On October 7, the Arkansas Court of Appeals issued a significant opinion addressing dozens of insurers, insurance coverage applicable to a national public-health crisis, and an arbitration clause imported from a Bermuda reinsurer. In ACE American Insurance Co. v. Walmart, Inc., 2026 Ark. App. 476, the court reaffirms some of the most policyholder-friendly principles in Arkansas insurance law and should be required reading for any company facing mass-tort liability and a reluctant insurance tower.
Link to Background Background
Beginning in 2017, plaintiffs across the country began filing what the court called the “Opioid Lawsuits” against Walmart, alleging the retailer contributed to the opioid crisis by selling and dispensing opioid medications. By the time this dispute reached the courthouse, more than 2,400 such suits were pending in state courts and in a federal multidistrict litigation in the Northern District of Ohio.
Walmart, like many large companies, built its insurance program in layers, also known as a tower: a primary CGL layer (the “AIG insurers”), a stack of excess and umbrella policies (the “excess insurers”), and a “quota share” layer at the top, split 50/50 between QBE Insurance Corporation and a Bermuda insurer, Endurance, that was not a party to the appeal. When Walmart asked its insurers to fund its defense of the opioid lawsuits, two groups of insurers said no, and the quota-share carrier, QBE, said the dispute belonged in arbitration rather than state court. Walmart filed a declaratory judgment action, won partial summary judgment on the duty to defend, and defeated the motion to compel arbitration. The insurers appealed both rulings. The Court of Appeals affirmed across the board.
Link to The Duty to Defend: “Mere Possibility” Still Means What It Says The Duty to Defend: “Mere Possibility” Still Means What It Says
Arkansas law has long held that the duty to defend is broader than the duty to indemnify, and that an insurer must defend whenever the underlying complaint presents the “mere possibility” that damages alleged might fall within the policy’s coverage. The Walmart decision cleanly applies that standard to whether the opioid lawsuits allege an “occurrence,” and whether they seek damages “because of bodily injury,” two frequently litigated coverage issues.
Link to Was There an “Accident”? Was There an “Accident”?
The AIG insurers argued that none of the opioid lawsuits alleged an “occurrence” (defined, as usual, as an “accident”) because the complaints accused Walmart of intentional wrongdoing in failing to control suspicious opioid orders. The court was not persuaded, and its analysis guides policyholders facing similar “it was all intentional” defenses.
First, the court looked to the “gravamen” of the underlying complaints rather than the labels the plaintiffs used. Even though the complaints invoked intentional conduct by manufacturers and distributors, the court found that the allegations against Walmart specifically sounded in negligence — a failure to maintain effective controls and to investigate, report, and halt suspicious orders. Relying on its own recent decision in Red Apple, the court reiterated that the use of a single “intentional” buzzword in a complaint does not transform an otherwise negligence-based claim into one for intentional malfeasance. Not mincing words, the court held that “if the crux of the complaints is a lack of reasonable care, then the essence of the alleged conduct is still negligence.”
Second, and just as important, the court rejected the insurers’ attempt to import an objective, tort-style “reasonably foreseeable consequences” standard into the definition of “accident.” Leaning on the Arkansas Supreme Court’s decision in Talley v. MFA Mutual Insurance Co., the court confirmed that an insured’s intentional act can still produce an unintended, and therefore accidental, result. Firing a weapon is intentional; hitting an unintended target is not. By the same logic, even if Walmart intentionally filled prescriptions without adequate controls, a resulting nationwide addiction crisis could still be “without foresight or expectation” — and therefore a covered — consequence.
Link to Did the Complaints Seek Damages “Because of Bodily Injury”? Did the Complaints Seek Damages “Because of Bodily Injury”?
The excess insurers took a different tack, arguing that even if there was an “occurrence,” the governmental and healthcare-entity plaintiffs were not seeking damages for “bodily injury” as the policies defined that term, since those plaintiffs sought reimbursement for the general costs of the opioid crisis rather than compensation for specific, identifiable injuries to specific people. In our view, this is the more remarkable and potentially wide-reaching portion of the opinion.
The court again sided with the policyholder, while acknowledging this issue as a “closer question.” It found the individual-plaintiff suits were plainly personal-injury claims, and it read the policies’ broad language covering damages “because of” bodily injury — including damages claimed by “any person or organization” for care, loss of services, or loss of support resulting from bodily injury — to extend to the governmental and healthcare entities’ claims for the costs of responding to the crisis. The court also looked to the policies’ own exclusions, which specifically carved out certain firearm- and pollution-related government claims, and reasoned that the presence of those narrow, express exclusions confirmed there was no broader, unstated exclusion for governmental bodily-injury claims generally. That is the familiar interpretive principle that specific exclusions imply the absence of unstated ones, and that any ambiguity in an exclusion is read against the insurer that wrote it.
Link to No Arbitration, Even with a Choice-of-Law Clause Borrowed from Another Policy No Arbitration, Even with a Choice-of-Law Clause Borrowed from Another Policy
The most procedurally interesting part of the opinion deals with QBE’s attempt to compel arbitration. QBE’s quota-share policies did not themselves contain an arbitration clause, but they incorporated certain terms from the policies issued by its 50% co-insurer, Endurance. And those policies did include a New York choice-of-law clause and an arbitration provision. QBE argued that incorporation clause imported Endurance’s choice-of-law provision, that New York law (which permits arbitration of insurance disputes) should apply instead of Arkansas law, and that the dispute should therefore be arbitrated.
The court rejected this at every turn. As a factual matter, the record did not even establish that the specific Endurance policy referenced in one of the two QBE policies matched the Endurance policy actually in the record. As a matter of contract interpretation, the court held that QBE’s incorporation clause, read as a whole and harmonized across all of its paragraphs, incorporated only those Endurance terms that would further limit or restrict coverage — not freestanding procedural terms like choice of law or arbitration that are not “coverage terms” at all.
Even if the choice-of-law clause had been validly incorporated, the court held that Arkansas’s prohibition on arbitration clauses in insurance contracts is an “established and important public policy” of the state, codified in two separate statutes, that Arkansas courts will not displace by applying another state’s law. And the court declined to consider QBE’s belated argument under the New York Convention on the enforcement of foreign arbitral awards, because QBE had not adequately raised or developed that specific argument before the circuit court.
Link to Practical Takeaways Practical Takeaways
- Mass-tort and crisis-driven litigation does not forfeit coverage just because plaintiffs use the word “intentional.” Courts look past the labels in a complaint to its gravamen, and allegations of negligent oversight, inadequate controls, or failure to prevent harm will usually support a duty to defend even when related allegations elsewhere in the same litigation allege intentional misconduct by other defendants.
- An insured does not need to show the ultimate harm was foreseeable in the tort sense to establish an “accident.” Arkansas law expressly rejects a reasonable-foreseeability standard for the definition of “accident;” an intentional act with unintended consequences remains an accident for coverage purposes.
- Broadly worded “because of bodily injury” language can reach third-party and institutional claimants, not just the directly injured individual. Governments and healthcare entities seeking reimbursement for crisis-response costs may still be asserting claims “because of” bodily injury, particularly where the policy’s own exclusions show the insurer knew how to — and did not — exclude those claims.
- Watch how exclusions are drafted, and use them affirmatively. Specific, narrowly drawn exclusions can be powerful evidence that no broader, unstated exclusion exists. Policyholders should scrutinize an insurer’s exclusion language for what it does not say, not just what it does.
- Incorporation-by-reference clauses pulling in another insurer’s policy terms deserve close scrutiny before accepting an insurer’s characterization of what was incorporated. Generic incorporation language aimed at coverage terms will not necessarily sweep in procedural provisions like arbitration clauses or choice-of-law provisions, especially where the incorporating clause itself signals a narrower purpose.
- In jurisdictions like Arkansas that prohibit arbitration clauses in insurance contracts by statute, do not assume an insurer can contract around that protection by borrowing another state’s law through a co-insurer’s policy. Public policy protections against forced arbitration of insurance disputes can trump a choice-of-law provision that would otherwise apply.
- Preserve every argument at the trial court level. QBE lost its New York Convention argument not on the merits but because it was not adequately raised in the court below — a reminder that even well-conceived appellate arguments need a developed record to succeed.
Tying a bow on this, the ACE American Insurance Co. v. Walmart decision is a significant win for policyholders navigating mass-tort exposure. The case is also a useful reminder that Arkansas courts will continue to resolve doubts about the duty to defend in favor of coverage and will not let insurers use arbitration provisions borrowed from a reinsurer’s policy, or a choice-of-law maneuver, to sidestep that duty.