District Courts Split on Whether Bacteria Is a Pollutant; Insurer Required to Indemnify Insured
Cherilyn Zavatsky | Bloomberg Law
The U.S. District Court for the Middle District of Florida, in ruling that Legionella bacteria did not constitute “pollutants,” as defined in a pollution exclusion, and in disagreeing with a decision from Southern District of Florida in which living organisms were determined to be “pollutants,” appears to have created a split between Florida district courts on this issue.
In general, courts that have addressed whether bacteria or living organisms are “pollutants” are split. See, e.g., Nova Cas. Co. v. Waserstein, 424 F. Supp. 2d 1325 (S.D. Fla. 2006) (Yes – living organisms); East Quincy Serv. Dist. v. Continental Ins. Co., 864 F. Supp. 976 (E.D. Cal. 1994) (Yes - E. coli); Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785 (Ariz. Ct. App. 2000) (No – fecal coliform bacteria); Michigan Mut. Ins. Co. v. Mitco Inc., No. 98-1745 (Minn. Dist. Ct. Aug. 27, 1999) (Yes - Legionella); Eastern Mut. Ins. Co. v. Kleinke, 739 N.Y.S.2d 657 (App. Div. 2002) (No - E. coli). The Middle District of Florida’s decision in this case now creates a split between district courts in Florida over whether bacteria is a “pollutant” for purposes of applying the pollution exclusion.
Nova Casualty v. Waserstein Ruling Rejected
Paul Walker contracted Legionnaires’ disease from a spa tub at a Quality Suites hotel that contained Legionella bacteria. Mr. Walker died from the disease and his widow filed suit against, among others, the owner of Quality Suites, VN Hotel Group, LLC. Westport Insurance Company issued a commercial general liability (CGL) insurance policy to VN Hotel that excluded coverage for bodily injury from the release of pollutants. “Pollutants” was defined by the policy as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids alkalis, chemicals, and waste. . . .”
Westport filed an action seeking a declaration that it had no duty to defend or indemnify VN Hotel. The parties cross-moved for summary judgment and, on December 9, 2010, the district court concluded that Westport had a duty to defend its insureds. The court expressly rejected the ruling in Nova Casualty Co. v. Waserstein, 424 F. Supp. 2d 1325 (S.D. Fla. 2006), in which the Southern District of Florida concluded that living organisms and microbial contaminants were “pollutants” under the pollution exclusion. The Middle District characterized the Waserstein holding as overbroad. However, the court also ruled that it was premature to determine Westport’s duty to indemnify.
Legionella Bacteria Is Not a “Pollutant”
Westport argued that Legionella bacteria was a “contaminant” under the pollution exclusion. In its December 9, 2010 opinion, the court rejected Westport’s argument, reasoning that the language in the exclusion modifying “contaminants” and the enumerated examples of “pollutants” did not intimate the inclusion of living organisms. Although the court recognized that a number of government agencies have classified Legionella bacteria as a “contaminant,” the court stated that this classification was only in the “abstract.” Further, the court noted that the presence of the policy’s “fungi or bacteria” exclusion supported its distinction between “pollutants” and bacteria. Lastly, the court noted that even if Legionella bacteria were “pollutants,” an exception to the pollution exclusion applied. The exception provided that there would be coverage for “‘Bodily injury’ if sustained within a building and caused by smoke, fumes, vapor or soot produced by or originating from . . . equipment that is used to heat water for personal use, by the buildings occupants or their guests. . . .”
In its October 11, 2011 opinion, the court addressed the duty to indemnify. The court rejected Westport’s arguments for the same reasons cited in its December 9, 2010 opinion. The court also distinguished Maxine Furs, Inc. v. Auto-Owners Insurance Co., 426 F. App’x 687 (11th Cir. 2011), in which the Eleventh Circuit held that curry aroma that wafted onto the insured’s property and damaged its fur coat stock was a pollutant. See Bloomberg Law Reports®—Insurance Law, Eleventh Circuit Holds Curry Aroma Is a Pollutant (Apr. 11, 2011). However, the Middle District of Florida noted that in Maxine Furs, although the curry aroma was clearly determined to be a “contaminant,” and that the definition adopted by the Eleventh Circuit of that term could encompass bacteria,Legionella bacteria nonetheless were not contaminants in this case because they were not readily classified as “solid, liquid, gaseous or thermal.” Curry aroma, the court continued, was clearly a gas. The court also distinguished Markel International Insurance Co. v. Florida West Covered RV & Boat Storage, LLC, No. 8:09-cv-2427-T-27TGW (M.D. Fla. Mar. 9, 2011), noting that the contaminants at issue in that case were millings, which were clearly classified as solid. Although in Markel, bodily injury was allegedly caused by bacteria mixed with solid millings, the court noted that the millings, not the bacteria, were determined to be the pollutant. In this case, the court noted that because the bacteria were the alleged pollutants, as opposed to the water vapor on which they were carried, Westport’s reliance on Markel was inappropriate.
Fungi or Bacteria Exclusion Does Not Apply
The court also ruled that the “fungi or bacteria” exclusion did not apply to bar coverage. The exclusion provided that there was no coverage for bodily injury caused by the inhalation or ingestion of fungi or bacteria “on or within a building or structure, including its contents,” but did not apply “to any ‘fungi’ or bacteria that are, are on, or are contained in, a good or product intended for bodily consumption.” Adopting a narrow definition the term, the court concluded that the spa tub did not qualify as a “structure.” The court reasoned that the proximity of “structure” to the term “building,” supported its conclusion that “structure” refers only to “an edifice or building of any kind.” In addition to its narrow reading of the fungi and bacteria exclusion, the court adopted a seemingly broad reading of the consumption exception, and concluded that the water in the spa tub was a “good” for “consumption” because it was for “the utilization in the satisfaction of wants . . . relating to the body.”
Determining that neither the pollution exclusion nor the fungi and bacteria exclusion applied to bar coverage, the court ruled that Westport had a duty to indemnify VN Hotel in connection with the underlying suit. On October 17, 2011, Westport filed a Notice of Appeal as to both the court’s December 9, 2010 and October 11, 2011 orders.
This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. Bloomberg Finance L.P. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.
©2011 Bloomberg Finance L.P. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of Bloomberg Finance L.P.