With so much litigation and such a substantial amount of economic and human loss, questions of insurance coverage to pay for this litigation and for the costs (both human and monetary) of the opioid epidemic will certainly arise. Some coverage litigation relating to the opioid litigation has been generated so far, but only in small pockets. Thus, there is, as of now, no definitive answer to the question of whether claims related to opioid litigation and the opioid epidemic are generally covered under directors’ and officers’ or professional, commercial, or products liability policies.
Whether there is such coverage or not, courts around the country are pushing the parties to the opioid litigation to settle their disputes. One recent effort in the MDL has been the filing of a motion by the largest group of plaintiffs, some 1,200 cities and counties, to form a “negotiating class” under Rule 23 of the Federal Rules of Civil Procedure. This is a novel approach to resolving a large subsection of the complex MDL, where new lawsuits are being filed weekly, with the goal of incentivizing certain national defendants (manufacturers, distributors, and pharmacies) to buy a modicum of peace through a settlement process that will bind far more parties than presently participate in the litigation. On September 11, 2019, the MDL court granted the motion to certify a negotiating class.
The questions considered by this article are how might a certified “negotiating class” secure a settlement with a national defendant in the opioid litigation, and what will be the likely involvement of that national defendant’s insurers in such a settlement, including the likely significant hurdles to a covered settlement.
Coverage Issues Generally in the Opioid Litigation
To understand the prospect of coverage for this litigation, one must first understand that the opioid litigation is not a monolithic set of lawsuits. A large number of lawsuits have been filed by cities, counties, states, Native American tribes, and other governmental or quasi-governmental agencies or entities with a general goal of recouping the plaintiffs’ economic losses associated with the asserted “public nuisance” of the opioid epidemic, which has allegedly cost these plaintiffs billions of dollars. There are also lawsuits by hospitals, insurers, and other third-party payers who have paid claims or provided services to cope with the opioid epidemic that are otherwise not reimbursable (for example, in treating or covering opioid overdoses and opioid-overdose deaths). Another class of plaintiffs consists of personal injury plaintiffs, which includes guardians of opioid-addicted babies claimed to suffer from neonatal abstinence syndrome, a condition with potential long-lasting and harmful consequences. In addition to claims arising from the economic loss associated with the opioid epidemic, this last group of plaintiffs can also assert “bodily injury” claims, which could arguably bring their claims within many insuring clauses of liability policies.
The coverage issues that have thus far been litigated arise from specific terms in commercial general liability (CGL) policies. These cases generally address the question of whether the non-personal-injury claims made by governmental entities are “because of” or “for” a bodily injury and therefore fall within the scope of the standard CGL policy’s insuring clause. Other cases have litigated whether the opioid epidemic (based on claims made by governmental entities) is a coverage-triggering “occurrence” or whether it could be intended or expected given the alleged conduct of opioid manufacturers.
No one has yet litigated to conclusion, in any reported decision in the opioid litigation context, additional significant coverage issues involving policyholders’ prior knowledge of the alleged opioid injuries, the existence of prior related claims (e.g., prior governmental investigations and lawsuits) and notice to other insurers, or when an opioid-related “claim” was first made (and in what policy period). Moreover, the application of various potentially relevant exclusions—including ones for governmental action, fraud, statutory or criminal violations, expected and intended conduct or misconduct, medical services, professional liability, and, ultimately, for the opioids themselves—has not been resolved in any reported cases. Many of these coverage issues are likely to be litigated in the next few years because there is so much money involved in the defense of, and potential judgments in, the opioid litigation, and the litigation of these thousands of cases will potentially be “bet the company” litigation for many of the target defendants and even some of the non-target defendants.
Potential Settlements Through a Negotiating Class
With the question of settlement lingering over the opioid litigation but with no clear opportunity for any of the national defendants to buy peace from the bulk of the claimants, a substantial group of plaintiffs in the MDL, namely most of the city and county plaintiffs, filed a motion requesting certification of a “negotiating class,” to try to jump-start settlement discussions with the national defendants. The MDL court’s certification of a “class” for purposes of negotiating (as opposed to approving) a settlement is unprecedented, and it remains debatable whether such certification is authorized by the Federal Rules of Civil Procedure.
The moving parties acknowledged that a settlement through this “negotiating class” would not buy “complete peace” for a national defendant, as it would not include third-party payers, addicted babies, or other groups, such as Native American tribes, insurers, medical centers, or the dozens of plaintiff states. It would also not include the cities and counties that have opted out of the negotiating class. However, it would presumably include the bulk of the cities and counties that are part of the opioid litigation. And, if a settlement were reached with a national defendant, the settlement would apply to other similar potential claimants, which may include more than 30,000 counties and cities throughout the United States.
The argument for a negotiating class is basically that the group of cities and counties is so large and unwieldy that there is no other practical way to achieve a settlement with them. The moving group has argued that Rule 23 of the Federal Rules of Civil Procedure provides a mechanism for class settlements, and while it does not necessarily strictly apply in this situation—because there is no certified litigation class—there is nothing to limit or preclude a court from using this mechanism to create a settlement class outside the class action litigation context. The movants have made clear that they are not trying to certify a litigation class and that, in their view, certification of a negotiating class would have no bearing on the litigation per se.
Pursuant to the motion, no national defendant would be required to actually negotiate with the class nor would the class provide the only mechanism for an individual city or county—or a group of them—to strike a separate settlement outside of the class.
Under the requested approach, the cities or counties would have to opt out of the negotiating class prior to the negotiation of any settlement. If a settlement were reached, the class member representatives would vote, and only a supermajority could approve a settlement. If a settlement were approved by the court, every city or county across the United States would be bound by that settlement, whether it filed suit or not, unless the city or county had previously opted out of the negotiating class. The settlement moneys would be allocated based on an allocation formula focusing on both the number of overdoses and the volume of opioids in any particular jurisdiction. The now-certified negotiating class may also serve as a potential model for other groups in the opioid litigation to jump-start their own settlement talks.
Certain city and county plaintiffs opposed the creation of a negotiating class, as did various state attorneys general and some distributor defendants. The opponents claimed that the process is procedurally deficient and would harm the ability of others (including proposed class members) to achieve settlements. They contended that the process is so novel that any potential settlement would almost certainly be tied up in the appeals courts for years, with the result that no one would be able to rely on the process to actually achieve a settlement resolution. Opponents also argued that the process—requiring a city or country to opt out before knowing the settlement amount—is unfair. The State of Ohio submitted a letter brief in which it argued that the cities and counties should not be allowed to create a class without the states, which have jurisdiction over them (effectively a constitutional challenge to the rights of the cities and counties to negotiate a settlement without involvement of and approval by their governing states). None of these arguments swayed the MDL court from certifying a negotiating class.
Potential Insurance Coverage for the “Negotiating Class”
Assuming that a national defendant were interested in negotiating with this class (an open question given the class’s structure, the likelihood of significant opt-outs, the absence of state involvement, and the significant likelihood of lengthy appeals of the order certifying the negotiating class), any settlement that could be reached would still have to be approved by a supermajority of class member representatives, which seems unlikely absent a strong settlement in favor of the class. With a potential class that is so large and with the allocation of money across the entire class, the settlement would likely have to be enormous (billions of dollars) to secure approval.
For purposes of considering the involvement of the insurers for a national defendant who chooses to engage in settlement negotiations with the negotiating class under the proposed model, the author assumes that there is insurance coverage for the litigation against the national defendant, even though the insurers will likely dispute coverage. This section specifically addresses three key questions:
· Would a settlement demand by the negotiating class present a covered claim for which the insurers would have an indemnity obligation?
· Can the insurers for a national defendant exhaust their collective limits in a settlement with the negotiating class, given the many other claims that would remain pending against their policyholder?
· How will the insurers likely seek to leverage their coverage defenses in the settlement negotiations?
Does a demand by the “negotiating class” constitute a covered claim? Most insurance policies require a “claim” to trigger coverage. In most cases, a “claim” can be a demand for monetary or nonmonetary relief. It also can be a lawsuit. If there is no claim, there is typically no duty or obligation for an insurer to respond with a defense for its insured, and certainly no duty or responsibility for an insurer to pay money to someone who has not yet made a claim just because a claim against the policyholder might be made in the future.
In general, the question of whether coverage is triggered arises in the context of the duty to defend. In that case, there may be a question of whether coverage for a “claim” has been triggered by an investigation of an occurrence where the “claimant” has not accused the insured of a wrongful act.
In a certified class action under Rule 23, it is reasonable to accept that the entire class is making a claim for damages, triggering coverage. In other words, while there may be only a handful of class representatives, the entire class, if certified, will be seeking relief from the defendant, typically in the form of damages. As a result, the entire class is making a claim for monetary (and potentially also nonmonetary) relief triggering coverage for a “claim,” for which an insurer would be obligated to indemnify, assuming the claim otherwise falls within the scope of coverage and is not excluded.
In the context of a “negotiating class,” however, there is no certified litigation class or even a “putative” class of claimants that a court may certify in the future. As a result, where more than 90 percent of the parties who could potentially receive settlement funds have never made a claim, there is an open question as to whether an insurer would have an obligation to indemnify the settlement. While actual claimants may be negotiating a settlement for these potential future claimants, there are likely to be disputes as to whether a standard policy, which is triggered by a “claim,” would be triggered for such a broad settlement involving an indemnity payment to a group of entities that have never made a claim and for which there is no putative litigation class.
There may be ways around this issue, including an effort by the negotiating class to allocate the insurance money to the portion of the negotiating class that has made a claim. While that allocation effort may overcome this issue to some extent, it could still leave more than 90 percent of the negotiating class settlement outside the national defendant’s insurance coverage.
Can the insurers reasonably exhaust their limits in a “negotiating class” settlement? A successful negotiating class settlement with a national defendant is likely to be in the range of hundreds of millions, and perhaps billions, of dollars. One need not look further than the handful of settlements by certain national defendants reached to date to see the scope of a potential negotiating class settlement with one of the national manufacturing or distribution defendants. Purdue Pharma, LP (maker of OxyContin) settled the State of Oklahoma’s claims (to avoid a trial) for more than $200 million. Endo Pharmaceuticals, Inc. (maker of Opana ER) settled with two counties in Ohio—the plaintiffs in the two initial bellwether trials in the MDL—for a total of $10 million in cash. Meanwhile, Endo Pharmaceuticals still faces more than a thousand lawsuits from other counties and cities around the country.
While the national defendants likely have towers of insurance providing tens of millions of dollars of coverage per year, it is also likely that a covered settlement with a negotiating class of cities and counties would wipe out these towers of insurance in a single massive settlement. If that occurs, what happens with respect to the many other parties that continue to maintain claims against these national defendants? Can the insurers settle with the cities and counties, exhausting their collective policies in the process, and leave their policyholders to deal with everyone else?
As a general rule, where multiple claims arise out of a single occurrence and those claims will dwarf the insurance available to a policyholder, an insurer has discretion in how it elects to settle those claims, and may even settle some claims to the exclusion of others, based on exhaustion of the insurer’s policy limits. However, to show that it is using its discretion reasonably, the insurer may need to demonstrate an investigation regarding the nature of each settled claim, an evaluation of the comparative coverage for each claim eligible for settlement (or defense), and an effort to resolve all claims on a global basis—particularly by providing the claimants an opportunity to divide the policy proceeds on an equitable basis. The Rhode Island Supreme Court has held, for example, that the insurer must negotiate the settlement with the various claimants “as if there were no policy limits applicable to the claims and as if the insurer alone would be liable for the entire amount of any excess judgment.”
When applying these principles to a potential settlement by a national defendant with a negotiating class of cities and counties as just one segment of the overall opioid litigation, the pitfalls are apparent. Given the massive size of the opioid litigation, an insurer will be hard-pressed to evaluate the competing claims for risk to the policyholder. Moreover, with respect to the likelihood of coverage, actual claims for bodily injury—such as those asserted by the class of babies allegedly suffering from neonatal abstinence syndrome and by other individuals directly claiming harm from opioids—may take precedence over the economic injuries alleged by the nation’s cities and counties, which may also be more susceptible to coverage defenses. Thus, the insurers’ exhaustion of their limits in a settlement with a negotiating class of cities and counties could leave them exposed to future arguments that their participation in that settlement, to the exclusion of the panoply of other claims, was not reasonable.
What kind of leverage will the various insurance disputes bring to the settlement negotiations? Given the issues noted above and the likelihood that insurers will assert significant coverage defenses to any effort to draw them into a negotiating class settlement, insurers will likely have a substantial impact on any ultimate settlement negotiations. The national defendants may use the various coverage issues asserted by their insurers as leverage to try to lower the settlement demands of the negotiating class. Alternatively, the insurers effectively may require that the national defendants broaden their negotiations, if possible, to buy their way out of the opioid litigation on a global scale so as to secure insurer participation in a broad settlement of the opioid litigation.
As a last resort, especially if the insurers see exhaustion of their policies as inevitable, some insurers also might interplead their limits in a court, or even the MDL court, and seek judicial aid in dividing those funds among the various claimants. Such an effort would seek to avoid potential future liability flowing from the insurers’ efforts to settle the opioid litigation claims for their policyholders. But it may be effective only in the future when the policyholder at issue has nothing left to defend because it is either bankrupt or facing corporate dissolution, so that the insurance money is all that is left for the opioid plaintiffs to go after. Raising this prospect may be another way for insurers and their policyholders to gain some leverage in settlement negotiations.
As the opioid litigation continues to chug along, it is evident that settlement will be tricky even without the involvement of the insurers in the process. For that reason, large-scale settlements, like those envisioned involving a negotiating class, will be difficult to achieve. Assuming that the national defendants (and other defendants) in the opioid litigation will want their insurers to participate in the settlement process because they believe that the opioid litigation is covered (a point the insurers will likely dispute), a significant layer of complexity will be added to the already complex settlement calculus, based on the insurers’ likely coverage defenses (not detailed in this article), as well as the additional issues outlined in this article.
Daniel Tranen is a partner with Wilson Elser, LLP, and a cochair of the ABA’s Insurance Coverage Litigation Committee’s subcommittee on food and drugs.
 Daniel Tranen is a partner with Wilson Elser, LLP. He works out of the firm’s Missouri and Edwardsville, Illinois, offices. He is one of the cochairs of the ABA’s Insurance Coverage Litigation Committee’s subcommittee on food and drugs.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP (N.D. Ohio).
 State of Oklahoma v. Purdue Pharma LP, No. CJH-2017-816 (Okla. Dist. Ct. Cleveland Cty.).
 These claims and figures are alleged throughout the MDL complaints.
 See, e.g., Navigators Specialty Ins. Co. v. Depomed, Inc., No. 4:19-cv-00255-HSG (N.D. Cal.); Giant Eagle, Inc. v. Am. Guarantee & Liab. Ins. Co., No. 2:19-cv-904 (W.D. Pa.).
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1820.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF Nos. 2590, 2591.
 See, e.g., Cincinnati Ins. Co. v. Richie Enters., LLC, 2014 U.S. Dist. LEXIS 96510 (W.D. Ky. July 16, 2014); Cincinnati Ins. Co. v. H.D. Smith, LLC, 829 F.3d 771 (7th Cir. 2016); see also Medmarc Cas. Ins. Co. v. Avent Am., Inc., 612 F.3d 607, 616 (7th Cir. 2010) (illustrating the difference between “because of” and “for” before the phrase “bodily injury” in product liability insuring clause).
 See, e.g., Liberty Mut. Fire Ins. Co. v. JM Smith Corp., 602 F. App’x 115 (4th Cir. 2015); Travelers Prop. Cas. Co. of Am. v. Actavis, Inc., 16 Cal. App. 5th 1026 (4th Dist. 2017).
 On August 26, 2019, the state court in Oklahoma entered a judgment against Johnson & Johnson in the amount of $592 million. See State of Oklahoma v. Purdue Pharma LP, No. CJH-2017-816 (Okla. Dist. Ct. Cleveland Cty. Aug. 26, 2019). This represents only this one defendant’s alleged harm in one state in the United States.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1690, amended, ECF No. 1820.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1820, at 11 (supporting brief).
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1820.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1820, at 6 (supporting brief).
 The supermajority voting process would require more than 75 percent of the voting class members to approve any settlement based on 75 percent supermajorities of litigating and non-litigating cities and counties, 75 percent of the populations, and 75 percent of allocations to the cities and counties. In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1820, at 4.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1820, at 10–11.
 E.g., In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1949 (AmerisourceBergen Drug Corp.; CVS Indiana, LLC; CVS Rx Services, Inc.; Cardinal Health, Inc.; Discount Drug Mart, Inc.; McKesson Corp.; Prescription Supply, Inc.; Rite Aid of Maryland, Inc.; Walgreen Co.; Walgreen Eastern Co.; Walmart, Inc.); In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1952 (City of East Cleveland, Ohio; City of Huron; City of Lyndhurst; City of Mayfield Heights; City of North Royalton; City of Wickliffe). The various state attorneys general also filed an amicus letter with the court. In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1951.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1949; ECF No. 1951, at 3.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1951, at 4.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1951, at 5.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 1973.
 Policies sometimes have other “claim” triggering events, such as governmental investigations, tolling agreements, and the like. These are not relevant to this discussion.
 See, e.g., Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. State Ins. Fund, 18 A.D.3d 202, 204 (N.Y. App. Div. 2005) (no coverage triggered without a claim or suit; therefore, payment made by insurer was as a volunteer).
 See, e.g., Emp’rs’ Fire Ins. Co. v. ProMedica Health Sys., Inc., 524 F. App’x 241 (6th Cir. 2013).
 This is based on the fact that there are about 1,200 litigating cities and counties but nearly 28,000 non-litigating cities and counties that have never made any claim in the opioid litigation.
 In Re Nat’l Prescription Opiate Litig., No. 1:17-md-02804-DAP, ECF No. 2574.
 See the MDL docket generally.
 Couch on Insurance § 203:29, Post-Loss Rights & Duties; Adjustment of Loss, at 1.
 Couch on Insurance § 203:29, Post-Loss Rights & Duties; Adjustment of Loss, at 1.
 DeMarco v. Travelers Ins. Co., 26 A.3d 585 (R.I. 2011).
 This scenario might ultimately play out with Purdue Pharma LP’s recent Chapter 11 bankruptcy filing.