Regular readers of the Policyholder Pulse know that we often frame coverage issues with a lighthearted or (hopefully) humorous theme, but there’s nothing funny about the opioid crisis that continues to devastate lives and communities across the United States. The extent and impact of opioid addiction are being examined and explained by experts in the field, and we aren’t trying to tackle that subject on an insurance blog. Instead, this post outlines the expanding breadth of opioid liability claims at every level of the industry, and insurance coverage considerations raised by these claims.
The Expanding Reach of Opioid Liability Claims
Lawsuits have been filed nationwide by states, counties and cities against the largest manufacturers and distributors of opioids. Many of these have been consolidated in a multi-district federal litigation styled In re: National Prescription Opiate Litigation pending in the Northern District of Ohio. Suits also continue to be filed in state courts or consolidated in this federal action.
The parties identified as defendants in these lawsuits continue to expand, and often include smaller distributors, clinics or other medical facilities, third-party payors and even individual physicians and pharmacists. The plaintiffs’ side is also diversifying, as lawsuits are now also being filed by non-governmental plaintiffs, including individuals bringing wrongful death or putative class action claims.
Key Coverage Considerations for Opioid Liability Claims
Lawsuits alleging liability in connection with the opioid industry are varied and complex, in terms of both the claims alleged and the parties involved. As a result, they raise many complex insurance issues. This post outlines a few of the most common ones:
Potentially Applicable Policies
Opioid-related lawsuits can trigger various insurance coverages, depending on the claims alleged. Commercial general liability insurance may respond to some of the claims commonly made in opioid litigation, including public nuisance, failure to report, negligence and negligent misrepresentation.
CGL policies frequently include exclusions for professional services, however, which could apply to allegations against clinics, doctors or pharmacists relating to prescribing or dispensing opiates. CGL policies also often have exclusions relating to insureds’ products that could apply to some claims. Specialty coverages should be considered for products liability or claims relating to insureds’ performance of professional services.
Directors and officers of companies involved in the opioid industry might be sued individually, and there could be claims by shareholders relating to the impact on company securities. D&O liability policies may respond to these kinds of claims.
Keep in mind that many opioid-related lawsuits allege conduct or damages occurring over many years, which could trigger occurrence-based (typically CGL) policies in effect during each of those years. Be careful not to limit claims under one policy type or year if others may apply.
The Impact of Intent
Some liability policies are triggered by alleged damages caused by an “accident” and most include some form of exclusion for intentional injury or willful violation of law.
Opioid-related lawsuits may include claims of fraud, conspiracy, and violations of statutes such as RICO, the Controlled Substances Act and consumer protection laws. Coverage may be denied based on intent provisions for these types of claims or others based on the same allegations. If, however, the lawsuit also alleges claims based on negligent conduct, or, in many jurisdictions, if the prospect of negligent conduct liability exists as a “lesser included” claim within the allegations of the complaint, then those claims are more likely to be covered.
Note that state law differs about whether defense costs can be allocated between covered and un-covered claims, or whether insurers can seek reimbursement of defense costs if an insured ultimately is found liable on a claim that is not covered. Policy wording and applicable law can make significant differences as to available coverage.
Coverage for Alleged Damages
Certain coverages, such as CGL and some professional liability policies, cover damages for or because of “bodily injury.” Governmental units bringing opioid-related lawsuits typically allege damages such as increased costs of care and law enforcement. Courts have issued mixed decisions on whether these lawsuits allege “bodily injury” damages. Wording that could make a difference is whether the policy covers damages “for” or “because of” bodily injury, with the latter term being interpreted more broadly and potentially including government response costs. CGL policies may also state that bodily injury damages include damages for care or loss of services resulting from bodily injury, which arguably applies to damages like those alleged by governmental plaintiffs.
Insurers may raise other damages-related exclusions such as for fines or penalties, or for profits to which the insured was not legally entitled. Application of such exclusions depends largely on what damages are sought by the plaintiffs.
If you or your organization is involved in any way in the manufacture, distribution, prescription of or payment for opioids, you should have your insurance program evaluated for coverage of opioid-related lawsuits. If you have already received claims for alleged liability relating to opioids, make sure you’ve checked for all potentially applicable policies and understand how your coverage should apply.