Much has changed since we last wrote about the opioid epidemic in the summer of 2018. Back then, many had come to recognize that the widespread abuse of these dangerous and addictive narcotics required action to curtail further harm—both to individuals as well as to entire communities. The legal case for establishing liability was, however, still developing.
For years during the 2000s, litigation was largely conducted on a case-by-case basis, with plaintiffs typically being harmed individuals or aggrieved families who had recently lost loved ones sometimes aggregated into class actions. Defendants were usually opioid manufacturers. While these cases against manufacturers did not end favorably for the plaintiffs, criminal and civil enforcement actions against allegedly negligent individual providers and prescribing doctors were increasing.
The litigation environment has evolved significantly since then. For one, plaintiffs are in most cases no longer harmed individuals. Beginning in the 2010s, governmental entities—including localities, states, tribes, and even the federal government—became the most common plaintiffs in opioid litigation, often alleging “population-level” harms to their communities, in part under a public nuisance theory. For another, lawsuits are now targeting not just opioid manufacturers, but also distributors, wholesalers, retailers with on-site pharmacies, pharmacy chains, and in some cases their consultants.
Under the public nuisance theory being advanced by governmental plaintiffs, lawsuits often seek to recover billions in damages from defendants for the past and future costs incurred by governments to address the crisis.
This litigation has already begun to bear fruit for some plaintiffs. Most recently, a coalition of state and local government attorneys announced a USD 26 billion settlement deal with opioid manufacturer Johnson & Johnson, which would contribute USD 5 billion over 9 years, and distributors AmerisourceBergen, Cardinal Health, and McKesson, which would collectively contribute USD 21 billion over 18 years (although the settlement is not yet final). If defendants continue to settle and if courts begin to find favorably for governmental plaintiffs, the total event loss from the opioid crisis could stretch into the hundreds of billions of dollars and potentially leave (re)insurers on the hook for damages they never anticipated.
Arium’s opioid crisis scenario has been enhanced to help (re)insurers quantify their potential exposures as opioid-related litigation continues to evolve. The scenario provides a range of potential losses and industry culpabilities to reflect the uncertainty around the future state of this emerging risk—with a severe loss estimate of more than USD 300 billion in ground-up losses. We will continue to monitor opioid litigation to provide you with the most up-to-date view of how losses might develop in the future.