Coverage for the Opioid Epidemic—A New Crisis, Raising the Same Questions

By Nicholas M Insua, Esq posted 4 days ago


The following originally appeared in the March 2018 Insurance Law Section Newsletter. The publication, as well as the opportunity to write for it, is available to section members. For more information on how to join this or any other section, email

     With the growing number of lawsuits being filed related to the opioid pain medication epidemic, businesses must be prepared to look to their various insurance policies for coverage that might help defray the costs to defend against such lawsuits, or pay any settlements or judgments resulting from them. Some of those policies include general liability insurance, product liability insurance, and directors and officers liability insurance.
     This article discusses a few decisions concerning coverage under general liability insurance policies for these opioid-related lawsuits, and some of the issues addressed in those decisions.
     As a quick refresher, the typical insuring agreement of a general liability policy requires the insurance company to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ [that is caused by an ‘occurrence’.]” The term “bodily injury” is generally defined as “bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time,” while an occurrence is usually defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The term “accident” in the definition of “occurrence” is not defined, nor is the phrase “as damages” in the insuring agreement itself. As might be expected, and as has been the case for countless categories of underlying losses—asbestos, environmental, and mold, to name just a few—these basic terms in the insuring agreement are where much of the action lies when policyholders, insurance companies, and courts have grappled with coverage questions related to the opioid epidemic.

Liberty Mutual Fire Ins. Co. v. J M Smith Corp., 2013 WL 5372768 (D.S.C. Sept. 24, 2013): Was there a covered occurrence?
     The insurer in J M Smith argued the underlying allegations did not constitute an occurrence because they involved “only knowing misconduct” and because the consequences of that conduct was “a natural and probable consequence of” the policyholder’s conduct. The court disagreed with both arguments. First, the court found the underlying complaint contained specific allegations of negligence, and also that the gist of alleged misconduct was that the policyholder should have been aware that large quantities of opioids were being used for non-legitimate purposes. Second, the court then held that the “conduct of distributing prescription drugs based upon orders placed by pharmacies is not, in and of itself, illegal.” Thus, the policyholder could not have reasonably anticipated a violation of West Virginia laws. The court, therefore, found the underlying actions arguably alleged occurrences that fell within the insurer’s coverage obligation, triggering its duty to defend.

Cincinnati Ins. Co. v. Richie Enterprises LLC, 2014 WL 838768 (W.D. Ky. March 4, 2014) and 2014 WL 3513211 (W.D. Ky. July 16, 2014): Was there “bodily injury”?
     Another requirement to trigger coverage under a general liability policy is for the occurrence to cause “bodily injury” or “property damage.” In the first Richie decision, the court found, quite comfortably, that the underlying complaint alleged bodily injury caused by an occurrence. The insurer argued the complaint only sought damages for “economic losses—namely, the money [West Virginia] has been required to spend because of the prescription drug abuse epidemic.” While the court acknowledged the underlying complaint certainly sought damages for West Virginia’s economic losses; it also found allegations of bodily injury to the extent the complaint “brought a claim for the costs of a ‘medical monitoring’ program.” This changed, however, in the second Richie decision, which analyzed coverage for an amended underlying complaint that did not include a claim for medical monitoring. With that key remedy omitted, the court agreed with the insurance company that the complaint only sought damages for economic losses, which did not trigger coverage for bodily injury; therefore, the amended complaint was not covered.

Cincinnati Ins. Co. v. H.D. Smith, L.L.C., 829 F.3d 771 (7th Cir. 2016): Does the complaint seek “damages”?
     In H.D. Smith, the court considered whether the underlying complaint sought “damages” on account of bodily injury caused by an occurrence. The insurance company made the somewhat convoluted argument that the state of West Virginia was seeking recovery for its “own damages,” rather than damages for bodily injury. The court found this to be a distinction without a difference, finding the insurance company’s argument to be “untethered to any language in the policy.” The court identified several specific ways in which underlying actions “caused West Virginia to spend money,” which were damages potentially insured by H.D. Smith’s insurance policies. Accordingly, the court held in favor of coverage.

Nicholas Insua, a partner at McCarter & English, practices insurance coverage on behalf of policyholders and is past chair and current editor of the newsletter of the Insurance Law Section.