Insurer off hook for opioid lawsuits against drug distributor – Ohio top court

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Tablets of the opioid-based Hydrocodone at a pharmacy in Portsmouth, Ohio, June 21, 2017. REUTERS/Bryan Woolston
  • Cities sued the now-defunct drug distributor for public nuisance, not ‘bodily injury,’ court's majority said
  • Dissent said the majority ignored the plain language of the policies

(Reuters) - Mutual insurance company Acuity does not have to cover a former drug distribution company’s legal costs in 22 lawsuits by cities and counties that have been hard-hit by the opioid epidemic, the Ohio Supreme Court has held.

Reversing an appellate court’s ruling, the top court held that Acuity had no duty to defend Masters Pharmaceutical Inc because the local jurisdictions were suing for their own economic losses, not for “damages because of bodily injury” as defined in Acuity’s insurance policies for the company between 2010 and 2018.

While opioid abuse causes bodily injury to the users, the link to the cities’ and towns’ damages was too remote to trigger coverage, the court held in a 5-2 split.

“To hold otherwise would be to conclude that a duty to defend exists simply because a consequence of the alleged public-health crisis is bodily injury, regardless of the fact that the underlying parties do not seek damages because of any particular bodily injury sustained by a person,” Chief Justice Maureen O'Connor wrote for the majority on Wednesday. “We find this to be an extraordinarily expansive view and one that gives us much pause given the potential floodgates it might open.”

The dissent said the majority’s analysis “ignores blackletter law and the plain language of the policies.”

Attorneys for Masters Pharmaceutical and Acuity did not immediately respond to requests for comment.

Masters is an Ohio-based corporation but is a non-operating “shell company,” the opinion notes. Its assets were purchased by McKesson Corp in 2018.

McKesson spokesman David Matthews said the company acquired only Masters’ assets, not “the entity that is a defendant in this case.” He declined to comment further.

The 22 underlying lawsuits against Acuity are among more than 3,300 that have been filed against drugmakers, distributors and pharmacies over the opioid epidemic, which led to nearly 500,000 overdose deaths between 2009 and 2019, according to the Centers for Disease Control and Prevention.

McKesson agreed to pay $8 billion as part of a $26 billion nationwide settlement finalized earlier this year, which also includes two other distributors and Johnson & Johnson. Several other settlements have been reached with jurisdictions that declined to join the national settlement.

However, insurers have been reluctant to cover defense costs, sparking court battles over the scope of their policies.

Decisions have gone both ways. Notably, the 7th Circuit ruled in 2016 that the suits allege “bodily injury” because the municipalities’ suits seek to recover the cost of treating overdose victims.

However, the Delaware Supreme Court rejected that analysis earlier this year, saying the connection to bodily injury was too remote, and the Ohio Supreme Court agreed with the Delaware Supreme Court.

The case is Acuity v. Masters Pharmaceutical Inc., Supreme Court of Ohio Slip Op. No. 2022-Ohio-3092.

For Acuity: Ben Sassé of Tucker Ellis; Gary L. Nicholson of Gallagher Sharp; Karen Libertiny Ludden, formerly of Dean & Fulkerson; and John Chlysta of Hanna, Campbell & Powell

For Masters Pharmaceutical Inc: Paul Rose and Amanda Leffler of Brouse McDowell

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