Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-15-02825/USCOURTS-ca7-15-02825-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 15‐2825

CINCINNATI INSURANCE COMPANY,

Plaintiff‐Appellee,

v.

H.D. SMITH, L.L.C.,

Defendant‐Appellant.

____________________

Appeal from the United States District Court for the

Central District of Illinois.

No. 3:12‐cv‐3289 — Richard Mills, Judge.

____________________

ARGUED APRIL 11, 2016 — DECIDED JULY 19, 2016

____________________

Before BAUER and WILLIAMS, Circuit Judges, and

ADELMAN, District Judge.

*

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 re‐

                                                  * Of the Eastern District of Wisconsin, sitting by designation.

Case: 15-2825 Document: 32 Filed: 07/19/2016 Pages: 7
2   No. 15‐2825

lief, 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 declara‐

tion that its policy does not cover the suit filed by West Vir‐

ginia. The district court agreed with Cincinnati and granted

its motion for summary judgment. But the plain language of

the 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 descrip‐

tion 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 com‐

plaint alleged that certain pharmacies—pejoratively called

“pill mills”—knowingly provided citizens with hydroco‐

done, 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 destruc‐

tive purposes. West Virginia alleged that the defendant dis‐

tributors “acted negligently, recklessly, and in contravention

of West Virginia law,” and cost the state hundreds of mil‐

lions of dollars every year. Among other things, that money

was spent caring for drug‐addicted West Virginians who suf‐

fer drug‐related injuries and cannot pay for their own care.

At relevant times, H.D. Smith was covered by a general

commercial liability insurance policy issued by Cincinnati

Case: 15-2825 Document: 32 Filed: 07/19/2016 Pages: 7
No. 15‐2825 3

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 de‐

fend 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.”1  

H.D. Smith asked Cincinnati to defend the suit brought

by West Virginia, but Cincinnati refused. Cincinnati filed

suit in federal court, seeking a declaration that its policy did

not cover West Virginia’s suit. Granting Cincinnati’s motion

for summary judgment, the district court held that West Vir‐

ginia’s suit did not seek damages “because of bodily injury.”

H.D. Smith appeals.

II. ANALYSIS

The issue is contract interpretation and the posture is an

appeal of summary judgment, so our review is de novo. Ko‐

ransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. Ins. Co., 712

F.3d 336, 341 (7th Cir. 2013); BASF AG v. Great Am. Assur. Co.,

522 F.3d 813, 818 (7th Cir. 2008). The parties agree that their

contract is governed by Illinois law—H.D. Smith is based in

Illinois—so we apply that substantive law. See Koransky, 712

F.3d at 341.

                                                  1 The policy requires that the injury be caused by an “occurrence”

that takes place in the “coverage territory” during the policy period, but

these requirements are not at issue on appeal.

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4   No. 15‐2825

Our job is to “compare the allegations in the underlying

complaint to the policy language in order to determine

whether the insurer’s duty to defend has arisen.” Gen. Agents

Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co., 828 N.E.2d

1092, 1098 (Ill. 2005). We must “liberally constru[e]” the alle‐

gations “in favor of the insured.” Id. And because the duty to

defend is “much broader” than the duty to indemnify, we

will hold that 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.”

Id. (emphasis added). Importantly, “if several theories of re‐

covery are alleged in the underlying complaint against the

insured, the insurer’s duty to defend arises even if only one

of several theories is within the potential coverage of the pol‐

icy.” Id.  

The policy that Cincinnati issued to H.D. Smith covers

suits seeking damages “because of bodily injury.” Such a poli‐

cy provides broader coverage than one that covers only

damages “for bodily injury.” Medmarc Cas. Ins. Co. v. Avent

Am., Inc., 612 F.3d 607, 616 (7th Cir. 2010) (applying Illinois

law). We explained that result with the following example:

[A]n individual has automobile insurance; the

insured individual caused an accident in which

another individual became paralyzed; the

paralyzed individual sues the insured driver

only for the cost of making his house wheel‐

chair accessible, not for his physical injuries. If

the insured driver had a policy that only cov‐

ered damages “for bodily injury” it would be

reasonable to conclude that the damages

sought in the example do not fall within the in‐

Case: 15-2825 Document: 32 Filed: 07/19/2016 Pages: 7
No. 15‐2825 5

surer’s duty. However, if the insurance contract

provides for damages “because of bodily inju‐

ry” then the insurer would have a duty to de‐

fend and indemnify in this situation. Id.  

Here, West Virginia alleged that its citizens suffered

bodily injuries and the state spent money caring for those

injuries—money that the state seeks in damages. On its face,

West Virginia’s suit appears to be covered by Cincinnati’s

policy. 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. At oral argument, we discussed

the following example. Suppose a West Virginian suffers

bodily injury due to his drug addiction and sues H.D. Smith

for negligence. Cincinnati’s counsel acknowledged that such

a suit would be covered by its policy. Now suppose that the

injured citizen’s mother spent her own money to care for her

son’s injuries. Cincinnati’s counsel acknowledged that her

suit would be covered too—remember the policy covers

“damages claimed by any person or organization for care ...

resulting ... from the bodily injury.”  

The mother’s suit is covered even though she seeks her

own damages (the money she spent to care for her son), not

damages on behalf of her son (such as his pain and suffering

or money he lost because he missed work). Legally, the re‐

sult is no different merely because the plaintiff is a state in‐

stead of a mother. Cincinnati’s lawyer acknowledged as

much but argued this case is different in fact because West

Virginia does not actually seek reimbursement for money it

spent because of its citizens’ injuries. Cincinnati argues—and

the district court held—that this suit is like Medmarc, where

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we held that no duty to defend arose. But Medmarc is readily

distinguishable. In that case, the insured party sold baby bot‐

tles and similar consumer products. When buyers learned

that the products contained a dangerous chemical, they re‐

fused to use them. The buyers filed suit, complaining about

the money they wasted by buying unusable products. But

importantly, “the plaintiffs never allege[d] that they or their

children ever used the products or were actually exposed to

the [harmful chemical].” 612 F.3d at 610. In other words,

there was “no claim of bodily injury in any form.” Id. at 616.

West Virginia’s complaint is quite different. The state al‐

leges that H.D. Smith negligently distributed drugs that

were “consumed by persons then residing in West Virginia.”

In so doing, H.D. Smith “interfered with the right of West

Virginians to be free from unwarranted injuries, addictions,

diseases and sicknesses.” H.D. Smith’s actions caused West

Virginia to spend money “addressing and combating the

prescription drug abuse epidemic.” In particular, “[h]ospital

services ... are being consumed by persons with prescription

drug abuse issues,” many of whom “have no medical insur‐

ance coverage.” So the state has incurred “excessive costs

related to diagnosis, treatment and cure of addiction,” and

has “provide[d] necessary medical care, facilities, and ser‐

vices for treatment of citizens” who cannot afford their own

care. West Virginia seeks reimbursement of such “damages

and losses sustained as the proximate result” of H.D. Smith’s

negligence.  

To be sure, West Virginia asserts numerous legal theories

and seeks a variety of remedies, but the duty to defend aris‐

es “even if only one of several theories is within the potential

coverage of the policy.” Midwest Sporting Goods, 828 N.E.2d

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No. 15‐2825 7

at 1098 (Ill. 2005). Given West Virginia’s allegations de‐

scribed above, Cincinnati has a duty to defend H.D. Smith.

III. CONCLUSION

We REVERSE the judgment of the district court.

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