Insurances Not Designed to Cure Public Illnesses
the plaintiffs in the underlying cases expressly dismiss personal injury claims and claim only their own pecuniary damages. The trial court ruled that the insured, Rite Aid, could effectively force its insurance companies to defend it against lawsuits filed by two Ohio counties to recover financial damages related to the opioid epidemic.
I ACE American Insurance Company, Illinois Union Insurance Company, ACE Property & Casualty Company and Federal Insurance Company v. Rite Aid Corporation, Rite Aid Hdqtrs. Corporation and Rite Aid Of Maryland, Inc. d / b / a Mid-Atlantic Customer Support Center No. 339, 2020, The Supreme Court of Delaware (January 10, 2022) The Supreme Court of Delaware resolved the dispute by reading the insurance policies and facts alleged by the Ohio Counties.
Three classes of plaintiffs are within the insured's personal injury protection:
- the injured,
- person injured, and
- persons or organizations who directly cared for or treated
In order to recover under the insured's insurance as a person or organization directly caring for or treating the injured party, the plaintiff must prove the costs of caring for the individual's personal injury. The plaintiffs, state entities, tried to recover only their own financial damages, and specifically waive recovery for personal injury or any specific treatment damages.
Rite Aid is a national pharmacy company with approximately 2,500 stores around the country. Chubb wrote a general liability insurance policy for Rite Aid.
Rite Aid and others are being sued in several districts before the United States District Court for the Northern District of Ohio ("MDL Opioid Lawsuits"). Plaintiffs have filed more than a thousand lawsuits in MDL Opioid lawsuits against companies in the drug supply chain for their role in the national opioid crisis. Some lawsuits are timed, including the summits of the Summit and the Cuyahoga counties of Ohio ("the Counties") pending before the Delaware Supreme Court.
Counties case is called "Track One Lawsuits." These trials: "address  the two primary causes of the opioid crisis: (a) a marketing program [by certain defendants]…; And (b) a supply chain system, under which the various units in the supply chain failed to design and operate systems to identify suspected orders for prescription opioids, maintain effective diversion controls and stop suspicious orders when they are identified, thereby contributing to the oversupply of such drugs and fuel to an illegal secondary market. "
ACE Policy XSL G27390900, 2015 policy "applies" to "personal injury" which is "caused by an" event "occurring in the" coverage area "; & # 39; and… occurs during the insurance period." "Personal injury" is defined in part as "bodily injury" and includes "any continuation, alteration or resumption of that" personal injury ". . . after the end of the insurance period. " "Bodily injury" has its own definition: "bodily injury, disease or illness suffered by a person, including death resulting from any of these at any time." And an incident, with respect to bodily injury, is "an accident, including continuous or repeated exposure to essentially the same general harmful conditions." Finally, the 2015 policy provides that Chubb has a "duty to defend the insured against any" process "seeking [personal injury] damages."
After Chubb denied coverage, Rite Aid sued the carriers in the Superior Court and claimed breach of contract, seeking a declaratory judgment on the obligation to pay or reimburse defense costs, and statutory remedies for Chubb's refusal to defend without good cause under Pennsylvania law. Rite Aid requested a partial summary judgment and requested a declaration that Chubb is liable to "pay or reimburse" Rite Aid's defense costs for the Track One trials and "all similarly invoked lawsuits [, ]" which would likely cover most of the MDLs. the opioid processes. Chubb sought a partial ruling on the grounds that it had no obligation to defend Rite Aid in the trials.
The Supreme Court granted summary judgment to Rite Aid. claims damages for damages that are undoubtedly covered by the insurance. And Chubb agrees that the 2015 policy covers lawsuits seeking damages "for" or "due to" personal injury. The coverage depends on whether the bodily injury was caused by the plaintiff or someone who is a victim claims bodily injury liability for the injured party. Dispositive for the Supreme Court was the fact that the counties did not suffer personal injury and therefore seek compensation only for their non-derivative financial damages, even though these damages have a certain causal link to a bodily injury.
It is axiomatic that the military service is broad. An insurer has an obligation to defend its insured, even if the action against the insured is unfounded, whenever the complaint may fall within the insurance's coverage. This also applies when the complaint only has a claim that falls within the scope of the insurance's coverage and even if an insured is ultimately found not to be liable.
By taking Cuyahoga County's complaints as representative, it seeks "financial harm" as a "direct and immediate result" of Rite Aid's failure to "effectively prevent diversion" and "monitor, report and prevent suspicious orders of opioids. Cuyahoga claims that Rite Aid's behavior also "broke well below the legal requirements" and "contributed significantly to the opioid crisis by enabling and failing to prevent opioid diversion" for illegal and over-the-counter use. Cuyahoga claims that the opioid crisis "saddled [it] with an enormous financial burden", with "several departments [incurring] direct and specific response costs amounting to tens of millions of dollars [, ]" including costs in the areas of medical treatment and criminal justice.
The complaints do not allege personal injury claims for or on behalf of individuals who have suffered or died from the alleged abusive disclosure of prescriptions. Rather, the counties explicitly wrote off damages for personal injuries. The counties made it clear that: "they are not seeking damages for death, physical harm to persons, emotional distress or physical harm to property." and their increased costs are of a different kind and degree than Ohio citizens in general and can only be borne by the counties and are not based on or derived from the rights of others.
Delaware's law recognizes that the obligation to defend the test extends beyond bare the labels of a claim, and asked if the actual allegations in the underlying complaint potentially support a covered claim. However, the Track One trials did not claim personal injury-only facts supporting the claims of financial loss. The Supreme Court admitted that the plaintiffs did not claim damages for personal injury. They are trying to recover from non-derivative economic losses.
The Supreme Court, in view of the mutual intention at the time of the contract, would read an objective, reasonable third party damages claimed by any person or organization for care or death resulting from at any time from the personal injury involves damages directly resulting from personal injury injuries to provide care to an injured individual.
The Supreme Court noted that if the counties ran public hospitals and sued Rite Aid on behalf of those hospitals to recover their actual, proven costs of treating bodily injuries caused by opioid overdose, the 2015 policy would most likely be triggered. But the counties' alleged injuries do not depend on evidence of bodily injuries or even suggest them.
The complaints, the Supreme Court stated, are not covered by the 2015 policy. The trial court was reversed and the Supreme Court concluded that insurers had no obligation to defend or reimburse the insured. They forget that insurance is a contract that protects the insured person or entity against certain identified random risks of loss. When, as in this case, the insurance only insures against personal injury, there can be no obligation to defend or compensate the insured for financial damages that do not fit the definition of "personal injury". The Supreme Court of Delaware read the policy and had no choice but to change the trial court and find that the insurance companies were neither liable for defense nor compensation to the Rite Aid units.
© 2022 – Barry Zalma
Barry Zalma, Esq. CFE, now limits its activities to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance fraud and insurance fraud almost equally for insurers and policyholders.
He also acts as arbitrator or media for insurance insurers. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry.
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