Rite Aid Corporation v. ACE American Insurance Company

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

RITE AID CORPORATION; RITE AID )
HDQTRS. CORP.; and RITE AID OF )
MARYLAND, INC. d/b/a MID-ATLANTIC )
CUSTOMER SUPPORT CENTER, )
)
Plaintiffs, )
)
v. )
) C.A. No. N19C-04-150 EMD CCLD
ACE AMERICAN INSURANCE COMPANY; )
JURY TRIAL ILLINOIS UNION INSURANCE )
COMPANY; DEMANDED ACE PROPERTY )
& CASUALTY COMPANY; FEDERAL )
INSURANCE COMPANY; LEXINGTON )
INSURANCE COMPANY; NATIONAL )
UNION FIRE INSURANCE COMPANY OF )
PITTSBURGH, PA; AMERICAN )
GUARANTEE & LIABILITY INSURANCE )
COMPANY; AMERICAN ZURICH )
INSURANCE COMPANY; CONTINENTAL )
INSURANCE COMPANY; ENDURANCE )
AMERICAN INSURANCE COMPANY; )
GREAT AMERICAN ASSURANCE )
COMPANY; GREAT AMERICAN )
INSURANCE COMPANY OF NEW YORK; )
GREAT AMERICAN SPIRIT INSURANCE )
COMPANY; LIBERTY INSURANCE )
UNDERWRITERS, INC.; ST. PAUL FIRE )
AND MARINE INSURANCE COMPANY; and )
XL INSURANCE AMERICA, INC., )
)
Defendants. )
)
)

Submitted: June 5, 2020
Decided: September 22, 2020

Upon Plaintiffs Rite Aid Corporation, Rite Aid Hdqtrs. Corp., and Rite Aid of Maryland Inc.’s
Motion for Partial Summary Judgment,
GRANTED
Upon Defendants ACE American Insurance Company, Illinois Union Insurance Company, ACE
Property & Casualty Insurance Company, and Federal Insurance Company’s Motion for Partial
Summary Judgment,
DENIED

Jody C. Barillare, Esquire, Morgan, Lewis & Bockius LLP, Wilmington, Delaware, Gerald P.
Konkel, Esquire, Christopher Popecki, Esquire, Morgan, Lewis & Bockius LLP, Washington,
D.C. Attorneys for Plaintiffs Rite Aid, Corporation, Rite Aid Hdqtrs. Corp., and Rite Aid of
Maryland Inc.

Marc S. Casarino, Esquire, White and Williams LLP, Wilmington, Delaware, Paul R. Koepff,
Esquire, Clyde & Co US LLP, New York, New York, Robert Mangino, Esquire, Clyde & Co US
LLP, Florham Park, New Jersey. Attorneys for Defendants ACE American Insurance Company,
Illinois Union Insurance Company, ACE Property & Casualty Insurance Company, and Federal
Insurance Company

Robert J. Katzenstein, Esquire, Robert K. Beste, Esquire, Smith, Katzenstein & Jenkins LLP,
Wilmington, Delaware, Mitchell J. Auslander, Esquire, Christopher J. St. Jeanos, Esquire,
Willkie Farr & Gallagher LLP, New York, New York. Attorneys for Defendants Lexington
Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa.

Deirdre M. Richards, Esquire, Fineman Krekstein & Harris P.C., Wilmington, Delaware, Hema
Patel Mehta, Esquire, Chartwell Law, Philadelphia, Pennsylvania. Attorneys for Defendant
Endurance American Insurance Company

David J. Soldo, Esquire, Morris James LLP, Wilmington, Delaware. Attorney for Great
American Assurance Company, Great American Insurance Company of New York, and Great
American Spirit Insurance Company

DAVIS, J.

I. INTRODUCTION

This insurance coverage dispute is assigned to the Complex Commercial Litigation

Division of the Court. Plaintiffs Rite Aid Corporation, Rite Aid Hdqtrs. Corp., and Rite Aid of

Maryland Inc. d/b/a Mid-Atlantic Support Center (collectively, “Rite Aid”) have been sued in

over 1,143 lawsuits by governmental entities, third-party payors of medical care, and individuals

seeking damages for costs arising out of Rite Aid’s distribution of opioids (“Opioid Lawsuits”).1

1
Rite Aid’s Op. Br. in Supp. of Its Mot. for Partial Summ. J. Requiring Def. ACE American Insurance Company to
Pay or Reimburse Rite Aid’s Defense Cost for Opioid Lawsuits (“Rite Aid’s Motion”) at 1.

2
The Opioid Lawsuits allege that Rite Aid knowingly distributed opioids to its own local

pharmacies, and separately allege that local Rite Aid pharmacies improperly dispensed

prescription opioids to its customers, which contributed and perpetuated drug abuse, addiction

and resulting injuries or death.2 Rite Aid sought coverage for the Opioid Lawsuits under ACE

policy XSL G27390900 (the “Policy” or the “2015 Policy”) issued by Defendant ACE American

Insurance Company (“ACE”).3 Chubb (as defined below) denied coverage under the Policy for

any of Rite Aid’s costs incurred in defending any of the Opioid Lawsuits. In response, Rite Aid

initiated this action on April 16, 2019.

On July 19, 2019, Rite Aid filed its Motion for Partial Summary Judgment Requiring

Defendant ACE American Insurance Company to Pay or Reimburse Rite Aid’s Defense Costs

for Opioid Lawsuits (“Rite Aid’s Motion”). On January 31, 2020, ACE filed ACE’s

Memorandum of Law in Opposition to Rite Aid’s Motion for Partial Summary Judgment.

Also, on January 31, 2020, two group of non-Chubb insurers filed responses to Rite Aid’s

Motion: (i) Defendants Great American Assurance Company, Great American Insurance

Company of New Yok, Great American Spirit Insurance Company (“Great American

Defendants”); and (ii) Defendants Endurance American Insurance Company (“Endurance”) and

National Union Fire Insurance Company of Pittsburgh, Pa., (“National Union” and, with

Endurance, “Certain Excess Insurer Defendants”). The Great American Defendants filed the

Response of Great American Assurance Company, Great American Insurance Company of New

Yok, Great American Spirit Insurance Company to Rite Aid’s Motion for Partial Summary

Judgment Requiring Defendant ACE American Insurance Company to Pay or Reimburse Rite

Aid’s Defense Costs for Opioid Lawsuits (“Great American Defendants’ Response”). The

2
Memorandum of Law in Supp. Of Chubb’s Mot. for Partial Summ. J. (“Chubb’s Mot.”) at 1.
3
Rite Aid’s Mot. at 2.

3
Certain Excess Insurer Defendants filed the Certain Excess Insurer Defendants’ Memorandum in

Connection with and in Opposition to Plaintiffs’ Motion for Partial Summary Judgment

Requiring Defendant ACE to Pay Defense Costs (“Certain Excess Insurer Defendants’

Response”).

On February 21, 2020, Rite Aid filed Rite Aid’s Reply Brief in Further Support of its

Motion for Partial Summary Judgment Requiring ACE to Pay or Reimburse Rite Aid’s Defense

Costs for Opioid Lawsuits and Rite Aid’s Reply to Certain Insurers’ Response to Rite Aid’s

Motion for Partial Summary Judgment Requiring ACE to Pay or Reimburse Rite Aid’s Defense

Costs for Opioid Lawsuits (“Rite Aid’s Reply to Certain Insurers’ Response”). The Reply to

Certain Insurers’ Response addressed both the Certain Excess Insurer Defendants’ Response and

the Great American Defendants’ Response.

On January 31, 2020, Defendants ACE, Illinois Union Insurance Company, ACE

Property & Casualty Insurance Company (i/p/a ACE Property & Casualty Company), Federal

Insurance Company (collectively, “Chubb”)4 submitted a Motion for Partial Summary Judgment

(“Chubb’s Motion”). On February 21, 2020, Rite Aid filed Rite Aid’s Memorandum of Law in

Opposition to Chubb’s Motion for Partial Summary Judgment. On March 9, 2020, Chubb filed

its Reply Memorandum in Support of Chubb’s Motion for Partial Summary Judgment.

The Court held a hearing on Rite Aid’s Motion and Chubb’s Motion on April 20, 2020.

At the hearing, the Court asked the parties to provide supplemental information regarding recent

developments in the MDL Opioid Lawsuits (as defined below). After that, the Court took the

4
For purposes of this Opinion and to avoid confusion, the Court will use Chubb to mean multiple parties, including
ACE. Any references to Chubb in this Opinion will also mean ACE, Illinois Union Insurance Company, ACE
Property & Casualty Insurance Company (i/p/a ACE Property & Casualty Company) and Federal Insurance
Company. This is because Chubb is handling these claims on behalf of ACE, Illinois Union Insurance Company,
ACE Property & Casualty Insurance Company (i/p/a ACE Property & Casualty Company) and Federal Insurance
Company. Affidavit of Ron Chima (“Chima Aff.”), at Ex. E.

4
matters under advisement. This is the Court’s opinion on the motions. For the reasons set forth

below, the Court GRANTS Rite Aid’s Motion and DENIES Chubb’s Motion.

II. BACKGROUND

Rite Aid is the third largest retail drugstore chain in the United States, operating nearly

2,500 stores across the country.5 On December 5, 2017, the United States Judicial Panel on

Multidistrict Litigation began to consolidate federal Opioid Lawsuits “involv[ing] common

questions of fact” into a multi-district litigation before the United States District Court for the

Northern District of Ohio (the “MDL Opioid Lawsuits”) after governmental entities, third-party

payors of medical care, and other plaintiffs began filing suit against manufacturers and suppliers

of opioids.6 The governmental entities seek to recover billions in governmental and economic

costs allegedly incurred in providing a wide array of public services in response to the influx of

opioids into their communities such as increased expenses for first responders, autopsies,

morgues, drug rehabilitation, foster care, and drug-related criminal activity.7

The MDL Opioid Lawsuits include the “Track One” bellwether litigation suits (the

“Track One Lawsuits”), which consist of claims by governmental entities alleging that Rite Aid

chased profits while turning a blind eye to the devastating epidemic.8 The Track One Lawsuits

initially involved County of Summit, Ohio v. Purdue Pharma L.P., Case No. 18-OP-45090 (N.D.

Ohio) (the “Summit” lawsuit), County of Cuyahoga, Ohio v. Purdue Pharma L.P., Case No. 17-

OP-45004 (N.D. Ohio) (the “Cuyahoga” lawsuit), and City of Cleveland, Ohio v. Purdue

5
Chubb’s Mot. at 1; ACE’s Memorandum of Law in Opp. to Rite Aid’s Mot. for Partial Summ. J. (“ACE’s Opp.”)
at 1.
6
In re Nat’l Prescription Opiate Litig., 290 F. Supp. 3d 1375, 1378 (J.P.M.L. 2017); see also Declaration of Gerald
P. Konkel (“Konkel Decl.”), Ex. F, In re Nat’l Prescription Opiate Litig., 1:17-MD-2804-DAP, Doc. (“MDL Doc.”)
3151 (N.D. Ohio Feb. 5, 2020) (stating nearly 2,000 Opioid Lawsuits transferred to MDL since 2017).
7
Id. at 1–2.
8
Id. at 2.

5
Pharma L.P., Case No. 18-op-45132 (N.D. Ohio) (the “Cleveland” lawsuit).9 On February 25,

2019, the Cleveland lawsuit and the City of Akron—a plaintiff in the Summit lawsuit—were

dropped from the trial.10

On April 27, 2018, two days after being named a defendant of the Track One Lawsuits,

Rite Aid tendered and provided timely notice of the Opioid Lawsuits, including the Track One

Lawsuits, to its insurers, including under the 2015 Policy.11

A. THE CHUBB POLICIES

Unlike Rite Aid’s Motion, which only involves the 2015 Policy, Chubb’s Motion

involves nineteen policies (the “Chubb Policies”) issued by the Chubb Companies that contain

“identical or materially similar terms.”12 Chubb argues that none of the Chubb Policies provide

coverage for the defense costs in the Track One Lawsuits.

i. The 2015 Policy

The 2015 Policy provides:

a. We will pay those sums that the insured becomes legally obligated to pay as
damages because of “personal injury” or “property damage” to which the insurance
applies. We will have the right and duty to defend the insured against any “suit”
seeking those damages. However, we will have no duty to defend the insured
against any “suit” seeking damages for “personal injury” or “property damage” to
which this insurance does not apply.

...

e. Damages because of “personal injury” include damages claimed by any person
or organization for care, loss of services or death resulting at any time from the
“personal injury.”13

9
See Konkel Decl., ¶¶ 5–6.
10
Chima Aff. ¶ 25.
11
Rite Aid’s Mot. at 2.
12
Chubb’s Motion at 4–5; Declaration of Paul R. Koepff (“Koepff Decl.”) ¶¶ 4–20, Exs. A–Q; see Chima Aff. Ex.,
A.
13
Chima Aff., Ex. A.

6
The Policy “applies” to “personal injury” that “occurs during the policy period” and “is caused

by an ‘occurrence,’” but also defines “personal injury” to include “any continuation, change, or

resumption of that ‘personal injury’. . . after the end of the policy period.”14

“Personal injury” is defined in part as “bodily injury.”15 “Bodily injury” is further

defined as “bodily injury, sickness or disease sustained by a person, including death resulting

from any of these at any time.”16 Such damages are covered so long as they were “caused by an

occurrence.17 An “occurrence,” with respect to “bodily injury,” is “an accident, including

continuous or repeated exposure to substantially the same general harmful conditions.”18 The

Policy states “[d]amages because of ‘personal injury’ include damages claimed by any person or

organization for care, loss of services or death resulting at any time from the ‘personal injury.’”19

It also states that Chubb has a “duty to defend the insured against any ‘suit’ seeking those

damages.”20

The Policy provides that the duty to defend “will attach only when the entire amount of

the ‘Retained Limit’ has been paid and then only in excess of the ‘Retained Limit.’”21 The

Policy further states that there will be “no reduction of the ‘Retained Limit’ because of payment

of claims or ‘suits’ arising from claims or ‘suits’ for which coverage is not afforded.”22 The

Policy has a $3,000,000 “Retained Limit” that is “the most an insured will pay for . . . [d]amages

and Supplementary Payments under Coverage A because of all ‘personal injury’ . . . arising out

14
Id.
15
Id. at RA0002535.
16
Id. at RA0002532.
17
Id. at RA0002519.
18
Id. at RA0002535.
19
Id. at RA0002520.
20
Id. at RA0002519.
21
Id. at RA0002573.
22
Id.

7
of any one occurrence.”23 The Policy characterizes “Supplementary Payments” as the expenses

incurred in the defense of such suits.24

ii. The 2018 Policy’s Unique Governmental Entity Suit Exclusion

ACE also issued a primary policy to Rite Aid, policy XSL G27874642, for the 2018

policy period after the first Opioid Lawsuits were filed (“2018 Policy”).25 The 2018 Policy has

the same standard insuring agreement as the other ACE American policies. The Court notes,

however, that it contains a unique endorsement that “changes” the scope of coverage provided

under ACE’s standardized insuring agreement supports Rite Aid’s understanding of the 2015

Policy’s coverage. The endorsement states that it “CHANGES THE POLICY” and thus instructs

the insured to “PLEASE READ IT CAREFULLY.”26 The endorsement excludes “opioid and

narcotics liability” claims brought by “any ‘governmental entity,’ health or group insurer” under

“COVERAGE A. PERSONAL INJURY AND PROPERTY DAMAGE LIABILITY”27 Chubb

issued the 2018 Policy with this exclusion after the first Opioid Lawsuits were asserted in 2017.28

No Chubb policy subject to Chubb’s Motion contains a similar “opioid” and/or “governmental

entity” suit exclusion.

B. THE TRACK ONE LAWSUITS

Rite Aid’s Motion concerns the allegations in the complaints of the Summit, Cuyahoga,

and Cleveland lawsuits.29 Rite Aid alleges that those three lawsuits, like the other MDL Opioid

Lawsuits, include substantively similar allegations that Rite Aid acted negligently in distributing

23
Id. at RA0002572.
24
Id. at RA0002519, RA0002525.
25
Chima Aff., Ex. C.
26
Id. at RA0004349–50.
27
Id.
28
Chima Aff., ¶ 7.
29
Rite Aid’s Submission Regarding Impact of Sixth Circuit’s Mandamus Decision and Judge Polster’s April 16,
2020 Order Regarding Track 1b And Track Three on Pending Summary Judgment Motions (“Rite Aid’s
Submission”) at 2.

8
opioids, resulting in damages including for costs of medical care for addicted individuals and for

opioid overdose deaths. Rite Aid’s Motion seeks declarations that Rite Aid satisfied the per

occurrence retention and ACE has a duty to defend based on the Track One Lawsuits’ pleadings

and defense costs incurred as of July 19, 2019—the date when its Motion was filed.30

On July 19, 2019, the operative pleadings in the Track One Lawsuits were the Summit

and Cuyahoga Third Amended Complaints.31 These Third Amended Complaints included

causes of action for negligence, statutory and common law public nuisance, and other claims

against opioid “supply chain” entities including Rite Aid, all arising out of their alleged failure to

prevent diversion and oversupply of opioids.32 This allegedly caused a “public health epidemic”

of “addiction, abuse, overdose and death,” and proximately caused governmental entities’ “costly

responses” including emergency services, medical care, and morgue operations.33 Specifically,

the negligence cause of action alleged:

 Breaches of duties through “Distributing by distributors” and their
“Choosing not to effectively monitor for suspicious orders” and related
failures;

 “Defendants were negligent by marketing, distributing, and selling opioids”
leading to illicit diversion;

 “Defendants had control over their conduct in Plaintiffs’ communities” by
“controll[ing] the systems they developed to prevent diversion . . . .”;

 “As a direct and proximate result of Defendants’ negligence,” Plaintiffs
“have suffered and will continue to suffer economic damages including, but
not limited to, significant expenses for…emergency, health, . . . and other
services”;

30
Id.
31
Rite Aid’s Memorandum of Law in Opp. to Chubb’s Mot. for Partial Summ. J. at 7.
32
Chima Aff., Ex. L, ¶ 9 (hereinafter, “Summit TAC”); Ex. N, ¶ 9 (hereinafter, “Cuyahoga TAC”). On August 19,
2019, the plaintiffs in the Track One Lawsuits dismissed their causes of action for negligence, common law fraud,
injury through criminal acts, and unjust enrichment. Konkel Decl., Ex. B, MDL Doc. 2487 (N.D. Ohio Aug. Aug.
19, 2019).
33
Summit TAC, ¶¶ 18, 20, 725; Cuyahoga TAC, ¶¶ 17, 19, 677.

9
  Defendants’ misconduct is “ongoing and persistent”; and

 Defendants’ conduct “does not concern a discrete event or discrete
emergency….”34

The common law public nuisance counts are premised on the same alleged inactions and

inadequate actions as the negligence cause of action. While the Track 1B Plaintiffs dismissed

the negligence counts in the Track 1B operative complaints on August 19, 2019, the public

nuisance counts remain unchanged.35

On November 20, 2019, the plaintiffs in the Track One Lawsuits filed Amendments by

Interlineation.36 The Amendments by Interlineation were substantively identical.37 The

Amendments by Interlineation filed in the Summit and Cuyahoga lawsuits made revisions to the

preexisting public nuisance count and alleged new details regarding National Retail Pharmacies’

alleged “distributing and dispensing” conduct.38 When the plaintiffs were granted permission to

amend their Third Amended Complaints, MDL District Court Judge pointed out that “although

some additional discovery will be necessary to address dispensing claims, much of the

foundational discovery and virtually all of the discovery regarding Plaintiffs has already been

done [with respect to the dispensing claims].”39

Chubb’s Motion was filed on January 31, 2020. At that time, the operative complaints

were the Third Amended Complaints as amended by the Amendments by Interlineation.40

34
Rite Aid’s Reply Brief in Further Support of its Motion for Partial Summary Judgment Requiring ACE to Pay or
Reimburse Rite Aid’s Defense Costs for Opioid Lawsuits (“Rite Aid’s Reply Br.”) at 6–7 (citing Summit TAC at ¶¶
1046, 1050, 1054, 1063, 1066 & 1067; Cuyahoga TAC at ¶¶ 1089, 1093, 1097, 1106, 1109, & 1110).
35
Rite Aid’s Submission at 4 n.10.
36
In re Nat’l Prescription Opiate Litig., No. 1:17-MD-2804 (“Opioid MDL”) (Nov. 20, 2019) ECF Nos. 2943,
2944. F.R.C.P. 15(c)(1)(B) provides that amendments “relate back” when the newly asserted claim arises out of the
“conduct, transaction or occurrence set out or attempted to be set out” in the pleading being amended. See, e.g.,
Bensel v. Allied Pilots Ass’n, 387 F.3d 298, 310 (3d Cir. 2004). Moreover, these Amendments are “interlineated”
such that they are part and parcel of the original Third Amended Complaints.
37
See, e.g., Summit TAC, ¶ 168; Cuyahoga TAC, ¶ 156.
38
Id.
39
Opioid MDL (Nov. 19, 2019) ECF No. 2940, p. 3.
40
Chubb’s Mot. at 5.

10
Chubb’s Motion is based on the pleadings in the Summit and Cuyahoga pleadings, consisting of

Second Amended Complaints, Third Amended Complaints, and the Amendments by

Interlineation.41 Chubb’s Motion concerns whether the Summit and Cuyahoga lawsuits allege

claims for “damages” “because of” “personal injury.”

On April 15, 2020, the Sixth Circuit issued an opinion overruling the MDL District Court

Judge’s November 2019 decision,42 which permitted the counties to amend their complaints to

assert the dispensing claims timely.43 Specifically, the Sixth Circuit stated that [t]he petition for

a writ of mandamus is granted, and the cases are remanded with instructions to strike each

County’s November 2019 “Amendment by Interlineation.”44 As a result of the Sixth Circuit’s

decision, in his April 16 Order, the MDL District Court Judge created a new litigation track to

resolve: “(1) only public nuisance claims (2) against only the pharmacy defendants (3) in their

roles as distributors and dispensers.”45

Given this, the Court will not consider the new allegations made in the Amendments by

Interlineation. Instead, the Third Amended Complaints remain the operative complaints.46 As

the negligence counts and the public nuisance counts in the Third Amended Complaints allege

the same source of Rite Aid’s alleged liability and as between the two, the public nuisance

counts remain pending, resolving Rite Aid’s Motion and the Chubb’s Motion calls for

consideration of the Third Amended Complaints’ public nuisance counts.47

As pled from their inception and currently, the Track One Lawsuits:

41
Id. (citing In re Nat’l Prescription Opiate Litig., No. 1:17-MD-2804 (“Opioid MDL”) (N.D. Ohio Dec. 23, 2019)
ECF No. 3044 p. 1 FN1, ECF No. 3045 p. 1 n.1.).
42
In re: National Prescription Opiate Litig., case no. 20-3075, dkt no. 50–53 (6th Cir. April 15, 2020) (“Mandamus
Order”).
43
Id. at 9.
44
Id.
45
See Rite Aid’s Submission, Ex. C, April 28, 2020 Pharmacy Defendants’ Position Statement and Objection.
46
Rite Aid’s Submission at 3.
47
Id. at 3–4.

11
 take[] aim at the two primary causes of the opioid crisis: (a) a marketing scheme
[by Marketing 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.48

The Track One Lawsuits also have consistently pled:

[o]n the supply side, the crisis was fueled and sustained by . . . manufacturers,
distributors, and pharmacies (together “Defendants”), who failed to maintain
effective controls over the distribution of prescription opioids . . . .49

i. The Cuyahoga Action

The second and third amended complaints in the Cuyahoga action assert claims against

Rite Aid seeking to recover specific costs borne by Cuyahoga resulting from alleged conduct by

Rite Aid entities operating in, or directly impacting Cuyahoga.50 Cuyahoga alleges that as a

“direct and proximate result” of Rite Aid’s failure to “effectively prevent diversion” and

“monitor, report, and prevent suspicious orders,” it “suffered and will continue to suffer

economic damages.”51 Cuyahoga claims that Rite Aid’s actions “fell far short of legal

requirements” and “contributed significantly to the opioid crisis by enabling, and failing to

prevent, the diversion of opioids.”52 Cuyahoga alleges that as a “practical and financial matter”

it was “saddled with an enormous economic burden,” with “several departments [incurring]

direct and specific response costs that total tens of millions of dollars.”53 The financial strain

was allegedly evidenced in “annual costs associated with treatment, criminal justice, and lost

48
Summit TAC, ¶ 9; Chima Aff., Ex. M (hereinafter, “Summit SAC”), ¶ 9; Cuyahoga TAC, ¶ 9; Chima Aff., Ex. O
(hereinafter, “Cuyahoga SAC”), ¶ 9.
49
Summit TAC, ¶ 14; Summit SAC, ¶ 14; Cuyahoga TAC, ¶ 14; Cuyahoga SAC at ¶ 14.
50
See Cuyahoga SAC ¶¶ 715–75; Cuyahoga TAC ¶¶ 729–89.
51
See Cuyahoga SAC ¶¶ 621, 1053, 1092; Cuyahoga TAC ¶¶ 635, 1067, 1106.
52
Cuyahoga SAC ¶¶ 620–21; Cuyahoga TAC ¶¶ 634–35.
53
Cuyahoga SAC ¶ 693; Cuyahoga TAC ¶ 707.

12
productivity.”54 These costs include the costs of forming an Opiate Task Force in 2010.55

Cuyahoga claims that the damages sought are “of a different kind and degree than Ohio citizens

at large,” “can only be suffered by [Cuyahoga],” and “are not based upon or derivative of the

rights of others.”56 Cuyahoga states that it “[does] not seek damages for death, physical injury to

person, emotional distress, or physical damages to property.”57 Cuyahoga alleges that the

damages sought are for “abatement, recovery of abatement costs, injunctive relief, and to prevent

injury and annoyance from any nuisance.”58

ii. The Summit Action

Summit asserts claims against entities in the opioid distribution “supply chain,” including

Rite Aid, that allegedly “failed” or “refus[ed] to monitor and restrict the improper distribution of

[opioid] drugs.”59 Summit alleges in detail the opioid-related bodily injury, sickness, disease,

and death fueled by the “proliferation of opioid pharmaceuticals [since] the late 1990s.”60

Summit alleges how taking opioids “produce[s] multiple effects on the human body, the most

significant of which are analgesia, euphoria, and respiratory depression.”61 Summit claims that

users develop tolerance and take “progressively higher doses,” which risks “arrest[ing]

respiration altogether” and causes “more severe” withdrawal symptoms. Withdrawal symptoms

54
Cuyahoga SAC ¶ 694; Cuyahoga TAC ¶ 708.
55
Cuyahoga SAC ¶ 684; Cuyahoga TAC ¶ 698.
56
Cuyahoga SAC ¶¶ 1060–61; Cuyahoga TAC ¶¶ 1074–75.
57
Cuyahoga SAC ¶ 1066; Cuyahoga TAC ¶ 1080.
58
Cuyahoga SAC ¶ 1023; Cuyahoga TAC ¶ 1037.
59
Summit TAC ¶¶ 1, 9, 14; accord Summit SAC ¶¶ 1, 9, 14; Cuyahoga TAC ¶¶ 1, 9, 14; Cuyahoga SAC ¶¶ 1, 9, 14;
Chima Aff., Ex. P (“Cleveland SAC”) ¶¶ 1, 9, 14.
60
Summit TAC ¶7; accord Summit SAC ¶ 7; Cuyahoga TAC ¶7; Cuyahoga SAC ¶ 7; Cleveland SAC ¶ 7.
61
Summit TAC ¶124; accord Summit SAC ¶ 130; Cuyahoga TAC ¶ 112; Cuyahoga SAC ¶ 98; Cleveland SAC ¶
99.

13
allegedly include “severe anxiety, nausea, vomiting, headaches, agitation, insomnia, tremors,

hallucinations, delirium, pain, and other serious symptoms . . . .”62

Summit contends that the spread of opioids has resulted in “skyrocketing” rates of opioid

“addiction, overdose and death,” as well as “black markets” for diverted prescription opioids that

cause heroin and fentanyl abuse.63 These trends allegedly caused extensive “[i]njury and illness

in Ohio” and across the country, including not only the foregoing overdose deaths and

withdrawal symptoms, but also, inter alia, “an increase in Hepatitis C…tied to intravenous

injection of opioids”; potential “suicides believed to be related to opioid withdrawal”; and

“neonatal abstinence syndrome,” a “painful condition” for “drug-exposed infants.”64

1. Costs incurred

Summit alleges that Rite Aid caused this “public health epidemic” and gave rise to the

“extraordinary costs” for overdose deaths, medical care, and other public health, safety, and

criminal justice services, for which it seeks redress.65 Summit alleges that the consequences of

Rite Aid’s actions burdened it with “severe and far-reaching public health, social services, and

criminal justice consequences” that “are not the normal or typical burdens of government

programs and services.”66 Summit avers, “necessary and costly responses to the opioid crisis

include,” inter alia, “handling of emergency responses to overdoses,” “providing addiction

treatment,” “treating opioid-addicted newborns in neonatal intensive care units,” and “burying

62
Summit TAC ¶137; accord Summit SAC ¶ 143; Cuyahoga TAC ¶ 125; Cuyahoga SAC ¶ 111; Cleveland SAC ¶
112.
63
Summit TAC ¶ 138; accord Summit SAC ¶ 144; Cuyahoga TAC ¶ 126; Cuyahoga SAC ¶112; Cleveland SAC ¶
113.
64
Summit TAC ¶ 18; see id. ¶¶ 4–6, 16; accord Summit SAC ¶ 18; Cuyahoga TAC ¶17; Cuyahoga SAC ¶ 17;
Cleveland SAC ¶ 17.
65
Summit TAC ¶¶ 1, 18, 20–21, 28, 30, 34–37; see id. ¶¶ 715–746; accord Summit SAC ¶¶ 1, 18, 20–21; Cuyahoga
TAC ¶¶ 1, 17; Cuyahoga SAC ¶¶1, 17, 19–20; Cleveland SAC ¶¶ 1, 17, 19–20.
66
See Summit SAC ¶¶ 20–21; Summit TAC ¶¶ 20–21.

14
the dead.”67 Summit alleges that for the period between 2012 and 2016, it incurred

approximately $66 million in costs for “special programs over and above [Summit’s] ordinary

public services.”68

These costs include “significant expenses for police, emergency, health, prosecution,

corrections, rehabilitation, and other services.”69 For example, “[f]rom 2012 to 2017 . . . the

County’s Children Services Board . . . incurred nearly $24 million in costs, and the County’s

Alcohol, Drug Addiction, and Mental Health Services Board [ ] more than $10 million [in] costs

related directly to the opioid epidemic.”70 Summit alleges that the harms were “of a different

kind and degree than Ohio citizens at large,” “can only be suffered by [Summit],” and “are not

based upon or derivative of the rights of others.”71 Summit claims “National Retail Pharmacies”

including Rite Aid “were or should have been aware” or “knew or reasonably should have

known” of multiple breaches of duties of care with respect to opioid distribution, including

alleged “fail[ure] to: (a) control the supply chain; (b) prevent diversion [of drugs for illicit uses];

(c) report suspicious orders; and (d) halt shipments of opioids in quantities they knew or should

have known could not be justified and were indicative of serious problems of overuse of opioids.

Plaintiffs allege such “actions and omission[s]…have contributed significantly to the opioid

crisis[.]” 72

Like Cuyahoga, Summit alleges that it “[does] not seek damages for death, physical

injury to person, emotional distress, or physical damages to property.”73 Summit similarly seeks

67
Summit TAC ¶ 20; accord Summit SAC ¶ 20; Cuyahoga TAC ¶ 19; Cuyahoga SAC ¶ 19; Cleveland SAC ¶ 19.
68
See Summit SAC ¶¶ 744, 993; Summit TAC ¶¶ 745, 994.
69
Summit SAC ¶¶ 1024, 1062; Summit TAC ¶¶ 1025, 1063.
70
Summit SAC ¶ 734; Summit TAC ¶ 735.
71
Summit SAC ¶¶ 1031–32; Summit TAC ¶¶ 1032–33.
72
Summit TAC ¶¶ 17, 518, 656–58; accord Summit SAC ¶¶ 517, 656–58; Cuyahoga TAC ¶¶ 502, 632–34;
Cuyahoga SAC ¶¶ 488, 581–88; Cleveland SAC ¶¶ 487, 619–21.
73
Summit SAC ¶ 1037; Summit TAC ¶ 1038.

15
“abatement, recovery of abatement costs, injunctive relief, and to prevent injury and annoyance

from any nuisance.”74

2. Rite Aid as a “Wholesale Distributor”

As a “wholesale distributor,” Rite Aid allegedly “reaped enormous financial rewards by

refusing to monitor and restrict the improper distribution of drugs.”75 Rite Aid’s actions

purportedly “fell far short of legal requirements” and “contributed significantly to the opioid

crisis.”76 Summit specifically identified Rite Aid’s alleged failure to: “control the supply chain,”

“prevent diversion,” “report suspicious orders,” and “halt shipments of opioids in quantities [it]

knew or should have known could not be justified and were indicative of serious problems of

overuse of opioids.”77 Summit asserts that the “distribution” of opioids “created the foreseeable

opioid crisis and opioid public nuisance for which [it] seeks relief.”78

3. Rite Aid’s Alleged Pre-2015 Knowledge

Rite Aid allegedly “distribut[ed] far greater quantities of prescription opioids than [it]

[knew] could be necessary for legitimate medical uses.”79 Summit contends that between 2010

and 2016, the average number of opioids “distributed” annually into Summit exceeded 67 per

person, and based on this amount, Rite Aid was, or reasonably should have been “fully aware

that the quantity of opioids being distributed . . . was untenable, and in many areas patently

absurd.”80

Summit also asserts that “from the catbird seat of [its] retail pharmacy operations,” Rite

Aid “knew or reasonably should have known about the disproportionate flow of opioids into

74
Summit SAC ¶ 995; Summit TAC ¶ 996.
75
Summit SAC ¶ 1; Summit TAC ¶ 1.
76
Summit SAC ¶ 659; Summit TAC ¶ 658.
77
Summit SAC ¶ 518; Summit TAC ¶ 518.
78
Summit SAC ¶ 36; Summit TAC ¶ 58.
79
Summit SAC ¶ 14; Summit TAC ¶ 14.
80
Summit SAC ¶¶ 626, 689; Summit TAC ¶¶ 627, 690.

16
[Summit] and the operation of ‘pill mills’ that generated opioid prescriptions that, by their

quantity or nature, were red flags for if not direct evidence of illicit supply and diversion.”81

Summit specifically contended that “information was provided by news reports,” including a

2011 article in the Columbus Dispatch titled 16 Charged in “Pill Mill” Pipeline.82 Summit

claims that “[i]n 2009, as a result of a multi-jurisdictional investigation by the DOJ, [Rite Aid]

and nine of its subsidiaries in eight states were fined $5 million in civil penalties for its violations

of the [Controlled Substances Act].”83 Summit states that the investigation revealed that “from

2004 onwards, [Rite Aid] pharmacies across the country had a pattern of non-compliance with

the requirements of the [Controlled Substances Act] and federal regulations that [led] to the

diversion of prescription opioids in and around the communities of the [Rite Aid] pharmacies

investigated.”84

C. CHUBB’S DENIAL OF ITS COVERAGE AND DEFENSE OBLIGATIONS

Beginning with its July 23, 2018 letter, Chubb reserved its rights without making a

coverage determination regarding the MDL Opioid Lawsuits and other Opioid Lawsuits.85 In

that letter, Chubb admitted that the “governmental plaintiffs claim they directly and foreseeably

sustained economic damages related to provision of medical care for people of all ages,

including infants born addicted to opioids, drug treatment, counseling and rehabilitation services,

social services, childcare for children whose guardians are addicted, law enforcement, public

safety, and morgues.”86 Chubb stated it had no “current” obligation to defend any Opioid

Lawsuit but did not yet deny coverage.87

81
Summit SAC ¶ 656; Summit TAC ¶ 657.
82
Summit SAC ¶ 663 n.177; Summit TAC ¶ 664 n.178.
83
Summit SAC ¶ 651; Summit TAC ¶ 652.
84
Summit SAC ¶ 652; Summit TAC ¶ 653.
85
Chima Aff., Ex. E.
86
Id. at 2.
87
Id. at 1; accord Chima Aff., Ex. F.

17
 On October 9, 2018, Rite Aid advised Chubb that the applicable per occurrence Retained

Limit had been satisfied by over $3,000,000 in defense cost payments.”88 Through a December

21, 2018 letter, notwithstanding its prior acknowledgements that the Opioid Lawsuits seek

damages from Rite Aid for “medical care,” “medical services,” and operating “morgues,” Chubb

denied that it had an obligation to defend the Opioid Lawsuits brought by governmental entities

and third-party payors of medical services.89 Chubb now contends that those claimants did not

suffer the underlying injuries themselves but only alleged “economic losses” for paying others’

care.90

Following this letter, Chubb’s subsequent correspondence adopted the positions taken in

their previous letters, including the July 23, 2018 letter describing the Opioid Lawsuits and the

December 21, 2018 coverage denial letter.91

III. PARTIES’ CONTENTIONS

A. RITE AID’S MOTION

i. Rite Aid’s Contentions

On April 16, 2019, Rite Aid filed its complaint. On July 19, 2019, with the other parties’

consent, Rite Aid filed its amended and supplemental complaint. In the amended and

supplemental complaint, Rite Aid asserts claims against ACE92 for breach of contract (Count I),

declaratory judgment on the duty to pay or reimburse defense costs (Count II), and for statutory

remedies under 42 Pa. Cons. Stat. Ann. § 8371 for refusing to defend without good cause (Count

III). Rite Aid brings this motion regarding Count II. Rite Aid’s Motion was filed before the

88
Chima Aff., Ex. G at 3.
89
Chima Aff., Ex. E.
90
Id., Ex. H at 2–3.
91
Id., Exs. I–K.
92
Although Chubb is handling the claims on behalf of numerous insurers, Rite Aid is moving for judgment against
ACE on the 2015 Policy.

18
Amendments by Interlineation were made to the Third Amended Complaint, the negligence

counts were dropped, and the Sixth Circuit’s decision to strike the Amendments by Interlineation

concerning dispensing claims.

In Rite Aid’s Motion, Rite Aid states that it selected the 2015 Policy to cover its defense

out of all the potentially applicable primary policies. Rite Aid argues that the Track One

Lawsuits allege potentially covered claims because the injuries occurred during the Policy

period, making Rite Aid’s Defense Costs “Supplementary Payments.” Rite Aid contends that

ACE’s denial of coverage under the Policy was without “good cause” because the Track One

Lawsuits allege a claim for potentially covered damages “because of” “bodily injury.” As such,

ACE’s defense coverage is implicated, and Rite Aid’s payment of defense costs qualifies as

“Supplementary Payments” under the Policy. Rite Aid claims that it satisfied the Policy’s per

occurrence retention for the Track One Lawsuits and all Opioid Lawsuits with these

Supplementary Payments. Rite Aid explains the retention has been satisfied because: (i) the

Track One Lawsuits and all Opioid Lawsuits that allege Rite Aid is liable as an opioid distributor

arise out of a single occurrence; and (ii) Rite Aid’s payment of defense costs for the MDL

Lawsuits has exceeded the Policy’s Retained Limit. Rite Aid argues that the Track One

Lawsuits are one occurrence because the allegations concern one proximate, uninterrupted and

continuing cause.

Accordingly, Rite Aid seeks declarations establishing that: (i) the Track One Lawsuits

(and all Opioid Lawsuits alleging similar claims) are “potentially covered” by the Policy as

required for a duty to defend; (ii) such suits are caused by one “occurrence”—the allegedly

tortious distribution of opioids; (iii) Rite Aid’s defense cost payments for such suits has satisfied

the “per occurrence” Retained Limit; and thus (iv) ACE has a present obligation to pay or

19
reimburse defense costs (“Supplementary Payments”) for the Track One Lawsuits and all Opioid

Lawsuits alleging similar claims, which lasts “until such time [if ever] when it is determined that

[each] claim [in the suits] is confined to a recovery that the policy does not cover,” or until ACE

pays the Policy’s limits in judgments or settlements.

ii. ACE’s Contentions

ACE93 argues that it has no duty to defend because of issues of material fact with respect

to whether Rite Aid properly exhausted retention. ACE claims these issues of material fact

include the number of occurrences, the reliability of Chima’s affidavit, and the proper exhaustion

of the retention. ACE further asserts that is has no duty to defend because prior to January 1,

2015, any alleged personal injury had already manifested, Rite Aid had knowledge of personal

injury, and the opioid epidemic was a known loss or loss-in-progress. ACE contends that Rite

Aid lacks the right to pick and choose a policy to provide coverage. ACE argues that this Court

cannot rule on Rite Aid Motion with respect to other purportedly “similar” Opioid Lawsuits

without identifying each one and explaining how these other Opioid Lawsuits are similar to the

allegations and claims in the Counties’ actions.

iii. Great American Defendants’ Contentions

In their response filed before the Amendments by Interlineation were stricken, the Great

American Defendants argue that the Track One Lawsuits’ pleadings as amended by interlineation

in November 2019 do not arise out of one occurrence nor seek “damages because of personal

injury.” The Great American Defendants also argue that no “duty to indemnify” future

settlements or judgments in the Opioid Lawsuits is at issue in the two pending motions.

iv. Certain Excess Insurer Defendants’ Contentions

93
ACE issued the 2015 Policy. Chubb, however, is handling Rite Aid’s claims relating to the MDL Opiate Lawsuits
on numerous insurance policies.

20
 In their response, Certain Excess Insurer Defendants request that any rulings on Rite

Aid’s Motion be narrowly and explicitly tailored to address only those matters at issue in that

Motion. They contend that the Court need not make any determinations on issues that (i) relate to

whether or not Rite Aid is entitled to a defense from any other excess insurer, or indemnity for

any future settlement or judgment, in connection with any other MDL Opioid Lawsuit pending

against Rite Aid or (ii) could implicate policies other than the single ACE policy at issue, such as

the number of Occurrences, whether the future abatement costs sought by plaintiffs in connection

with their nuisance claims are covered, or when the harm at issue in plaintiffs narrowed claims

was first known to Rite Aid. Further, Rite Aid’s Motion for partial summary judgment should be

denied, according to Certain Excess Insurer Defendants, because there are issues of fact that can

only be resolved after discovery.

B. CHUBB’S MOTION

i. Chubb’s Contentions

Chubb’s Motion was filed when the operative complaint was the Third Amended

Complaint as amended by the Amendments by Interlineation. For purposes of Chubb’s Motion,

all of the Chubb Policies at issue contain identical or materially similar terms.

Chubb’s Motion seeks a declaration that Chubb has no obligation to provide coverage for

the Track One Lawsuits on the grounds that those lawsuits do not seek “damages” “because of”

or “for bodily injury” or “property damage.” Chubb asserts that summary judgment is proper

because the issue is one that involves a pure question of law, because there is no dispute that

Cuyahoga and Summit are not seeking damages because of or for bodily injury, nor is there a

dispute about the pertinent terms of the Chubb Policies. Chubb additionally argues that

21
Pennsylvania law governs and fully supports Chubb’s position that there is no coverage for the

Summit and Cuyahoga lawsuits.

ii. Rite Aid’s Contentions

Rite Aid contends that the Chubb Policies unambiguously cover liability claimed by

governmental entities resulting from bodily injury to other persons. Rite Aid claims that

Pennsylvania and Delaware law supports finding that the Track One Lawsuits seek “damages

because of” bodily injury.

IV. STANDARD OF REVIEW

Summary judgment is appropriate where the record demonstrates that “there is no

genuine issue as to any material fact and that the moving party is entitled to a judgment as a

matter of law.”94 On a motion for summary judgment, a movant must establish that the

“undisputed facts support [its] claims or defenses,” after which the burden “shifts to the non-

moving party to demonstrate that there are material issues of fact to be resolved” at trial.95

Where no such material facts exist, the moving party is entitled to judgment as a matter of law.96

V. DISCUSSION

The principles governing the interpretation of an insurance contract are well-settled. In

attempting to resolve a dispute over the proper interpretation of an insurance policy, “a court

should first seek to determine the parties’ intent from the language of the insurance contract

itself.”97 In reviewing the terms of an insurance policy, the Court considers “the reasonable

94
Super. Ct. Civ. R. 56(c); Burkhart v. Davies, 602 A.2d 56, 58–59 (Del. 1991).
95
Petroleum v. Magellan Terminals Holdings, L.P., 2015 WL 3885947, at *3 (Del. Super. June 23, 2015).
96
Id.
97
Alstrin v. St. Paul Mercury Ins. Co., 179 F. Supp. 2d 376, 388 (D. Del. 2002); see also Emmons v. Hartford
Underwriters Ins. Co., 697 A.2d 742, 745 (Del. 1997) (“The scope of an insurance policy's coverage . . . is
prescribed by the language of the policy.”) (citing Rhone–Poulenc Basic Chems. Co. v. American Motorists Ins. Co.,
616 A.2d 1192, 1195–96 (Del. 1992)); Playtex FP, Inc. v. Columbia Cas. Co., 622 A.2d 1074, 1076–77 (Del. Super.
1992) (citing E.I. du Pont de Nemours v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985)); Kaiser Alum. Corp. v.
Matheson, 681 A.2d 392, 395 (Del. 1996).

22
expectations of the insured at the time of entering into the contract to see if the policy terms are

ambiguous or conflicting, contain a hidden trap or pitfall, or if the fine print takes away that

which has been provided by the large print.”98 Ambiguity exists when the disputed term “is

fairly or reasonably susceptible to more than one meaning.”99 Absent any ambiguity, contract

terms should be accorded their plain, ordinary meaning.100

If an insurance policy contains an ambiguous term, then the policy is to be construed in

favor of the insured to further the contract’s purpose and against the insurer, as the insurer drafts

the policy and controls coverage.101 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.”102 As long as the complaint “‘might or might not’ fall within

. . . coverage, the [insurer] is obliged to defend.”103 Although the Court looks to the allegations

of the underlying Counterclaim, the Court is not “limited to the plaintiff’s unilateral

98
See E.I. du Pont de Nemours & Co. v. Admiral Ins. Co., 1996 WL 111205, at *2 (Del. Super. Jan. 30, 1996); see
also Steigler v. Ins. Co. of N. Am., 384 A.2d 398, 401 (Del. 1978) (“[A]n insurance contract should be read to accord
with the reasonable expectations of the purchaser so far as the language will permit.”) (quoting State Farm Mutual
Auto. Ins. Co. v. Johnson, 320 A.2d 345 (Del. 1974)).
99
Id.
100
Alta Berkeley VIC. V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012); see also Goggin v. Nat'l Union Fire Ins.
Co. of Pittsburgh, 2018 WL 6266195, at *4 (Del. Super. Nov. 30, 2018); IDT Corp. v. U.S. Specialty Ins. Co., 2019
WL 413692, at *7 (Del. Super. Jan. 31, 2019).
101
See Alstrin, 179 F. Supp. 2d at 390 (“Generally speaking, however, Delaware . . . courts continue to strictly
construe ambiguities within insurance contracts against the insurer and in favor of the insured in situations where the
insurer drafted the language that is being interpreted regardless of whether the insured is a large sophisticated
company.”); Rhone–Poulenc Basic Chems. Co., 1992 WL 22690, at *8 (“Application of the [contra proferentem]
doctrine turns not on the size or sophistication of the insured, but rather on the fact that the policy language at issue
is drafted by the insurer and is not negotiated.”); Pennsylvania Nat. Mut. Cas. Ins. Co. v. St. John, 630 Pa. 1, 23, 106
A.3d 1, 14 (2014).
102
Gedeon v. State Farm Mut. Auto. Ins. Co., 188 A.2d 320, 321–22 (Pa. 1963).
103
Jerry’s Sport Center, 2 A.3d at 541 (citation omitted); see also Stidham v. Millvale Sportsmen’s Club, 618 A.2d
945, 953–54 (Pa. Super. Ct. 1993) (“If coverage depends upon the existence or nonexistence of undetermined facts
outside the complaint, until the claim is narrowed to one patently outside the policy coverage, the insurer has a duty
to defend….”) (citations omitted); DecisionOne Corporation v. ITT Hartford Ins. Group, 942 F. Supp. 1038, 1042
& 1044 (E.D. Pa. 1996) (“If a single claim in a multi-claim lawsuit has potential for coverage, the insurer must
defend all claims until it is obvious that no possibility of recovery exists as to claims within the policy provisions.”).

23
characterization of the nature of [its] claims.”104 The Court considers “all reasonable inferences

that may be drawn from the alleged facts.”105 The Court then determines “whether the

allegations of the complaint, when read as a whole, assert ‘a risk within the coverage of the

policy.’”106

Under the Policy, Chubb has a “duty to defend” suits “seeking” damages to which the

Policy applies by paying “expenses” “incur[red]” in the defense of such suits.107 Chubb’s duty to

defend and its other coverage obligations are subject to Rite Aid first paying $3,000,000 in

“Supplementary Payments” caused by one occurrence.108 Both Rite Aid’s and Chubb’s Motions

ask the Court to resolve whether Rite Aid’s payment of over $3,000,000 in defense costs for the

MDL Lawsuits since May 2018 constitute “Supplementary Payments” that satisfied the Policy’s

Retained Limit, triggering ACE’s duty to defend and pay “Supplementary Payments.”

To arrive at its decision, the Court must determine whether the complaints in the Track

One Lawsuits allege claims that (i) seek damages potentially within the scope of the Policy’s

coverage, and (ii) arise out of a single occurrence.

A. PENNSYLVANIA OR DELAWARE LAW GOVERNS THE POLICIES.

In contract interpretation disputes, absent a choice of law provision, Delaware courts

apply the law of the state that “has the most significant interest in applying its law to the

104
Verizon Commc'ns Inc. v. Illinois Nat'l Ins. Co., 2017 WL 1149118, at *6 (Del. Super. Ct. Mar. 2, 2017), rev'd
and remanded sub nom. In re Verizon Ins. Coverage Appeals, 222 A.3d 566 (Del. 2019) (finding that the same law
applies in Delaware and New York regarding the duty to defend and to advance defense expenses); IDT Corp, 2019
WL 413692, at *10.
105
See Blue Hen Mech., Inc. v. Atl. States Ins. Co., 2011 WL 1598575, at *2 (Del. Super. Apr. 21, 2011) (“The
Court may review the complaint as a whole, considering all reasonable inferences that may be drawn from the
alleged facts.”), aff'd, 29 A.3d 245 (Del. 2011).
106
Verizon Commc'ns, 2017 WL 1149118, at *7 (citing Cont'l Cas. Co. v. Alexis I. DuPont Sch. Dist., 317 A.2d 101,
103 (Del. 1974).
107
Chima Aff., Ex. A at RA0002519, RA0002525.
108
Chima Aff., Ex. A at RA0002572; see also Chima Aff., Ex. B at RA0002791 (ACE P&C 2015 umbrella policy
stating “Defense costs are included in the limit” of underlying Self-Insured Retention).

24
interpretation of the insurance scheme and its terms as a whole in a consistent and durable

manner that the parties can rely on.”109 Delaware and Pennsylvania each have significant

interests in this contract interpretation dispute. Delaware is Rite Aid Corporation’s state of

incorporation and this forum’s location, while Pennsylvania is the place of the contracting, the

place of contract performance, Rite Aid’s and ACE’s principal place of business, and ACE’s

state of incorporation.110

Although both states have significant interests, the Court does not need (at this stage of

the litigation) make a determination as to which state’s law applies to the Policy. The Court

notes that Pennsylvania and Delaware law do not conflict or are materially different with respect

to the Motions’ relevant issues.111 As such, the Court may consider both states’ shared legal

principles to resolve the Motions.

B. THE PLAINTIFFS IN THE TRACK ONE LAWSUITS SEEK DAMAGES “BECAUSE OF BODILY
INJURY.”

The Policy covers “sums” that Rite Aid “becomes legally obligated to pay as damages

because of ‘personal injury’….”112 “Personal injury” includes “bodily injury,” which in turn

means “means bodily injury, sickness or disease sustained by a person, including death resulting

109
See Certain Underwriters at Lloyd’s London v. Chemtura Corp., 160 A.3d 457, 460 (Del. 2017) (applying
Restatement (Second) of Conflict of Laws Section 188 factors to determine the state with most significant interest in
insurance contract dispute). The Section 188 factors are: (a) the place of contracting, (b) the place of negotiation of
the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicile,
residence, nationality, place of incorporation and place of business of the parties. See id. at 465.
110
See Chima Aff., Ex. A at RA0002512 (“ACE American Insurance Company[,] 436 Walnut Street Philadelphia,
PA 19106-3703 . . . NAMED INSURED[,] Rite Aid Corporation 30 Hunter Lane Camp Hill PA 17011); id. at
RA0002518 (“By signing and delivering the policy to you, we state that it is a valid contract . . . ACE AMERICAN
INSURANCE COMPANY. . . 436 Walnut Street, P.O. Box 1000, Philadelphia, Pennsylvania 19106-3703); Ex. E
(July 23, 2018 letter from Chubb LTE Claims, Scranton, Pennsylvania); Ex. G (October 9, 2018 letter from Rite Aid
Corporation, Camp Hill, Pennsylvania); Ex. V ¶¶ 5–6, 9–10, 12, 50, 52–53.
111
See Valley Forge Ins. Co. v. Nat’l Union Fire Ins. Co., 2012 WL 1432524, at *6–9 (Del. Super. Mar. 16, 2012)
(applying Delaware law to determine number of occurrences because Delaware applies “substantially the same
‘cause’ test” as Pennsylvania and Massachusetts); Smith, 201 A.3d at 560–61 (reciting Delaware’s “potential” for
coverage standard for duty to defend); Jerry’s Sport Ctr., 2 A.3d at 541–543 (same under Pennsylvania law).
112
Chima Aff., Ex. A at RA0002519.

25
from any of these at any time.”113 The parties do not dispute that physical harm from opioid

addiction constitutes “bodily injury” under the Policy. The dispute centers on whether plaintiffs

in the Track One Lawsuits were the ones that suffered the injury. Chubb argues that because

plaintiffs in the underlying Track One Lawsuits are not the individuals who suffered from opioid

addiction, plaintiffs are not seeking damages “because of bodily injury,” but rather are “instead

are “seek[ing] to recover solely economic losses.”114

As alleged, Summit and Cuyahoga claim these damages as their own “unique harms” and

disavow asserting claims “derivative of others.”115 Summit and Cuyahoga “seek all legal and

equitable relief as allowed by law” for their significant health, emergency, and other expenses

“as a direct and proximate result” of such persons’ opioid-related injuries or deaths.116 Although

Summit and Cuyahoga in the Track One Lawsuits distinguish their own “economic damages”

from harms and damages of injured Ohioans, they do not disavow that the harms and injuries

caused the economic damages.117

Indeed, Summit and Cuyahoga only make the distinction that their claims purportedly are

not “product liability claim[s]” on behalf of citizens that sustained opioid-related injuries or

death. As represented by the parties, this is likely due to the Ohio Product Liability Act

(“OPLA”) which abrogates “product liability claims.”118 In the Track One Lawsuits, the MDL

District Court Judge ruled that the plaintiffs’ public nuisance claims are not “product liability”

claims, relying on a distinction between (i) claims seeking compensatory damages for “harm,”

113
Id. at RA0002532, RA0002535.
114
Chima Aff., Ex. H at 2–3.
115
Konkel Decl., Ex. D ¶¶ 138–139, 144; Ex. E ¶¶ 153–154, 159.
116
Konkel Decl., Ex. D ¶¶ 113, 131, 145; Ex. E ¶¶ 127, 146, 160.
117
See In re: Nat’l Prescription Opiate Litig., 2018 WL 6628898, at *12 (N.D. Ohio Dec. 19, 2018) (“MDL
Order”).
118
Id.; Konkel Decl., Ex. D ¶¶ 138–139, 144; Ex. E. ¶¶ 153–154, 159.

26
which OPLA abrogates, and (ii) claims seeking solely “economic loss,” which OPLA does not

abrogate.119

OPLA provides that “harm” includes “death [and] physical injury to person,” and

“[e]conomic loss is not ‘harm.’”120 OPLA, however, does not abrogate all claims “as a result of”

such “death” or “physical injury.” By definition, such “economic loss” encompasses:

All expenditures for medical care or treatment, rehabilitation services, or other care,
treatment, services, products, or accommodations incurred as a result of an injury,
death, or loss to person that is a subject of a tort action . . . [and] [a]ny other
expenditures incurred as a result of an injury, death, or loss to person or property
that is a subject of a tort action . . . .121

Although the MDL District Court Judge ruled that the Track One Lawsuits plaintiffs’ public

nuisance claims do not seek damages for what OPLA defines as “harm,” the MDL District Court

Judge did hold that the defendants remained at least liable for “economic loss” which, by

definition, includes “direct, incidental, or consequential pecuniary loss” apart from the initial

“harm” itself.122 OPLA thus only abrogates claims seeking compensatory damages directly for

one’s “death” or “physical injury.”

The parties have identified a number of insurance coverage cases arising out of similar

issues presented in the Motions. The Court first addresses in Medmarc Casualty Insurance Co.

v. Avent America Inc.123 In Medmarc, the Seventh Circuit considered the plaintiff insurance

company’s duty to defend under Illinois law in relation to a suit against the defendant, a

manufacturer of baby bottles and other accessories that had been sued regarding possible toxic

contamination of those products.124 The insurance policy at issue in Medmarc provided that the

119
MDL Order at *14.
120
Ohio Rev. Code Ann. § 2307.71(A)(7).
121
Ohio Rev. Code Ann. § 2307.011(C); see In re: Nat’l Prescription Opiate Litig., 2019 WL 4194272, at *3 n.5
(N.D. Ohio Sept. 4, 2019) (quoting same).
122
Ohio Rev. Code Ann. § 2307.71(A)(2).
123
612 F.3d 607 (7th Cir. 2010).
124
Id.

27
insurer would cover damages “because of bodily injury.”125 There was no claim of bodily injury

as a result of the insured’s conduct in the underlying lawsuit.126 Rather, the manufacturer

contended that allegations in the underlying lawsuits that plaintiffs would not use the products

out of fear of bodily injury was sufficient to allege a claim for damages “because of bodily

injury,” pursuant to the insurance policies.127 As such, the court found that the plaintiffs

sustained purely economic damages unrelated to bodily injury.128

This Court recognizes a critical distinction between the plaintiffs of the underlying

lawsuit in Medmarc and the governmental entities in the Track One Lawsuits. The Medmarc

plaintiffs alleged they bought “dangerous” but “unusable products” that never actually injured

their children.129 In the Track One Lawsuits, however, plaintiffs allege their citizens used

opioids, their citizens were extensively injured by such usage and, therefore, plaintiffs suffered

their own damages for handling emergency responses to overdoses, providing addiction

treatment, holding opioid related investigations, arrests and alike.130

The application of Medmarc was further expanded in Cincinnati Ins. Co. v. Richie

Enterprises LLC.131 In Richie, the district court considered whether an opioid distributor was

entitled to coverage under a policy that covered damages “because of bodily injury.”132 The

insured in Richie argued that West Virginia, the governmental plaintiff, “should be deemed an

organization seeking damages ‘because of bodily injury’ because of the opioid epidemic.”133

125
Id. at 608.
126
Id.
127
Id.
128
Id.
129
Id.
130
Summit TAC ¶¶ 2–24; Cuyahoga TAC ¶¶ 2–23; Cuyahoga SAC ¶¶ 2–23; Ex. P ¶ 2–23.
131
2014 WL 3513211, *3–5 (W.D. Ky. 2014).
132
Id. at *5–6.
133
Id. at *6.

28
The Richie court disagreed and held that West Virginia was seeking damages solely for

economic loss.134

The Richie court explained there was an important distinction between an organization

seeking damages “because of” a citizen’s bodily injury versus damages due to a defendant’s

“alleged distribution of drugs in excess of legitimate medical need.”135 The Richie court

reasoned that West Virginia did not need to prove “bodily injury” to establish that the

distributors violated the statutes, caused a public nuisance, or were negligent in their distribution

of controlled substances. The Richie court held that West Virginia “is not seeking damages

‘because of’ the citizens’ bodily injury; rather, it is seeking damages because it has been required

to incur costs due to drug distribution companies’ alleged distribution of drugs in excess of

legitimate medical need.”136 Importantly, West Virginia had dropped a medical monitoring

claim when it amended its complaint.137 The Richie court found that, in the absence of the

medical monitoring claim, there was no duty to defend because the insured was not potentially

responsible for a covered claim.138

Travelers Property Casualty Co. v. Anda also analyzes the insurance policy of a different

pharmaceutical drug company sued in the same underlying complaint in Richie.139 Relying upon

the Richie court’s analysis in part, the Anda court found no coverage for the defense costs

incurred in the opioid lawsuits.140 The Anda court explained that the underlying plaintiffs did not

“assert claims on behalf of individual citizens for the physical harm sustained personally by

those citizens” and that “[a]ny reference to the drug abuse and physical harm to West Virginia

134
Id. at *5.
135
Id. at *6.
136
Id.
137
Id. at *2, *5.
138
Id. at *5–6.
139
90 F. Supp.3d 1308, 1314–1315 (S.D. Fla. 2015), aff’d, 658 Fed. Appx. 955 (11th Cir. 2016).
140
Id.

29
citizens merely provides context explaining the economic loss to the state.”141 Further, on

appeal, the Eleventh Circuit “decline[d] to reach” the “damages because of bodily injury” issue

and held that “the better conclusion” is that a “Products Exclusion” barred coverage.142

Unlike in Richie and Anda, Delaware and Pennsylvania courts recognize 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.143 These courts generally

acknowledge that the duty to defend arises whenever the underlying complaint alleges facts that

fall within the scope of coverage and construe this duty broadly in favor of the policyholder.144

It is undisputed that the Track One Lawsuits allege in fact that there was physical harm from

opioid addiction and that such harm constitutes bodily injury under the Policy.145

Although the Eleventh Circuit in Anda did not directly address the scope of the phrase

“damages because of bodily injury,” several courts since have interpreted the phrase broadly as it

relates to insurance policies and have declined to apply the reasoning in Richie. For instance, the

Seventh Circuit opted for a broader interpretation of the phrase in Cincinnati Ins. Co. v. H.D.

Smith, L.L.C.146 In H.D. Smith, the plaintiff sought coverage for defense costs incurred in the

underlying action brought against it by West Virginia for the cost of care for its drug-addicted

citizens.147 The policy defined “damages because of bodily injury” as including “damages

claimed by any person or organization for care, loss of services or death resulting at any time

141
Id.
142
See 658 Fed. App’x 955, 958 (11th Cir. 2016).
143
Verizon Commc'ns, 2017 WL 1149118, at *6; IDT, 2019 WL 413692, at *10; D'Auria v. Zurich Ins. Co., 352 Pa.
Super. 231, 234, 507 A.2d 857, 859 (1986).
144
Verizon Commc'ns, 2017 WL 1149118, at *6; AR Capital, LLC v. Xl Specialty Ins. Co., 2018 WL 6601184, at *8
(Del. Super. Dec. 12, 2018) ; Prudential Prop. & Cas. Ins. Co. v. Sartno, 217, 903 A.2d 1170, 1177 (2006); Kurach
v. Truck Ins. Exch., 2020 WL 4760092, at *8 (Pa. Aug. 18, 2020); Gen. Acc. Ins. Co. of Am. v. Allen, 692 A.2d
1089, 1095 (1997).
145
Summit TAC ¶¶ 2–24; Cuyahoga TAC ¶¶ 2–23; Cuyahoga SAC ¶¶ 2–23; Ex. P ¶ 2–23.
146
829 F.3d 771, 773 (7th Cir. 2016).
147
Id.

30
from the bodily injury.”148 This definition is substantially the same as the definition provided in

Chubb’s Policy.149

Chubb’s interpretation of the Policy is similar to the insurer’s interpretation of its

insurance policy in H.D. Smith. In that underlying complaint, West Virginia alleged that it

“incurred ‘excessive costs related to diagnosis, treatment and cure of addiction,’ and has

‘provide[d] necessary medical care, facilities, and services for treatment of citizens’ who cannot

afford their own care.”150 The insurer advanced an argument that West Virginia was seeking its

own damages, not damages on behalf of its citizens, in its suit against a pharmaceutical company

for money spent addressing the opioid epidemic.151 The H.D. Smith court responded “[b]ut so

what?” to the insurer’s argument.152 Based on the same policy language as in the 2015 Policy,

the insurer conceded that its policy would cover a mother’s cost of “care” for her son’s opioid-

related injuries, though those are “her own” damages. As the H.D. Smith court observed, under

the policy language, “the result is no different merely because the plaintiff is a state, instead of a

mother.”153

The H.D. Smith court also noted that West Virginia sought “reimbursement for such

‘damages and losses sustained as a proximate result’ of [the insured’s] negligence.”154 In other

words, under the plain meaning of the policy, coverage depends on the causal connection

between those damages and “bodily injury” or “property damage.”155 Accordingly, the H.D.

Smith court held that “because of bodily injury” included claims brought by West Virginia to

148
Id.
149
See Chima Aff., Ex. A.
150
H.D. Smith, 829 F.3d at 775.
151
Id. at 774.
152
Id.
153
Id.
154
Id. at 775.
155
See id.

31
recover damages sustained due to the opioid epidemic, and so that insurer had a duty to defend

against the underlying suit.156 Although the H.D. Smith court applied Illinois law, this reasoning

comports with the principles of Delaware and Pennsylvania law.

The Ohio First District Court of Appeals’ recent decision in Acuity v. Masters

Pharmaceutical Inc. provides additional guidance supporting this Court’s application of H.D.

Smith.157 Initially, the trial court determined as a matter of law that the counties did not seek

“damages because of bodily injury” from the pharmaceutical wholesale distributor.158 Rather,

the trial court found that the governmental entities lacked standing and could not “usurp citizens’

right to recover their “damages because of bodily injury.”159 On appeal, the Acuity court

reversed, declining to follow the reasoning in Richie due to its reliance on Medmarc and found

the reasoning in H.D. Smith persuasive.160 The Acuity court explained “that there is arguably a

causal connection between [the insured pharmaceutical wholesale distributor’s] alleged conduct

and the bodily injury suffered by individuals who became addicted to opioids, overdosed, or

died, and the damages suffered by the governmental entities (money spent on services like

emergency, medical care, and substance-abuse treatment).”161 Although the governmental

entities were seeking their own economic losses, the Acuity court found that some of those losses

were arguably because of bodily injury.162

The Court agrees with the reasoning set out in Acuity and H.D. Smith. The decisions in

Richie and Medmarc either view the alleged facts too narrowly or do not involve claims similar

156
Id.
157
2020 WL 3446652 (Ohio Ct. App. June 24, 2020).
158
Acuity v. Masters Pharm., Inc., No. A1701985 (Ohio C.P. 2019), attached as Keopff Decl., Ex. R (hereinafter,
Acuity, Court of Common Pleas Decision), at 3–6.
159
Id. at 5.
160
Acuity, 2020 WL 3446652, ¶ 24.
161
Id. ¶ 28.
162
Id. ¶ 29.

32
to those asserted in the Track One Lawsuits. The Court has analyzed the allegations in the Track

One Lawsuits and finds that some of the economic losses sought by the governmental entities are

arguably because of bodily injury. Construing this duty to defend “broadly in favor of the

policyholder,” the Court finds that the Track One Lawsuits and all Opioid Lawsuits alleging

similar claims are potentially covered under the Policy, triggering ACE’s duty to defend.

C. THERE ARE NO DISPUTED ISSUES OF MATERIAL FACT BECAUSE THE TRACK ONE
LAWSUITS AND SIMILAR OPIOID LAWSUITS ALLEGE ONE OCCURRENCE.

Rite Aid argues that it properly satisfied the per occurrence retention. Rite Aid asserts

that the Track One Lawsuits and all “similar” Opioid Lawsuits arise from one occurrence, which

is described as only “the tortious distribution of opioids.”163 Chubb disagrees and contends that

the Track One Lawsuits plead that there were two separate occurrences created when the

Amendments by Interlineation included allegations regarding the disbursement of opioids: an

occurrence for distribution and an occurrence for dispensing.

As set forth above, the Sixth Circuit struck the Amendments by Interlineation. The Court

finds that this moots the multiple occurrence argument and there is no dispute that the claims in

the Track One Lawsuits arise from one occurrence. Moreover, no genuine dispute exists on

whether Rite Aid has paid more than $3,000,000 in defense costs in the Track One Lawsuits.

The Policy has a $3,000,000 “Retained Limit” that is “the most an insured will pay for …

[d]amages and Supplementary Payments under Coverage A because of all ‘personal injury’ …

arising out of any one occurrence.” 164 Thus, the retention is satisfied.

The remaining dispute is whether the Track One Lawsuits and all “similar” lawsuits

alleging “tortious distribution and/or dispensing of opioids” arise from a single occurrence. Rite

163
Chima Aff. ¶ 31.
164
Chima Aff., Ex. A. at RA0002572.

33
Aid argues that ACE must defend each Opioid Lawsuit alleging similar and/or consistent claims

to the Track One Lawsuits. For purposes of similar litigation where dispensing claims are

alleged, is still relevant to determine if dispensing and distribution claims would be considered

the same occurrence. Indeed, the MDL District Court Judge noted that “dispensing-related

claims are at issue in many of the nearly 2,500 cases in the MDL.”165

Rite Aid explains that distribution and dispensing should be one occurrence where it

involves the “movement of opioid products from (for example) a warehouse to a specific

pharmacy, while ‘dispensing’ refers to the ‘final step’ in the distribution process, from the

pharmacy to an individual patient.” Chubb contends that there are separate causes present that

could result in economic loss. For example, Summit contended Rite Aid’s misconduct as a

distributor included: (i) Rite Aid’s participation in industry organizations that worked with

“Marketing Defendants” (the manufacturers) to devise methods of deceptive advertising; 166 (ii)

Rite Aid’s failure to control the supply chain;167 (iii) Rite Aid’s failure to “prevent diversion”;168

(iv) Rite Aid’s failure to “report suspicious” orders;169 and (v) Rite Aid’s failure to halt

shipments of opioids in quantities it “knew . . . could not be justified and were indicative of

serious problems of overuse of opioids.”170 Chubb contends that each of these activities could

result in a separate “cause” of the Counties’ economic losses.

Chubb also contends that the arguments by Rite Aid reveal that the dispensing and

distribution claims are separate causes. As argued by Rite Aid in the MDL Opioid Lawsuits,

165
Opioid MDL (Nov. 19, 2019) ECF No. 2940 pp. 2–3.
166
E.g., Summit TAC ¶¶ 534, 545.
167
Id. at ¶¶ 518, 580.
168
Id. at ¶¶ 101, 518.
169
Id. at ¶ 518.
170
See, e.g., Summit SAC ¶¶ 518, 534–35; Summit TAC ¶¶ 518, 534–35.

34
there are significant differences between the distribution and the dispensing of prescription

opioids:

 “Plaintiffs’ new [dispensing] claims target the conduct of completely
different corporate functions and employees . . . are based on entirely
different legal duties.”171

 “While Plaintiffs’ distribution claims focused on a handful of distribution
centers, their proposed dispensing claims implicate the work of hundreds of
pharmacists at dozens of locations filling innumerable prescriptions written
by doctors across the region for any number of patients.”172

 Rite Aid pointed out to the Sixth Circuit that “[p]rescriptions filled in
Honolulu are irrelevant in Houston. . . . Dispensing related claims are
inherently jurisdiction-specific, as they concern particular prescriptions in
particular states and can implicate state-specific statutes and legal
principles.” Opioid MDL (Jan. 17, 2020) ECF No. 3084-1 pp. 24-25. This
is exactly the point ACE is making with respect to the dispensing claims.
“Plaintiffs previously asserted claims against the Pharmacy Defendants
only for the conduct of their distribution centers in monitoring orders placed
by their own pharmacies.”173

 “Plaintiffs’ proposed new claims, in contrast, challenge the conduct of the
individual pharmacists employed by the Pharmacy Defendants in filling
individual prescriptions . . . on behalf of individual patients.”174

 “These are new and different claims in every possible respect – including
as a matter of the governing legal obligations and facts at issue. The
regulatory provisions applicable to the new claims are entirely different.”175

Chubb misconstrues the cause test. Under Pennsylvania law, in order for there to be one

occurrence, there must be “one proximate, uninterrupted and continuing cause which resulted in

all of the injuries and damage.”176 Furthermore, the Policy defines “Occurrence” to mean

“[w]ith respect to injury within subparagraph a. of the definition of ‘personal injury’ (that is,

171
ACE’s Opp. at 16 (citing Rite Aid Opposition to Motion to Amend at 2).
172
Id. at 16–17 (citing Rite Aid Opposition to Motion to Amend at 6).
173
Id. at 17 (citing Rite Aid Opposition to Motion to Amend at 5).
174
Id.
175
Id.
176
Sunoco, Inc. v. Illinois Nat. Ins. Co., 226 Fed. Appx. 104, 107 (3d Cir. 2007).

35
‘bodily injury’) or ‘property damage,’ an accident, including continuous or repeated exposure to

substantially the same general harmful conditions.”177 Under this cause test, there can be

multiple instances that constitute a single cause. Two District Court for the District of Nevada

cases––Insurance Company of the State of Pennsylvania v. National Fire & Marine Insurance

Co.178 and Century Surety Co. v. Casino West, Inc.179–– aptly demonstrate this important

distinction concerning independent causes in applying the cause test.

The National Fire court considered whether independent defects in the structural

components and electrical and plumbing systems of a condominium building constituted

multiple occurrences such that the primary insurance provider’s aggregate limit applied to the

damage.180 The National Fire court held that the various causes constituted multiple occurrences

under the insurance policy because the expert reports identified independent defects in the

structure, electrical system, and plumbing system, “all of which independently caused

damages.”181 The defects in question each contributed some degree of damage that was

identifiable and measurable.182 The defects in the roof led to water intrusion resulting in damage

to the substrates and building interiors, the defects in the electrical installations resulted in faulty

wiring and code violations, and the faulty plumbing led to the improper installation of toilets,

bathtubs, and showers.183 The court concluded that the alleged damage could not be attributed to

“one common cause.”184

177
Koepff Decl. Ex. J at RA0002519–2520.
178
2012 WL 4482674 (D. Nev. Sept. 26, 2012).
179
99 F. Supp. 3d 1262, 1266 (D. Nev. 2015).
180
National Fire, 2012 WL 4482674, at *3.
181
Id. at *4.
182
Id.
183
Id.
184
Id.

36
 Unlike the damages in National Fire that arose from independent causes, Century Surety

Co. presented one common cause of the victims’ deaths—carbon monoxide poisoning.185 The

fact that the fatal conditions in this case were the result of more than one contributing cause does

not undermine that conclusion. Unlike the structural, electrical, and plumbing issues discussed

in National Fire that each produced a separate harm, the various causes of the carbon monoxide

identified in Century Surety Co. did not result in damage independent and apart from one

another.186 On the contrary, the faulty heater, the missing ventilation, and the sealed vents

together produced the fatal conditions.187 Had even one of these elements been absent, there is

no evidence that lethal levels of carbon monoxide would have spilled into the victims’ room.188

Similarly, the over distribution and improper dispensing produced injuries to opioid

users, the costs of which ultimately fell upon the government. There is no evidence that the

opioids could have caused the personal injuries alleged in the complaint had there not been both

the improper distribution and dispensing of the opioids. It is not possible to identify independent

damages from each respective cause of distribution and dispensing. Thus, the distribution and

dispensing claims should be deemed to be one occurrence under the policy. This finding is

consistent with Pennsylvania law. The Pennsylvania Supreme Court in Donegal Mutual

Insurance Co. v. Baumhammers held that when an insured’s alleged liability is premised on

alleged negligent inaction or inadequate action that permits others’ intervening conduct resulting

in harm, liability arises from one occurrence.189 Specifically the court found:

Parents liability . . . is premised on their negligence in failing to confiscate
Baumhammers’ weapon and/or notify law enforcement or Baumhammers’ mental
health care providers of his unstable condition. Because coverage is predicated on

185
Century Sur. Co., 99 F. Supp. 3d at 1266.
186
Id.
187
Id.
188
Id.
189
938 A.2d 286, 295 (Pa. 2007).

37
 Parents’ inaction, and the resulting injuries to the several victims stem from that
one cause, we hold that Parents’ alleged single act of negligence constitutes one
accident and one occurrence.190

Because the injuries alleged resulted from the inadequate action in both the distribution and

dispensing stages, whereby if there had been proper controls in place in either stage the injury

could have been prevented, the alleged act should constitute one occurrence.

D. ACE HAS A DUTY TO DEFEND THE TRACK ONE LAWSUITS UNDER THE “MULTIPLE
TRIGGER” THEORY.

ACE argues in its Opposition that it does not have a duty to defend because any alleged

personal injury first manifested prior to 2015. ACE argues that under Pennsylvania law, the only

potentially applicable policy is the policy in effect when the injurious effects of an alleged

occurrence first manifest themselves to the Counties. The Court disagrees with this

characterization of Pennsylvania law. The Court reads Pennsylvania law to provide certain

exceptions in latent injury cases. In a case relied upon by ACE, Pennsylvania National Mutual

Casualty Ins. Co. v. St. John,191 the Supreme Court of Pennsylvania quoted the Pennsylvania

Superior Court in Consulting Engineers, Inc. v. Ins. Co. of North American192 to determine where

the “multiple trigger theory” should apply and where the “single trigger theory” should apply.

The Superior Court in Consulting Engineers stated, in relevant part:

The “multiple trigger” theory is applied in latent disease cases, like asbestosis or
mesothelioma, because such injuries may not manifest themselves until a
considerable time after the initial exposure causing injury occurs. The overriding
concern in latent disease cases is that application of the D'Auria “first
manifestation” rule would allow insurance companies to terminate coverage during
the long latency period (of asbestosis); effectively shifting the burden of future
claims away from the insurer to the insured (manufacturers of asbestos), even
though the exposure causing injury occurred during periods of insurance coverage.

190
Id. at 288–89.
191
106 A.3d 1, 15–23 (Pa. 2014).
192
710 A.2d 82, 87–88 (Pa. Super. 1998).

38
 Based upon this reasoning, the Superior Court declined to apply the multiple trigger
theory to determine coverage under various policies of CGL insurance for injuries
arising from the wrongful use of civil proceedings, as these injuries did not lie
dormant for extended periods prior to manifesting.193

The Supreme Court of Pennsylvania then distinguished the latent injury circumstances of

Consulting Engineers from the facts in St. John:

The justification advanced in [ ] Consulting Engineers for utilizing the multiple
trigger theory is absent with respect to Appellants' action seeking coverage under
the Penn National policies. Here, the damage sustained by Appellants’ dairy herd,
occasioned by LPH Plumbing's negligent installation of the plumbing system, did
not lay dormant for an extended period. The record indicates that damage to
Appellants’ dairy herd first manifested in April 2004, less than a year after the dairy
herd first began ingesting the contaminated drinking water. Moreover, unlike
asbestos bodily injury claims which insurers could predict with near certainty, there
was no indication of probable injury to Appellants’ dairy herd prior to manifestation
that would cause Penn National to anticipate a future claim. Accordingly, this case
does not present the problematic scenario where a risk averse insurer takes steps to
limit or terminate coverage, in anticipation of future claims that have not yet
materialized but can be predicted with near certainty.194

The personal injury of opioid abuse and opioid used disorder would plainly fall into the category

of a “latent injury” because, similar to asbestosis or mesothelioma, “such injuries may not

manifest themselves until a considerable time after the initial exposure causing injury occurs.”195

The record also does not indicate when the injury first manifested.

Even under ACE’s “first manifestation” trigger theory, the complaints do not establish

when any one or all persons’ alleged bodily injury caused by Rite Aid occurred. ACE must

defend a “suit” if even one claim seeks potentially covered damages. The Policy’s coverage

“applies” to “bodily injury” that is “sustained by a person” during the policy period that also is

“caused by” an “occurrence.”196 Because some of the alleged bodily injuries to “person[s]”

193
Id.
194
St. John, 106 A.3d at 23.
195
Consulting Engineers, 710 A.2d at 87–88.
196
See id. Chima Decl., Ex. A at RA0002519–RA0002532.

39
“caused” by Rite Aid potentially took place during 2015, ACE has a duty to defend under the

Policy.

E. ACE’S PRIOR KNOWLEDGE AND KNOWN LOSS/LOSS-IN-PROGRESS DEFENSES ALSO FAIL.

ACE raises two separate defenses related to Rite Aid’s knowledge. First, the 2015 Policy

includes a “prior knowledge” provision, which is not an exclusion, but rather a prerequisite to

establishing coverage.197 The provision states, in relevant part:

This insurance applies to “personal injury” and “property damage” only if . . .
[p]rior to the policy period, no insured . . . knew that the “personal injury” or
“property damage” had occurred, in whole or in part.198

ACE contends that it has no duty to defend under this “prior knowledge” provision.

Second, in addition to ACE’s “prior knowledge” defense, there is a separate and distinct

defense under Pennsylvania law providing that an insurer has no obligation to defend (or

indemnify) a known loss/loss-in-progress that exists prior to a policy’s inception date (the

“known loss doctrine”).199 ACE argues there was also “a known loss/loss-in-progress with

respect to opioids” before 2015 and therefore it owes no defense obligations.200 This “known

loss” ACE contends existed “was the opioid epidemic that started in the early 2000s . . . .”201

In the Acuity case relied on by ACE, the Ohio trial court had originally granted

summary judgment on the ground that the insurer had no duty to defend or indemnify

based on the “loss-in-progress” provision of the insurance policy.202 This provision

stated in relevant part:

197
Id. at RA0002519.
198
Id.
199
See, e.g., Rohm & Haas Co. v. Cont’l Cas. Co., 781 A.2d 1172, 1176 (Pa. 2001) (the known loss doctrine
precludes an insured from insuring against a loss that has already occurred or is ongoing); Appalachian Ins. Co. v.
Liberty Mut. Ins. Co., 676 F.2d 56, 63 (3d Cir. 1982) (a “contrary result . . . would contravene the rule that an
insured cannot insure against something which has already begun”).
200
ACE’s Opp. at 30.
201
Id.
202
Acuity, Court of Common Pleas Decision at 2, 4.

40
 (3) Prior to the policy period, no insured * * * knew that bodily injury or property
damage had occurred, in whole or in part. If insured * * * knew, prior to the policy
period, that the bodily injury or property damage occurred, then any continuation,
change or resumption of such bodily injury or property damage during or after the
policy period will be deemed to have been known prior to the policy period.203

Considering this provision and the underlying complaints, the Ohio trial court found that the

opioid epidemic existed years before the relevant policy period, the insured allegedly filled

suspicious orders prior to the policy period, and the insured allegedly knew that its actions

created or assisted in the creation of the alleged public nuisance.204 As stated above, this

decision was recently reversed.205 The Ohio First District Court of Appeals held, in relevant

part:

A loss-in-progress provision is included in an insurance contract because insurance
policies are only meant to cover fortuitous events, not losses that are certain to
occur. The awareness that there is a risk that an insured’s conduct might someday
result in damages is not equivalent to knowledge of the damages.

In this case, it is unclear at this stage in the proceedings whether some of the
governmental entities’ damages, such as increased costs for medical and addiction
treatment, were due to diversion of [the insured’s] products or were known to [the
insured] prior to the policy period. We agree that [the insured] may have been aware
there was a risk that if it filled suspicious orders, diversion of its products could
contribute to the opioid epidemic, thus causing damages to the governmental
entities. But, we hold that mere knowledge of this risk is not enough to bar coverage
under the loss-in-progress provision.206

This Court finds the Ohio First District Court of Appeals’ reasoning persuasive. Indeed, ACE

concedes that the “same pre-2015 allegations” made in the underlying complaints in Acuity are

alleged against Rite Aid in the Track One Lawsuits.207 The language in this “loss-in-progress”

provision is also substantively the same as the “prior knowledge” provision cited by ACE.

Accordingly, the Court finds the pre-2015 allegations made by the plaintiffs in the Track One

203
Acuity, 2020 WL 3446652, ¶ 32.
204
Acuity, Court of Common Pleas Decision at 9–10.
205
See generally Acuity, 2020 WL 3446652.
206
Id. ¶¶ 49–50 (citations omitted).
207
ACE’s Opp. at 31–32.

41
Lawsuits cited by ACE might show, at most, the mere knowledge of a risk on the part of Rite

Aid, which is not sufficient to bar coverage under this “prior knowledge” provision.208 Here,

Rite Aid also contends that the Policy “applies” to each separate person’s bodily injury occurring

during the policy period. Construing the Policy in favor of the policyholder, the Court finds that

this is a reasonable interpretation of the plain language of the Policy. Thus, even if it the

plaintiffs in the Track One Lawsuits or other Opioid Lawsuits eventually show Rite Aid knew it

injured certain persons before 2015, this does not necessarily demonstrate that it also knew it

injured different persons in 2015.

As for ACE’s known loss doctrine defense, relevant “losses” “for purposes of applying

the known loss doctrine . . . [are] not simply the [bodily injuries or] the property damage itself,

but the insured’s liability for the [bodily injuries or] the property damage.”209 The fact people

abused opioids before 2015 does not make it a “known loss.” For the known loss doctrine to

apply, there must be evidence showing the insured is charged with knowledge, before the

Policy’s inception date, which reasonably shows that it was, or should have been aware of “a

likely exposure to losses which would reach the level of coverage.”210 The governmental entities

in the Track One Lawsuits began advancing this recently developed, novel legal theory in 2017,

and only against Rite Aid in 2018.211 Accordingly, the complaints’ allegations in the Track One

Lawsuits do not constitute evidence of Rite Aid’s knowledge.

208
See id.; Cuyahoga TAC ¶¶ 14, 627, 628, 632, 715; Summit TAC ¶¶ 14, 627, 652, 653, 690.
209
State v. Hydrite Chemical Co., 695 N.W.2d 816, 828 (Wis. 2005) (describing “majority view” for applying the
known loss doctrine) (citing, inter alia, Rohm and Haas Co., 781 A.2d at 1177).
210
Rohm and Haas Co., 781 A.2d at 1177.
211
Rite Aid’s Reply Br. at 21–22.

42
 VI. CONCLUSION

For the foregoing reasons, Rite Aid’s Motion is GRANTED and Chubb’s Motion is

DENIED with respect to the 2015 Policy. Because the Court finds there is coverage under the

2015 Policy, Chubb’s Motion is also DENIED as moot with respect to the other 18 policies. In

regard to the Responses from the Great American Defendants and the Certain Excess Insurers

Defendants, this is not a ruling on their obligations under their respective policies, but the Court

is not limiting any of the implications of this decision.

Dated: September 22, 2020
Wilmington, Delaware

/s/ Eric M. Davis
Eric M. Davis, Judge

cc: File&ServeXpress

43