MIAMI – A federal court ruled earlier this week that an insurer does not have to defend and indemnify its client, one of more than a dozen major prescription drug distributors that was sued by former West Virginia Attorney General Darrell McGraw in 2012.
McGraw filed two lawsuits in Boone County Circuit Court in January 2012 against 14 out-of-state drug distributors “for their roles in creating and profiting” from a “prescription drug epidemic.
At the time, the Centers for Disease Control listed West Virginia as the nation’s most-medicated state, filling nearly seven more prescriptions per person annually than the national average.
McGraw argued the distributors are a “major scourge” in West Virginia, costing the state $430 million to $695 million annually and burdening its hospitals, courts and law enforcement.
Prior to the underlying lawsuit, Gemini Insurance Co. issued Florida-based Anda Inc. – one of the distributors McGraw sued – an insurance policy.
However, Gemini argues it has no duty to defend and indemnify its client. It filed a motion for summary judgment in the U.S. District Court for the Southern District of Florida.
On Monday, the federal court granted Gemini’s motion, ruling that coverage was not implicated because the attorney general’s lawsuit was for economic damages, not for “bodily injury,” seeing as there were no claims by the individual citizens of West Virginia.
“Key to the conceptualization of the Underlying Complaint is West Virginia’s theory of relief -- the State seeks relief solely for its own economic loss and not for any individual claims the persons harmed directly by the prescription drugs might assert,” wrote Judge K. Michael Moore in his 18-page omnibus order.
“The Underlying Complaint makes clear that the claims asserted are for ‘costs to the State of West Virginia’ incurred as a result of the prescription drug abuse epidemic.
“Any reference to the drug abuse and physical harm to West Virginia citizens merely provides context explaining the economic loss to the State.”
The federal court also ruled that the policy’s antitrust/unfair competition exclusion applied.
Chicago-based law firm Hinshaw & Culbertson LLP represented Gemini in the coverage dispute.
According to media reports, Boone Circuit Judge William Thompson ruled in December that the case against the distributors can proceed. The companies had asked for the case to be dismissed.