California Federal Court Rules No Duty To Defend Opioid Lawsuits

• Published date: 20 April 2022
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Personal Injury
• Law Firm: Wilson Elser Moskowitz Edelman & Dicker LLP
• Author: Mr Paul S. White and Siobh'n A. Breen

By Order dated April 5, 2022, the Northern District of California granted partial summary judgment to insurers National Union Fire Insurance Company of Pittsburgh, PA (National Union) and ACE Property and Casualty Insurance Company (ACE) (together, the Insurers), ruling that the Insurers had no duty to defend the insured, a distributor and seller of prescription drugs, in connection with three opioid-epidemic lawsuits wherein state and local governments sought to recover the increased costs they have incurred responding to the opioid epidemic.

In so holding, Judge Jacqueline Corley held that the insured's over-distribution of opioids led to the foreseeable diversion of prescription painkillers. In turn, the illegitimate use of such painkillers and increased costs incurred by state and local governments in response to the opioid crisis did not arise from an accident or occurrence. Accordingly, National Union and ACE did not have a duty to defend and reimburse the insured for the more than $230 million it incurred to defend against thousands of opioid lawsuits.

Background

The Insurers filed the lawsuit captionedAIU Insurance Co., et al. v. McKesson Corp. against the insured in October 2020. The Insurers sought a declaratory judgment that they were not obligated to defend or indemnify the insured against lawsuits that state and local governments have filed against it wherein they seek to recover increased costs responding to the opioid epidemic.

The Insurers and insured then filed cross-motions for summary judgement using three exemplar cases, two suits filed by counties in Ohio and one filed by the Oklahoma attorney general, for the insured's alleged liability as a painkiller distributor in connection with the opioid epidemic. The parties later filed motions for partial summary judgment regarding the duty to defend. The exemplar suits included similar allegations of opioid abuse, sickness, addictions, overdoses and deaths.

The insured argued that the underlying opioid lawsuits were at least potentially covered by the National Union and ACE policies because they seek damages for "bodily injury" caused by an "occurrence" and because the insured had exhausted the retention limit for a single occurrence. In contrast, the Insurers argued that the underlying opioid suits were conclusively not covered by the policies because (1) the insured did not exhaust each retention limit for the multiple occurrences at issue, (2) the suits did not seek damages for bodily...