Widespread addiction to opioid medications has led to a national health crisis. Governmental entities, such as states, cities, and counties, have incurred enormous costs in dealing with this crisis, including costs for medical response, intervention, and treatment. These governmental entities have asserted claims for these costs against companies in the stream of commerce for these medications, including manufacturers, wholesalers, distributors, and pharmacies. Huge settlements and verdicts have resulted from governmental lawsuits over these claims, some in the hundreds of millions or billions of dollars.

The companies sued in these cases have looked to their general liability insurers for defense and indemnity. Insurers, however, much as they did in response to earlier waves of expensive liability claims—such as asbestos or environmental claims—typically have denied the claims, at times without any apparent regard for the claim merits. Coverage litigation has ensued nationally. Courts are beginning to weigh in on the coverage issues, although there have been very few decisions to date from appellate courts.

In June of this year, Ohio’s First Appellate District, deciding a case from Hamilton County, weighed in on two significant opioid claim coverage issues, deciding both in favor of the policyholder, a pharmaceutical wholesaler. In Acuity v. Masters Pharmaceutical, Inc., C-190176, 2020-Ohio-3440, the court reversed a trial court decision in favor of the insurer. The appellate court rejected the insurer’s arguments that defense coverage under the subject policies was barred because (1) governmental expenses in the nature of economic loss were not covered and (2) the “prior-known-loss” provision in the policies operated to bar coverage. Brouse McDowell represented the policyholder in the appeal.

In regard to the insurer’s “economic loss” argument, the court noted that the policies at issue required a defense of claims for legal liability “because of bodily injury” and that “bodily injury” was defined to include “bodily injury, sickness, or disease.” The policies also expressly covered damages “claimed by any person or organization … resulting at any time from the bodily injury.” The court held, therefore, that “the policies expressly provide for a defense where organizations [such as governmental entities] claim economic damages, as long as the damages occurred because of bodily injury.” The court noted that the underlying governmental claims included claims for “medical expenses and treatment costs.” The court also noted that the governmental entities were not seeking bodily injury damages on behalf of their citizens, but this did not matter. As the court noted, “the governmental entities [were] seeking their own economic losses ….”

Regarding the insurer’s “prior known loss argument,” the court considered policy language that barred coverage when the policyholder “knew, prior to the policy period, that the bodily injury … occurred ….” The court stated, “The underlying suits claim that an opioid epidemic existed prior to 2010,” which was the inception year of the first policy at issue. The court, however, declined to equate knowledge of an opioid epidemic, if such knowledge existed, with knowledge of the specific bodily injuries involved in the underlying governmental lawsuits. In ruling in favor of the policyholder and finding defense coverage, the court reasoned as follows: “We agree that [the policyholder] may have been aware there was a risk that if it filled suspicious orders, diversion of its products could contribute to the opioid epidemic, thus causing damages to the governmental entities. But, we hold that mere knowledge of this risk is not enough to bar coverage under the loss-in-progress provision.”

At present, therefore, policyholders in Ohio asserting coverage for opioid liability claims can cite to a very favorable precedent. As the law on these issues develops nationally, policyholders across the country can do so as well. At the time of this writing, the insurer in this Ohio case is seeking review of the appellate court’s decision by the Ohio Supreme Court. If the Supreme Court should accept the case, there may be a further determination on these issues.