A federal district court in Kentucky has held that a pharmaceutical drug distributor’s CGL insurer must defend it in a suit by a state attorney general alleging damages due to widespread prescription drug addiction. Cincinnati Insurance Co. v. Richie Enterprises, LLC, 2014 WL 838768 (W.D. Ky. Mar. 4, 2014) 

An insured drug distributor was sued by the State of West Virginia for its part in an alleged “pill mill” scheme to supply pharmacies and prescribing doctors with far greater quantities of prescription medicine than that needed for medical purposes. The suit alleged that this conduct violated various state laws and sought damages for, among other costs, medical monitoring. The insured tendered its defense to its CGL insurer, which denied coverage and filed a declaratory judgment action. The parties filed-cross motions for summary judgment. 

The insurer argued that there was no “occurrence” because the insured was alleged to have participated in a prescription drug fraud. Addressing the duty to defend only, the court rejected this argument because the complaint also contained allegations that the insured “should have known” that the prescriptions were fraudulent or invalid and because the insured failed to diligently respond to “suspicious orders.” The court also held that the suit alleged bodily injury because the “action is based on the alleged prescription drug abuse epidemic and the bodily injury of West Virginia citizens.” Finally, the court rejected the insurer’s argument that the claims were excluded as intentional or criminal actions because the complaint did not foreclose the possibility of liability predication on unintentional, non-criminal actions.