Appeals Court Rules Insurers Not Obligated to Defend Opioid Distributor McKesson

By Chad Hemenway | January 31, 2024

The role drug distributor McKesson Corp. had in the opioid crisis was no accident, meaning the company is not entitled to defense costs related to litigation against it.

McKesson Corp. appealed a district court’s ruling that subsidiaries of AIG and Chubb were not obligated to provide defense costs under general liability policies that covered bodily injury caused by an accidental occurrence, not deliberate conduct.

Underlying lawsuits alleged McKesson deliberately schemed to increase the sale of opioids by flooding the market and defying safeguards. However, the distributor attempted to claim it could not have foreseen the “downstream” actions of doctors, pharmacists and opioid addicts.

“We reject this argument,” wrote Circuit Judge Eugene E. Siler for the U.S. Court of Appeals for the 9th Circuit.

“It is simply not credible that when doctors prescribed the drugs McKesson allegedly pushed, when pharmacists filled those prescriptions with drugs McKesson distributed, and when end users became addicted to those drugs, overdosed, resorted to heroin, and died, that was a mere ‘matter of fortuity,'” Siler continued.

Having found no basis that McKesson’s action were accidental, the appeals court ruled in the favor of AIG’s Nation Union Fire Insurance Co. of Pittsburgh and Chubb’s ACE Property and Casualty Insurance Co. and affirmed an earlier ruling by the U.S. District Court for the Northern District of California.

Insurers have in the past looked to deny defense costs or indemnify those involved in the opioid epidemic. At the start of last year the 6th Circuit said policies written by Westfield National Insurance Co. and Motorists Mutual Insurance Co. for Quest Pharmaceuticals covered only damages resulting from bodily injuries, not the economic damages sought by local and state governments.

Chubb was dealt a blow in August 2023 when the U.S. District Court for the Middle District of North Carolina rejected the insurer’s attempted use of two D&O exclusions and ruled it had to provide defense costs to drug wholesaler North Carolina Mutual Wholesale Drug Company.

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