DOVER, Del. (Legal Newsline) - Insurance companies don’t have to cover defense costs for Rite Aid against opioid lawsuits by governments seeking economic damages, Delaware’s highest court ruled, rejecting one major source of funding that plaintiffs and defendants alike were counting upon to pay out multibillion-dollar settlements.
Reversing a lower court judgment in Rite Aid’s favor, the Delaware Supreme Court ruled that Chubb, Ace and other insurers were protected by language in a 2015 policy limiting coverage to damages “because of” personal injury.
Rite Aid was seeking coverage for the costs associated with lawsuits by two Ohio counties that accused it of fueling the opioid crisis with lax dispensing practices. For tactical reasons, the counties’ private lawyers disclaimed any claims directly relating to personal injury, which would have been subject to a two-year statute of limitations under the Ohio Product Liability Act.
Last year, a trial court ruled against the insurers, citing “straightforward principles regarding insurance contract interpretation.” The Supreme Court disagreed, saying the clear language of the policy required claims based upon actual personal injuries.
“If the counties ran public hospitals and sued Rite Aid on behalf of these hospitals to recover their actual, demonstrated costs of treating bodily injuries caused by opioid overprescription, the 2015 policy would most likely be triggered,” the court said in a Jan. 10 decision.
The question of insurance coverage looms large over opioid litigation, as thousands of cities and counties as well as most states have sued the industry for tens of billions of dollars, much of which will almost certainly be paid out by insurers. Several government entities including the State of Delaware have hired attorney Richard Fields, a highly experienced insurance litigator, to represent them on a contingency-fee basis in opioid litigation.
The court cited a similar ruling by a federal court in Kentucky, rejecting coverage for a drug distributor because West Virginia didn’t have to prove anyone was injured to recover on its claims. The Seventh Circuit Court of Appeals also rejected coverage for a baby-bottle manufacturer after plaintiffs strategically limited their complaint to economic claims that they were deprived the value of the products they bought.
The lower court found it was a “crucial distinction” that in other cases there was no allegation of personal injury to anyone but that the opioid lawsuits were based on the effects of addiction and death. But the Supreme Court said the fact a personal injury was involved somewhere in the chain of events didn’t trigger coverage.
The plaintiffs also pointed to an Ohio appellate decision ordering coverage in opioid suits because the economic damages were causally linked to opioid-related injuries. The Delaware court rejected that reasoning.
While the counties claim economic damages that include the cost of publicly funded healthcare, the appeals court said, the plaintiff has to show they treated a person, how much it cost, and that the defendant caused the injury. The counties deliberately wrote their complaint to avoid those claims. The court made an analogy to a city suing a soda distributor over the costs of expanding its parks and recreational facilities to handle an obesity crisis.
“Without claiming damages directly incurred in treating a specific individual’s obesity, the soda distributor would not be covered,” the court said.
Justice James T. Vaughn dissented, saying the insurer’s duty to defend is broader than its duty to cover damages from a successful lawsuit. He cited another Seventh Circuit decision directly involving a government suit against an opioid distributor that did find coverage.
“The alleged personal injury is opioid addiction,” the judge wrote. “It appears plain to me that the Counties intend to prove that Rite Aid, along with other drug distributors and others, caused the personal injury, that is, the alleged opioid-addiction epidemic, that is at the heart of their claims.”
Rite Aid settled on the eve of the bellwether trial of opioid claims in federal court in Ohio. Walmart, CVS and Walgreens took their cases to a jury, which found them liable for causing the opioid crisis in Lake and Trumbull counties. They have vowed to appeal the verdict, as they await U.S. District Judge Dan Aaron Polster’s determination of damages.