When a sweeping public health crisis ultimately reaches the country’s court systems, the grim statistics and financial accounting that are sure to accompany its narrative are shocking – and inescapable. CDC reports more than 806,000 overdose deaths from 1999-2023 linked to prescription and illegal opioids. Back in 2021, the Pew Charitable Trust estimated the opioid crisis already was responsible for $35 billion in health care costs, $14.8 billion in criminal justice costs, and $92 billion in lost productivity.

A litigation avalanche set about to allocate many of these costs, and attempt to assess damages arising from a complex medico-legal narrative. The Business Court’s disposition of Harris Teeter Supermarkets, Inc. v. Ace Am. Ins. Co., 2026 NCBC 68, provided a snapshot of how an underlying case brought against Harris Teeter by Durham County ultimately resulted in a high-stakes insurance coverage dispute in which a settlement agreement’s wording – or lack of it – tipped the balance on potentially $60 million.

In Harris Teeter, the court examined a coverage dispute arising from a $1.37 billion settlement of government-initiated claims against The Kroger Co. and its grocer subsidiaries (including Harris Teeter) for their alleged distribution and dispensing of opioid drugs. The settlement resolved hundreds of claims against Kroger and its subsidiary grocers, including Durham County’s claims against Harris Teeter. Id. ¶¶ 20-22.

The Business Court’s decision relieving the defendant insurers of coverage responsibility centered on the settlement agreement’s structure of what entity was paying for whose damages. The settlement included agreement by Kroger to pay out up to $1.37 billion over 11 annual payments. By the point of motions practice before the Business Court, the government plaintiffs had dismissed all claims against Kroger and its subsidiaries (including Harris Teeter) and Kroger had made two of its payments. Id. ¶¶ 34-37.

magnifying glass over agreement paperwork and pen

The settlement agreement did not make any allocations among Kroger and its grocer subsidiaries about the percentage responsibilities of each for the global payouts securing their releases and dismissals. However, on an internal basis, Kroger determined based on “percentage shares of opioids dispensed” an allocation of $60.4 million to Harris Teeter that was reflected on the companies’ corporate books. Id. ¶¶ 38-40.

Judge Robinson noted the North Carolina maxim that “[p]rovisions of insurance policies extending coverage must be construed liberally so as to provide coverage, whenever possible by reasonable construction.” Id. ¶ 56 (quoting AP Atl., Inc. v. Crescent Univ. City Venture, LLC, 2017 WL 2988241, at *5 (N.C. Super. Ct. July 13, 2017)). But here, it was the Court’s construction of the settlement agreement that tipped the scales in favor of the carrier. Because the settlement agreement imposed payment obligations only on Kroger, and released Harris Teeter without any obligations to account for under its terms, Harris Teeter’s carrier was not reached because “its liability depends on whether or not its insured is liable to the plaintiff.” Id. ¶ 61 (quoting Lida Mfg. Co. v. U.S. Fire Ins. Co., 116 N.C. App. 592, 595 (1994)).

The Court rejected Harris Teeter’s argument that Kroger’s settlement payments came from the companies’ centralized treasury and were “made in satisfaction of Harris Teeter’s legal obligation to pay damages for its alleged opioid-related tort liability.” Id. ¶ 59. The Court explained that (Id. ¶ 67):

“Any ‘allocation’ of a portion of the Global Settlement liability to Harris Teeter was made pursuant to Kroger’s internal processes – not to the terms of the Global Settlement, any contractual agreement between Kroger and Harris Teeter, or any other binding legal or contractual obligation.”

Worth Noting

  • Against a landscape of frequent multi-state settlements that resolve hundreds if not thousands of claims against multiple parties, the Business Court’s decision commends particular vigilance to the thorough memorialization of parent and subsidiary liabilities and agreed payments. Here, Kroger struck a settlement that resolved the opioid claims brought against it and its subsidiary grocers. But even while resolving the claims against Harris Teeter, HT lost access to potential insurance coverage due to the settlement agreement’s failure to apportion specific payment obligations to it. The NC Supreme Court will get the last word on this one.

Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.