Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
January 14, 2022
Supreme Court of Delaware Applies Policy as Written

Economic Damages not a Risk Insured Against

Read the full article at https://www.linkedin.com/pulse/supreme-court-delaware-applies-policy-written-barry-zalma-esq-cfe and at https://zalma.com/blog plus more than 4050 posts.

Insurance is not Designed to Cure Public Ills

The Supreme Court of Delaware was asked whether insurance policies covering lawsuits “for” or “because of” personal injury require insurers to defend their insureds when the plaintiffs in the underlying suits expressly disavow claims for personal injury and seek only their own economic damages. The trial Court decided that the insured, Rite Aid, could effective compel its insurance carriers to defend it against lawsuits filed by two Ohio counties to recover opioid-epidemic-related economic damages.

In ACE American Insurance Company, Illinois Union Insurance Company, ACE Property & Casualty Company, and Federal Insurance Company v. Rite Aid Corporation, Rite Aid Hdqtrs. Corporation, and Rite Aid Of Maryland, Inc. d/b/a Mid-Atlantic Customer Support Center, No. 339, 2020, Supreme Court of Delaware (January 10, 2022) the Delaware Supreme Court resolved the dispute by reading the policies involved and the facts alleged by the Ohio Counties.

FACTS

Three classes of plaintiffs are within the scope of the insured’s personal injury coverage:

the person injured,

those recovering on behalf of the person injured, and

people or organizations that directly cared for or treated the person injured.

To recover under the insured’s policy as a person or organization that directly cared for or treated the injured person, the plaintiff must prove the costs of caring for the individual’s personal injury. The plaintiffs, governmental entities, sought to recover only their own economic damages, specifically disclaiming recovery for personal injury or any specific treatment damages.

Rite Aid is a national drugstore company with about 2,500 stores around the country. Chubb wrote general liability insurance for Rite Aid.

Rite Aid and others are defendants in multi-district litigation before the United States District Court for the Northern District of Ohio (the “MDL Opioid Lawsuits”). Plaintiffs have filed over a thousand suits in the MDL Opioid Lawsuits against companies in the pharmaceutical supply chain for their roles in the national opioid crisis. Certain suits are bellwether suits-including the complaints of Summit and Cuyahoga Counties in Ohio (“the Counties”) which are at issue before the Delaware Supreme Court.

The Counties’ cases are called the “Track One Lawsuits.” Those lawsuits: “take[] aim at the two primary causes of the opioid crisis: (a) a marketing scheme [by certain defendants] . . .; and (b) a supply chain scheme, pursuant to which the various entities in the supply chain failed to design and operate systems to identify suspicious orders of prescription opioids, maintain effective controls against diversion, and halt suspicious orders when they were identified, thereby contributing to the oversupply of such drugs and fueling an illegal secondary market.”

ACE Policy XSL G27390900, the 2015 Policy “applies” to “personal injury” which “is caused by an ‘occurrence’ that takes place in the ‘coverage territory;’ and . . . occurs during the policy period.” “Personal injury” is defined in part as “bodily injury” and includes “any continuation, change, or resumption of that ‘personal injury’ . . . after the end of the policy period.” “Bodily injury” has its own definition: “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” And an occurrence, with respect to bodily injury, is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Finally, the 2015 Policy provides that Chubb has a “duty to defend the insured against any ‘suit’ seeking [personal injury] damages.”

After Chubb denied coverage, Rite Aid sued the carriers in the Superior Court, claiming breach of contract, seeking a declaratory judgment on the duty to pay or reimburse defense costs, and statutory remedies for Chubb’s refusal to defend without good cause under Pennsylvania law. Rite Aid moved for partial summary judgment seeking a declaration that Chubb is obligated to “pay or reimburse” Rite Aid’s defense costs for the Track One Lawsuits and “all similarly pled lawsuits[, ]” which would likely encompass most of the MDL Opioid Lawsuits. Chubb moved for partial summary judgment on the grounds that it had no obligation to defend Rite Aid in the lawsuits.

The Superior Court granted summary judgment to Rite Aid.

ANALYSIS

Chubb acknowledges that an insurer has a duty to defend the insured when a complaint seeks damages for injuries that arguably are covered by the policy. And Chubb agrees that the 2015 Policy covers suits seeking damages “for” or “because of” personal injury. Coverage depends on whether the bodily injury was suffered by the plaintiff, or someone asserting bodily injury liability derivatively for the harmed party. Dispositive to the Supreme Court was the fact that the Counties did not suffer personal injury and thus seek compensation only for their non-derivative economic harms, even if those harms have some causal connection to a bodily injury.

It is axiomatic that the duty to defend is broad. An insurer has an obligation to defend its insured, even if the action against the insured is groundless, whenever the complaint may potentially come within the coverage of the policy. This applies even when the complaint has only one allegation that falls within the scope of the policy’s coverage and even if an insured is ultimately found to be not liable.

Taking Cuyahoga County’s complaint as representative, it seeks “economic damages” as a “direct and proximate result” of Rite Aid’s failure to “effectively prevent diversion” and “monitor, report, and prevent suspicious orders” of opioids. Cuyahoga alleges that Rite Aid’s conduct also “fell far short of legal requirements” and “contributed significantly to the opioid crisis by enabling, and failing to prevent, the diversion of opioids” for illegal and non-prescription use. Cuyahoga claims the opioid crisis “saddled [it] with an enormous economic burden,” with “several departments [incurring] direct and specific response costs that total tens of millions of dollars[, ]” including costs in the areas of medical treatment and criminal justice.

The complaints do not allege personal injury damage claims for or on behalf of individuals who suffered or died from the allegedly abusive prescription dispensing practices. Rather, the Counties expressly disclaimed personal injury damages. The Counties made clear that: they “do not seek damages for death, physical injury to person, emotional distress, or physical damages to property;” and their increased costs are of a different kind and degree than Ohio citizens at large and can only be suffered by the Counties and are not based upon or derivative of the rights of others.

Delaware law recognizes that the duty to defend test extends past the mere labels of a claim, inquiring into whether the factual allegations in the underlying complaint potentially support a covered claim. However, the Track One Lawsuits asserted no claims for personal injury-just facts that support the economic loss claims. The Supreme Court recognized that the plaintiffs did not seek damages for personal injury. They seek to recover for non-derivative economic loss.

The Supreme Court, looking to the mutual intent at the time of contracting, an objective, reasonable third party would read damages claimed by any person or organization for care or death resulting at any time from the personal injury to mean damages directly resulting from the personal injury-damages for providing care to an injured individual.

The Supreme Court noted that if the Counties ran public hospitals and sued Rite Aid on behalf of these hospitals to recover their actual, demonstrated costs for treating bodily injuries caused by opioid over-prescription, the 2015 Policy would most likely be triggered. However, the Counties’ alleged damages do not depend on proof of bodily injuries or even suggest them.

The complaints, the Supreme Court concluded, are not covered by the 2015 Policy. The trial court was reversed and the Supreme Court concluded the insurers had no duty to defend or indemnify the insureds.

ZALMA OPINION

People insured and many judges seem to believe that insurance is not a contractually established risk transfer device but is a means of curing the ills of the community. They forget that insurance is a contract that protects the person or entity insured against certain identified fortuitous risks of loss. When, as in this case, the policy only insures against personal injury, there can be no duty to defend or indemnify the insured for economic damages that do not fit the definition of “personal injury.” The Supreme Court of Delaware read the policy and had no choice but to reverse the trial court and determine the insurers owed neither defense nor indemnity to the Rite Aid entities.

© 2022 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.

You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, [email protected] and [email protected] . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma;  you can follow Mr. Zalma on Twitter at; you should  see Barry Zalma’s videos on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims–library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ 

Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
21 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...

00:08:42
placeholder
May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals