The Standout Firm For

Insurance, Malpractice
And Business Litigation

In California

Decision in insurance case puts pharmaceutical companies on alert

On Behalf of | Apr 18, 2022 | Firm News

In efforts to undo the damage of the opioid crisis, various government entities seek to hold drug companies responsible for the overprescription of painkillers. Government sectors have pursued legal action against McKesson Corporation and other pharmaceutical companies for violations, culminating in the second-largest cash settlement ever of $26 billion.

Pharmaceutical firms look to insurance coverage to defray the costs of adverse rulings. The case of AIU Insurance Company v. McKesson Corporation could establish a precedent that keeps insurers off the hook for large payments.

Insurers refused payouts to McKesson

Three insurers declined to pay defense costs for McKesson in opioid litigation cases and sued the distributor over the issue. The insurance companies state that the umbrella policies in question indemnify accidental bodily harm. The insurers assert that McKesson’s actions were not accidents and that the compensation the government seeks is for economic damages and not bodily injury.

Ruling denies McKesson the aid of insurers

Within her first seven days as a U.S. District Judge, Jacqueline Scott Corley made an impactful ruling that may affect other opioid suits. Judge Corley determined that McKesson’s actions did not qualify the firm for an insurance payout. While the judge dismissed the claim that the damage did not result from bodily harm, she upheld that McKesson committed foreseeable and preventable offenses that were not accidental.

McKesson may appeal the ruling, so a precedent is not yet set. Other drug companies may refrain from fighting similar cases in court if this decision stands.

This finding reminds business owners to be conscious of the legal limits of insurance coverage. Still, Judge Corley’s disagreement with the insurers on the point of bodily harm shows where fine distinctions can mean the difference between a business winning or losing an insurance case.