- Eleventh Circuit Rules Pollution and Fungi/Bacteria Exclusions Inapplicable to Legionella Bacteria
- November 9, 2012 | Author: Thomas M. Witowski
- Law Firm: Hinshaw & Culbertson LLP - Coral Gables Office
A hotel guest died after contracting Legionnaires’ Disease when he inhaled and ingested heated water vapors from the outdoor spa at a Quality Suites hotel in Orlando, Florida. Legionnaires’ Disease is caused by inhaling legionella bacteria, which is naturally found in water. After the hotel was sued in a wrongful death action, the hotel’s insurer filed a declaratory judgment action seeking a declaration that it had no duty to defend or indemnify the hotel based on the policy’s pollutants and fungi/bacteria exclusions.
The policy’s pollution exclusion precluded coverage for bodily injury “arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants.’” “Pollutants” was defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste . . .”
The U.S. District Court for the Middle District of Florida concluded that legionella bacteria was not a pollutant because it was not an irritant or contaminant, and not a “solid, liquid, gaseous, or thermal” substance. The district court further noted that if bacteria was considered a “pollutant,” the fungi/bacteria exclusion would be rendered meaningless. The U.S. Court of Appeals for the Eleventh Circuit agreed, noting that “the legionella bacteria cannot be considered a pollutant” under the policy because the policy “includes a separate exclusion provision for bacteria.”
The fungi/bacteria exclusion precludes coverage for bodily injury “which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of any ‘fungi’ or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury of damage” (emphasis added). The fungi/bacteria exclusion also contained an exception stating that the exclusion did not apply “to any ‘fungi’ or bacteria that are, are on, or are contained in, a good or product intended for bodily consumption.” The district court relied on the interpretation of the same “consumption exception” set forth in Nationwide Mutual Fire Insurance Co. v. Dillard House, Inc., 651 F. Supp. 2d 1367 (N.D. Ga. 2009). In Dillard House, water in a hot tub from which a bather allegedly contracted Legionnaires’ Disease was found to be “a good or product intended for bodily consumption.” The Dillard House court defined a “good” as “something that has economic utility or satisfies an economic want,” and “consumption” as “the utilization of economic goods in the satisfaction of wants.” It reasoned that hotel guests bathing in a hot tub consumed the water because they entered the tub to satisfy a desire or want and that such consumption was “bodily” because “the utilization in the satisfaction of wants [was] relating to the body.” The insurer provided no authority to the district court to challenge its interpretation.
Although the district court acknowledged that Legionnaires’ Disease is bacterial in nature, it concluded that the fungi/bacteria exclusion was inapplicable because the bacteria was not found “on or within a building or structure.” The district court found that a broad definition of the term “structure” would encompass the outdoor spa, but that there was no basis to apply the broad definition. Noting that exclusions are “construed even more strictly against the insurer than coverage clauses,” the Eleventh Circuit concluded that the term “building” modified the term “structure” and showed that the term “structure” was to be narrowly construed. The appellate court therefore concluded that an outdoor spa would not qualify as a “structure.” Although the district court also noted that the exception to the fungi/bacteria exclusion would apply because the legionella bacteria was “on, or . . . contained in, a good or product intended for bodily consumption,” the Eleventh Circuit did not address whether the exception to the exclusion would apply.
The Eleventh Circuit concluded that the insurer had a duty to defend and indemnify the hotel for the lawsuit arising out of the guest’s death caused by Legionnaires’ Disease.
The applicability of pollution exclusions and fungi/bacteria exclusions will turn on the specific language of the exclusions as applied to the unique facts presented in each case. As this case demonstrates, exclusionary provisions such as these will be construed strictly against insurers.
Westport Insurance Corporation v. VN Hotel Group, LLC, No. 11-14883, 2012 WL 5262886 (11th Cir. Oct. 25, 2012)