Insurer Wins in Opioid Cases Loom Over Gun, Climate Liability

Fights over insurance coverage for opioid lawsuits are prompting some courts to narrow what constitutes a covered accident under commercial policies—an issue at the heart of liability disputes involving firearm, energy, and other kinds of companies.

Most recently, a California federal court, relying on earlier opioid coverage rulings, held that an insurer isn’t on the hook for litigation against a firearm accessory manufacturer alleging its marketing tactics influenced a shooter who open fired on a school in Washington, D.C.

Under most general liability policies, an “occurrence,” usually defined as an accident, is required for coverage to kick in. In the case at issue, the court concluded the underlying suits from shooting survivors alleged purely deliberate conduct—that the perpetrator’s purchase and use of SureFire LLC’s product was a foreseeable consequence of its intentional marketing.

Policyholder attorneys and insurance law scholars warn the decision may represent a narrowing of coverage under a range of policies bought precisely to shield insured parties from liability.

The ruling “misses the basic point of insurance—to provide coverage for negligence,” said Jeffrey Stempel, a law professor at the University of Nevada, Las Vegas.

‘Line-Drawing Exercise’

The suits brought against the gun accessories maker were “based solely on factual allegations of deliberate misconduct,” even though they asserted claims for negligence, the US District Court for the Central District of California said in its March 6 ruling in James River Insurance Co. v. SureFire LLC, finding the insurer owes no coverage for the underlying litigation.

That reading was “misguided and very cramped,” said Cléa Liquard, a Covington & Burling LLP partner who represents policyholders.

An uptick over the past several decades in litigation over various “public nuisance” claims—gun violence, opioid addiction, climate change, social media addiction, and lead contamination, to name a few— has fueled friction over what insurance liability policies should and shouldn’t cover.

Insurers’ duty to defend policyholders, often spelled out “explicitly and definitely under the case law,” requires them to pay defense costs even for fraudulent, false, or baseless claims, said Jay Konkel, a partner at Pillsbury Winthrop Shaw Pittman LLP who represents policyholders.

But insurer-side attorneys said any claims stemming from deliberate conduct should be excluded, even if they were brought as negligence claims.

“If you market a product for use in a way you know is going to hurt people, that’s not an accident,” said Simpson Thacher & Bartlett LLP’s Bryce Friedman, who leads the firm’s insurance litigation practice. “It’s really a line-drawing exercise.”

Still, the “foreseeable” standard applied in SureFire is less demanding than how courts generally interpret whether harm was expected or intended, making it a lower bar for insurers to clear and avoid coverage, according to University of Pennsylvania law professor Tom Baker.

Attorneys on both sides noted that plaintiffs’ lawyers have increasingly leaned on marketing-based causes of action similar to the claims asserted in the suits underlying James River. One of those suits alleged SureFire “invoked the popular television show Game of Thrones and its ominous message of ‘winter is coming’ to encourage sales.”

“The insurance industry has been attempting to take these liabilities out of liability coverage by hitting ‘occurrence,’” Konkel said.

California ‘Twist’

California law is generally viewed as favorable for policyholders, but even before SureFire, courts in the state sided with insurers on several instances finding they owe no coverage for similar underlying claims surrounding marketing and distribution.

Those included two opioid cases cited by the James River court involving American International Group Inc. and Travelers Cos. units and a 2022 ruling related to lead paint.

“If I were a commercial business, I’d be worried about not being able to rely on my liability insurance in California,” Liquard said.

As a matter of public policy, California law prohibits indemnity coverage for a policyholder’s willful acts under Section 533 of the state’s insurance code. The state appeals court in the lead paint case held that Section 533, which acts as a statutory exclusion, precluded coverage for abatement fund payments.

According to Liquard, the trend reflected in SureFire represents an “unfortunate twist” of California law but is unlikely to extend to other states. Policyholders in California may be facing headwinds until the state’s high court clarifies the law, she said.

Disputes over opioid liability coverage are still pending in many states. As other courts issue their own rulings interpreting what constitutes an accident, those decisions may be used to determine insurance coverage for many kinds of claims, as seen in California’s SureFire ruling.

Some courts in recent years have addressed similar questions over negligence and deliberate conduct in other contexts. Last October, for example, in a dispute over coverage for climate change-related suits against a gas company, Hawaii’s high court held that reckless conduct could be classified as a covered accident.

“This will continue to come up in cases which focus on marketing and distribution of products that get used in a way, overused, or otherwise cause societal harm, whether it’s guns, or opioids, or video games,” Friedman said.