Insured’s Awareness of Opioid Epidemic, not a Known Loss

By David A. O’Neill, JD

A Delaware state court has ruled that Rite Aid pharmacies, defendants in thousands of lawsuits alleging tortious distribution of opioids, can receive reimbursement from their insurer for their defense expenditures. On September 22, 2020, the Delaware Superior Court in New Castle, Delaware issued its opinion, granting Rite Aid’s motion for partial summary judgment in the case styled Rite Aid Corp. et al v. ACE American Insurance Company et al. The opinion addressed those suits brought by governmental entities against Rite Aid Corp. alleging that it knowingly distributed and improperly dispensed opioids to their citizens, contributing to drug abuse, addiction, injury and death.

In Rite Aid Corp. et al v. ACE American Insurance Company et al, Rite Aid brought a suit against Chubb Ltd. Rite Aid alleged breach of contract for Chubb’s denial of coverage under a 2015 insurance policy that contained a $3 million self-insured retention. While not deciding the merits of the Rite Aid suit, the Delaware court liberally construed the Chubb policy’s “duty to defend” clause in ruling that the government suits “and all Opioid lawsuits alleging similar claims are potentially covered under the policy.”

The court rejected the insurer’s argument that Rite Aid’s “knowledge of personal injury, and the opioid epidemic” prior to the 2015 insurance policy’s effective date constituted the kind of “known loss” or “loss-in-progress” that would relieve its insurer’s obligations.  The court also ruled that Rite Aid’s “inadequate action“ in the “distribution and dispensing” of opioids constituted “a single occurrence” under the policy, rather than multiple occurrences, so that Rite Aid would need to only ante its $3 million once, rather than for each suit.

PolicyFind will monitor this evolving situation to learn if Rite Aid Corp. et al v. ACE American Insurance Company et al may set a precedent for other carriers providing coverage to those associated with litigation in opioid matters.

If you have any questions, contact PolicyFind.

headshot of David O'NeillDavid A. O’Neill, Director of Investigations

David O’Neill has over 20 years of experience in claims recovery on behalf of corporate policyholders involving environmental property damage and toxic tort and asbestos exposure claims. He is an accomplished insurance archeologist with extensive experience in locating and retrieving insurance coverage evidence on behalf of potentially responsible parties responding to environmental investigation and remediation demands. Mr. O’Neill is also an experienced PRP investigator with knowledge of CERCLA/SARA requirements, having conducted over thirty PRP searches at Superfund hazardous waste sites for PRP defense counsel and previously for USEPA Regions V and VIII. Mr. O’Neill was formerly Insurance Research Manager for Risk International Services, Inc. He graduated from Case Western Reserve Law School in 1986.