In a thorough overview of the current landscape of Opioid litigation, the final panel of the AIRROC Spring Membership Meeting presented a compelling view of why the liability trends and coverage issues involved in this litigation are expanding the scope and theories of exposure extend beyond opioid claims; it also highlighted the unique impact of opioid use on workers’ compensation coverage claims.
Lisa Simons, Swiss Re, gave a brief history of the opioid crisis that has claimed the lives of over 450 thousand people over the last 20 years. Use of various types of opioids, that trigger the release of endorphins in the brain to mask pain, skyrocketed in the 1990’s particularly after the FDA approved the drug OxyContin in 1995. This was heavily marketed by its manufacturer, Purdue Pharma as an innovative, non-addictive pain medication that could work for up to 12 hours. Another reason for the increased use was a joint commission that published pain management standards making pain a “fifth vital sign” in hospital care management. Prescriptions for opioids increased from 112 Million in 1992 to 282 million in 2012. But then the trend decreased so that 2019 saw the lowest level in years. This was due to increased awareness of the potential for addiction and death plus the implementation of a prescription drug monitoring program which provided an online database for monitoring prescriptions. But during the period of May 2019 to May 2020, there were 81,230 deaths due to opioids, the largest number of deaths ever for a yearly period. If opioids are not available legally due to the increased restrictions on prescriptions, users may turn to illegal distribution sources with the hazards that that entails. Many experts are predicting an ongoing up-tick due to the impact of Covid-19.
Lisa also reviewed the litigation landscape. While similar to the tobacco litigation, opioid plaintiffs include local governments in addition to states, and also native American tribes, hospitals, and schools seeking a range of damages due to the costs of treatment, training, care and security— all due to dealing with opioid addiction and its consequences. The major defendants include manufacturers, distributors, and pharmacies.
While doctors have not traditionally been defendants in these cases, pharmacies have sought to bring them in. Many suits are in state court and the federal multidistrict litigation is in Ohio. The first case went to trial in Oklahoma in 2019. Prior to trial, two defendants settled, Purdue ($270 Million) and Teva ($85 Million). J&J tried the case and suffered a verdict of $572 Million (later reduced to $465 Million). In the Ohio MDL, Cuyahoga and Summit counties in Ohio reached a $260 million settlement with McKesson Corp., AmerisourceBergen, Cardinal Health and Teva Pharmaceuticals in 2019. Recently, the state plaintiffs in the MDL have potentially settled with 4 major distributors (McKesson Corp., Cardinal Health Inc., AmerisourceBergen Drug Corp. and Johnson & Johnson) agreeing to pay $26 Billion. But that has not yet been approved and does not include other pharmacy defendants and other manufacturers. Several more cases are scheduled for trial across the country this year. All of the controversy surrounding the DOJ settlement with Purdue Pharma and the Sacher family as well as the pending bankruptcy has made the national news. Recent settlements have also shown the breath of the scope of potential defendants — McKinsey agreed to pay $600 Million to settle charges that their work for Purdue had “turbo-charged” sales of opioids. (There are still ongoing suits against McKinsey). This could foreshadow the inclusion of other defendants who advised pharmaceutical companies including accounting firms and law firms. In addition to these types of suits, companies such as McKesson, Cardinal Health and most recently Walmart (after Walmart was sued by the Department of Justice) have face shareholder derivatives suits.
In the next section of the presentation, Scott Davis of Husch Blackwell posited that the opioid litigation is “remaking” the scope of coverage under CGL policies due to the expansive nature of the allegations, the range of defendants, the sympathetic nature of the victims at the core of the underlying litigation, and the massive exposures at risk. First of all, the plaintiffs are not the victims themselves but rather collective parts of society: governments, tribes, organizations. There is a wide range of defendants, including not only those in the supply chain, but also management and advisors— essentially anyone and everyone involved in a massive industry. And while there are a wide range of issues that we have seen before in product liability litigation, the trend of holdings for insurance carriers is not good. On the core issue of “accident or occurrence” a Fourth Circuit case out of West Virginia construed South Carolina law and found there was a duty to defend under the facts of that case, Liberty Mut. Fire Ins. Co. v. JM Smith Corp., 602 Fed.App. 115 (4th Cir. 2015). Citing South Carolina law, the court distinguished between “intentional acts” and “intended consequences,” such that distributors who intentionally provided the drugs, but did not intend the resulting injury, were covered for defense. To the contrary is a California case, The Travelers Property Casualty Company of America v. Actavis, Inc., 16 Cal.App.5th 1026 (November 6, 2017) in which the California Fourth District Court of Appeal said the claims in that case were based on allegations that the defendant engaged in deliberate conduct: “a common, sophisticated, and highly deceptive marketing campaign” aimed at increasing sales of opioids and enhancing corporate profits. “Claims involving intentional or negligent misrepresentations do not constitute an accident under a liability policy.” The court also found the products exclusion applied. [There is a substantial possibility this case will be overturned by the California Supreme Court]. As to number of occurrences, the Delaware Supreme Court, in Rite Aid Corp. v. ACE American Ins. Co., No. N19C-04-150 (Del. Super. Ct. Sept. 22, 2020) agreed with Rite Aid that all government entity opioid lawsuits alleging either distribution or dispensing claims should be deemed a single occurrence under the ACE American general liability policy. (ACE American argued that the MDL lawsuits should be treated as multiple separate occurrences). The court also dismissed ACE American’s “prior knowledge” and “known loss” defenses. See also Giant Eagle, Inc. v. American Guarantee and Liability Insurance Company District Court, W.D. Pennsylvania for similar rulings under Pennsylvania law. As to whether the claims seek “bodily injury” since they are typically claims for monetary loss, the 7th Circuit Court of Appeal in Cincinnati Ins. Co. v. H.D. Smith, LLC., No. 15-2825 (7th Cir. 2016) distinguished the policy provision “because of bodily injury” from language like “for bodily injury” and found the former was broader, reversing the trial court and finding a duty to defend.
Scott went on to state that claims being made under D&O policies are a more recent development and there is no caselaw on those issues yet. Since these policies vary greatly, decisions are likely to be case specific.
Jennifer Cogbill, VP GBCare, discussed the opioid crisis as it impacts worker’s comp cases and the need to monitor for the risk of opioid addition from day one. Studies have shown that injured workers given high doses of opioid painkillers end up spending significantly more time off work due to their injuries than those who use other types of painkillers or lower dosages. Also, when returning to work, such workers can pose safety issues. Use of opioids for acute pain should also be closely monitored for dangerous interactions with other drugs in addition to the potential for addiction. Additional drugs may be needed to deal with the side effects of opioid use. Furthermore, Medicare set-asides will likely dramatically increase for those workers eligible for Medicare. Fortunately a lot of progress has been made at managing opioid us in workers’ comp claims through the use of “Formularies”. A state workers’ compensation drug “closed formulary” is a list of prescription drugs, both generic and brand name, that are usually categorized as “pre-approved”, “not-approved”, or an exception that may require additional pre-approval (or authorization) before dispensing. In addition to Drug Formularies, several states have enacted or are working through legislation on “Prescription Drugs, Opioid Dispensing, Opioid Management, and Controlled Substance Management”. Jennifer cited the California legislation as an example. The impact in California as of 12/31/18 has resulted in a 6% reduction in opioid prescriptions and a reduction in total prescriptions as well as costs per claim. In terms of overall opioid use for chronic pain (as opposed to acute pain) use has dropped significantly since the CDC changed its guidelines in 2016. But as of 2020, the spend per claim has risen because prescriptions have shifted away from opioid to less addictive and more expensive alternatives. In 2020, Covid changed the landscape. Previous rules on opioid dispensing have been altered due to pandemic lockdowns and stress related to Covid disruption and social isolation has increased the risk of mental health disorders and the risk of addiction and abuse. Delays in surgery or treatment could contribute to an increase in pain with a consequential uptick in opioid use.
AIRROC is grateful to the panel for this informative update and for alerting us to the issues that we should continue to follow as this high-stakes litigation evolves.
