A January Delaware Supreme Court decision encouraged insurers eager to avoid massive policy claims from companies proposing to settle opioid liability lawsuits. In the last two months, a half-dozen complaints have been filed in Delaware, seeking court approval to bar coverage for everything from cash damages to attorneys' fees for companies such as CVS Health Corp. and AmerisourceBergen Corp.
Opioid manufacturers agreed to pay more than $32 billion to help cover the costs of opioid addiction, which has claimed the lives of an estimated 500,000 Americans over the last two decades. After a Delaware court ruled that Chubb Ltd. did not have to pay to defend Rite Aid Corp. against thousands of lawsuits, insurers such as Hartford Financial Services Group Inc. and American International Group Inc. took legal action.
“There certainly will be a short-term jump in the number of insurance companies filing suit in Delaware” because of the Rite Aid ruling, said Michael Miguel, a Los Angeles-based insurance lawyer with McKool Smith. Insurers “will be searching for any grounds they can find” to get their cases tried in the state, he said.
Delaware courts are frequently used to settle multimillion-dollar business disputes. More than half of all publicly traded companies in the United States are headquartered in the state, as are more than 60 percent of Fortune 500 companies. If insurers are successful in denying claims, the financial burden on companies targeted in over 3,000 opioid lawsuits filed by state and local governments may increase.
The legal battle revolves around whether insurance claims can be denied if policyholders created a "public nuisance" by improperly marketing addictive painkillers. This is the claim made by communities across the United States seeking restitution from drug manufacturers, distributors, and pharmacies.
Four new cases filed by insurers in Delaware target AmerisourceBergen, one of the largest drug distributors in the United States. According to state and local governments, the company profited billions of dollars by ignoring red flags about unusually large shipments of the painkillers.
'Not Included'
In its Delaware lawsuit filed on February 11, a unit of Hartford Financial Services Group Inc. stated that it denied coverage for AmerisourceBergen after "conducting an investigation." Because state and local governments "seek equitable relief in the form of nuisance abatement, which is not covered as damages under the policies," Hartford has asked a judge to uphold its denial of coverage, according to court filings.
AmerisourceBergen spokesman Gabriel Weissman declined to comment on the insurer lawsuits. As part of a $26 billion proposal that includes distributors McKesson Corp. and Cardinal Health Inc., as well as drugmaker Johnson & Johnson, the company has offered to pay $6.4 billion to settle all of its opioid litigation.
Greenwich Insurance Co.'s XL Insurance America unit claimed in a Feb. 9 lawsuit that AmerisourceBergen sought at least $300 million in coverage for opioid defense costs, but no payment was made because the policy excludes public-nuisance claims. American International Group Inc.'s National Union Fire Insurance Company of Pittsburgh and Munich Reinsurance Co.'s American Alternative Insurance Corp. both filed similar lawsuits.
CVS was sued last month by National Union and Chubb unit Ace Property and Casualty, which stated that it has "no obligation to defend or indemnify CVS in connection with" the opioid cases.
Counter-Claim
CVS has since countersued Chubb and other insurers and is requesting that a Delaware judge transfer all of those cases to Rhode Island, according to Mike DeAngelis, a spokesman for the pharmacy company. CVS is headquartered in Woonsocket, Rhode Island.
CVS stated in its Rhode Island countersuit, which names more than 50 insurers as defendants, that it had purchased "hundreds of millions of dollars in liability coverage" from Chubb each year, which should cover injuries caused by opioids.
In a court filing, CVS lawyers stated, "Chubb denied coverage outright in or around 2018 and has not paid a single dollar toward the defense, settlement, or liability arising from any of the opioid lawsuits." "In the years since then, Chubb has relied on its coverage denial, while CVS has focused solely on defending the opioid lawsuits."
Rite Aid declined to comment on the Delaware Supreme Court ruling in January, and spokeswoman Terri Hickey did not respond to requests for comment on Friday.
Policyholders may still win. While the Delaware ruling against Rite Aid in January encouraged insurers to deny coverage, courts in other states have determined that general liability policies should cover nuisance claims.
"It's not entirely clear that the Delaware Supreme Court got this one right," Miguel, the California insurance lawyer, said. "It's very out of character for them to take such a hard stance on such issues."