Opioid litigation keeps moving forward and continues to raise coverage issues

In recent years, state and local governments, labor unions, hospitals, and health insurers have filed well over a thousand lawsuits in courts across the country against pharmaceutical manufacturers, distributors, and retailers of opioids. These plaintiffs seek to recover millions of dollars spent to manage and combat the controlled substances epidemic, such as, for example, increased costs to support state-funded rehabilitation services or law enforcement and public safety measures related to the opioid epidemic.

Opioid litigation

Complaints in the opioid litigation typically allege both intentional and negligent actions by the manufacturers, distributors, and retailers. They also allege that these entities have contributed to and substantially, illicitly, and tortuously benefited financially from the prescription drug abuse problem. Plaintiffs allege that the manufacturers knew of the risks and dangers associated with their controlled substances, in terms of their ability to be abused or have their time-release components bypassed or diverted, but made misrepresentations about and failed to adequately warn the public and its users of those risks. Instead, it is often alleged that the manufacturers aggressively advertised their controlled substances as safe for human use in all areas of pain relief. Plaintiffs also allege that the distributors and retailers worked together with the manufacturers to reap enormous financial rewards by refusing to monitor and restrict the improper distribution of opioids.

Common causes of action against the manufacturers, distributors, and retailers include public nuisance, negligence, and violation of federal and state statutes, including RICO, state consumer fraud and deceptive business practices acts, state controlled substances acts, and state deceptive trade practices acts.

In December 2017, a multi-district litigation (“MDL”) was formed in the United States District Court for the Northern District of Ohio in response to the multitude of opioid lawsuits. U.S. District Judge Dan Polster presides over the MDL, which consists of hundreds of the lawsuits filed across the country, including those filed in Alabama, California, Illinois, Kentucky, Ohio, Washington, and West Virginia.

No trials have taken place in these suits against manufacturers, distributors, and retailers, though trial is scheduled in the Ohio MDL for October of this year. Last month, Judge Polster refused to permit further adjournments of the trial date.

On the other hand, also on the defense front, a Connecticut state court judge dismissed lawsuits brought by local governments, stating that the plaintiffs in those opioid lawsuits had no standing because they could not prove a causal link between the manufacture of opioids and the costs incurred in combating the opioid epidemic. In City of New Haven v. Purdue Pharma, L.P., et al., Docket No. X07 HHD CV 17 6086134 S (Ct. Super. Ct. Jan. 8, 2019), defendants moved to dismiss plaintiffs’ claims (which were substantially similar to the claims in other opioid cases discussed above) on the basis that any alleged link between the plaintiffs’ damages and defendants’ alleged conduct is too speculative to hold defendants liable. The court agreed, finding that “[plaintiffs’] lawsuits can’t survive without proof that the people they are suing directly caused them the financial losses they seek to recoup” and plaintiffs failed to offer any method of proving this connection. The court explained that although other courts handling opioid lawsuits may be tempted to overlook plaintiffs’ burden of proof, “these matters are ordinary civil damages cases and face the ordinary civil rules about who can sue for what.”

Coverage considerations

On the coverage side, the opioid lawsuits raise threshold issues, such as whether the damages sought by the plaintiffs are sought “because of,” “for,” or “on account of” “bodily injury.” The question of whether the “occurrence” requirement is satisfied, i.e., whether the underlying opioid complaints allege accidental conduct, is also an important one in this arena.

Courts, in various jurisdictions, construing different policies, have reached differing results on the interpretation of the phrase “because of” in insurance policy coverage grants. In Cincinnati Insurance Company v. Richie Enters, LLC, 2014 U.S. Dist. LEXIS 96510 (W.D.K.Y. July 16, 2014), the District Court held that West Virginia’s claims against distributors did not trigger the duty to defend because the suit did not seek damages “because of” bodily injury suffered by a specific opioid user, but instead sought reimbursement for West Virginia’s public expenditures such as a medical monitoring program.

Similarly, a Connecticut court found that an insurer had no duty to defend or indemnify Purdue in connection with putative class action suits because those suits did not seek damages “because of bodily injury.” Steadfast Ins. Co. v. Purdue Frederick Co., 2006 Conn. Super. LEXIS 1093 (Conn. Super. Ct. Apr. 10, 2006). The plaintiffs in those suits sought injunctive relief, restitution for allegedly illegal profits, and attorneys’ fees based upon Purdue’s alleged inappropriate marketing which caused users to become addicted to OxyContin. The plaintiffs generally alleged that Purdue, among others, spurred the drug addiction epidemic and that the plaintiffs were entitled to refunds of the purchase price of OxyContin. These suits did not seek compensatory or punitive damages for those persons seeking to assert a personal injury claim. See also Acuity v. Masters Pharmaceutical, Inc., No. A 1701985 (Ohio Ct. Com. Pl. Feb. 1, 2019).

The Seventh Circuit reached a different decision in Cincinnati Ins. Co. v. H.D. Smith, L.L.C., 829 F.3d 771 (7th Cir. 2016). The Seventh Circuit concluded that the liability policy at issue, which covered suits seeking damages “because of bodily injury,” provided “broader coverage than one that covers damages ‘for bodily injury.’” The policy at issue defined the term “damages because of bodily injury” to include “damages claimed by any person or organization for care, loss of services or death resulting at any time from the bodily injury.” The court then held that the underlying lawsuit triggered the duty to defend because it alleged bodily injury suffered by West Virginia citizens, and the state sought recoupment of money to care for those injuries. The Seventh Circuit noted that the insured, H.D. Smith, negligently distributed drugs that were “consumed by persons then residing in West Virginia.” By doing so, the court found that H.D. Smith “interfered with the right of West Virginians to be free from unwanted injuries, addictions, diseases and sickness.” Hence, the court believed that H.D. Smith’s actions caused the state to spend money to address and combat the prescription drug abuse epidemic, and that West Virginia has incurred “excessive costs related to diagnosis, treatment and cure of addition.”

The other threshold coverage issue that arises in this context is whether the “occurrence” requirement can be satisfied. For example, in Travelers Property Casualty Co. v Actavis, Inc., 16 Cal. App. 5th 1026 (2017), the insurer sought a declaration that it was not obligated to defend or indemnify Actavis against lawsuits brought in California and Illinois regarding the sale of opioids. The underlying complaints alleged that Actavis engaged in a common, sophisticated and highly deceptive marketing campaign designed to expand the market and increase sales of opioid products by promoting them for treating long-term chronic, nonacute, and noncancer pain – a purpose for which it allegedly knew its opioid products were not suited. The California Court of Appeals found that Travelers did not have a duty to defend because the injuries alleged did not constitute an occurrence as the injuries were not “additional, unexpected, independent or unforeseen.” It was not unexpected or unforeseen for a marketing campaign to lead to an increase in opioid addiction. By contrast, the court in Liberty Mut. Fire Ins. Co. v. J.M. Smith Corp., 602 Fed. Appx. 115 (4th Cir. 2015) found that the occurrence requirement was met because opioid manufacturers were not alleged to have disseminated prescription drugs with the intent to harm prescription drug users, or through them, the state.

Other potential coverage issues include: trigger; allocation; whether the insured had knowledge of the occurrence; whether the insured expected or intended the injury; whether the alleged damages arise out of the failure of the product to meet any warranty; timing of the alleged injury; and the insurability of punitive damages, restitutionary damages, and disgorgement. Some policies may also contain applicable exclusions for pharmaceutical products, toxic substances and exclusions for certain specifically named or identified drugs.


With opioid litigation against manufacturers, distributors, and retailers marching forward, insurers can expect to continue to tackle coverage issues raised by these opioid epidemic claims. The law on the key coverage issues is unsettled, leaving room for advancing positions that these claims are not covered, for a variety of reasons. We expect both the underlying opioid litigation, as well as the coverage litigation on these issue, to continue to evolve over the next few years.

Read other items in Coverage Digest - May 2019