Insurance Coverage for the Opioid Crisis

by Blank Rome LLP
Contact

With the “opioid epidemic” at an all-time high—and the resulting news coverage and public awareness also at an all-time high—now is the time for pharmaceutical companies, pharmacists, hospitals, doctors, first responders, and employers to review their professional liability and general liability insurance policies and any other potentially applicable policies such as products liability and directors and officers (“D&O”) insurance.

Pharmacies, Healthcare Professionals, and Employers

Pharmacy manager CVS Caremark, which has 90 million plan members, recently announced that it will issue prescription policies intended to help curb opioid abuse. Generally, the program will limit and control initial prescriptions and daily dosages. The new rules will bring CVS in line with guidelines issued by the Centers for Disease Control and Prevention last year. However, doctors can request exemptions for certain patients, and employers and insurers can opt out of the program.

As opioid prescription standards become the norm, health care professionals and employers should make sure that their insurance policies cover them for alleged improper deviations from an industry standard of care. Allegations could concern either a failure to implement a proper prescription policy or a failure to adhere to a policy already implemented. A typical professional liability policy will exclude “intentional acts” committed by the insured as well as an insured’s “dishonest, fraudulent, criminal or malicious acts or omissions.” Thus, the issue of whether a knowing departure from the standard of care is “intentional” or “negligent” becomes paramount for insurance coverage. See Moscarillo v. Professional Risk Management Services, Inc., 398 Md. 529, 921 A.2d 245 (2007).

Pharmaceutical Companies

Pharmaceutical companies, distributors, and other professionals that sell and market opioids have been named as defendants in lawsuits alleging causes of action, such as deceptive marketing, unfair trade practices, False Claims Act liability, fraud and misrepresentation, products liability, failure-to-warn, and various common law torts. See, e.g., City of Chicago v. Purdue Pharma L.P., 211 F. Supp. 3d 1058 (N.D. Ill. 2016) (city plausibly alleged that five pharmaceutical companies engaged in deceptive practices through a marketing campaign that overstated benefits and downplayed risks of long-term opioid therapy).

Deceptive marketing claims, for example, may be covered under commercial general liability (“CGL”) or D&O policies. Although the wrongful rendering of “professional services” typically is excluded from these types of policies, the marketing of pharmaceuticals to professionals is not necessarily a “professional service.” In Scottsdale Ins. Co. v. Coapt Systems, Inc., 2013 WL 3146781 (N.D. Cal. Jun. 18, 2013), the court held that a D&O insurer was required to pay defense costs to former officers and directors of a medical device company that manufactured, marketed, and sold defective pharmaceutical products to physicians. The court declined to hold that “all” sales and marketing activities directed toward a professional constitute “professional services.” Nothing in the underlying lawsuits brought by consumers alleged that the company “engaged in any activity that has been held to be, or can be considered analogous to, the provision of professional services, as opposed to ordinary commerce.” 2013 WL 3146781, at *6.

In 2012, the State of West Virginia sued several wholesale pharmaceutical distributors alleging that the distributors contributed to the drug epidemic by failing to identify, block, and report excessive drug orders. One of the distributor’s insurers, Liberty Mutual, sought a judgment in South Carolina district court that it had no obligation to cover a distributor under its CGL policy. In an appellate ruling, the Fourth Circuit held that the underlying lawsuit alleged a covered accidental “occurrence.” Liberty Mut. Fire Ins. Co. v. JM Smith Corp., 602 F. App’x 115, 120 (4th Cir. 2015). In so holding, the court distinguished between “intentional acts” and “intended consequences,” such that distributors who intentionally provided the drugs, but did not intend the resulting injury, were covered. The court concluded:

[T]he defendants here were engaged in the lawful activity of providing prescription drugs to pharmacies. They may not have been sufficiently careful about whose hands the drugs eventually reached, but that does not preclude finding accidental injury. We cannot forecast how the case will conclude, but it is at least possible that the state court will find that the defendants did not take sufficient care to catch suspicious activity and therefore accidentally caused harm to prescription drug abusers and the state of West Virginia. Therefore we hold that there is at least a possibility of coverage under the Liberty Mutual CGL policy[.]

602 F. App’x at 122. See also Cincinnati Ins. Co. v. Richie Enterprises LLC, 2014 WL 838768 (W.D. Ky. Mar. 4, 2014), order clarified, 2014 WL 3513211 (W.D. Ky. Jul. 16, 2014) (in related coverage suit, holding that distributor’s conduct was accidental).

Another question that arose in the West Virginia insurance coverage litigation was whether the state’s lawsuit sought damages “because of bodily injury” to consumers, as was required for coverage under the CGL policies, or whether the state only sought monetary damages incurred on its own behalf. The court in Cincinnati Ins. Co. v. H.D. Smith, L.L.C., 829 F.3d 771 (7th Cir. 2016) found in favor of the insured distributor on this issue.

All Stakeholders

Myriad insurance issues can arise from allegations of harm caused by opioid marketing practices, prescription policies, employer policies, and hospital and first responder care. This post touches on only a few. The issues specific to each entity or individual will need to be carefully reviewed to assess the scope of available insurance coverage.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Blank Rome LLP | Attorney Advertising

Written by:

Blank Rome LLP
Contact
more
less

Blank Rome LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.