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Insurance Coverage Law
But war itself has evolved, perhaps more than the policies and the war exclusions. As an example, September 11, 2001 presented a different type of “war” related insurance catastrophe: no declaration of war, no state actor, but a definite military type of objective. The result was very similar to traditional war: large scale destruction of lives and buildings through explosive and deadly force.
Cyber-attacks are similarly difficult to pinpoint but have many of the elements of “war.” Some attacks are conducted by rogue actors, independent of state sponsorship or support, targeting non-state entities. State-sponsored cyber-warfare, however, exists and has many parallels to traditional warfare. The attacks may be state sponsored and supported. Many states have known offensive (and defensive) cyber-warfare capabilities and programs. And the targets, like in traditional war, can be state related or private industry (e.g., infrastructure or other destabilizing industries)11. Thus, the further development of the law as “war- like” and “state sponsored” cyber-attack exclusions continue to evolve, as do the attacks themselves, is imminent. State-sponsored attacks raise the specter of the catastrophic attack intended to be excluded by the very first war exclusions – that is, an attack that can take down a company or information service system important enough to affect an entire system or area of the country. And the federal government will have to react to protect the system. Indeed, the Treasury Department, among others, is already considering how it will react to a systemic attack.
If you’re involved in cyberinsurance, expect this area to change rapidly for the next year or more.
Feeling the Pain – Opioid Coverage
As the focus of opioid litigation shifts from pharmaceutical companies to large drug store chains that allegedly facilitated and failed to check excess prescriptions for Oxycontin and other addictive pain drugs, there has been a recent surge in coverage litigation in Delaware in the wake of the Delaware Supreme Court‘s ruling in Ace American Insurance Company v. Rite Aid Corp.12, that suits by two Ohio counties seeking to recover opioid-related economic damages did not seek damages “for” or “because of” bodily injury. In the wake of Rite-Aid, the Chancery Court rejected arguments by CVS that its own declaratory judgment action should go forward alone in Rhode Island, ruling in In Re: CVS Opioid Insurance Litigation13, that there was no “race to the courthouse” in this instance and that the insurers’ filing in Delaware therefore should be given some deference as being first-filed.
The force of Rite-Aid was amplified in September when, a year after hearing oral argument, the Ohio Supreme Court overturned an intermediate appellate court’s declaration and ruled 5-2 in Acuity Insurance v. Masters Pharmaceuticals14, that law suits brought by governmental entities in Michigan, Nevada and West Virginia only seek damages for their own economic losses and not because of bodily injury. The court found that “[t]he repeated use of the phrase ‘the bodily injury’ suggests that the damages sought in the underlying suit need to be tied to a particular bodily injury sustained by a person or persons in order to invoke coverage under the policies.”
As we begin 2023, the impact of Rite-Aid is already apparent. In Westfield Nat. Ins. Co. v. Quest Pharmaceuticals15, a Kentucky case argued in the Sixth Circuit on October 22, 2022, and decided on
11 https://cilj.law.uconn.edu/wp-content/uploads/sites/2520/2022/02/Cyberwar-By-Almost-Any-Definition-Wolff-CILJ-Vol.- 28.1.pdf
12 270 A.3d 239 (Del. 2022).
13 No. 22C-02-045, 2022 Del.Super. LEXIS 335 (Del. Super. Aug. 12, 2022).
14 2022-Ohio-3092 (Ohio Sept. 7, 2022).
15 2023 U.S.App. LEXIS 851 (6th Cir. 2023).
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FDCC ANNUAL INSIGHTS 2023