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Case Law

Do Liability Policies Cover Suits Related to the Opioid Epidemic?

Jes Alexander | February 21, 2024

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Pill bottle laying on its side with pills spilling out

Since the 1990s, the increased prescribing of opioids has led to the overdose of nearly a million Americans. The impacts of the opioid epidemic are vast, as families are shattered and communities are devastated. In a 2022 article, "Suicide in Construction: The Long Emergency," safety expert TJ Lyons notes that the opioid epidemic is especially acute in the construction industry due to the physical nature of the work and the ongoing suicide problem faced by the industry.

Moreover, the epidemic consumes vast resources of local and state governments. In the past few years, local and state governments have filed thousands of lawsuits against pharmaceutical distributors and manufacturers seeking to recoup some of the costs they incurred related to the opioid epidemic. These lawsuits point to and demand the costs related to services they provided related to the epidemic, such as police, health, emergency prosecution, and rehabilitation services. Significantly, many of these underlying suits make clear that they do not seek damages for death, physical injury to person, emotional distress, or physical damages to property. Thus, these opioid suits seek pure economic damages.

Pharmaceutical companies have sought coverage under commercial general liability (CGL) and excess/umbrella insurers for these claims. However, insurers have largely taken the position that these opioid suits do not trigger coverage under liability policies. These denials have led to numerous pitched coverage battles being filed in courts across the nation.

The results of this coverage litigation nationwide have trended in the insurer's favor. As reported by IRMI in its Insurance Law Reporter, the following are some of the critical appellate rulings from the past 2 years.

  • Kentucky law. The Sixth Circuit Court of Appeals held that, under Kentucky law, a CGL policy did not owe coverage to a pharmaceutical distributor, as the suits only sought pure economic damages related to the opioid epidemic.
  • Delaware law. The Delaware Supreme Court ruled that public nuisance lawsuits brought by governmental entities seeking funds for social services related to the opioid crisis sought only economic damages. Thus, the Delaware Supreme Court ruled that the underlying opioid suits did not meet the CGL policy's requirement that there be damages "for" or "because of" bodily injury.
  • Ohio law. As the opioid lawsuits brought by the cities did not allege bodily injuries tied to any particular individual, the Ohio Supreme Court ruled that the CGL policy's requirement for "damages because of bodily injury" was not met.

Interestingly, these recent decisions all focus on the fact that the underlying opioid suits seek pure economic damages. According to these courts, allegations of pure economic damages do not meet the CGL policy's requirement that there be damages "for" or "because of" bodily injury.

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Also, another reason for no coverage has emerged in California—that the lawsuits only allege intentional conduct by the pharmaceutical companies.

The Most Recent Appellate Decision Rules No Coverage Is Owed for a Different Reason

In AIU Ins. Co. v. McKesson Corp., No. 22-16158 (9th Cir. Jan. 26, 2024), the Ninth Circuit Court of Appeals ruled that a wholesale pharmaceutical distributor was not entitled to coverage under multiple manuscript commercial umbrella policies for underlying suits filed by state and local governments to recover costs related to the opioid crisis. The court ruled that the underlying suits did not allege an accident, and thus, there was not an "occurrence" for purposes of the duty to defend under the policies.

A wholesale pharmaceutical distributor, McKesson, was alleged to have committed misconduct in the distribution of opioids. In fact, it was sued in more than 3,200 underlying opioid lawsuits. The majority of these suits were brought by governmental entities (e.g., cities, counties, and states).

Many of these lawsuits were consolidated in Ohio (the "Ohio Opioid underlying suits"). Generally, the Ohio Opioid underlying suits contained allegations regarding suspicious orders of opioids and ignoring quotas that governed the distribution of opioids. Importantly, the Ohio underlying suits sought abatement; injunctive relief; equitable relief such as disgorgement or restitution; damages, including punitive damages; and attorneys' fees. These suits were settled by McKesson, but it paid more than $60 million in attorneys' fees to defend against these suits.

Another major lawsuit was filed against McKesson by the state of Oklahoma in 2020 (the "Oklahoma Opioid underlying suit"). The Oklahoma Opioid underlying suit sought recovery against McKesson for "substantial costs and losses for prescription opioid-dependency-related health care." This health care included "opioid use disorder treatment services, ambulatory services, inpatient hospital services, and emergency department services, among others." The underlying lawsuit alleged "negligence" against McKesson, stating:

122. At all times relevant hereto, McKesson had a duty to act reasonably under the circumstances and owed such duties to the State. McKesson had a duty to act reasonably in, among other things: monitoring and/or reporting suspicious orders of opioids; guarding against diversion of opioids; training its employees related to the distribution of opioids; supplying the market of opioids; and providing effective controls and procedures for guarding against theft and diversion.

123. McKesson negligently and carelessly fell below the standard of care and failed to act reasonably. McKesson's negligent acts include, among other things: failing to monitor and/or report suspicious orders of opioids; failing to guard against diversion of opioids; failing to reasonably and properly train its employees related to the distribution of opioids; supplying the market of opioids in an unreasonable and unsafe way; and failing to provide effective controls and procedures for guarding against theft and diversion.

124. Despite its knowledge of the dangers of opioids and the substantial likelihood that sales in such volumes were for abuse, non-medical use, and/or being diverted, McKesson continued to supply the opioid market and sell opioids into the supply chain.

125. McKesson breached its duty to exercise the reasonable care and prudence appropriate when selling and distributing opioids, which are highly dangerous and addictive narcotics.

Source: Oklahoma Opioid underlying suit, at page 31–32.

Also, the Oklahoma Opioid underlying suit asserted public nuisance claims against McKesson.

Having paid about $230 million in attorneys' fees and expenses to defend itself from the underlying suits, McKesson sought coverage from two of its commercial umbrella insurers, ACE and AIG. Both insurers contested coverage, stating that none of the underlying lawsuits alleged an accident and, therefore, did not meet the definition of an "occurrence" under the policy. The following are the umbrella policies' nearly identical definitions of an "occurrence."

Table 1. The Policies' Definition of an Occurrence

O. "Occurrence" means:

1. With respect to "bodily injury" or "property damage," an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Source: ACE, Umbrella Plus Commercial Umbrella Liability Policy, XS-20835 (08/06), at page 17 of 19.

S. Occurrence means:

1. As respects Bodily Injury or Property Damage, an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Source: AIG, Umbrella Prime Commercial Umbrella Liability Policy with CrisisResponse, 80517 (5/06) , at page 21 of 24.

The district court agreed with AIG and ACE. It issued a ruling that the umbrella policies were not triggered, as the underlying suits did not allege an accident; an appeal was filed.

The Ninth Circuit Rules in the Insurers' Favor

The Ninth Circuit concluded that the umbrella policies did not provide coverage for the opioid lawsuits. In reaching this result, the court addressed the meaning of the term "accident" under California Insurance law. It stated:

An accident is an unexpected, unforeseen, or undesigned happening or consequence from either a known or unknown cause." But "[a]n accident does not occur when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage."

[Citations omitted.]

Thus, the Ninth Circuit engaged in a two-step inquiry that first asked whether the underlying suits alleged anything other than strictly deliberate conduct. If not, did the underlying suits allege "some additional, unexpected, independent, and unforeseen happening" that may have produced the damage? As set forth below, the Ninth Circuit answered both questions "no."

Question 1: Did the Underlying Opioid Suits Only Allege Deliberate Conduct?

First, the court analyzed the underlying lawsuits to determine the type of conduct alleged in the underlying suits. McKesson asserted that it was being sued for merely shipping opioids to consumers. However, the court spotlighted the fact that the underlying suits expressly alleged that "McKesson intentionally flooded the market with opioids and intentionally flouted safeguards." According to the court, the underlying suits sought "to hold McKesson accountable for the deliberate manner in which it distributed opioids: by flooding the market, concealing facts, disregarding its duties, and ignoring risks."

Significantly, the court further held that the underlying lawsuits contained no allegations that McKesson engaged in this conduct by accident even though the underlying lawsuits contained a claim "for negligence" and asserted that McKesson "should have known" its actions would cause the injuries. The court rejected that the negligence label was sufficient, even in the duty to defend context, to trigger coverage. Rather, the court held that the proper focus in determining the duty to defend is the facts alleged, not the theories of recovery alleged (i.e., negligence). The court reiterated that the facts alleged in the underlying suit only alleged deliberate conduct.

Question 2: Did the Underlying Opioid Suits Allege Some Additional Unexpected, Independent, and Unforeseen Happening?

After finding that deliberate conduct was alleged in the underlying opioid suits, the court then asked whether there were "some additional, unexpected, independent, and unforeseen happening" that may have caused the alleged damages. The court concluded that they did not allege this type of conduct, relying on a similar opioid lawsuit where the California Court of Appeals held that no liability coverage existed for an opioid manufacturer, ​ Travelers Prop. Cas. Co. of Am. v. Actavis, Inc., ​ 225 Cal. Rptr. 3d 5 (Cal. Ct. App. 2017). Although the Actavis case involved opioid manufacturers and not distributors, the court noted that the decision was not driven by this distinction. Based on the analysis of that case, the court held:

The alleged injuries in the [underlying suits] stem from opioid "addiction, overdoses, and death," which the complaints exhaustively demonstrate "were the direct result … of [McKesson's] alleged scheme to increase the sale of opioids." McKesson asserts that the conduct of downstream actors including doctors, pharmacists, and opioid addicts who turned to heroin more immediately produced the injuries and must be deemed an additional, unexpected, independent, and unforeseen happening. We reject this argument. McKesson may not have "intended to cause injury, or mistakenly believed its deliberate conduct would not or could not produce injury," but such injuries were "not unexpected or unforeseen" in light of McKesson's intentional acts. As the Actavis court bluntly stated, "[t]he role of doctors in prescribing, or misprescribing, opioids is not an independent or unforeseen happening." The same is true here for the doctors, pharmacists, and drug users upon whom McKesson seeks to lay blame.

At bottom, the complaints charge McKesson with intentionally oversupplying opioids on a massive scale. It is simply not credible that when doctors prescribed the drugs McKesson allegedly pushed, when pharmacists filled those prescriptions with drugs McKesson distributed, and when end users became addicted to those drugs, overdosed, resorted to heroin, and died, that was a mere "matter of fortuity." The complaints allege that these happenings were the functionally inevitable and entirely foreseeable results of the deliberate conduct McKesson is alleged to have engaged in. They were not unexpected or unforeseen.

[Citations omitted.]

Do D&O Policies Cover These Opioid Suits?

Given the current trend in courts nationwide that CGL policies do not provide coverage, is that the end of the road for these pharmaceutical companies in obtaining coverage for these underlying opioid suits? Recently, a North Carolina federal court ruled that a distributor's directors and officers (D&O) liability policy provided coverage for opioid lawsuits brought by governmental entities. Although the D&O insurer conceded that the opioid claims fell within the policy's entity liability coverage section, it argued that coverage for the opioid lawsuits was barred by the breach of contract and professional services exclusion.

The court rejected that these two exclusions applied to the opioid lawsuits and ruled that coverage was owed. Thus, insureds now have case law establishing that coverage for these opioid lawsuits may be available under D&O liability policies.

Some insurers recently added opioid exclusions to their D&O policies seeking to avoid coverage for these opioid lawsuits. Here is an example:

No coverage shall be available under this Policy … based upon, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving:

  1. any actual or alleged injury or damage arising out of or resulting from the actual or alleged emergence, contraction, aggravation, or exacerbation of any form of addiction, abuse, or other health condition caused by the manufacturing, handling, distribution, promotion, marketing, advertising, labeling or lack of labeling, failure to warn, sale, compounding, prescribing, application, ingestion, consumption, testing, exposure to, or any use of any Opioids;
  2. any proceeding, investigation, legal action, order, or regulation made by or on behalf of any federal, state, local, provincial, or foreign governmental, regulatory, or administrative agency or entity, regardless of the name in which such action or proceeding is brought, based on, arising from or in any way attributable to Opioids, including but not limited to any governmental coordinated actions.…

[Emphasis added.]

This exclusion is broad and directly excludes lawsuits brought by governmental entities. Had this exclusion been attached to the D&O policy in the North Carolina case, it likely would have resulted in a ruling of no coverage for the insured.


The battle over coverage for opioids has set new precedents that will impact liability coverage not just for opioids but for all similar types of claims. Moreover, there are other emerging coverage battles that will similarly impact the scope of liability coverage, such as liability coverage for biometric claims or silent cyber claims. Thus, it is critical to stay up to date with these breaking and emerging coverage trends.

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