Rite Aid Insurer Off Hook for Opioid-Suit Cost, Court Says (2)

Rite Aid Corp.’s insurer, Chubb Ltd., won’t have to pay the cost of defending the pharmacy chain against lawsuits alleging it mishandled addictive opioid painkillers, an appeals court.

The Delaware Supreme Court on Monday, in a 4-1 ruling, overturned a lower court finding that the language of Rite Aid’s insurance policies required Chubb units to cover the liability. States and municipalities across the U.S. sued the chain, along with other pharmacy owners, drug makers and distributors, seeking to recoup costs associated the opioid epidemic.

But the appeals court said the lower court erred because “public nuisance” lawsuits seeking funds to beef up drug-treatment and social-services aren’t the kind of personal-injury claims covered under the policy. The local governments “sought to recover only their own economic damages, specifically disclaiming recovery for personal injury or any specific-treatment damages,” according to the 27-page ruling. “Thus, the carriers did not have a duty to defend Rite Aid under the governing insurance policy.”

Terry Hickey, a Rite Aid spokeswoman, said the chain wouldn’t comment on the ruling. Eric Samansky, a Chubb spokesman, declined to comment.

Camp Hill, Pennsylvania-based Rite Aid is among more two dozen companies facing more than 3,000 suits filed by state and local governments over the public-health crisis tied to opioid painkillers. Municipalities blame opioid makers, like Johnson & Johnson, distributors such as McKesson Corp. and retailers like Rite Aid for wrongfully flooding communities with millions of pills.

Government officials complain they spent billions trying to cope with the opioid epidemic, which they blame for killing more than 500,000 Americans over the last two decades. Earlier this year, Rite Aid agreed to pay $1.5 million to settle a New York county’s claim that it failed to properly monitor opioid prescriptions.

The chain also negotiated an out-of-court settlement in a case in Cleveland, where other pharmacy providers -- including Walmart Inc. -- were held liable for not having proper systems for monitoring opioid prescriptions. A judge will decide damages in that case later this year.

No Payout

In the Delaware case, Rite Aid demanded coverage under a 2015 policy issued by Chubb that could have provided $3 million toward defense costs. Chubb denied coverage for any of the company’s opioid exposure.

The case hinged on whether the policy extended to damages other than those tied to personal injuries, Chief Justice Collins Seitz said in the majority ruling. Because governments aren’t required to prove personal injuries to recover under public-nuisance suits, the policy didn’t apply, he said.

If the municipalities “ran public hospitals and sued Rite Aid on behalf of these hospitals to recover their actual, demonstrated costs of treating bodily injuries caused by opioid over-prescription, the 2015 policy would most likely be triggered,” Seitz said. But because the governments seek to recover only tax dollars spent addressing the opioid epidemic, the policy didn’t apply, he added.

The case is Rite Aid Corp. et al. v. ACE American Insurance Co., No. 339, 2020, Delaware Supreme Court (Dover).

(Updates with Rite Aid spokeswoman comment.)

--With assistance from Max Reyes.

To contact the reporter on this story:
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story:
Katia Porzecanski at kporzecansk1@bloomberg.net

Steve Stroth

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