Opioids and litigation funding rises boost mass tort cases; insurer losses likely: Praedicat

The year 2019 could be one of the biggest for mass tort litigation, with issues such as opioids fuelling the boom, and an abundance of finance to meet the legal costs.

Litigation on opioids, painkillers to which millions of people have become addicted, is based on the same principles as tobacco, said Robert Reville, chief executive of risk analytics firm Praedicat, in a briefing at the Monte Carlo Rendez-Vous.

Tobacco companies paid out some $300 billion but were not insured because of a “generation of exclusions,” he added.

But opioids are different from tobacco in a number of respects. Although most of the pharmaceutical companies do not buy insurance, the distributors, such as McKesson and Cardinal Health, and the retailers, such as Rite Aid and CVS, do. In tobacco litigation, state governments only sued tobacco manufacturers and insurers had excluded tobacco from coverage so there was no insurance loss.

However, Praedicat estimates that insurer losses will be under $1 billion for opioids. As well as the pharmaceutical manufacturers not being insured, the liability for the distributors and the retailers is based upon novel legal principles, said Reville, adding: “There is also coverage uncertainty because it is unclear that the liability will be found to meet the bodily injury language of the coverage.”

Another important factor in the number of cases is the availability of financing. Hedge funds are financing such cases and there are even publicly traded litigation finance companies, said Reville. This makes it easier for plaintiffs to pursue litigation.

Greater distrust of corporations is also fuelling the rise. Praedicat said there was evidence this was more true of “millennials”. While jurors tend to believe the arguments the plaintiffs are making.

Praedicat said the biggest “new” risks in 2019 were sugar, antibiotic over-prescription, and diesel.