The Law

Pill-Mill Pusher Seeking Indemnity Was Left on the Hook for Own Defense

Miami-Luken Inc. was left without insurance coverage after the West Virginia Attorney General sued it for being part of a pill-mill pushing scheme.
By: | October 15, 2018

Miami-Luken Inc. was named as a defendant in an action brought about by the Attorney General of West Virginia. The action alleged Miami-Luken, among others, was a major distributor of controlled substances influencing the vast prescription drug abuse epidemic in the state.

The company was accused of oversupplying pharmacies in low-population cities — essentially supplying for pill mills. From 2007 to 2011, Miami-Luken distributed large quantities of narcotics, hydrocodone tablets, oxycodone and more to the impacted areas.

Miami-Luken’s insurance carrier, Cincinnati Insurance Company, notified the company that its D&O policy would not be renewed due to claims history. The company was tasked with finding replacement coverage and settled on a $5 million limit with Navigators Insurance Company.

Miami-Luken’s CEO signed an ExecPro Proposal form for D&O and employment practices liability, disclosing the W.Va. lawsuit in the application. Navigators issued a claims-based policy to the company.


When Navigators refused to cover litigation from the W.Va. lawsuit, Miami-Luken sought summary judgment, alleging breach of contract.

In court, Navigators argued its policy was unambiguous in its barring of coverage for the activities alleged by the Attorney General. Further, Navigators said, Miami-Luken must have made material misrepresentations in its application, which would preclude coverage anyway. Navigators then pointed to a Specific Litigation Exclusion (SLE) — any legal action already against the company would not be covered under the new policy.

Miami-Luken argued the SLE only applied to the W.Va. lawsuit itself or an addition to the W.Va. lawsuit. By including the word “or,” the wording became ambiguous as to what was covered.

But the court said no dice: “The inclusion of ‘or’ makes clear that the SLE is not limited to the West Virginia Lawsuit and, as here, was intended to preclude coverage for similar allegations as those raised by the West Virginia Lawsuit … This is a clear-cut case of insurance contract interpretation. The undisputed facts and application of the law establish that the SLE bars coverage here.”

Scorecard: Miami-Luken will be responsible for its own litigation fees and other payments for the underlying “pill mill” suit.

Takeaway: A thorough reading of each policy can help define when and how coverage kicks in. Of course, a company’s best defense in avoiding mounting litigation would be to refrain from illegal activities in the first place.

Autumn Heisler is the digital producer at Risk & Insurance®. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]