(Article from Insurance Law Alert, April 2022)
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A California district court granted insurers’ summary judgment motion, finding that underlying opioid suits did not allege a covered “occurrence,” notwithstanding negligence causes of action in the underlying complaints. AIU Ins. Co. v. McKesson Corp., 2022 WL 1016575 (N.D. Cal. Apr. 5, 2022).
McKesson, a distributor and seller of prescription drugs, was named as a defendant in numerous lawsuits alleging negligence, statutory violations and common law claims based on its role in marketing and distributing opioid products. Its insurers denied coverage and sought a declaration that they had no duty to defend or indemnify the claims.
The court ruled that the underlying suits alleged damages “for” or “because of” bodily injury because they alleged “sickness, addictions, overdoses, and deaths.” Further, the court held that when government plaintiffs seek damages reflecting the costs incurred to provide various opioid-related services, such costs are for bodily injury. The court deemed it irrelevant that the government entities themselves did not suffer bodily injury, noting that “nothing in the policies limits coverage to suits that seek damages for the plaintiff’s own bodily injury.” Similarly, the court rejected the insurers’ contention that the suits sought only economic damages, explaining that damages because of bodily injury may be measured in monetary terms, but that does not transform them into purely economic losses. In concluding that the suits alleged bodily injury, the court expressly disagreed with the reasoning and conclusion in ACE American Ins. Co. v. Rite Aid Corp., 270 A.3d 239 (Del. 2022) (holding that government entities’ claims for the money it spent on the opioid epidemic were not damages “because of” bodily injury) (discussed in our January 2022 Alert).
However, the court ruled that the insurers had no duty to defend because the underlying claims failed to allege an “occurrence,” which is an “accident” or “unexpected, unforeseen, or undesigned happening” under California law. Emphasizing that an accident is defined by the initial act itself rather than its consequences, the court held that virtually all of the conduct alleged in the complaints was intentional. The court acknowledged that each complaint included at least one negligence claim, but concluded that those claims were based directly on deliberate and intentional conduct. The court rejected McKesson’s argument that because the complaints included “should have known” language, they alleged accidental conduct, explaining that such an argument “conflates the issues of whether the injury was foreseeable and whether the ‘injury-producing acts of the insured’ were deliberate.”