Finding Coverage for Opioids

As thousands of opioid-related lawsuits make their way through the courts, a growing and diverging body of case law continues to develop around the availability of insurance coverage for such suits. The threshold question of whether an insurance policy that provides coverage for “damages because of bodily injury” covers claims brought by governmental entities to recover economic costs they incurred as a result of the opioid epidemic continues to divide courts. To be sure, the opioid epidemic, as a public health crisis, necessarily relates to bodily injuries, such as opioid addictions, hospitalizations, and deaths. The lawsuits that make headlines, however, are typically the multi-million-dollar suits brought not by individuals, but by governmental entities—such as cities, counties, or municipalities—against corporate entities believed to have contributed to the opioid crisis. In these suits, governmental entities seek to recover economic losses due to the opioid epidemic, such as costs of services to mitigate the effects of the epidemic or money spent caring for drug-addicted citizens. However, unlike an individual plaintiff, governmental entities are not capable of sustaining bodily or physical injury in the traditional sense. Therefore, determining whether the redress sought by a city or municipality triggers coverage often involves distinguishing between physical injury and economic harm. More pointedly, are such damages because of “bodily injury” as it is defined in a standard commercial general liability policy?

Courts are largely divided, which has only come into sharper contrast recently. Some courts have interpreted similar or nearly identical policy language in holding that opioid-related lawsuits filed by governmental entities invoked the insurer’s duty to defend because those entities sought (or potentially sought) “damages because of bodily injury.” These courts tend to offer a broader view of the policy’s “because of” language. Many of these decisions take root from the Seventh Circuit’s 2016 decision in Cincinnati Insurance Co. v. H.D. Smith, L.L.C. In H.D. Smith, the court interpreted a liability policy that required the insurer to defend the insured against suits that sought damages “because of bodily injury.” The state of West Virginia sued the insured pharmaceutical distributor for its role in the opioid epidemic and alleged that it had incurred “excessive costs related to diagnosis, treatment, and cure of addiction,” and had provided “necessary medical care, facilities, and services for treatment of citizens who [could not] afford their own care.” The court concluded that the insurer had a duty to defend the pharmaceutical distributor in the underlying litigation because West Virginia alleged that its citizens had suffered opioid-related bodily injuries, and the state sought to recover as damages the money it had spent caring for those injuries.

In so holding, the Seventh Circuit offered this scenario: a hypothetical West Virginian who suffered bodily injury because of his opioid addiction, whose mother spent her own money to care for her injured son, decided to bring a suit against the pharmaceutical distributor seeking recovery of those costs. The insurer conceded that its policy would cover the mother’s negligence claim in that situation, and the court reasoned that a state seeking damages related to medical care and services it provided for its own citizens is no different than a mother seeking damages for her own losses sustained in caring for her son. In the court’s view, the phrases “because of bodily injury,” and “for bodily injury,” were distinguishable; the former providing broader coverage than a liability policy that covered damages “for bodily injury.” Using this interpretation, the Seventh Circuit found that the claims against H.D. Smith alleging that it was liable for money spent caring for drug-addicted citizens was at least potentially within the policy coverage and, therefore, found a duty to defend. Courts applying California, Illinois, and Pennsylvania law have adopted this view, reaching outcomes more favorable to policyholders.

Other courts, however, have rejected H.D. Smith’s interpretation in favor of a narrower application of the disputed policy language. Earlier in 2022, in ACE American Ins. Co. et al. v. Rite Aid Corporation, et al., the Delaware Supreme Court held that defendant insurance carriers had no duty to defend lawsuits against a drugstore company as it related to the opioid epidemic, specifically Rite Aid’s alleged failure to effectively monitor, report, and prevent suspicious orders of opioids that contributed significantly to the opioid crisis. The court highlighted that the lawsuits at issue had no claims for personal or bodily injury. Rather, plaintiffs—two governmental entities—sought only to recover their own economic damages from Rite Aid’s alleged contribution to a public health crisis of opioid addiction. The court held that “the existence of injury, untethered to the claims, does not transform the allegation into claims for damages ‘because of’ personal injury.” In order to trigger a duty to defend, the complaint must do more than relate to a personal injury; it must seek to recover for the personal injury or seek damages derivative of the personal injury. In other words, “there must be more than some linkage between the personal injury and damages to recover ‘because of’ personal injury: namely, bodily injury to the plaintiff, and damages sought because of that specific bodily injury.”

More recently, the Ohio Supreme Court in Acuity v. Masters Pharmaceutical, Inc., joined those jurisdictions applying a narrower interpretation of the “damages because of bodily injury” policy language. In Masters, the court held that the underlying complaints sought reimbursement for costs due to increased governmental services provided to the public in response to the opioid epidemic, not for bodily injury experienced by any specific person or persons. The court reasoned that the governments sought damages for their own aggregate economic injuries caused by the opioid epidemic and alleged that Masters failed to prevent the improper diversion of prescription opioids. It found that these complaints did not sufficiently allege damages for any particular opioid-related bodily injury sustained by a citizen. Although the court recognized that the opioid epidemic necessarily relates to bodily injuries, it held that the phrase “damages because of bodily injury,” required more than a tenuous connection between the alleged bodily injury sustained by a person and the damages sought. Courts in or applying Maryland, New York, and Kentucky law have issued similar opinions.

For now, predicting how one jurisdiction might rule on similar opioid-related cases—or other lawsuits seeking consequential damages for a third party’s injury or damage—is difficult. There remains a diverging body of case law interpreting whether government-brought, opioid-related lawsuits allege or seek “damages because of bodily injury” under the standard commercial general liability insuring agreement. Such decisions, while tending to fall into one of the two camps above, are also informed by that state’s prior case law and reasoning in non-opioid cases, and the specific allegations and relief sought by plaintiffs. Thus, the cases presented here provide a starting point in the discussion, but still leave much to be determined when analyzing similar coverage issues, opioid-related or not.