Insurance Defense: Opioids are a “Product”
The opioid crisis in New Orleans and Louisiana is real and is being taken very seriously at all levels of the government, including the courts. The crisis is leading to a myriad of litigation including actions for:
- Wrongful death
- Malpractice – mis-prescribed and overprescribed opioids
- Product liability
- False and misleading advertising
- Violation of state and federal regulations
- And more
This article will discuss defending insurance policy claims on the basis that opioids are “products” and, as such, might be excluded under one of the product exclusions.
Louisiana Insurance Defense: Opioids are a “Product” and Excluded
Many general commercial liability insurance policies contain provisions similar to “Products and Completed Work Exclusions” and a “Products Exclusion.” Basically, those are exclusions that exclude coverage for product liability. A business seeking product liability coverage needs to obtain and pay premiums for a policy specific to product liability.
Several courts have recently held that opioids are “products” within the meaning of liability insurance. Many policies exclude coverage for bodily injury that “arises out of” or “results from” “products.” There is no question that personal injury, addiction, overdoses and various other harms arise and result from opioids. As such, courts have held that insurers have no duty to defend or indemnify.
Two cases involving Traveler’s Insurance provide good examples. In an unpublished opinion from the 11th Circuit Federal Court of Appeals, Traveler’s Property Cas. Co. of America, v. Adna, Inc., Case No. No. 15-11510 (11th Cir. August 26, 2016), held that Traveler’s had no duty to defend. In that case, the State of West Virginia sued the defendants, pharmaceutical companies, for fraudulent and deceptive advertising and distribution of opioid products. The State sought monetary damages arising from the injuries. The court held that, since opioids were “products” and because their policy excluded bodily injury that arose from products manufactured or sold by the insured, the insurer had no duty to defend.
The court cited its decision in Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 431 F.3d 765 (11th Cir. 2005), which affirmed that an insurer had no duty to defend based on product exclusions related to injuries and damages caused by firearms based on Florida law.
Louisiana Insurance Defense: Heroin Use “Arises Out of”
A similar result was reached in Traveler’s Property Cas. Co. of America, v. Actavis, Inc., Case No. G053749 (Cal. App. 4th Dist. November 6, 2017).
Actavis involved similar claims by California and Illinois governmental units against pharmaceutical companies related to marketing campaigns. Actavis is notable because California and Illinois accused the defendants of causing a resurgence in heroin use. However, the pharmaceutical companies did not manufacture or sell heroine and, thus, they claimed that the insurer owed at least a partial duty to defend those claims.
However, the court rejected the arguments based on how the complaint was drafted and how “arising out of” was defined under California law. The court noted that the “Products Exclusions” in the policy extended to not only bodily injury arising out of the products — opioids — but also the warranties and representations made in connection with the products. Looking then to the complaint, the court noted that the complaint alleged that the pharmaceutical companies made warranties and representations with respect to quality and safety. The complaint then alleged a direct causal connection between those representations and warranties and the resurgence in heroin use: Warranties and representations led to an increase in highly addictive opioid prescriptions/sales leading to an increased use leading to increased addiction rates, which directly caused a dramatic increase in the use of heroin. The nature of addiction is that ever-increasing amounts of the drug are needed. Competent physicians will prescribe only amounts indicated under the applicable standard of care. But when the doses run out, some patients turn to illegal sources. As heroine is cheaper than prescription opioids and is the cheapest “street” version, there is a surge in heroin use and heroin deaths. Under California law, the definition of “arising from” was broad enough to encompass claims related to increased heroin use. As such, those claims too were excluded under the Product Exclusion provisions.
Defending Against Opioid Cases in Louisiana: Contact New Orleans Attorney Kristin M. Lausten
The author may be contacted at:
Kristin M. Lausten
This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.