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July 13, 2001


The opinion of the court was delivered by: Ruben Castillo, Judge


Knoll Pharmaceutical Company ("Knoll") filed this diversity lawsuit, seeking a declaration that Automobile Insurance Company of Hartford ("Automobile"), National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union") and Royal Insurance Company of America ("Royal") (collectively "Defendant Insurers") owed a duty to defend Knoll in the underlying case, In re Synthroid Marketing Litigation, 110 F. Supp.2d 676 (N.D. Ill. 2000). Currently before this Court are Knoll's and Defendant Insurers' motions for judgment on the pleadings. Knoll's motion is partially granted, (R. 23-1), and all of Defendant Insurers' motions for judgment on the pleadings are denied (R. 27-1, 33-1, 34-1).


Defendant Insurers issued the policies in question to Boots Pharmaceuticals, Inc., a wholly-owned subsidiary of Boots (USA). In 1995, BASF acquired Boots (USA) and, in connection with that acquisition, Boots Pharmaceuticals changed its name to Knoll Pharmaceutical Co. Knoll claims relief under these policies as successor-in-interest to Boots. Defendant Insurers deny that the policies have transferred to Knoll.

Boots manufactured, marketed and sold a prescription drug known as Synthroid. Synthroid, a synthetic form of a thyroid hormone (levothyroxine sodium), is used to treat certain thyroid diseases and cancer. Levothyroxine sodium (LT4) medications are narrow therapeutic index drugs: slight over- or under-dosing can cause serious medical problems. Beginning in 1986, various companies have claimed their LT4 medications are Synthroid's bioequivalents — drugs capable of being freely interchanged without altering their therapeutic effects. When bioequivalents exist, doctors may prescribe these other brand names or generic versions to their patients at lower prices.

I. The Underlying Synthroid Marketing Actions

Certain consumers and third-party payors filed more than seventy lawsuits, most as class actions, against Knoll and other defendants regarding the sale and marketing of Synthroid. These actions were transferred to the United States District Court for the Northern District of Illinois, as part of a Multi-District Litigation ("MDL") proceeding called In re Synthroid Marketing Litigation. See 110 F. Supp.2d 676. In the Master Consumer Class Action Complaint ("MCCAC"), the underlying plaintiffs were consumers who purchased Synthroid beginning January 1, 1990. In the Master Third-Party Payor Class Action Complaint ("TPPCAC"), the underlying plaintiffs were payors of health and medical services and supplies, including government agencies, who allegedly paid excessive costs for Synthroid medication on behalf of their insureds. These complaints contain allegations that the insured "concealed or suppressed information about cheaper bioequivalent drugs, falsely represented that there were no equivalents, and charged individual consumers and their insurers more than they would have been able to if the correct information had been known, in violation of federal antitrust and racketeering laws and state fraud statutes." Id. at 679.

According to the MCCAC, by fraudulently concealing information proving that bioequivalents to Synthroid exist and by misrepresenting that Synthroid is superior to other LT4 drugs, Knoll, Boots and BASF "have successfully controlled the levothyroxine market, persuaded physicians to specify Synthroid in their levothyroxine prescriptions, and thus required the millions of persons afflicted with hypothyroidism and other thyroid diseases to purchase Synthroid instead of the less expensive, bioequivalent brand name and generic levothyroxine drugs." (R. 1-1, Compl. Ex. 9, MCCAC ¶ 1.) According to Knoll, the Food and Drug Administration ("FDA") has not determined that all LT4 products are bioequivalent. (Id., Compl. ¶ 7.)

Knoll's complaint highlights the allegations in the underlying litigation reflecting Boots' advertisements. These advertisements claimed that "[t]here is no substitute for Synthroid," that there was "[n]o proven bioequivalent product," and that "[n]o adequate and well-controlled studies have demonstrated bioequivalence among levothyroxine sodium products." (Id., Compl. ¶ 20.) Knoll also focuses on allegations claiming that Boots published certain letters and articles disparaging a scientist, Dr. Betty Dong, whose University of California at San Francisco study suggested the existence of bioequivalents for Synthroid. (Id., Compl. ¶ 22.) In their answers and briefs, Defendant Insurers emphasize the allegations against Boots for antitrust activities, consumer fraud, unfair competition, negligent misrepresentation and violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Moreover, the underlying allegations do not claim Boots slandered, libeled or disparaged any of the consumers' or third party payors' goods or reputations.

II. Defendant Insurers' Policies

Boots tendered the original underlying complaint to Defendant Insurers for a defense in 1997. All Defendant Insurers refused the tender, denying they had a duty to defend Knoll under the insurance policies in question.

On October 27, 2000, Knoll filed a three-count complaint in this Court seeking: (1) a declaratory judgment that Defendant Insurers had a duty to defend Knoll in the underlying Synthroid litigation; (2) a finding that each Defendant Insurer's refusal to defend Knoll against the underlying complaint breached its respective insurance policies requiring each defendant to defend and indemnify on behalf of Knoll all liabilities, losses, costs and expenses incurred in the underlying litigation; and (3) attorneys' fees and additional amounts recoverable pursuant to § 155 of the Illinois Insurance Code. Knoll claims that Defendant Insurers' policies' advertising and personal injury provisions activated defense obligations. Presently before the Court are the parties' cross-motions for judgment on the pleadings filed pursuant to Federal Rule of Civil Procedure 12(c). For the following reasons, we partially grant Knoll's motion for judgment on the pleadings. Furthermore, we deny Automobile's, National Union's and Royal's motions for judgment on the pleadings.


A party can move for judgment based on the pleadings alone. N. Ind. Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998). Rule 12(c) provides the standard to be ...

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