Ohio Supreme Ct: Insurer Has No Duty to Defend Drug Distributor Against Opioid Lawsuit

An insurer has no duty to defend a drug distributor against lawsuits filed by cities and counties that allege it failed to take proper steps to prevent abuse of prescription opioids, the Ohio Supreme Court ruled Wednesday.

In a 5-2 decision, the high court said because the lawsuits filed against Masters Pharmaceutical Inc. seek to recover for economic damages — not bodily injuries — there is no coverage by a commercial general liability policy issued by Acuity that said it will pay for “damages because of bodily injury.” The majority said an expansive view of coverage would contradict Ohio precedent.

“Moreover, if the intent behind the liability policy had been to afford such broad coverage—with ‘damages because of bodily injury’ encompassing any suit seeking losses that tangentially relate to a bodily injury sustained by a person—different language would have been used to make that intent clear,” the opinion says.

The high court reversed a ruling by the First District Court of Appeals and reinstated a decision by the Hamilton County Court of Common Pleas. The decision adds to a growing divergence among the courts on the question of whether insurers have a duty to defend drug distributors accused of contributing to an epidemic of opioid overdoses.

Numerous lawsuits have been filed against drug wholesalers and retailers. The case brought before the Ohio Supreme Court was spawned by 22 cities and counties in West Virginia, Michigan and Nevada that accused Masters and other wholesale drug distributors of improperly marketing and distributing prescription painkillers.

Masters asked Acuity to defend it under liability policies it purchased from 2010 to 2018. Instead, Acuity filed a lawsuit seeking a declaratory judgment from the Hamilton County Court of Common Pleas that it had no duty to defend Masters against the lawsuit.

The trial court agreed with Acuity, but the appellate court reversed. It ruled that Acuity must defend against the suits because they allege economic damages that were caused by the physical harm of opioid addiction.

After the Supreme Court took up the case, the Ohio Insurance Institute, Complex Insurance Claims Litigation Association and American Property Casualty Insurance Association filed amicus briefs in favor of the insurer. United Policyholders filed a brief supporting Masters.

Masters cited a 2016 decision by the Seventh Circuit Court of Appealsin which the insurance company was found to have a duty to defend the insured opioid distributor against a lawsuit filed by West Virginia. (Cincinnati Ins. Co. v. H.D. Smith, LLC)

The Supreme Court majority, however, cited a Delaware Supreme Court decision in another case that found an insurer had no duty to defend an insured pharmacy chain from lawsuits filed by Ohio counties seeking payment for “economic damages” caused by the opioid-addiction epidemic. (Ace Am. Ins. Co. v. Rite Aid Corp.)

“The Delaware court reasoned that the policy required ‘more than some linkage between the personal injury and damages to recover because of personal injury — namely, that the underlying claims stem from a bodily injury and the damages sought to be tied to that specific bodily injury.”

The majority opinion says the claims made against Masters are similar, if not identical, to the claims against Masters. Genesee County, Michigan, for example, alleges that Masters failed to implement measures to prevent the improper filling of opioid prescriptions and “greatly contributed to the vast increase in opioid overuse and addiction” which “directly caused a public-health and law-enforcement crisis” that forced the county to “shoulder tremendous costs.”

The majority said the lawsuits seek damages for aggregate economic injuries that were caused by the opioid epidemic, not any particular opioid-related bodily injury sustained by a citizen.

“To be sure, the opioid epidemic, as a public-health crisis, necessarily relates to bodily injuries, such as opioid addictions, hospitalizations and deaths,” the opinion says. “But allegations of bodily injury alone to not automatically bring an action within the coverage for ‘damages because of bodily injury.'”

Justices Melody Stewart and Jennifer Brunner dissented. Stewart wrote that the policy language does not limit claims to those seeking costs for their own bodily injuries. The majority opinion adds restrictions that are not stated in the policy, her dissenting opinion says.