In a 4-1 decision on Monday, the Delaware Supreme Court overturned a lower court's finding that the language of Rite Aid's insurance policies required Chubb units to cover the liability. States and municipalities across the country have sued the chain, as well as other pharmacy owners, drug manufacturers, and distributors, in an attempt to recoup costs associated with the opioid epidemic.
However, the appeals court ruled that the lower court erred because "public nuisance" lawsuits seeking funds to improve drug treatment and social services aren't the type of personal-injury claims covered by the policy. According to the 27-page ruling, the local governments "sought to recover only their own economic damages, specifically disclaiming recovery for personal injury or any specific-treatment damages." "As a result, the carriers had no obligation to defend Rite Aid under the governing insurance policy."
Rite Aid spokeswoman Terry Hickey said the company would not comment on the ruling. A spokesman for Chubb, Eric Samansky, declined to comment.
Based in Camp Hill, Pennsylvania Rite Aid is one of more than a dozen companies facing more than 3,000 lawsuits filed by state and local governments in connection with the opioid painkiller crisis. Municipalities blame opioid manufacturers such as Johnson & Johnson, distributors such as McKesson Corp., and retailers such as Rite Aid for illegally dumping millions of pills into communities.
Government officials claim they have spent billions of dollars attempting to combat the opioid epidemic, which they blame for the deaths of over 500,000 Americans over the last two decades. Rite Aid agreed to pay $1.5 million earlier this year to settle a New York county's claim that it failed to properly monitor opioid prescriptions.
In addition, the chain reached an out-of-court settlement in a case in Cleveland in which other pharmacy providers, including Walmart Inc., were held liable for failing to have proper systems for monitoring opioid prescriptions. In that case, a judge will decide on damages later this year.
There is no payout.
In the Delaware case, Rite Aid sought coverage under a 2015 Chubb policy that could have provided $3 million in defense costs. Chubb refused to cover any of the company's opioid exposure.
According to Chief Justice Collins Seitz in the majority ruling, the case hinged on whether the policy covered damages other than those resulting from personal injuries. The policy didn't apply because governments aren't required to prove personal injuries in order to recover in public-nuisance suits, he said.
The 2015 policy would most likely be triggered if municipalities "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 over-prescription," Seitz said. However, because governments seek to recover only tax dollars spent on combating the opioid epidemic, the policy did not apply, he added.