The County of Santa Clara and the County of Orange brought a California civil lawsuit against various pharmaceutical manufacturers and distributors, including Actavis, Inc., Actavis LLC, Actavis Pharma, Inc., Watson Pharmaceuticals, Inc., Watson Laboratories, Inc., and Watson Pharma, Inc. to seek redress for the costs of the opioid epidemic.

The California Action alleges the companies engaged in a “common, sophisticated, and highly deceptive marketing campaign” designed to expand the market and increase sales of opioid products by promoting them for treating long term chronic, nonacute, and noncancer pain – a purpose for which the companies allegedly knew its opioid products were not suited. The City of Chicago brought a lawsuit in Illinois making essentially the same allegations.

The Chicago Complaint alleges: “The City’s health plans have also paid costs imposed by long term opioid use, abuse, and addiction, such as hospitalizations for opioid overdoses, drug treatment for individuals addicted to opioids, intensive care for infants born addicted to opioids, long-term disability, and more. The City’s workers’ compensation program and health benefit plans have expended approximately $2.4 million on addiction treatment services from May 2013 to May 2015.”

Some of the companies purchased general liability policies from The Travelers insurance company, and St.. Paul, The carriers declined to defend the companies. In September 2014, Travelers filed a California lawsuit to obtain a declaration it had no obligation under the St. Paul Polices or the Travelers Policies to defend or indemnify the companies it insured in connection with the California Action or the Chicago Action.

The trial court found that Travelers had no duty under the Policies to defend the insured companies. The court concluded (1) the California Complaint and the Chicago Complaint do not alleged an “accident” as required by the definition of “occurrence” (Travelers Policies) or “event” (St. Paul Policies) to create a duty to defend and (2) the Products Exclusions precluded coverage for Watson’s claims. The court deemed moot the issue whether the California Action or the Chicago Action “seek damages for” or “because of” potentially covered “bodily injury.”

The Court of Appeal affirmed in the published case of The Travelers Property Casualty Company of America v Activis Inc., et. al.

The policies cover damages for bodily injury caused by an “accident,” a term which has been interpreted to exclude the insured’s deliberate acts unless the injury was caused by some additional, unexpected, independent, and unforeseen happening. The California Action and the Chicago Action do not create a potential for liability for an accident because they are based, and can only be read as being based, on the deliberate and intentional conduct of the companies that produced injuries – including a resurgence in heroin use – that were neither unexpected nor unforeseen.

In addition, all of the injuries allegedly arose out of products or the alleged statements and misrepresentations made about those products, and therefore fall within the products exclusions in the policies.