Traveler's Prop. Cas. Co. of Am. v. Actavis, Inc.
16 Cal. App. 5th 1026
Cal. Ct. App. 5th2017Background
- Watson (pharmaceuticals group) was sued in two actions (California counties; City of Chicago) alleging a long-term, deliberate marketing scheme to promote opioids for chronic noncancer pain, causing an opioid epidemic, heroin resurgence, overdoses, addiction, and municipal health/public-safety costs.
- Watson tendered defense to its commercial general liability (CGL) insurers (Travelers; St. Paul). Insurers denied coverage and sought declaratory relief; parties tried duty-to-defend issues on stipulated facts.
- St. Paul policies cover "bodily injury" caused by an "event" defined as an "accident." Travelers policies cover "bodily injury" caused by an "occurrence" defined as an "accident." Both sets contain broad Products/Completed Operations exclusions that also reach statements or representations about products.
- The operative complaints allege intentional, deceptive marketing and misrepresentations (not defective products), and seek public-nuisance, consumer-protection and related remedies and recovery of municipal costs.
- Trial court held insurers had no duty to defend because (1) the alleged conduct was deliberate (not an "accident"), and (2) the claims fell within the Products Exclusions. The appellate court affirmed.
Issues
| Issue | Plaintiff's Argument (Travelers) | Defendant's Argument (Watson) | Held |
|---|---|---|---|
| Whether complaints allege an "accident"/"occurrence" triggering duty to defend | Allegations describe deliberate marketing and misrepresentations, so no accidental "event/occurrence"; no duty to defend | Even if conduct was intentional, injuries (epidemic, heroin use, costs) were unintended consequences or possibly negligent/fortuitous, so an "accident" potential exists | No. Under California law deliberate acts are not "accidents" unless an additional unexpected, independent event caused the harm; complaints allege direct, foreseeable harms from Watson’s conduct, so no potential for accidental coverage |
| Whether complaints create potential liability based on negligence (triggering coverage) | Allegations show intentional scheme; not reasonably read as alleging primarily negligent conduct | Public-nuisance theory could encompass negligent omissions or conduct, creating potential coverage | No. Facts pleaded point to intentional misconduct; any conceivable negligent theory is either foreclosed or, if present, falls within the Products Exclusions |
| Whether alleged injuries "arise out of" Watson's products or representations (Products Exclusions) | Products Exclusions broadly bar coverage for bodily injury arising out of insured’s products or representations about them | The injuries stem from conduct (marketing, misrepresentations) sufficiently independent from product design/distribution; exclusions should not apply | Held that exclusions apply. "Arising out of" is construed broadly; alleged harms logically and directly flow from sale/marketing/use of opioids and related representations, including alleged heroin resurgence |
| Whether Products Exclusions are ambiguous or limited to defective products | Exclusion language covers "any" goods/products and expressly includes statements about product safety/use; not limited to defective products and not ambiguous here | Exclusions should be read to exclude only defective-product claims or be ambiguous in favor of coverage; some precedent suggests narrower reading | Held exclusion unambiguous and not limited to defective products; excludes product-related injuries and injuries tied to representations about products |
Key Cases Cited
- Delgado v. Interinsurance Exchange of Automobile Club of Southern California, 47 Cal.4th 302 (Cal. 2009) (definition of "accident" in liability policies and focus on insured's conduct)
- Swift Distribution, Inc. v. Hartford Casualty Ins. Co., 59 Cal.4th 277 (Cal. 2014) (insurer's duty to defend is broader than duty to indemnify; potential for indemnity standard)
- Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (Cal. 1993) (duty-to-defend principles; insurer must negate all potential for coverage)
- Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1 (Cal. 1995) (burden on insurer to prove exclusions apply)
- Navigators Specialty Ins. Co. v. Moorefield Construction, Inc., 6 Cal.App.5th 1258 (Cal. Ct. App. 2016) (deliberate acts are not "accidents" absent an additional independent, unexpected event)
- Taurus Holdings, Inc. v. U.S. Fidelity & Guaranty Co., 913 So.2d 528 (Fla. 2005) (broad construction of "arising out of" in product exclusion; municipal claims against product manufacturers excluded)
- Acceptance Ins. Co. v. Syufy Enterprises, 69 Cal.App.4th 321 (Cal. Ct. App. 1999) ("arising out of" construed broadly to require only minimal causal connection)