Given how broad duty to defend standards generally are, an insurer faced with a complaint, that has a lot to say about an insured’s responsibility for causing bodily injury, may be gun shy about arguing that it does not owe a defense, under a policy that provides coverage for damages for, well, bodily injury. That is no doubt what confronted Gemini Insurance Company, concerning a complaint filed by the State of West Virginia, against Gemini’s insured, Anda Inc. But Gemini and its counsel understood the real issue. The duty to defend may be broad, but it is not robotic.

Travelers Ins. Co. v. Anda, Inc., 12-62392 (S.D. Fla. Mar. 9, 2015) involves coverage for Anda, a distributor of controlled substance prescription drugs, for claims brought against it by the State of West Virginia. The opinion sets out the facts succinctly: “West Virginia alleges that Anda ‘violated West Virginia statutes and regulations that govern controlled substances and consumer protection’ by ‘distributing controlled substances without sufficient monitoring and controls.’ For example, West Virginia alleges that Anda and other prescription drug manufacturers sold pharmacies such large quantities of abused prescription drugs that the number of prescription drugs in some communities is far greater than the population could actually warrant. This practice of unfettered distribution to ‘pill mills’ cost West Virginia an estimated ‘$430 million annually in ... 2010 with costs projected to be as much as $695 million annually by 2017.’ These figures are derived from additional costs to West Virginia’s hospitals, schools, courts, social service agencies, jails, and prisons due to the epidemic.” Six hundred and ninety-five million dollars annually by 2017. That is a staggering amount of money. The stakes here were very high.

But despite the complaint’s many allusions to bodily injury, Gemini maintained that it did not owed a defense to Anda under a policy that provided coverage for damages for bodily injury. As Gemini no doubt saw it, there is more to the duty to defend analysis than simply having allegations that read like bodily injury and then automatically concluding that a defense must be owed.

The competing arguments were straightforward. They went like this. Gemini argued that it did not owe Anda any duty to defend because West Virginia was not asserting claims for bodily injury, but, rather, for its own economic losses. Anda argued it was covered under the Gemini policy because the State was seeking damages “for bodily injury.” As Anda saw it, the State’s “claims stem from addictions, diseases, and sickness related to West Virginia citizens’ abuse of prescription drugs.”

The court sided with Gemini: “West Virginia asserts claims only for its own economic loss and not ‘for bodily injury.’ It does not purport to assert claims on behalf of individual citizens for the physical harm sustained personally by those citizens, for instance. Instead, West Virginia seeks relief from the massive costs suffered by the State due to Anda’s distribution of drugs allegedly in excess of legitimate medical need. Any reference to the drug abuse and physical harm to West Virginia citizens merely provides context explaining the economic loss to the State.”

Despite facing a complaint alleging all sorts of things about bodily injury, Gemini did not reflexively conclude that a defense was owed. Instead, the insurer understood the real issue and so did the court: “Any reference to the drug abuse and physical harm to West Virginia citizens merely provides context explaining the economic loss to the State.”