U.S. Eighth Circuit Court of Appeals Holds No CGL Insurance Coverage for Damages Arising from Contractor’s Shoddy Work

Gregory M. Boucher | Saul Ewing Arnstein & Lehr

On May 12, 2020, the United States Eight Circuit Court of Appeals, applying Missouri law, rejected a contractor’s contention that its commercial general liability (CGL) policy provided coverage for claims arising out of the contractor’s allegedly defective construction work. See Am. Family Mut. Ins. Co., S.I. v. Mid-Am. Grain Distributors, LLC, No. 19-2050, 2020 WL 2373986 (8th Cir. May 12, 2020). The court’s decision affirmed the lower court’s summary judgment decision in favor of the insurer.

Contractor Mid-American Grain Distributors, LLC (“Mid-American”) sought a defense and indemnification under its CGL policy issued by American Family Mutual Insurance Company (the “Insurer”) in response to claims in a lawsuit alleging damages arising from “design and construction issues.” However, the CGL policy only provided coverage for an occurrence, which was defined as an accident under the policy. Under Missouri law, an accident is determined by examining whether “the insured foresaw or expected the injury or damages” and does not include “acts that result in expected or foreseeable damages.”

Reasoning that damages resulting from shoddy workmanship are foreseeable, the appellate court ruled that there was no “accident” to trigger a defense or indemnification for Mid-American. This case serves as a reminder to owners and contractors alike that a contractor’s insurance policy often does not provide coverage for damages resulting from the contractor’s defective or shoddy work.

First Circuit: No Coverage, No Duty to Investigate Alleged Loss Prior to Policy Period

Eric B. Hermanson and Austin D. Moody | White & Williams

On April 1, 2020, the First Circuit, applying Massachusetts law, issued a potentially useful decision addressing the Montrose “known loss” language in ISO Form CGL policies. In Clarendon National Insurance Company v. Philadelphia Indemnity Insurance Company,[1] the court applied this language to allow denial of defense for claims of recurring water infiltration that began before the insurer’s policy period, and it found an insurer had no duty to investigate whether the course of property damage might have been interrupted, or whether other property damage might have occurred during the policy period, so as to trigger coverage during a later policy.

In the underlying dispute, a condominium owner (Doherty) asserted negligence claims against her association’s property management company (Lundgren) stemming from alleged water infiltration into her condominium. The complaint said leaks developed in 2004 in the roof above Doherty’s unit, and repairs were not made in a timely or appropriate manner. The following year, the complaint said, a Lundgren employee notified Doherty that the threshold leading to her condominium’s deck was rotting. In February 2006, Doherty discovered a mushroom and water infiltration on the threshold and notified Lundgren. At that time, Lundgren asked its maintenance and repair contractor (CBD) to replace the rotting threshold. According to the complaint, CBD did not do this repair in a timely manner and left debris exposed in Doherty’s bedroom.

In March 2006, the complaint said, a mold testing company hired by Lundgren found hazardous mold in Doherty’s unit, caused by water intrusions and chronic dampness. Lundgren’s attempts at remediation were ineffectual. In September 2008, Doherty’s doctor ordered her to leave the condominium and not to return until the leaks were repaired and mold was eliminated.

In February 2009, Doherty filed suit. Lundgren tendered defense to two different insurers: Clarendon, which insured Lundgren from June 24, 2004, to June 24, 2005, and Philadelphia Indemnity (Philadelphia), which insured the company from September 1, 2007, to September 1, 2008. Clarendon agreed to defend under reservation of rights. Philadelphia declined to defend, based on the “known loss” provision in its CGL insuring agreement:

b. This insurance applies to “bodily injury” and “property damage” only if:

. . . .

(3) Prior to the policy period, no insured listed . . . and no “employee” authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the policy period.

After the underlying case settled, Lundgren assigned its rights to Clarendon, which sued Philadelphia. Clarendon argued that Doherty’s complaint could be read to suggest that leaks prior to Philadelphia’s policy period had been repaired. It argued that new leaks might have arisen during the period of Philadelphia’s policy. At a minimum, Clarendon argued, Philadelphia had an obligation to investigate the underlying allegations before denying defense.

The District of Massachusetts rejected Clarendon’s arguments. Clarendon appealed, and the First Circuit affirmed. It found the underlying complaint unambiguously alleged damage resulting from continuing leaks that began prior to the Philadelphia policy’s inception, and it found nothing in the complaint was “reasonably susceptible” to an interpretation in which the original leaks were resolved prior to Philadelphia’s policy inception.

Finally, and importantly, the First Circuit held that when an underlying complaint does not contain allegations that would implicate coverage, the insurer has no duty to investigate further. An insurer cannot ignore known facts extrinsic to the complaint, but it has no duty to go looking for such facts.

The First Circuit’s decision provides helpful guidance for insurers faced with allegations of property damage prior to policy inception, and clarifies – importantly – that an insurer in this situation has no independent duty to investigate for damage during the policy period.

[1] No. 19-1212, 2020 U.S. App. LEXIS 10257 (1st Cir. Apr. 1, 2020).

Your CGL Policy May Cover More Than You Think – Damages “because of’ Property Damage or Bodily Injury for Construction Projects

Stella Szantova Giordano | Saxe Doernberger & Vita

Construction projects are susceptible to injuries and property damage – which is why the stakeholders involved rely heavily on commercial general liability (“CGL”) insurance policies when such losses occur. While many insureds are familiar with pursuing insurance coverage for bodily injury and property damage, a CGL policy can also cover certain consequential damages if they can be characterized as damages “because of” property damage or bodily injury.

Imagine the following scenario: An employee falls from scaffolding at the project site. OSHA shuts down the site for investigation of safety issues, and no trades are allowed to return to work for a month. Because of this, the project schedule falls behind, and the owner and the GC suffer extensive delay damages. The question is: can these (and similar) consequential damages be covered as “because of” damages under a CGL policy.

How does “because of” coverage work?

The key language to access the “because of” damages coverage is in the insuring agreement of every CGL policy written on the post-1973 ISO coverage form CG 00 01. Section I.A(1) reads:

(a) We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies.2

Because the highlighted phrase can be interpreted very broadly, many courts have concluded that a CGL policy covers certain damages flowing from a bodily injury and property damage if the following is true: 1) there is a bodily injury or property damage for which the CGL policy provides coverage; 2) the sought damages were incurred “because of” such bodily injury or property damage; and 3) the connection between the bodily injury or property damage and the “because of” damages sought is not too attenuated.3

As for the third element, any degree of “but for” causation can be construed to provide coverage, since “because of” damages can (and very often are) far broader than property damage or bodily injury itself. Exactly how closely related the losses for which coverage is sought must be related to the underlying bodily injury or property damage will vary from case to case, but a good rule of thumb is the closer related to the underlying bodily injury or property damage, the better.

What types of damages can be covered?

Theoretically, any damages which can be described as damages “because of” bodily injury or property damage could be covered. However, case law on this type of coverage is limited so a creative argument, matching your particular circumstances, may be needed. Courts found “because of” coverage for these types of damages stemming from underlying property damage: 1) delay costs (California, Illinois, Michigan, Texas, Washington and Wisconsin); 2) liquidated damages (Texas and Pennsylvania); and 3) diminution of value (Missouri and Texas).

Delay Costs. If construction is halted and delayed “because of” property damage, associated costs can be very expensive. Examples of covered losses include: a 131-day delay in completion of a California residential project because of water intrusion property damage4; and delay costs associated with re-engineering and rip-and-tear damages stemming from a subcontractor’s failure to construct concrete piles to their required strength in Washington.5

Liquidated Damages. Because liquidated damages are considered to be contract-based, obtaining coverage for them under the “because of” theory can be more difficult. The key distinction is whether the damages are a result of the insured’s negligence (in which case they are covered), or whether the damages arise from a contractual obligation (in which case they are not). A federal court applying Texas law allowed coverage for liquidated damages of $5,400 per day resulting from damage to an oil pipeline.6 A court in Pennsylvania found that liquidated damages “because of” a subcontractor accidentally cutting structural parts of a bridge were covered.7 Finally, a Tennessee court explained that if the insurers wanted to protect themselves from coverage for liquidated damages as “because of” damages, they could specifically endorse their policies to exclude liquidated damages.8

Diminution of Value. In and of itself, diminution in value is a purely economic loss not considered property damage. However, if it stems from underlying property damage, “because of” coverage is available. One court, applying Missouri law, allowed “because of” coverage to a supermarket for diminution in value to its building because of improperly installed and cracking terrazzo floor.9 Another court in Texas allowed coverage for diminution in value caused by water leakage from developer-made lakes to individual homes.10

NOTE: Many states also allow coverage for ensuing damage arising out of defective construction. While some cases characterize this as “because of” coverage, seeking defective construction coverage usually involves a different analysis which is beyond the scope of this article.11

Damages “because of” bodily inury may be more limited

Very few cases address coverage for consequential damages “because of” bodily injury on a construction project, but the argument should be the same as with damages flowing from property damage. One notable New York case allowed “because of” damages coverage for a project owner whose employees slipped and fell on water which came from an improperly installed (and leaking) roof.12 In addition, cases from non-construction settings can be used as guidance when seeking damages “because of” bodily injury. For example, a Maryland case allowed compensatory damages (including purchase of a cell phone head set) to individuals injured by cell phones emitting dangerous levels of radiation.13 In any case, the argument that damages “because of” bodily injury (such as the delay costs in the hypothetical scenario mentioned earlier) should be covered by a CGL policy is often worth making.

Conclusion

If you find yourself faced with consequential damages on a construction project caused by property damage or bodily injury, you should consider whether the “because of” argument could get you additional recovery under a CGL policy. Coverage counsel can help you evaluate whether damages such as delay in completion, repair costs, liquidated damages or diminution in value could be covered.

Inadvertent Construction Defects Are an ‘Occurrence’ Under the CGL Insurance Policy

Clifford J. Shapiro | National Law Review

Whether property damage caused by defective construction work constitutes an accidental “occurrence” under the standard form Commercial General Liability (CGL) insurance policy is now highly dependent on which state’s law applies. Determining which state’s law applies to a particular construction defect claim is therefore critical and often outcome determinative. 

The current status of each’s state’s law can be found in the Barnes & Thornburg Construction Law Practice Group’s 50 state survey of the “occurrence” issue.

This article discusses some of the correct and the incorrect ways that courts are currently addressing this issue. In particular, it focuses on the failed state of the law in Illinois, a state that continues to use an incorrect and outdated analysis to determine whether construction defects constitute an “occurrence” under the CGL insurance policy. 

A majority of jurisdictions find that defective or faulty workmanship can constitute an “occurrence” under the modern day CGL insurance policy. Generally, these jurisdictions find that defective construction work that occurs unintentionally is a fortuitous “accident,” and therefore an “occurrence” within the meaning of the coverage grant in the CGL policy. Other jurisdictions find that unintentional defective work can constitute an accidental “occurrence” if the defective work causes property damage to something other than the defective work itself. In all of these jurisdictions, a policyholder can potentially trigger coverage for a construction defect claim, assuming other terms and exclusions in the policy do not apply to bar coverage.

A minority of jurisdictions still hold that construction defect claims do not, and cannot, give rise to an accidental “occurrence” within the meaning of the CGL insurance policy, and therefore refuse to provide any coverage at all for construction defect claims. This is the situation in Illinois, and frankly the law in Illinois needs to be corrected. 

Understanding ‘Occurrence’ Under the CGL Policy

The modern day CGL insurance policy contains two key parts: the coverage grant and the policy exclusions. The coverage grant broadly provides insurance coverage up to the policy limits for amounts the policyholder becomes legally obligated to pay because of “property damage” caused by an accidental “occurrence.” The CGL policy then narrows and defines the actual scope of insurance coverage for a particular claim through the many policy exclusions.

The correct legal analysis recognizes that there is an accidental “occurrence” under the CGL policy coverage grant when a claim alleges that a general contractor or subcontractor caused property damage by accidentally (not intentionally) performing faulty construction work. Whether or not coverage exists for the claim is then determined by examining the various construction-specific policy exclusions that may apply to the particular situation. 

The correct legal analysis then examines the kind of property damage at issue only as required by the analysis of the policy exclusions, and not to determine in the first instance if the claim involves an accidental “occurrence.” This is a very important difference. A threshold finding of no “occurrence” is an absolute bar to coverage, which means there is no possibility of coverage and therefore no duty to defend the policyholder against the claim. 

On the other hand, a finding that the claim involves an accidental “occurrence” then requires analysis of the claim under the policy exclusions. This often leads to a finding that there is at least potential coverage for part of the claim, and the insurance company is therefore required to provide its policyholder with a defense at the carrier’s cost. As a result, the applicable law regarding the “occurrence” issue can, and often does, dramatically affect the policyholder’s financial posture for a construction defect claim.

The Important ‘Your Work’ Exclusion

A policyholder is more likely to have coverage in jurisdictions that recognize construction defects can be an “occurrence” and properly examine the applicable policy exclusions. For example, in the completed operations context, the “your work” exclusion generally applies to bar coverage for the cost to repair or replace property damage caused by the work of the policyholder, but it also has a specific “subcontractor exception” that does not bar coverage for property damage arising out of the work of the policyholder’s subcontractors. Thus, in a jurisdiction that recognizes that construction defects can be an accidental “occurrence,” a general contractor generally will have coverage for property damage caused by the work of its subcontractors. 

While a subcontractor does not have the benefit of the subcontractor exception in the “your work” exclusion, a subcontractor can still have coverage under the correct analysis of the CGL policy if its work causes property damage to other work (i.e., property damage outside of the subcontractor’s own scope of work). The reason for this is not that the claim alleges an accidental “occurrence” because there is damage to other work. Rather, the correct conclusion is based on the “your work” exclusion, which generally excludes coverage for the cost to repair or replace the policyholder’s own defective work, but does not exclude the cost to repair or replace damage to other work.

Illinois Courts Get It Wrong

The legal framework used by the Illinois courts is fundamentally flawed. In fact, it fails to apply the terms of the CGL insurance policy as intended by the insurance companies themselves. 

Illinois decisions currently hold (incorrectly) that inadvertent construction defects cannot be an “occurrence” unless the defective work causes property damage to something other than the “project,” “building” or “structure.” Most, but not all, of these decisions address the coverage question in situations where the policy holder was a general contractor. The cases find that there can never be an “occurrence” – and that there is therefore no insurance coverage at all for the claim – if the alleged property damage was to any property within the general contractor’s scope of work. Because the general contractor’s scope of work usually includes construction of the entire building or project, this analysis finds that a CGL insurance policy provides no coverage at all to a general contractor for any claim that involves property damage to the building or project. This virtually eliminates insurance coverage for construction defect claims for general contractors. Under this analysis, there can only be insurance coverage if the claim includes property damage to something other than the project or building being constructed.

Among other things, this analysis fails to apply the “your work” exclusion as intended by the insurance contract. The correct legal analysis recognizes that there would be no reason to have an exclusion for property damage caused by the “work” of the policyholder if the “occurrence” requirement in the coverage grant did not allow any possible coverage for property damage caused by inadvertent construction defects in the first place. And there would certainly be no reason for the same exclusion to have an exception that specifically restores coverage for property damage caused by the policyholder’s subcontractors if there never could have been an accidental “occurrence” within the meaning of the policy’s coverage grant in the first place. In short, the Illinois analysis makes the “your work” exclusion essentially meaningless.

Unfortunately, the incorrect analysis is now very established in Illinois. For more than twenty years, Illinois appellate courts have repeatedly applied the incorrect analysis to deny insurance coverage for construction industry policyholders facing construction defect claims, and the Illinois Supreme Court has never decided the issue. Illinois appellate court cases continue to hold that there can never be an “occurrence” if the policyholder is a general contractor and the alleged damage was to any part of the project or building itself. As a result, Illinois decisions continue incorrectly to collapse what should be a second and separate analysis of coverage under the applicable policy exclusions (including the “your work” exclusion) into the initial threshold coverage determination of whether the claim involves an accidental “occurrence.” 

Illinois decisions also continue to disregard or fail to apply the well accepted requirement that an insurance policy must be read and interpreted as a whole. Instead of applying the “your work” exclusion as intended, Illinois decisions often simply state that the legal analysis does not need to even consider the “your work” exclusion. The decisions find that construction defect claims for property damage within the policyholder’s scope of work are simply not sufficiently “fortuitous” or “accidental” to constitute an “occurrence.” This reasoning is based on an outdated judicial gloss that is not found in the insurance policy itself. It is based on old reasoning used by certain courts and commentators before the CGL policy terms were materially changed, including in 1986. Those changes to the policy modified the exclusions (including the “your work” exclusion) to clarify that the CGL policy provides coverage for certain kinds of property damage caused by inadvertent faulty workmanship, and that the scope of that coverage is found in the policy exclusions. 

Illinois Coverage for Subcontractors: Correct Result, Wrong Analysis

Until recently, there was uncertainty whether the same incorrect “scope of work” analysis for the “occurrence” issue would be applied in Illinois to claims against subcontractors. Some federal decisions held that there could be an “occurrence” if the subcontractor’s defective work caused property damage to some other part of the project or building outside of its scope of work. But other decisions held that the subcontractor, like the general contractor, could not show the existence of any accidental “occurrence” if the claim involved property damage to any part of the entire project or building.

On March 29, 2019 the First District of the Illinois Appellate Court issued an opinion in Acuity Insurance Co. v. 950 W. Huron Condominium Association that directly answers the “occurrence” question for insured subcontractors. The decision finds that a subcontractor can have insurance coverage for an inadvertent construction defect claim under a CGL policy in Illinois if the claim involves property damage to a part of the project that is outside of the subcontractor’s scope of work. A 2017 Seventh Circuit decision in Westfield Ins. Co. v. National Decorating Service also finds that a general contractor can have coverage under its subcontractor’s insurance policy as an additional insured where the general contractor is being sued for defective work performed by its subcontractor that caused damage to property outside of the subcontractor’s scope of work.

Applying Illinois’ flawed analysis, Acuity and Westfield essentially arrive at the correct outcome for claims that involve resulting property damage caused by subcontractors – but for an absolutely wrong reason. Worse, the decisions do nothing to remedy current Illinois law that continues to deny coverage for general contractors even when the claim involves property damage that arises out of the work of subcontractors. Under that law, the general contractor who worked on the same project at issue in Acuity would not be able to obtain any insurance coverage for the loss under its own CGL policy even if the claim involved the exact same property damage caused by the same subcontractor. This is absurd, as the subcontractor exception in the “your work” exclusion should apply in this circumstance to allow coverage for the general contractor under these circumstances.

Similarly, while the insured subcontractor in the Acuity case should have insurance coverage for part of the cost to repair the property damage, it is not because the existence of property damage outside of the subcontractor’s scope of work somehow created an “occurrence.” Instead, the “occurrence” requirement in the policy was satisfied by the accidental and inadvertent nature of subcontractor’s defective work, and the scope of coverage for the claim should have been determined by the applicable policy exclusions. Here, the subcontractor’s defective work itself should be excluded from coverage under the “your work” exclusion in the subcontractor’s CGL policy. But that exclusion does not apply to the resulting property damage to the other non-defective parts of the work, including the damage that the subcontractor caused to other parts of the project. It is for this reason, and not because the claim somehow fails to allege an accidental “occurrence,” that the subcontractor has coverage for the resulting damage it caused to other parts of the project.

Will Illinois Law Ever Be Corrected? 

The Acuity case presented a rare opportunity for the Illinois Supreme Court to reconsider and correct Illinois law, but unfortunately the court recently refused to accept the opportunity to decide the case on appeal. Illinois therefore continues to have an incorrect analysis in its case law for determining whether construction defect claims are covered by the CGL insurance policy. The Illinois Supreme Court needs to consider this issue and publish a decision that finally addresses and corrects the law in Illinois, or the Illinois legislature needs to take up and pass corrective legislation. 

Just Because? COVID-19 Coverage under General Liability Insuring Agreements

Syed S. Ahmad and Rachel E. Hudgins | Hunton Andrews Kurth

Potential damages flowing from the COVID-19 pandemic, similar to those flowing from the opioid crisis, will likely result in courts considering the plain meaning of these common coverage triggers.

A policy’s insuring agreement sets out the scope of coverage. It should be the starting point for any coverage analysis, especially when confronted with claims likely to arise from COVID-19. For instance, if a general liability (GL) policyholder faces liability for the negligent provision of services when short-staffed because of COVID-19-positive employees, would the employees’ illness constitute “bodily injury” that triggers coverage for the negligent services, even if those services did not result in bodily injury or property damage? The answer depends on the specific policy language.

One concept that will likely be the focus is the phrase “because of” in a GL policy’s insuring agreement:

“We will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury’… to which this insurance applies.” In most cases, “because of” does not merit any consideration at all.

Under well-established contract interpretation principles, this policy language like most others is interpreted according to its plain meaning. That is true for liability claims that are common and straightforward and also for claims that arise less often. However, as commentators have noted, while the underlying contract interpretation principles do not change, the nature of the liability claim may bring into focus the significance of certain terms used in insurance policies. See, e.g., Kenneth S. Abraham, Plain Meaning, Extrinsic Evidence, and Ambiguity: Myth and Reality in Insurance Policy Interpretation, 25 Conn. Ins. L.J. 329, 350 (2019) (“However, when a claim for coverage of an unconventional form of liability arises for example, when the party seeking to recover damages from the policyholder that are the consequence of bodily injury is not the same party who suffered the bodily injury then the courts must become more explicit [about] what these words mean.”).

Some courts “interpret the phrase `because of bodily injury’ more broadly” than insuring agreements providing coverage “for” bodily injury. See, e.g., Medmarc Cas. Ins. Co. v. Avent Am., Inc., 612 F.3d 607, 616 (7th Cir. 2010). This makes sense given that the “because of” trigger is broad. The Medmarc court illustrated the difference with an 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 wheelchair accessible, not for his physical injuries. If the insured driver had a policy that only covered damages “for bodily injury” it would be reasonable to conclude that the damages sought in the example do not fall within the insurer’s duty. However, if the insurance contract provides for damages “because of bodily injury” then the insurer would have a duty to defend and indemnify in this situation.

Id. The Seventh Circuit Court of Appeals cited this logic in Cincinnati Ins. Co. v. H.D. Smith LLC, 829 F.3d 771, 777 (7th Cir. 2016).

In H.D. Smith, the insured pharmaceutical distributor allegedly provided West Virginia citizens prescription opioids in quantities so large that the insured should have known the drugs were being used illicitly. Id. at 773. West Virginia sued the insured for amounts it spent caring for drug-addicted citizens, and the insured sought a defense under its GL policy. Id.

The court found the claimed damages were due, in part, “because of bodily injury,” and therefore within the scope of coverage. In so deciding, the Seventh Circuit provided its own illustration:

Suppose a West Virginian suffers bodily injury due to his drug addiction and sues [the distributor] for negligence… [S]uch 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… [H]er suit would be covered too… 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).

Id. at 774 (emphasis original).

A Kentucky federal court, considering a similar lawsuit, disagreed with this conclusion in dicta. Cincinnati Ins. Co. v. Richie Enter. LLC, No. 1:12CV00186, 2014 WL 3513211 (W.D. Ky. July 16, 2014). That citizens suffered physical harm or death due to prescription drugs, the court began, was not necessary to prove the state’s claim. Id. at *5. The alleged bodily injury “only explain[ed] and support[ed] the claims of the actual harm complained of: the economic loss to the State.” Id. The state was “not seeking damages `because of’ the citizens’ bodily injury; rather, it [was] seeking damages because it has been required to incur costs due to … drug distribution companies’ alleged distribution of drugs in excess of legitimate medical need. This distinction, while seemingly slight, is an important one.” Id. at *6.

That analysis ignores the significance of the actual policy terms. The court’s conclusion that the state was “not seeking damages `because of’ the citizens’ bodily injury” is undermined by the fact that individuals had suffered bodily injury, the state paid amounts to deal with that injury, and the state sought reimbursement of those amounts. Those facts should satisfy the “because of” trigger. That the state sought damages due to the distribution of drugs should not change the analysis. The policy language required only that the liability alleged be “because of” bodily injury, not that there be no other basis for liability. Tellingly, the court did not cite any authority supporting the “seemingly slight” distinction it relied on.

Furthermore, even if the Cincinnati court’s interpretation was reasonable, that would render the “because of” phrase ambiguous. When there are two reasonable interpretations of a policy provision, the ambiguity is resolved in favor of coverage. In fact, at least one court found the “because of” language ambiguous, since the insurer and the insured provided two different–though reasonable–interpretations of the phrase. State v. Am. Family Mut. Ins. Co., 693 N.W.2d 79, 82 (Wis. Ct. App. 2005). Applying the rule of contra proferentem, the court construed the policy in the insured’s favor to provide coverage for re suppression costs charged by the state. Id. These cases highlight the importance of just one or two words in an insurance policy “because of” versus “for”. The H.D. Smith suit, which is on appeal, may result in coverage for the $3.5 million settlement between West Virginia and the drug distributor. Potential damages flowing from the COVID-19 pandemic, similar to those flowing from the opioid crisis, will likely result in courts considering the plain meaning of these common coverage triggers.