Is a drug company that’s sued in connection with the manufacture, promotion and distribution of opioids covered by its insurer for defense costs?

According to Laura A. Foggan and Michael Lee Huggins of Crowell & Moring, LLP, that determination will come down to whether, in the relevant state, an accident takes place when either the act or the injury was unintentional, or whether an accident occurred if only the act was unintentional.

This definition will vary by state, Foggan and Huggins wrote in California Litigation, published by the Litigation Section of the California Bar earlier this year.

South Carolina may permit coverage if “either the act or the injury was unintentional,” they explained. In Liberty Mutual v. J.M. Smith, the Fourth Circuit held that if a drug company failed to identify and alert regulatory agencies of suspicious drug orders, then there may be a duty to defend.

But in California, the Crowell & Moring attorneys wrote, with that state’s definition of “accident” a state appellate court in Travelers v. Actavis held that a “deliberate act is not an accident, even if the injury is unintentional, unless the injury was produced by an additional, unexpected, independent, and unforeseen happening.”

In that case drug company Actavis allegedly engaged in deceptive marketing in order to sell more opioids and reap more profits. According to Foggan and Huggins, the court said such alleged conduct can only be described as deliberate and intentional. Whether the company intended to injure anyone is irrelevant in determining coverage, the court determined.

“[T]he court concluded that none of the alleged injuries — including the flood of opioids into the American medical market, the opioid epidemic, the resurgence in heroin use, or the increased public healthcare costs resulting from long-term opioid use — was an ‘additional, unexpected, independent, or unforeseen’ event that would support a duty to defend,” the attorneys wrote. For these reasons the California appeals court found there was no possibility of defense coverage under a CGL policy.

The latest is that the California Supreme Court granted review of Travelers v. Actavis but deferred briefing until there is a ruling on the definition of “occurrence” in another case, Liberty Surplus v. Ledesma & Meyer.

Foggan and Huggins also discussed issues such as “relief sought ‘for’ or ‘because of’ bodily injury,” products exclusions, and a number of untested coverage issues, such as whether opioid injuries constitute a continuous trigger of coverage or how the role a defendant played in the opioid market impacts coverage.

The complete article will be included with the handouts accompanying our Dec. 4, 2018, CLE webinar. Laura will be joined by policyholder counsel Bernard Bell of Miller Friel PLLC.