(Article from Insurance Law Alert, January 2023)
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The Sixth Circuit affirmed a Kentucky district court holding that insurers have no duty to defend or indemnify a pharmaceutical company in underlying opioid litigation because the claims failed to allege damages “because of” bodily injury. Westfield National Ins. Co. v Quest Pharmaceuticals, Inc., 2023 WL 179766 (6th Cir. Jan. 13, 2023).
Quest, a wholesale distributor of pharmaceutical products, was sued in numerous lawsuits brought by cities and other government agencies, alleging misconduct that contributed to a nationwide epidemic of opioid abuse. The underlying suits sought damages for economic costs incurred by the local and state governments in response to the epidemic. Quest’s insurers denied coverage, arguing that the suits did not seek damages “because of” bodily injury, as required by the policies. In ensuing litigation, a Kentucky district court granted the insurers’ summary judgment motion. (See May 2021 Alert). This month, the Sixth Circuit affirmed.
Addressing this matter of first impression under Kentucky law, the Sixth Circuit concluded that claims seeking compensation for losses incurred by government agencies in addressing the opioid crisis were not damages “because of” bodily injury. The court reasoned that “because of” requires a connection between the damages sought in the underlying suits and particular individual bodily injury, which was not present here. As the court noted, the Supreme Courts of Ohio and Delaware have employed similar reasoning in finding that insurers were not obligated to defend underlying opioid suits.
Finally, the Sixth Circuit held that even assuming that the policy language could be considered ambiguous and therefore construed in accordance with the insured’s reasonable expectations, an insured could not reasonably expect coverage for the underlying suits. The court explained that the policies used the terms “because of bodily injury” and “for bodily injury” interchangeably in various provisions and that both phrases suggest that coverage would extend only to “claims requiring proof of an actual bodily injury, not all claims tangentially related to bodily injuries.”