In the wake of “an epidemic of addiction, overdosing, death, and other problems brought on by the increasing use and abuse of opioid painkillers,” municipalities are filing lawsuits against the companies that manufactured, distributed and marketed opioid painkillers. In turn, those companies are seeking insurance coverage. In a case illustrating the importance of the allegations of the complaint and the applicable substantive coverage law, Travelers Prop. Cas. Co. of Am. v. Actavis, Inc., 2017 WL 5119167 (Cal. Ct. App. Nov. 6, 2017), the California Court of Appeals held a CGL policy did not cover a claim by a municipality against a pharmaceutical company because the complaint did not allege an “accident” or an “occurrence,” and a “products” exclusion applied.
Actavis arose out of lawsuits filed against several defendants, including one group of companies that manufactured and distributed opioid products (“Watson”), by two counties in California, and one county in Illinois. Each lawsuit alleged that Watson and the other defendants “engaged in a fraudulent scheme to promote the use of opioids for long-term pain in order to increase corporate profits.” The lawsuits alleged that the defendants knew that using opioids were too addictive and debilitating for long-term use for most types of chronic pain, but defendants overstated the benefits of the drugs and made “untrue and unproven” statements that the painkillers were rarely addictive. The lawsuits alleged that the defendants’ acts resulted in damages, including increased demand for emergency services and law enforcement.
Watson sought coverage under several consecutive insurance policies, which limited coverage (in pertinent part) to “bodily injury” caused by an “accident” and/or “occurrence.” The court held there was no coverage because the complaint’s allegations that the defendants engaged in a “massive marketing campaign to promote the use of opioids for purposes for which they are not suited” did not allege an “accident” or “occurrence.” The court emphasized that under California law, a “deliberate act” is not an “accident” unless it “some additional, unexpected, independent, and unforeseen happening occurs that produces the damage.” The court rejected Watson’s argument that the complaints alleged “indirect unintended results” of the alleged conduct.
Actavis identified two other courts have held an insurer owes a duty to defend claims against pharmaceutical companies “for their alleged role in the opioid crisis.” Liberty Mut. Fire Ins. Co. v. JM Smith Corp. 602 Fed.Appx. 115 (4th Cir. 2015) (West Virginia law); Cincinnati Ins. Co. v. Richie Enterprises, LLC, Civ. A. No. 1:12-CV-00186-JHM-HBB, 2014 U.S.Dist Lexis 27306 (W.D. Ky. 2014). However, Actavis distinguished JM Smith and Richie. Specifically, the court cited the complaint’s allegations that the defendants engaged in a massive and misleading marketing scheme to sell the painkillers. The court also distinguished the analysis of the state law described in JM Smith and Richie, emphasizing that a deliberate act is not an occurrence under California law merely because the insured did not intend to cause injury. The court also found that even if the complaint alleged an “accident,” coverage would have been barred by an exclusion for bodily injury that arises out of or results from “any goods or products manufactured, sold, handled, distributed or disposed of by  you” and warranties made with respect to the fitness, safety or use of those goods or products.
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