The Great American Insurance Group is off the hook for a chunk of a grocery chain’s $1.4 billion settlement in opioid litigation, a North Carolina court found in a case that hinged on the wording of the settlement and the corporate structure of a parent firm and its subsidiaries.
The North Carolina Business Court, a division of Superior Court that handles complex business litigation, agreed with lawyers for Great American and decided that the insurance group’s policies covered only those damages owed by Harris Teeter Supermarkets, a Carolina and Virginia-centered chain bought by The Kroger Co. in 2014.
The 2024 global settlement in some 800 opioid lawsuits that had been brought by local and state governments named only Kroger, even though Harris Teeter had been named in a separate North Carolina lawsuit that was later dismissed because of the settlement, the court noted.
“Upon execution of the Global Settlement, which by its express terms does not bind Harris Teeter as a party or obligate Harris Teeter to pay any portion of the settlement amount, Harris Teeter no longer had any binding legal or contractual obligation to pay damages to the governmental plaintiffs,” the in granting Great American’s request for summary judgment, effectively dismissing the lawsuit brought by Harris Teeter.
True, the court opinion explained, Kroger had its own, internal accounting system that allocated $60.5 million of the settlement liability to Harris Teeter, based on the subsidiary’s calculated share of opioid sales at its pharmacies. That was what Harris Teeter was asking its insurance carriers to cover.
But that internal allocation was not the product of the court-approved global settlement.
“This allocation was not made pursuant to any requirement in the Global Settlement or any terms of a separate contractual agreement between Kroger and Harris Teeter,” Business Court Chief Judge Michael Robinson wrote.
Robinson based his decision on precedent set by a 1994 North Carolina Court of Appeals decision known as Lida Manufacturing vs. U.S. Fire Insurance Co., and subsequent cases. Those opinions had established that a named insured must show that it is legally obligated to pay damages before an insurer must defend and indemnify, per the policy wording.
In the Harris Teeter litigation, Great American’s policy wording is clear enough, the Business Court said.
The insurer will pay “on behalf of the ‘Insured’ those sums in excess of the ‘Retained Limit’ that the ‘Insured’ becomes legally obligated to pay by reason of liability imposed by law or assumed by the ‘Insured’ under an ‘insured contract’ because of ‘bodily injury,’ ‘property damage,’ ‘personal injury,’ or ‘advertising injury’ that takes place during the Policy Period and is caused by an ‘occurrence’ happening anywhere,” reads the policies, which were in place from 2005 to 2014.
“Thus, as in Lida, the Court determines that Harris Teeter is not ‘legally obligated to pay’ any damages pursuant to the terms of the Global Settlement, and any obligations Defendants may have had to indemnify Harris Teeter under the policies at issue have been extinguished,” Chief Judge Robinson concluded.
The North Carolina Business Court is not an appellate court. But most of its decisions can be appealed only to the state Supreme Court, which may not consider all petitions for review. That often means that Business Court rulings, such as the Great American decision in this case, stand.
The opinion can be seen here.
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Topics Lawsuits
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