Insurers question coverage obligations for opioid lawsuits

AIU Insurance Company (AIU) and National Union Fire Insurance Company of Pittsburg, Penn., are asking courts to relieve them of obligations to defend or indemnify McKesson Corp. from lawsuits seeking to hold the corporation liable for the role it played during the opioid epidemic.

McKesson claims its policy should cover the costs of defending the suits, and the insurers should indemnify it for the settlements it has paid or might agree to pay in the future.

McKesson, a wholesale pharmaceutical distributor, had commercial umbrella liability insurance policies from AIG, effective from July 1999 to July 2009. The coverage dispute stems from McKesson’s alleged misconduct in the distribution of opioids, which has subjected the company to Drug Enforcement Agency and Department of Justice investigations, fines, and settlements, as well as thousands of opioids lawsuits brought by entities as large as cities states and putative classes, and individuals. Many of those suits have been consolidated in multi-district litigation.

McKesson supposedly provided notice of the opioids lawsuit to primary, excess, and umbrella carriers that issued the company policies between 1996 and 2018, including AIG. Despite requests from the insurer, McKesson has failed to demonstrate that it has satisfied self-insured retentions or limits underlying the policies. McKesson also failed to provide information AIG has repeatedly requested to allow the company to completely assess coverage for the opioids lawsuits. Despite these shortcomings, McKesson has demanded that AIG pay its fees and the costs of defending the opioids lawsuits and indemnify McKesson for the settlements it has agreed to pay or may reach in the future.

AIG denied McKesson’s claims for coverage for several reasons, including a failure to establish exhaustion of self-insured retentions, and failure to provide efficient information about the lawsuits; the opioids lawsuits did not stem from accidents so, under California law, there was no occurrence; McKesson cannot show that the damages in the opioids lawsuits were caused by bodily injuries that occurred during the policy periods; and McKesson had knowledge of the bodily injury prior to the policy periods and expected or intended bodily injuries to occur. So AIG seeks a declaration that it has no duty to defend or indemnify McKesson in any of the opioids lawsuits.

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