This month, Walmart Inc. of Bentonville became the latest retailer to sue its insurance carriers for refusing to cover costs and billions of dollars in settlements in connection with hundreds of opioid lawsuits.
Walmart sued dozens of its insurance providers in Benton County Circuit Court on Nov. 7, saying its insurance companies are obligated to cover its defense costs, settlements, judgments and other losses involving the opioid lawsuits, but aren’t doing so.
Walmart wants a judge to rule that it is entitled to the coverage.
Walmart filed the lawsuit a week before it offered a $3.1 billion nationwide opioid settlement framework on Nov. 15 that would resolve substantially all opioid lawsuits and potential lawsuits by state, local and tribal governments. The settlement still needs approval from other states, but New York Attorney General Letitia James, who announced the settlement, said in a news release that she believes it will be approved.
The lawsuits alleged that pharmacists at Walmart and other retailers unlawfully dispensed opioids that fueled the national opioid crisis, resulting in 350,000 overdose deaths between 1999 and 2016.
On Nov. 2, Walgreen Co. of Deerfield, Illinois, and CVS Health Corp. of Woonsocket, Rhode Island, announced they were settling the opioid lawsuits and each company agreed to pay $5 billion.
Walmart has denied the allegations that its pharmacies improperly filled the prescriptions, and it doesn’t admit liability with the settlement plan. CVS and Walgreen also don’t admit liability.
Before the settlements were announced, Walgreen and CVS had sued their insurance carriers for denying coverage in the lawsuits.
“We believe the law obligates the insurers who provide CVS liability coverage to pay for the defense and indemnification of the Company in connection with ongoing opioid litigation,” a CVS spokesman told Arkansas Business via email. “As this matter is also the subject of ongoing litigation, we have no additional comment at this time.”
Walgreen also declined to comment on its case because of the pending litigation.
On Nov. 11, Publix Super Markets Inc. of Lakeland, Florida, a grocery store chain with in-store pharmacies mainly in the Southeast part of the country, also sued its insurance carriers for rejecting claims to defend it in opioid related lawsuits.
So far this year, however, judges have ruled in favor of insurance companies. The Delaware Supreme Court and the Ohio Supreme Court “have correctly held that CGL [commercial general liability] insurers do not have a duty to defend their policyholders against lawsuits by governmental entities seeking to recover billions of dollars in costs allegedly incurred in providing an array of public services in response to the opioid epidemics in their communities,” Claire Howard, senior vice president and general counsel for the American Property Casualty Insurance Association of Washington, told Arkansas Business via email. “While the insurance policies at issue in these cases, as with CGL policies generally, covered ‘damages because of bodily injury,’ both courts held that the purely economic damages sought by the governmental entities did not fall within that coverage.”
She said that extending the coverage of these policies to include “governmental expenditures for public services related to the opioid epidemic would subject insurers to uncontemplated and uncontracted-for exposures, threatening their ability to fulfill their contracted-for obligations to all other policyholders.”
Jay Feinman, who teaches insurance law at Rutgers Law School in Camden, New Jersey, said he hasn’t followed the retailers’ lawsuits, but he wouldn’t describe them as a trend of companies suing their insurance companies over coverage disputes.
“Large companies buy insurance against some risks, just like individuals do,” he said. “And there have been lots of instances in which there have been disputes about whether there’s coverage and they have to fight about it as well as individual policyholders would.”
Millions in Premiums
In its lawsuit against insurers, Walmart said that it has spent millions of dollars in insurance premiums and expected that it would be covered against allegations such as those brought in the opioid lawsuits.
“But now, when Walmart seeks to rely on the policies it has purchased to cover these losses, the Insurers have turned their backs, providing a litany of excuses why the policies supposedly do not cover the Opioid Lawsuits,” Walmart said in its 31-page pleading.
Walmart said it has broad commercial liability insurance coverage with many of the nation’s leading companies that provides hundreds of millions of dollars of general liability insurance.
Many of the policies require the insurance providers to defend or pay for Walmart’s defense and indemnify the retailer, Walmart said.
Walmart’s opioid legal charges showed up as a $3.325 billion line item in its operating income in its latest quarterly report that ended Oct. 31. Its adjusted operating income for the nine-month period that ended Oct. 31 was $18.31 billion, down 8.7% from the same period a year ago.
Walmart said that its insurance policies generally cover damages because of bodily injury and “wrongful acts.”
But National Union Fire Insurance Co. of Pittsburgh, based in New York, told Walmart in 2019 that coverage for the opioid lawsuits might not be available because they don’t allege damages of bodily injury or a covered occurrence, the lawsuit said.
“National Union further asserted that all the allegations in the Opioid Lawsuits allege or suggest that Walmart ‘expected or intended’ ‘bodily injury,’” Walmart said. “These erroneous positions illustrate the approach Insurers have taken to the Opioid Lawsuits.”
A spokesperson for National Union didn’t immediately respond to an email seeking its side of the issue.
Walmart’s lawsuit seeks an unspecified amount of damages for breach of contract against the insurance companies for failing to pay Walmart’s defense costs in the opioid litigation. Walmart also is suing the companies for failing to cover its losses, including the settlements to resolve the opioid suits.
Walmart is represented by the law firms Quattlebaum Grooms & Tull of Little Rock, RMP of Springdale and Cohen Ziffer Frenchman & McKenna of New York.
None of the insurance companies had filed a response to the lawsuit as of Wednesday afternoon.