Potential costs and expenses for liability for opioid based claims are formidable, leaving many companies wondering whether insurance policies offering commercial general liability insurance (“CGL”), product liability insurance (“PLI”), and directors’ and officers’ insurance (“D&O”) provide coverage for direct and opioid-related claims. “Opioid-related claims” refers to litigation filed by governmental entities and other groups against multiple defendants which feature allegations of mass marketing and distribution of opioid products to the public at large – as opposed to personal injury claims brought by individual plaintiffs. “Direct opioid claims” include typical private lawsuits brought by an injured plaintiff for personal injuries or as the spouse of a decedent for wrongful death claim under a theory of products liability, fraud and statutory violations.
Multiple state and federal courts have addressed CGL and PLI policies’ coverage for defense costs in opioid-related litigation; no courts have yet considered indemnity for settlement or judgment amounts. The courts follow the same general rules of insurance contract interpretation in order to determine whether there is coverage for the defense of opioid-related claims that they do in other cases. The outcomes vary from case-to-case, turning on the precise wording of the applicable insurance policy, the local law applied, the posture of the case, and the nature of the claims. There is authority supporting coverage for defense costs in opioid litigation when at least one negligence-based claim resulting in bodily injury or property damage is alleged.
There is scant authority dealing with an insurer’s duty to defend and indemnify individual personal injury claims arising from “opioid crisis” allegations. On the other hand, there is no reason why the coverage analysis should depart from the analysis applicable to any other pharmaceutical products liability claim.
Good arguments exist supporting a claim for defense costs under PLI policies based on allegations of arguably negligent conduct separate and apart from the type of intentional and fraudulent conduct that is excluded; there is also case law supporting the argument that the type of economic damages sought by the municipalities, and insurance companies are damages that “arise from bodily injury”. Coverage under the CG policy will follow a similar analysis but will depend on whether or not product based claims are excluded.
Liability policies typically cover “‘bodily injury or property’ damage resulting from an ‘occurrence.’” Generally, “occurrence” is loosely defined as an “accident.” The critical point is that the harm claimed is not intentionally caused; liability insurance policies exclude coverage for harm caused by intentional conduct.
The opioid suits typically allege both intentional and negligence-based conduct. Most jurisdictions hold that as long as there is a claim in an underlying lawsuit that is eligible for coverage, an insurance company must defend the insured. This evaluation is made on the face of the pleadings. The Court determines whether or not negligence is the operative theory uniting the claims or whether there is a valid negligence claim amongst the intentional conduct claims.
Courts also have reasoned that the economic losses claimed by municipalities qualified as damages caused by or resulting from “bodily injury or property damage” covered under the policies.
Current literature regarding indemnification for opioid suits under D&O coverage offers little guidance, but we believe the usual principles should apply allowing indemnification when the policy terms are met. Complaints have been filed by shareholders of pharmaceutical companies claiming violations of federal security laws in regards to the marketing, manufacturing and distribution of opioids against pharmaceutical companies and their individual officers, including past and current CEO’s, VP’s and SVP’s; in other actions, individual officers and directors have been subject to regulatory and derivative claims.
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