AIG Beats Mallinckrodt Trust in Twist on Opioid Insurance Clash

American International Group Inc.'s successful bid to avoid covering litigation against opioid manufacturing giant Mallinckrodt offers guidance on a novel issue: the scope of an insurance policy exclusion for claims stemming from opioid products and efforts to market them.

Opioid insurance fights typically hinge on what constitutes a covered “occurrence” in liability policies and whether the underlying suits seek damages “because of bodily injury.”

But in a March 10 ruling, a Missouri state court sided with AIG units and other insurers, finding that an exclusion in many of the policies at issue in the case precluded coverage for opioid-related claims against Mallinckrodt. The exclusion, contained in several primary, umbrella, and excess policies, bars coverage for claims arising out of “your products”—also known as the products hazard exclusion—and representations made about those products.

The ruling has implications for other high-profile fights pitting drugmakers and pharmacies against insurers seeking to avoid legal bills tied to the opioid crisis.

Mallinckrodt—which the Drug Enforcement Administration once called the “kingpin within the drug cartel” of pharmaceutical companies fueling the opioid epidemic—filed for bankruptcy twice in recent years, partly in an effort to limit its liability in about 3,000 underlying opioid-related cases, according to court filings. Its latest restructuring plan, approved in 2023, reduced a fund for opioid claimants to $700 million from $1.7 billion under a prior court-approved plan.

Mallinckrodt last week announced a deal to merge with Endo, another pharmaceutical company that filed for bankruptcy in part to reduce its exposure to opioid litigation.

In the case at hand, the trust handling opioid claims against Mallinckrodt sued its insurers in 2022 and subsequently sought partial summary judgment on the scope of the “your products” exclusion.

Seeking an early decision on the exclusion was risky “because of the danger of this kind of ruling coming out and then ending your case before it begins,” said Jeremy King, who leads Olshan Frome Wolosky LLP’s policyholder-side insurance coverage practice.

AIG declined to comment. Counsel for the trust didn’t respond to a request for comment.

Products Exclusion

Some of the underlying opioid claimants alleged Mallinckrodt was liable for bodily injury arising from other manufacturers’ products—rather than its own—as a result of its unbranded marketing of opioid drugs generally, the trust said in its brief on the motion for partial summary judgment on the “your products” exclusion.

“Mallinckrodt was responsible nationally, in large part, for the widespread misuse and abuse of ALL opioid drugs, including opioids manufactured by other drug companies and illicit opioid drugs,” the brief said. “Bodily injury arising in whole or in part from non-Mallinckrodt opioid drugs is not within the products hazard, and the National Union policies therefore cover Mallinckrodt’s liability for such bodily injury.”

AIG pushed back, arguing Missouri law required broad interpretation of language in the products exclusion describing claims “arising out of” a policyholder’s product or representations made about its products.

“The minimal causal connection required by ‘arising out of’ is surely met here: harm arising from ‘unbranded’ marketing intended to sell more of Mallinckrodt’s products indisputably originates from Mallinckrodt’s products,” the insurer said in its brief.

AIG and several other insurers filed cross-motions seeking summary judgment on the exclusion and a related endorsement, and the court heard arguments on the motions in January. In a five-page order on March 10, Judge Richard M. Stewart granted the insurers’ motions, holding that the exclusion barred coverage.

“Any alleged injuries caused by Mallinckrodt’s ‘unbranded’ representations arose out of Mallinckrodt’s products, both because those unbranded representations were part of Mallinckrodt’s efforts to boost its own opioid product sales and because unbranded representations about the safety and efficacy of opioids in general encompass Mallinckrodt’s products,” Stewart said in the order.

‘Slam-Dunk Win’

The ruling didn’t explicitly address lingering questions about whether language in the exclusion about representation of “your products” should encompass claims involving the use of non-Mallinckrodt opioids resulting from its unbranded marketing, said Freya Bowen, an attorney with Neal Gerber & Eisenberg LLP who represents policyholders.

The court simply adopted the insurers’ arguments and gave them a “slam-dunk win,” Bowen said.

The opinion shows the danger for policyholders in some case law about the broad construction of “arising out of” language, King said.

“I’m not saying that ‘arising out of’ needs to be proximate causation, but it also shouldn’t be so broad that it captures the entirety of what a company does,” he said.

The trust pushed for an early ruling on the products exclusion likely because it wanted to maximize the assets available to it—including Mallinckrodt’s insurance rights—to resolve the opioid beneficiaries’ claims, Bowen added.

Bowen and King both predicted the trust will seek to appeal the ruling. “There’s quite a bit of money at stake here, so I imagine this isn’t the end of the story,” Bowen said.

Gilbert LLP and Riezman Berger PC represent the trust. Willkie Farr and Gallagher LLP and Husch Blackwell LLP represent AIG. Holwell Shuster & Goldberg LLP, Cozen O’Connor LLP, and BatesCarey LLP are among the firms representing other insurers in the case.

The case is Opioid Master Disbursement Trust II v. ACE American Ins. Co., Mo. Cir. Ct., No. 22SL-CC02974, 3/10/25.