones, Attorney, Indianapolis, IN, L. Rachel Lerman, Attorney, Los Angeles, CA, Barnes & Thornburg LLP, for Defendant–Appellant.