Cincinnati Insurance v. H.D. Smith, L.L.C.
829 F.3d 771
7th Cir.2016Background
- West Virginia sued pharmaceutical distributors (including H.D. Smith) alleging they negligently/ recklessly supplied large quantities of prescription opioids to "pill mills," fueling addiction and causing the State to incur substantial costs caring for injured, uninsured residents.
- H.D. Smith was insured under a Cincinnati Insurance Company commercial general liability policy that covered "damages because of bodily injury" and included coverage for "damages claimed by any person or organization for care ... resulting ... from the bodily injury."
- H.D. Smith requested a defense; Cincinnati refused and filed a declaratory-judgment action seeking a ruling that the policy did not cover West Virginia’s suit.
- The district court granted summary judgment to Cincinnati, holding the State’s suit did not seek damages "because of bodily injury." H.D. Smith appealed.
- The Seventh Circuit reviewed de novo under Illinois law, applying the rule that an insurer’s duty to defend is broader than its duty to indemnify and arises unless the complaint clearly falls outside potential coverage.
- The Court concluded West Virginia’s allegations—that citizens suffered bodily injuries and the State spent money (hospital services, diagnosis, treatment) as a proximate result—triggered Cincinnati’s duty to defend and reversed the district court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Cincinnati must defend H.D. Smith against West Virginia’s suit under the policy’s coverage for "damages because of bodily injury" | West Virginia alleges citizens suffered bodily injuries from distributed drugs and the State seeks reimbursement for care and related costs—claims fall within "damages because of bodily injury." | Cincinnati contends the State seeks its own economic losses (not injuries to individuals) and thus the suit is not for "damages because of bodily injury." | The court held Cincinnati has a duty to defend: the complaint alleges bodily injury to persons and claims for care resulting from those injuries, which potentially fall within policy coverage. |
Key Cases Cited
- Koransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. Ins. Co., 712 F.3d 336 (7th Cir. 2013) (de novo review of district court’s grant of summary judgment in insurance coverage dispute)
- BASF AG v. Great Am. Assur. Co., 522 F.3d 813 (7th Cir. 2008) (contract interpretation and duty-to-defend principles)
- Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co., 215 Ill.2d 146 (Ill. 2005) (insurer’s duty to defend is broader than duty to indemnify and allegations must be liberally construed)
- Medmarc Cas. Ins. Co. v. Avent Am., Inc., 612 F.3d 607 (7th Cir. 2010) (distinguishing coverage where plaintiffs did not allege any bodily injury or exposure)