Risk Management

Tokio Marine not obligated to pay opioid company under D&O policy

Judy Greenwald

March 10, 2022 Reprints

Coverage Disputes D&O P/C Insurers Chubb Ltd. More + Less -

A federal appeals court ruled Wednesday that a Tokio Marine HCC unit does not have to compensate an opioid manufacturer for costs incurred in association with subpoenas under its directors and officers liability coverage.

Sola Beach, California-based Sentynl Therapeutics Inc., which markets two prescription opioid pain relievers, received subpoenas from the U.S. Attorney’s Office for the District of New Jersey in 2018 and 2019 in conjunction with an investigation of potential violations of federal law by anyone illegally profiting from opioids, according to the ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in Sentynl Therapeutics Inc. v. U.S. Specialty Insurance Co.

After Tokio Marine unit U.S. Specialty denied Sentynl’s claim under the policy, in which it was seeking reimbursement for the costs of complying with the subpoenas, Sentynl sued the insurer in U.S. District Court in Pasadena for breach of contract and of the implied covenant of good faith.

The district court ruled in the insurer’s favor, and was affirmed by a unanimous three-judge appeals court panel. While there is no case that is “on point,” “Having reviewed analogous cases, we are satisfied that the district court’s analysis was correct,” the appeals court panel said.

The policy, for instance, excludes coverage for losses in connection with a claim “arising out of” its products, the ruling said. The panel said the district court was correct in defining the term broadly.

“‘Arising out of’ is broad, but not ambiguous,” the ruling said, in affirming the lower court.

Attorneys in the case had comment or did not respond to a request for comment.

In January, the Delaware Supreme Court reversed a lower court and held in a divided opinion that Chubb Ltd. units are not obligated to defend Rite Aid Corp. in opioid litigation filed by two Ohio counties.