Judge rules insurer must pay RDC legal costs

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Buoyed by a federal judge’s ruling last week ordering an insurer to cover its legal bills in a court fight against New York State, Rochester Drug Co-operative Inc. still must prove its case against the liability carrier.

RDC sued Chicago-based Hiscox Insurance Co. seeking to force the balking insurance company to cover costs RDC is racking up as it defends itself against charges that it helped fuel the opioid epidemic. These charges were brought in a civil suit by the state and a number of New York counties including Monroe.

Among RDC’s first steps in its Jan. 10 suit against Hiscox was a Jan. 24 bid to have the court issue a preliminary injunction ordering Hiscox to pay RDC’s legal bills while the case is being heard. In an order handed down Feb. 25, U.S. District Judge Elizabeth Wolford granted RDC’s request with a condition: that RDC post a $500,000 bond to cover the possibility that she ultimately might rule in the insurance company’s favor.

Despite that condition, the judge’s ruling would seem to bode well rather than ill for RDC in the insurance dispute. Among factors Wolford cited as inclining her to grant the injunction was that the drug distributor is likely to succeed in the larger case. Wolford also found that depriving RDC of means to defend itself against the state’s charges would impose greater hardship on it than laying out cash to fund RDC’s defense would harm Hiscox. 

The insurance company is asking Wolford to dismiss the case. Hiscox argues that RDC’s prior admission of guilt to federal charges of illegally distributing opioids should cancel its obligation to cover RDC’s legal bills in the civil suit. 

RDC counters that despite agreeing to pay $20 million in the federal criminal case, it has not been convicted of any crime. RDC agreed to pay the $20 million as part of an agreement struck with federal prosecutors and the Drug Enforcement Agency in April 2019. Terms of that pact call for criminal prosecution to be deferred for five years and for charges against RDC to be dropped if it has not committed any drug offenses at the end of that period. Since it no longer distributes opioids, the drug distributor is virtually guaranteed to not be criminally charged, RDC’s attorneys argue.  

The possibility of a win against Hiscox still leaves RDC in a tough spot. Founded a century ago as a buying cooperative for independent pharmacies, RDC grew into one of the top 10 U.S. distributors of pharmaceuticals, with gross sales of some $2 billion. Citing adverse economic conditions, the drug distribution cooperative filed a notice  with state officials Feb. 13 detailing plans to close a local facility and lay off 98 workers in May.

Will Astor is Rochester Beacon senior writer.  

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