Opioid litigation, the new asbestos crisis?
In recent years, the opioid crisis in the US has given rise to thousands of lawsuits filed against drug manufacturers, distributors and retailers. In August of this year, a judge in the Cleveland County District Court in Norman, Oklahoma ordered pharmaceutical company Johnson & Johnson to pay a landmark $572 million to the state of Oklahoma, to be used for the care and treatment of opioid addicts. The case was the first of over 2,000 lawsuits filed in the US by plaintiffs including local and state governments, health insurers and hospitals. The judgment, although under appeal, is being seen by many as an indication of what is to come in the lawsuits to follow.
Given the potential exposure to defendants, and their insurers, it is unsurprising that many in the insurance market are drawing comparisons with the asbestos crisis of the 1990s, when spiralling asbestos claims from the US almost resulted in the collapse of the Lloyd's of London market. It seems likely, then, that insurers will approach claims relating to opioid litigation with extreme caution.
Whilst many of the underlying liability policies affected will be subject to the jurisdiction of local US courts, it is common for excess liability insurance, particularly when placed in the London or Bermuda markets, to be subject to London-arbitration. Our lawyers have significant experience representing US policyholders in London-seated arbitrations of this nature.
Opioids are a group of drugs formulated to replicate the pain-reducing properties of opium. The term "opioids" includes both legal painkillers, like morphine, codeine and Oxycodone, and illegal drugs like heroin. Increased prescription of legal opioid medications in the US from the late 1990s, at a time before it was clear just how addictive these medications could be, led to misuse of both prescription and non-prescriptions opioids.
By 2017, according to the Centers for Disease Control and Prevention, 91 Americans died each day from an opioid overdose. That figure has since risen to over 100. In October 2017 the US Department of Health and Human Services declared a public health emergency to address what it called the "National Opioid Crisis". In January 2019, the US National Safety Council found that the daily death toll had increased to more than 130 Americans and, for the first time on record, the odds of dying from an opioid overdose in the United States were greater than those of dying in a vehicle accident.
The emergence of opioid litigation
Following the declaration of a public health emergency, a wave of lawsuits was filed against manufacturers and distributors across the US by cities and counties who claimed that public services such as law enforcement, hospitals and jails, had been strained financially by the crisis.
In December 2017, the US Panel on Multidistrict Litigation ordered the consolidation of around 200 cases into multidistrict litigation in the US District Court for the Northern District of Ohio.
In March 2019 more than 600 US cities, counties and Native American tribes filed a federal lawsuit against members of the Sackler family; owners of Purdue Pharma, which manufactures OxyContin. The lawsuit alleged that the family had made a fortune using deceptive marketing practices to sell the addictive painkillers, increasing sales of OxyContin by creating "a new health care narrative, one in which opioids are considered safe and effective for long-term use, and pain is aggressively treated at all costs." The company has since filed for bankruptcy in an effort to deal with the thousands of lawsuits filed against it.
In May 2019, a major opioid trial against Johnson & Johnson (J&J) began in Oklahoma. The landmark judgment in that trial, the first judgment to be handed down in an opioid case, was announced in August this year, with the judge ordering J&J to pay $572 million for its role in the state's opioid crisis.
There remain more than 2,000 opioid lawsuits pending in the US.
Britain has the world's third fastest growing rate of opioid use and there are fears a similar crisis could soon be seen in Britain.
Insurance coverage for opioid litigation?
The nature of the allegations raised in the opioid lawsuits gives rise to complex questions regarding the extent to which coverage might be available for damages and defense costs incurred by the defendant manufacturers, distributors and retailers.
A typical commercial general liability policy issued in the US will cover the insured for sums that the policyholder becomes liable to pay "because of" bodily injury or property damage caused by an "occurrence". "Occurrence" is typically defined as an "accident" often including "continuous or repeated exposure to substantially the same general harmful conditions."
Where the plaintiff in an opioid lawsuit is a governmental body, seeking damages for public expenditure as a result of the opioid crisis, questions will surely arise as to whether the damages can be said to be "because of" bodily injury. Similarly, where lawsuits allege intentional conduct by defendants, e.g. deliberate misrepresentation of the risks, violation of state consumer fraud and deceptive business practices acts etc., it will likely be said that the "accidental" nature of the occurrence definition has not been met; and policyholders may need to consider whether coverage would alternatively be available under D&O/E&O policies.
We also anticipate insurers raising coverage defences based on "expected or intended" language, the insurability of punitive damages, notification, allocation and aggregation. In addition, it is common for drug manufacturers to have special "Pharmaceutical Endorsements" and/or "Pharmaceutical Exclusions" applied to their policies, which it might be said restrict cover for opioid lawsuits.
Bearing in mind the above considerations, as well as an inevitable degree of caution likely to be exercised by insurers when it comes to opioid-related claims, policyholders can expect to face difficulty presenting claims to insurers.
If you would like to discuss this article with a member of our insurance policyholder practice, please contact Garbhan Shanks, Head of Insurance & Reinsurance at Garbhan.Shanks@michelmores.com or Harriet Chopra, Senior Associate at Harriet.Chopra@michelmores.com.