By Isha Marathe

Jan 30 - (The Insurer) - McKinsey & Co has sued units of Chubb, AIG, Everest Group, CNA, Liberty Mutual, American Financial Group and Axa XL for a violation of their contractual obligation to defend and indemnify McKinsey in over 260 opioid-related lawsuits.

The suit was filed in the New York Supreme Court on 24 January. It came after Chubb and AIG units said they had no duty to defend or indemnify McKinsey in the opioid-related lawsuits because the charges do not meet the terms and conditions of their policies, as per suits filed in Delaware.

McKinsey, in its civil suit, has listed a cause of action for breach of contract against all insurers, declaratory relief against all insurers, and bad faith refusal to consent against certain insurers.

The management consulting firm is asking the court for relief in the form of damages at an amount over $500,000 from each insurer to be determined at trial, a judgment stating that the insurance policies do cover the opioid lawsuits and that the insurers have indeed consented to do so, along with attorneys fees and costs.

'Bodily inury' defense

McKinsey is suing five Chubb units, including Ace Property and Casualty Insurance Company, Federal Insurance Company, Indemnity Insurance Company of North America, and Vigilant Insurance Company.

It is suing AIG unit National Union, CNA's Continental Insurance Company, Everest Group's Everest National Insurance Company, Great American Financial Group's Great American Spirit Insurance Company, Liberty Mutual's Liberty Insurance Underwriters and the Ohio Casualty Insurance Company, and Axa XL insurance company.

The insurers wrote the first layer of general liability and/or excess liability policies to McKinsey at various times in the period between 2001 and 2007, according to the lawsuits filed by Chubb and AIG.

McKinsey was sued by state and local governments, Native American tribes, public school districts, and third-party payers, who held the firm liable for allegedly contributing to and profiting from the opioid epidemic through its consulting work for opioid manufacturers such as Purdue Pharma and other pharmaceutical companies.

So far, McKinsey has paid or agreed to pay close to $990mn to settle the cases and continues to incur fees from ongoing cases. These include a $78mn settlement with third-party payers, a $39.5mn settlement with Native American tribes disclosed in December 2023, a $207mn settlement with government subdivisions, and a $23mn settlement with public school districts disclosed in October 2023, according to Chubb's complaint.

However, the insurers claim that the costs and litigation McKinsey is liable for are not due to "bodily injury" – a condition of the insurers' policy – but rather recovery of economic loss, according to Chubb and AIG's lawsuits. They added that since dangers of opioids were common knowledge since Purdue had already plead guilty in 2007, McKinsey's involvement was not an unforeseeable accident or "occurrence."

McKinsey said in its suit that an endorsement to the National Union policies expressly preserves coverage for “resultant Bodily Injury or Property Damage arising out of professional services performed by or on behalf of the Insured.”

The company argued that its settlements and costs for the opioid lawsuits are indeed for "bodily injury" and not simply for economic losses, according to the complaint.

"The National Union Policies broadly define 'Bodily Injury' as 'bodily injury, sickness or disease sustained by any person, including death, mental anguish, mental injury, shock or humiliation resulting from any of these at any time,'" McKinsey said in the suit.

The company also said that the National Union policies "broadly define 'Property Damage' to include 'physical injury to tangible property, including all resulting loss of use of that property' and 'loss of use of tangible property that is not physically injured.'"

And while McKinsey denies all wrongdoing in the case of the opioid lawsuits, "[the] liability alleged is based on the widespread bodily injury/property damage that the hazard of opioid abuse purportedly caused and continues to cause," according to the complaint.

'Bad faith' denial to consent

McKinsey added that National Union Fire Insurance Company of Pittsburgh, Ace Property and Casualty Insurance Company, Federal Insurance Company, Indemnity Insurance Company of North America, Vigilant Insurance Company, The Continental Insurance Company, Everest National Insurance Company, Great American Spirit Insurance Company, and Axa XL's XL Insurance America acted in "bad faith" when McKinsey sought their consent to the opioid settlements but never received a response.

Two insurers, Liberty Insurance Underwriters and Ohio Casualty Insurance Company, expressly agreed that they would not raise lack of consent and/or policy provisions related to voluntary payments as a defense to coverage for the opioid settlements made to date, McKinsey said in its complaint.

"Put simply, the Defendant Insurers repudiated and disclaimed their coverage obligations," McKinsey said, "expressly and implicitly taking the position that they are not liable under the Policies in connection with the opioid lawsuits, long refusing to pay toward their coverage obligations, unreasonably delaying the processing of McKinsey’s insurance claims, and consistently stating objections to and purported defenses against coverage."

McKinsey, Chubb, Everest Group, CNA, Liberty Mutual, and American Financial Group did not respond to requests for comment from The Insurer by the time of publication.

AIG and Axa XL declined to comment to requests from The Insurer.