The California Supreme Court has agreed to take up a lower court decision which held an insurer didn't have to pay to defend a drug company from claims related to the opioid epidemic.

The state's high court on Wednesday indicated it granted a petition to review in Traveler's Property Casualty Company of America v. Actavis, a case where the Fourth District Court of Appeal held late last year that Hartford, Connecticut-based Travelers didn't have a duty to defend or indemnify Watson Pharmaceuticals in lawsuits filed by two California counties and the city of Chicago.

“This decision is really important because it's really going to the fundamental question of what is an 'occurrence' under a [commercial general liability] policy,” said Caroline Ford, an insurance coverage lawyer in the Orange County office of Haynes and Boone who represents insureds.

Ford, who isn't involved in the Travelers case, said that for insurance purposes, an occurrence has “traditionally been looked at as fortuity—an accident, something that happened.” Ford said the question the court seems to be grappling with in this case and Liberty Surplus Insurance v. Ledesma and Meyer Construction—another related case referred to the court in 2016 by the U.S. Court of Appeals for the Ninth Circuit—is whether an intentional act with unintended consequences triggers coverage.

In the litigation that underlies the coverage dispute, Watson and various other pharmaceutical companies were sued by Santa Clara County, Orange County, and the city of Chicago, seeking redress to cover the costs the opioid epidemic has had on their communities. Travelers denied Watson's demand to pay for a defense and brought a declaratory judgment lawsuit against the company.

In November, the Fourth District Court of Appeal found the underlying Travelers policy covered bodily injuries caused by an accident.

“The California action and the Chicago action do not create a potential liability for an accident because they are based, and can only be read as being based, on the deliberate and intentional conduct of Watson that produced injuries—including a resurgence in heroin use that were neither unexpected nor unforeseen,” wrote Justice Richard Fybel.

According to the docket, Chief Justice Tani Cantil-Sakauye and Justices Ming Chin, Goodwin Liu, Mariano-Florentino Cuéllar and Leondra Kruger voted to take the case up, and Justice Carol Corrigan recused herself.

When taking up the case Wednesday, the court indicated that it would defer briefing until after it considers a related issue in the Liberty Surplus case, which is set to be argued on March 6. In that case, the court will consider whether there is an “occurrence” under an employer's commercial general liability policy when someone sues an employer for the negligent hiring and supervision of an employee who intentionally injures them.

Linda Kornfeld of Blank Rome who represents Watson Pharmaceuticals didn't respond to a message seeking comment Thursday. Travelers' lawyers at Dentons, Ronald Kent and Susan Walker, likewise didn't respond to a message.