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Opioid Fight: Walmart Wins a Round in Insurance Claim BattleLock Icon

5 min read

Walmart Inc. won an early legal victory last month in its fight with insurance carriers that refused to cover Walmart’s legal costs and billions of dollars in settlements the retailer made in lawsuits over its sales of opioid drugs.

Benton County Circuit Court Judge John R. Scott ruled on Dec. 29 that American International Group Inc. entities have a duty to defend the Bentonville retailing giant against suits brought by governments over the opioid crisis. The AIG entities that insured Walmart are American Home Assurance Co. and National Union Fire Insurance Co. of Pittsburgh, Pa.

Walmart has sued the insurers to recover the money it paid for attorneys and other defense costs in the lawsuits. It also is seeking coverage for the billions in settlements it paid.

“Walmart has spent hundreds of millions of dollars to defend the Opioid lawsuits and it expects to spend many million more,” the company said in a court filing in the case. It didn’t specifically say how much it had spent.

Scott also said in his 19-page order that his ruling could be appealed now, rather than waiting until the end of the trial, which is set to begin on March 24, 2025. If Walmart’s motion for a partial summary judgment is rejected on appeal, the jury trial will be unnecessary because Walmart “will not be entitled to judgment for any damages against the Defendants,” Judge Scott wrote.

The case is expected to be stayed during the appeal.

In November 2022, Walmart sued more than three dozen of its insurance providers, saying its insurance companies were obligated to cover its defense costs, settlements, judgments and other losses, but weren’t doing so. More than 100 attorneys are estimated to be involved in the case.

Walmart isn’t the only retailer to sue its insurance carriers for denying coverage in opioid lawsuits. Walgreen Co. of Deerfield, Illinois, and CVS Health Corp. of Woonsocket, Rhode Island, have sued their insurance carriers for denying coverage in similar cases.

Walmart said in court filings that the insurance policies have two aspects. The first is a duty to defend, which is to pay for the lawyers, and the other is a duty to indemnify — to compensate the insured party for harm or loss.

In November 2022, without admitting liability, Walmart said it agreed to pay $3.1 billion to settle all the lawsuits brought by state and local governments alleging that Walmart created a public nuisance that resulted in taxpayers paying more for public services related to opioid addiction treatment, care and other related services. Walmart and the drugstore chains argued that they were legally obligated to fill apparently legitimate prescriptions for the painkillers.

Walmart asked Scott to rule on the policies from the AIG entities. Meanwhile, Walmart’s dozens of other insurance carriers asked Scott to rule that they had no duty to defend Walmart because the policies didn’t cover the allegations in the governments’ lawsuits.

Scott denied that request from the insurance carriers.

But other judges in other similar cases have found otherwise.

The Delaware Supreme Court and the Ohio Supreme Court have ruled that commercial general liability insurers don’t have a duty to defend their policyholders against lawsuits by governmental entities seeking to recover billions of dollars allegedly spent to provide an array of public services in response to the opioid epidemic.

Claire Howard, senior vice president and general counsel for the American Property Casualty Insurance Association, agreed with those rulings.

“Commercial general liability insurance policies provide coverage for third-party liability for alleged wrongful acts where compensation is sought by someone who suffered bodily injury or property damage,” she said in an email statement to Arkansas Business. “These policies do not cover a plaintiff’s economic losses untethered to the plaintiff’s own bodily injury.”

She said extending coverage to cover that “would subject insurers to uncontemplated and uncontracted-for exposures, threatening their ability to fulfill their contracted-for obligations to all other policyholders.”

Duty to Defend

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 lawsuit.

The insurance companies said in their court filings that the policies they have with Walmart don’t include a duty to defend against the claims that are alleged in the government’s lawsuits. Those lawsuits, the insurance companies say, don’t involve allegations of “bodily injury or property damage” caused by an accident.

Walmart’s $3.1 billion settlement with the government entities is intended to help fight the opioid crisis. Walmart’s opioid legal charges showed up as a $3.325 billion expense in its financial results for the quarter that ended Oct. 31, 2022.

“Walmart believes these settlements are in the best interest of all parties and will provide significant aid to communities across the country in the fight against the opioid crisis, with aid reaching state and local governments faster than any other nationwide opioid settlement to date,” Walmart said in a December 2022 news release.

The insurers said, however, that Walmart’s settlement of the lawsuits is not what the liability policies are for. The policies were intended, for example, to apply to cases such as when a wrong prescription was filled resulting in an overdose, the insurers argued.

Walmart disagreed. Walmart said that its insurance policies generally cover damages because of bodily injury and “wrongful acts.”

Benton County Circuit Court Judge Scott ruled the insurance companies had a duty to defend based on the allegations in the government lawsuits that sought to hold Walmart liable “at least in part, based on allegations that Walmart negligently dispensed and/or distributed opioids over many years, resulting in injuries to thousands of individuals.”

Scott said that the lawsuits against Walmart for negligence “are replete with negligence-based allegations, including that Walmart failed to put in place adequate policies, training, and procedures to prevent improper diversion of opioids.”

Scott added that since there was “a ‘possibility’ that Walmart could be held liable” in the government lawsuits, the insurance companies had a duty to defend it.
If the appellate court rules in favor of Walmart, the next step will be discovery, which could take about a year before a trial occurs to determine if Walmart is entitled to coverage for the $3.1 billion settlement.

But if the Arkansas Court of Appeals or the Arkansas Supreme Court rules in favor of the insurance carriers, the case will be over because if the insurance companies don’t have a duty to defend Walmart, they don’t have a duty to pay the coverage.

As of Tuesday afternoon, an appeal had not been filed.

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