In its recent decision in Westport Ins. Corp. v. VN Hotel Group, 2012 U.S. App. LEXIS 22187 (11th Cir. Oct. 25, 2012), the United States Court of Appeals for the Eleventh Circuit, applying Florida law, had occasion to consider whether a pollution exclusion and a fungi/bacteria exclusion operated to bar coverage for an underlying wrongful death claim involving Legionnaires' Disease.
The underlying lawsuit involved three individuals staying at a Quality Suites in Florida, all of whom contracted Legionnaires’ Disease while guests. One of these individuals died while the two others required significant medical attention. Two lawsuits were brought against VN Hotels, as the owner and operator of the Quality Suites. The suits alleged that the plaintiffs contracted the disease as a result of exposure to legionella bacteria contained in shower water in their own rooms, or from steam generated by the hotels’ outdoor spa. The plaintiffs later conceded, however, that the source of the bacteria was from the hotel’s outdoor spa. VN Hotels tendered its defense to its general liability insurer, Westport Insurance.
Westport brought a coverage action against VN Hotels, seeking a declaratory judgment that its policy’s pollution exclusion and fungi/bacteria exclusion precluded a finding of coverage. The pollution exclusion applied to:
"Bodily injury" . . . arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":
* * *
"Pollutants" means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste . . . .
Additionally, the policy’s fungi/bacteria exclusion applied to:
"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 or damage.
The fungi/bacteria exclusion, however, also contained an exception applicable to:
This exclusion does not apply to any 'fungi' or bacteria that are, are on, or are contained in, a good or product intended for bodily consumption.
On motion for summary judgment, the Middle District of Florida found in favor of VN Hotels, concluding that bacteria is not a “pollutant” for the purpose of the pollution exclusion. The district court further held that the bacteria exclusion was inapplicable since the bacteria was not “within” a structure, and that in any event, the exception applied as the bacteria was contained in a good or product intended for bodily consumption.
On appeal, the Eleventh Circuit agreed with the lower court’s logic that bacteria did not qualify as a pollutant, at least under Westport’s policy, as such a ruling would render meaningless the policy’s fungi/bacteria exclusion. Turning to the issue of the policy’s exclusion for bacteria, the Eleventh Circuit found persuasive the lower court’s reasoning that an outdoor spa is not clearly part of the hotel’s “structure,” which the court agreed must be defined narrowly, explaining:
In this Policy, the term "building" modifies the term "structure" and shows that "structure" is to be narrowly construed … Thus, we, like the district court, conclude that an outdoor spa would not qualify as a "structure" for purposes of the exclusion.
Importantly for insurers and insureds alike, neither the district court nor the Eleventh Circuit held the bacteria exclusion unenforceable. Rather, the two holdings appear limited to the language of the exclusion – requiring the bacteria to be on or within a building or structure – and the unique facts involved. Further, other Florida courts, including the Eleventh Circuit, have held that similar claims are barred by the pollution exclusion. See, e.g., Markel Ins. Co. v. Florida West Covered RV & Boat Storage, LLC, No. 8:09-cv-2427-T-27TGW (M.D. Fla. Mar. 9, 2011), aff’d, 2011 U.S. App. LEXIS 16552 (holding that pollution exclusion applied to bacterial infection caused by millings from roadwork); First Specialty Ins. Corp. v. GRS Mgmt. Assocs., 2009 U.S. Dist. LEXIS 72708 (S.D. Fla. Aug. 17, 2009) (concluding virus in swimming pool excluded by pollution exclusion); Nova Cas. Co. v. Waserstein, 424 F. Supp. 2d 1325 (S.D. Fla. 2006).