Filed Under:Risk Management, Corporate Risk

Travelers off the hook for opioid maker's defense, court rules

The Hartford-based insurer does not have a duty to defend or indemnify Watson Pharmaceuticals.

Travelers denied Watson’s demand to pay for its defense in lawsuits by counties & cities seeking redress for costs related to the opioid epidemic in their communities. (Photo: Shutterstock)
Travelers denied Watson’s demand to pay for its defense in lawsuits by counties & cities seeking redress for costs related to the opioid epidemic in their communities. (Photo: Shutterstock)

Travelers Property Casualty Co. of America doesn’t have to pay to defend an opioid maker that was sued by two California counties and the city of Chicago.

In upholding a lower court ruling, California’s Court of Appeal, Fourth Appellate District, Division Three ruled 3-0 Monday that the Hartford-based insurer does not have a duty to defend or indemnify Watson Pharmaceuticals. The ruling marks the company’s second victory in 15 months.

Costs related to opioid epidemic


California’s Santa Clara and Orange counties, as well as the city of Chicago, have sued several pharmaceutical manufacturers and distributors, including Watson, seeking redress for costs related to the opioid epidemic in their communities. Travelers denied Watson’s demand to pay for its defense and brought a lawsuit against the company.

Travelers won a similar ruling against Watson in August, 2016, in a case that originated in Florida. In that case, the U.S. Court of Appeals for the Eleventh Circuit found the insurance carrier did not have to defend Anda Inc., a division of Watson Pharmaceuticals. The court decision was based on exclusions in the insurance policy.

In its 31-page ruling, the California Court of Appeal noted the Travelers policy covers damages for bodily injuries caused by an accident. “The California action and the Chicago action do not create a potential liability for an accident because they are based, and can only be read as being based, on the deliberate and intentional conduct of Watson that produced injuries — including a resurgence in heroin use that were neither unexpected nor unforeseen,” wrote Justice Richard Fybel.

Both the California Court of Appeal and the lower court used strong language in its critique of Watson.

Product exclusions clause of policies


“All of the injuries arose out of Watson’s products or the alleged statements and misrepresentations made about those products, and therefore fall within the product exclusions clause of the policies,” Fybel wrote.

The trial court’s comments, which were cited in the California Court of Appeals ruling, stated: “In the case at hand, the theory of both the California and the Chicago lawsuits is that Watson engaged in a well-orchestrated scheme to increase the use and sales of its opioids notwithstanding their known but undisclosed addictiveness.”

Justices William Bedsworth and Eileen Moore concurred with Fybel’s opinion.

Related: 18 emerging risks for the insurance industry, its customers and society at large

The decision by the California court comes in the midst of numerous lawsuits that have been filed against companies that manufacture and distribute highly addictive painkillers. Within the past year, at least 25 states, cities and counties have filed civil cases against those that have reaped profit from the $13 billion-a-year opioid industry. Lawsuits on behalf of Waterbury and New Haven, Connecticut, were recently filed against those that distribute and manufacture opioids.

Los Angeles-based attorney Larry Golub, who has practiced insurance law for more than 30 years, has been watching the California case closely. Golub, who does not represent any of the parties in the California case, noted one recent ruling that went against an insurance carrier — a Seventh Circuit case out of Illinois in August 2016. In that case, the court held that Cincinnati insurance companies had an obligation to defend HD Smith, a drug wholesaler, in claims related to opioid usage.

2 of 3 courts have refused to pass costs onto insurance companies


“The takeaway is that the opioid crisis has gone into the realm of whether there is insurance coverage to pay for some of the costs being incurred by public entities,” said Golub, a partner with Hinshaw & Culbertson. “So far, at least two out of three courts have refused to pass the costs onto the insurance companies.”

“I think there is a potential for more cases,” Golub said, adding, “Big bucks are being spent to deal with the opioids crisis.”

Robert Storace covers legal trends, lawsuits and analysis for the Connecticut Law Tribune. Follow him on Twitter @RobertSCTLaw or reach him at 203-437-5950.

Originally published on Connecticut Law Tribune. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Related

Insurance coverage for opioid litigation

A single rule for insurance coverage for opioid litigation will never exist.

Featured Video

Most Recent Videos

Video Library ››

Top Story

5 insurance advisor marketing mistakes to avoid

The right marketing tactics can help insurance agents and brokers reach their goals.

Top Story

Fire prevention: 5 potential fire risks in your home

Can you identify fire hazards hiding in your home? Learn about potential fire risks and how to protect your home from flames.

More Resources

Comments

eNewsletter Sign Up

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Mobile Phone

Advertisement. Closing in 15 seconds.