Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

The Traveler's Property Casualty Company of America v. Actavis, Inc.

California Court of Appeals, Fourth District, Third Division

November 6, 2017

THE TRAVELER'S PROPERTY CASUALTY COMPANY OF AMERICA et al., Plaintiffs and Respondents,
v.
ACTAVIS, INC., et al., Defendants and Appellants.

         Appeal from a judgment of the Superior Court of Orange County No. 30-2014-00746842 William D. Claster, Judge. Affirmed.

          Blank Rome, Elizabeth B. Kim and James R. Murray for Defendants and Appellants.

          Dentons US, Ronald D. Kent, Joshua Kroot; Choate Hall & Stewart, Robert A. Kole and Jean Paul Jaillet for Plaintiffs and Respondents.

          OPINION

          FYBEL, J.

         INTRODUCTION

         The United States faces an epidemic of addiction, overdosing, death, and other problems brought on by the increasing use and abuse of opioid painkillers. This epidemic has placed a financial strain on state and local governments dealing with the epidemic's health and safety consequences. To seek redress for the opioid epidemic, the County of Santa Clara and the County of Orange brought a lawsuit (the California Action) against various pharmaceutical manufacturers and distributors, including the appellants in this matter.[1] The California Action alleges Watson engaged in a “common, sophisticated, and highly deceptive marketing campaign” designed to expand the market and increase sales of opioid products by promoting them for treating long term chronic, nonacute, and noncancer pain-a purpose for which Watson allegedly knew its opioid products were not suited. The City of Chicago brought a lawsuit in Illinois (the Chicago Action) making essentially the same allegations.

         The issue presented by this appeal is whether there is insurance coverage for Watson based on the allegations made in the California Action and the Chicago Action. Specifically, do the Travelers Property Casualty Company of America (Travelers Insurance) and St. Paul Fire and Marine Insurance Company (St. Paul)[2] owe Watson a duty to defend those lawsuits pursuant to commercial general liability (CGL) insurance policies issued to Watson?

         Travelers denied Watson's demand for a defense and brought this lawsuit to obtain a declaration that Travelers had no duty to defend or indemnify. The trial court, following a bench trial based on stipulated facts, found that Travelers had no duty to defend because the injuries alleged were not the result of an accident within the meaning of the insurance policies and the claims alleged fell within a policy exclusion for the insured's products and for warranties and representations made about those products.

         We conclude that Travelers has no duty to defend Watson under the policies and therefore affirm. The policies cover damages for bodily injury caused by an “accident, ” a term which has been interpreted to exclude the insured's deliberate acts unless the injury was caused by some additional, unexpected, independent, and unforeseen happening. The California Action and the Chicago Action do not create a potential for liability for an accident because they are based, and can only be read as being based, on the deliberate and intentional conduct of Watson that produced injuries-including a resurgence in heroin use-that were neither unexpected nor unforeseen. In addition, all of the injuries allegedly arose out of Watson's products or the alleged statements and misrepresentations made about those products, and therefore fall within the products exclusions in the policies.

         FACTS

         I.

         The Policies

         A. The St. Paul Policies

         Watson purchased primary CGL policies from St. Paul covering the period from May 15, 2006 to May 15, 2010 (the St. Paul Policies). The St. Paul Policies provide a duty to defend against any “suit for injury or damage covered by this agreement... even if all of the allegations of the claim or suit are groundless, false, or fraudulent.” The St. Paul Policies cover “damages for covered bodily injury or property damage” that are “caused by an event.” The term “Event” is defined as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The term “bodily injury” is defined as “any physical harm, including sickness or disease, to the physical health of other persons.”

         The St. Paul Policies have an exclusion for “Products and Completed Work, ” stating, “[w]e won't cover bodily injury or property damage that results from your products or completed work.” The St. Paul Policies include, within the definition of excluded products, “any statement made, or that should have been made, about the durability, fitness, handling, maintenance, operation, performance, quality, safetyor useof the products.”

         B. The Travelers Policies

         Watson purchased primary CGL policies from Travelers Insurance covering the period from May 15, 2010 to May 15, 2013 (the Travelers Policies). The Travelers Policies provide a duty to defend against any “suit” seeking damages “because of ‘bodily injury' or ‘property damage'” caused by an “occurrence.” The Travelers Policies define “occurrence” in the same way as “event” is defined in the St. Paul Policies, that is, as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Travelers Policies define “bodily injury” as “[p]hysical harm, including sickness or disease, sustained by a person; or... [m]ental anguish, injury or illness, or emotional distress, resulting at any time from such physical harm, sickness or disease.” The Travelers Policies provide that “damages because of ‘bodily injury' include damages claimed by any person or organization for care, loss of services or death resulting at any time from ‘bodily injury.'”

         The Travelers Policies have an exclusion for “Products Completed Operations Hazard Medical and Biotechnology, ” which bars coverage for “‘Bodily injury' or ‘Property damage' included in the ‘products-completed operations hazard.'” We will refer to the Products and Completed Work provision of the St. Paul Policies and the Products Completed Operations Hazard Medical and Biotechnology provision of the Travelers Policies as “the Products Exclusions.” The term “products-completed operations hazard” is defined to include “all ‘bodily injury' and ‘property damage' occurring away from premises owned by or rented or loaned to you and arising out of ‘your product' or ‘your work.'” The term “your product” is defined as “[a]ny goods or products... manufactured, sold, handled, distributed or disposed of by: [¶]... [y]ou.” The term “your work” is defined to mean: “Warranties or representations madeat any time, or that should have been made, with respect to the fitness, quality, durability, performance, handling, maintenance, operation, safety, or useof such goods or products.”

         II.

         The California Action and the Chicago Action

         In May 2014, Santa Clara County and Orange County (the Counties) filed the California Action against Watson[3] and other pharmaceutical companies in the California Superior Court, Orange County. In December 2014, the Counties filed a second amended complaint (the California Complaint), which is the operative pleading in the California Action. In June 2014, the City of Chicago (the City) brought the Chicago Action against Watson and other prescription drug distributors in Cook County, Illinois. The Chicago Action was removed to federal court. In August 2015, the City filed a second amended complaint (the Chicago Complaint), which is the operative pleading in the Chicago Action.

         The California Complaint and the Chicago Complaint are based on allegations that Watson and the other defendants engaged in a fraudulent scheme to promote the use of opioids for long term pain in order to increase corporate profits. Both complaints allege that Watson had by the 1990's developed the ability to cheaply produce opioid painkillers, but the market for them was small. Defendants knew that opioids were an effective treatment for short term postsurgical pain, trauma related pain, and end of life care and knew that, except as a last resort, “opioids were too addictive and too debilitating for long term use for chronic non cancer pain.” Defendants knew the effectiveness of opioids decreases with prolonged use, requiring increases in dosages and “markedly increasing the risk of significant side effects and addiction.”

         The California Complaint and the Chicago Complaint allege: “In order to expand the market for opioids and realize blockbuster profits, Defendants needed to create a sea-change in medical and public perception that would permit the use of opioids for long periods of time to treat more common aches and pains, like lower back pain, arthritis, and headaches. [¶]... Defendants, through a common, sophisticated, and highly deceptive marketing campaign that began in the late 1990s, deepened around 2006, and continues to the present, set out to, and did, reverse the popular and medical understanding of opioids.” Defendants are alleged to have spent millions of dollars developing seemingly scientific materials, studies, and guidelines that misrepresented the risks, benefits, and superiority of opioids to treat chronic pain and distributed those materials, studies, and guidelines to physicians to encourage them to prescribe opioids to treat chronic, noncancer pain.

         To increase prescription sales of their opioid drugs, Watson and the other defendants allegedly “(a) overstated the benefits of chronic opioid therapy, promised improvement in patients' function and quality of life, and failed to disclose the lack of evidence supporting long-term use and the significant risks associated with such use; (b) trivialized or obscured their serious risks and adverse outcomes, including the risk of addiction, overdose, and death; and (c) overstated their superiority compared with other treatments, such as other non-opioid analgesics, physical therapy, and other alternatives.”

         Central to the scheme were representations made by Watson that opioids are rarely addictive. Watson allegedly “persuaded doctors and patients that what they had long known-that opioids are addictive drugs, unsafe in most circumstances for long-term use-was untrue, and quite the opposite, that the compassionate treatment of pain required opioids.”

         The California Complaint alleges that Watson and the other defendants “took steps to avoid detection of and fraudulently conceal their deceptive marketing and conspiratorial behavior” and “made, promoted, and profited from their misrepresentations-individually and collectively-knowing that their statements regarding the risks, benefits and superiority of opioids for chronic pain were untrue and unproven.” Both the California Complaint and the Chicago Complaint allege that Watson's strategy was “first, to plant and promote supportive literature while burying unfavorable evidence, and then to cite that same pro-opioid evidence in their promotional materials, while failing to disclose evidence that contradicts those claims-are flatly inconsistent with their legal obligations.” Those strategies were intended to, and did, “distort the truth regarding the risks and benefits of opioids for chronic pain relief and distorted prescribing patterns as a result.” Watson and the other defendants knew and intended that their representations “would persuade doctors to prescribe and patients to use opioids for chronic pain.”

         The California Complaint and the Chicago Complaint allege the efforts of Watson and the other defendants were “wildly successful” so that “[t]he United States is now awash in opioids.” The result, the complaints allege, has been “catastrophic” and a nationwide “opioid-induced ‘public health epidemic.'” In addition, the complaints allege the epidemic of opioid use has led to a resurgence in heroin use. The “dark side of opioid abuse and addiction” is that it can lead to abuse of and addiction to heroin, which produces a “high” similar to opioids but at a lower cost.

         The California Complaint and the Chicago Complaint allege that the Counties and the City have and will incur increased costs of care and services to their citizens injured by prescription and illegal opioid abuse and addiction. The California Complaint alleges: “The diversion of opioids into the secondary, criminal market and the increase in the number of individuals who abuse or are addicted to opioids have increased the demands on emergency services and law enforcement in California; [¶]... [¶] These harms have taxed the human, medical, public health, law enforcement, and financial resources of the People.”

         The Chicago Complaint alleges: “The City's health plans have also paid costs imposed by long term opioid use, abuse, and addiction, such as hospitalizations for opioid overdoses, drug treatment for individuals addicted to opioids, intensive care for infants born addicted to opioids, long-term disability, and more. The City's workers' compensation program and health benefit plans have expended approximately $2.4 million on addiction treatment services from May 2013 to May 2015.... [¶]... Defendants' conduct has also imposed costs on the City beyond those incurred by its health and workers compensation plans. These include costs of providing emergency services in response to opioid-related deaths, overdoses, addiction, and other injury; costs of funding addiction treatment, such as the prescription of additional drugs... and other costs attendant to the epidemic of opioid use and abuse in the City.”

         The California Complaint asserts three causes of action: (1) false advertising in violation of Business and Professions Code section 17500 et seq.; (2) unfair competition in violation of Business and Professions Code section 17200; and (3) public nuisance under Civil Code section 3479 et seq. Under the first cause of action, the Counties seek injunctive relief, restitution, and civil penalties. Under the second cause of action, the Counties seek civil penalties, and under the third cause of action seek an order of abatement and injunctive relief. Watson does not seek coverage based on the first two causes of action.

         The Chicago Complaint asserts 10 counts: (I) Consumer Fraud-Deceptive Practices; (II) Consumer Fraud-Unfair Practices; (III) Misrepresentations in Connection with Sale or Advertisement of Merchandise; (IV) False Statements to the City; (V) False Claims; (VI) Conspiring to Defraud By Getting False or Fraudulent Claims Paid or Approved by the City; (VII) Recovery of City Costs of Providing Services; (VIII) Insurance Fraud; (IX) Civil Conspiracy; and, (X) Unjust Enrichment. Of these, counts I, II, III, IV, V, VII, VIII, and X are asserted against Watson. Against Watson, the Chicago Complaint seeks injunctive relief, restitution, treble restitution, civil penalties, disgorgement of profits based on unjust enrichment, treble damages, and costs incurred by the City of Chicago that were related to the violations of state, federal, and local law.

         III.

         The Coverage Lawsuit

         In June 2014, Watson tendered the California Action and the Chicago Action to Travelers. In September and December 2014, Travelers denied it had a duty to defend Watson in connection with either action.

         In September 2014, Travelers filed this lawsuit to obtain a declaration it had no obligation under the St. Paul Polices or the Travelers Policies to defend or indemnify Watson in connection with the California Action or the Chicago Action. Travelers filed an amended complaint in December 2014. Watson answered and filed a cross complaint for declaratory relief, breach of contract, and breach of the implied covenant of good faith and fair dealing. Travelers and Watson stipulated to a stay of all claims other ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.