In a long-awaited decision, the Ohio First District Court of Appeals overturned a trial court decision that insurance companies relied on to justify their refusal to provide a defense to defendants in the National Prescription Opioid MDL and confirmed that Acuity Insurance must defend pharmaceutical wholesale distributor Masters Pharmaceutical in suits alleging that Masters negligently failed to maintain effective controls against diversion of prescription opioids, resulting in damages to governmental entities in the nature of medical treatment and care for their citizens.

Masters Pharmaceutical, Inc.’s general liability policies require the insurer to pay money that Masters becomes obligated to pay as damages “because of bodily injury.” The court held that the governmental entities’ allegations that they incurred medical expenses and costs to treat addiction-related injuries triggered the insurer’s duty to defend. The Ohio appellate court expressly found persuasive the Seventh Circuit’s decision in Cincinnati Ins. Co. v. H.D. Smith, LLC, 829 F.3d 771 (7th Cir. 2016), in which the Seventh Circuit held that general liability insurers had a duty to defend another pharmaceutical wholesale distributor in similar litigation filed by the state of West Virginia.

The decision also confirms that policyholders are entitled to a strong presumption in favor of coverage, and that the defense obligation attaches as long as even one claim against the policyholder is within the policy’s scope. To avoid its defense obligation, the insurer bears the burden of proving that all claims against the policyholder are indisputably outside the scope of coverage.

Client Alert 2020-417