According to the filings, Master's conduct "greatly contributed to the vast increase in opioid overuse and addiction" and caused "a public-health and law-enforcement crisis." (Credit: Kimberly Boyles/Adobe Stock)
In a 5-2 decision, the Supreme Court of Ohio has ruled that lawsuits brought by governmental bodies against a prescription opioid distributor seeking damages merely related to opioid-related addiction and overdoses do not invoke an insurers' duty to defend. The case is Acuity v. Masters Pharm., 2022-Ohio-3092.
Hamilton County Ohio based Masters Pharmaceutical was a wholesale distributor of pharmaceutical products that shipped prescription opioids to pharmacies across the nation, until it ceased operations in 2018. A group of more than 20 cities and counties in West Virginia, Michigan and Nevada sued Masters and several other pharmaceutical manufacturers, distributors and retailers making similar claims that the companies were responsible for the opioid epidemic that was ravaging their communities. The governments alleged that Masters had failed to monitor and report suspicious opioid orders and had failed to maintain effective control against the diversion of opioid painkillers into the illegal drug market.
According to the filings, Master's conduct "greatly contributed to the vast increase in opioid overuse and addiction" and caused " a public-health and law-enforcement crisis."
Each year between 2010 and 2018, Masters purchased commercial general liability policies from insurer Acuity. The policies provided that under certain circumstances Acuity would defend Masters against lawsuits seeking "damages because of bodily injury," and that Acuity would pay damages that Masters had been found legally obligated to pay.
After the filing, Acuity sought a declaratory judgment from the common pleas court stating that it owed no duty to defend Masters against the government lawsuits and didn't have to pay for any potential judgments against Masters. The court sided with the insurer. Masters appealed to the First District, which in 2020 ruled that the policies expressly provided coverage to defend against lawsuits from organizations, such as governments, seeking to recover "economic damages" when those damages occurred because of bodily injury. According to the appellate court, since the governments alleged that their losses were related to physical harm caused by opioid addiction, Acuity had a duty to defend the pharmaceutical company.
In the opinion, Chief Justice O'Connor explained that several courts across the country have ruled in lawsuits considering policies that contained nearly identical language to that found in the policies between Acuity and Masters. Some courts have held that the insurer must defend the pharmaceutical company, while others have held that the insurer has no duty to defend.
Masters cited a case from 2016 out of the U.S. Court of Appeals for the Seventh Circuit, in which the insurer was found to have a duty to defend the insured opioid distributed, titled Cincinnati Ins. Co. v. H. D. Smith, LLC. In H.D. Smith the state of West Virginia alleged that it was entitled to damages for the money it spent caring for state citizens who suffered from opioid-related bodily injuries. The Seventh Circuit found in favor of the state, and in doing so, told a story of a hypothetical West Virginian who suffered opioid addiction related bodily injuries. In that scenario, the addict's mother spent her own money to care for her son and then sued the pharmaceutical distributor seeking to recover the medical costs. According to the Seventh Circuit, the insurer acknowledged that its policy would cover the pharmaceutical company against the claims of the mother in the hypothetical, and reasoned that the state's damages for the care of its citizens was no different than a mother caring for her addict child.
The Delaware Supreme Court rejected the hypothetical mother analogy and ruled that the mother's claim was not similar to the state's claim in Ace Am. Ins. Co. finding that in the mother's case for the claim to be covered, she would have to prove that the alleged harm caused by the pharmaceutical company was the "immediate and direct result of her son's injury." Alternately, the cases brought by the counties allege that their damages are tied to a public health crisis fueled by the pharmaceutical companies instead of individual injuries. The majority in the Supreme Court of Ohio agreed with the Delaware Supreme Court and found that the above hypothetical was "unhelpful and not comparable to the underlying suits."
According to the court, "the opioid epidemic, as a public-health crisis, necessarily relates to bodily injuries, such as opioid addictions, hospitalizations, and deaths. But allegations of bodily injury alone do not automatically bring an action within the coverages for 'damages because of bodily injury.'" Because the government's suits tied their "alleged losses to the aggregate economic injuries they have experienced as a result of the opioid epidemic" and "not tied to any particular bodily injury," the Court held that Acuity did not owe Masters a duty to defend it in the underlying governments' suits.
The dissenting opinion noted that decades ago the Ohio Supreme Court had made it clear that an insurer had a duty to defend its insured against a claim that is potentially or arguably within the coverage listed in the policy. The dissent also states that the majority opinion disregards the language from the policy which does not limit claims to those seeking costs for their own bodily injuries. The policies specifically indicate that they provide coverage for the costs that the organizations accrue for losses associated with bodily injuries despite the fact that an organization cannot personally suffer "bodily injuries."
Editor's Note: This decision joins a "growing and diverging" body of case law on whether insurance policies purchased by opioid makers distributors and sellers provide coverage brought by government entities for claims seeking "damages because of bodily injuries."
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