A recent outbreak of Legionnaires’ disease in New York has, according to published news reports, been responsible for the death of 12 people. According to those same reports, more than 100 other people have become ill as a result of the outbreak, which has been traced to a rooftop cooling tower(s).
For better or worse, when an outbreak of a disease occurs, lawsuits may soon follow. Indeed, recent news stories report that one individual who contracted Legionnaires’ disease in New York just sued the hotel where the outbreak allegedly began. According to published reports, that person is alleging that the hotel was “negligen[t], careless, and reckless.”
When such third-party lawsuits – relating to Legionnaires’ disease or some other disease – are filed against an insured, insurance coverage may be available under its commercial general liability (“CGL”) insurance policy(ies). CGL policies typically provide coverage for “damages” on account of “personal injuries” or “property damage.” Relying on various policy exclusions, insurers, however, may try to deny coverage for disease-related lawsuits. So, faced with such a suit, a policyholder should carefully review its policy(ies) and make sure its interests are adequately protected.
Legionnaires’ disease in particular has been at the center of a number of insurance-coverage disputes. According to the U.S. Centers for Disease Control and Prevention, “Legionnaires’ disease … is caused by a type of bacterium called Legionella …. The bacterium is named after a 1976 outbreak, when many people who went to a Philadelphia convention of the American Legion suffered from this disease, a type of pneumonia (lung infection).”
In the past, insurers have invoked different policy exclusions in their attempts to defeat coverage for third-party claims involving bodily injury relating to this bacterium.
For example, they have argued that exclusions pertaining to fungi or bacteria may bar coverage under a CGL policy. Such exclusions often preclude 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 or damage.”
However, many such exclusions also contain an exception, providing that the “exclusion does not apply to any ‘fungi’ or bacteria that are on, or contained in, a good or product intended for [bodily] consumption.”
Thus, in cases involving Legionnaires’ disease, courts have had to resolve disputes about, for example, what “good or product” the Legionella bacteria was “on or contained in.” For example, was the relevant “good or product” a hot tub or the water in the tub? Courts also have had to determine whether the relevant “good or product” was “intended for [bodily] consumption.” For example, do people using a hotel swimming pool or whirlpool tub “consume” the water in it? Arguably, “yes.” As the U.S. District Court for the District of South Carolina observed: “[W]hile water in either a swimming pool or whirlpool tub may not be noticeably ‘used up’ every time a person makes use of one of these amenities, the Hotel surely puts water in them for the guests’ consumption.” Conversely, at least one state appellate court has held that water in a decorative hotel fountain is not consumed by guests who look at the “art.”
Insurers also have relied on the pollution exclusion to attempt to deny coverage. Such an exclusion typically provides that the relevant policy or insurance does not apply to, or provide coverage for – among other things – bodily injury arising out of “the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants [anywhere] at any time.” “Pollutants” are typically defined to mean “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapors, soot, fumes, acids, alkali, chemicals, and waste.”
Insurers have argued that bacteria (or a virus) – such as the Legionella bacteria – is a “pollutant.” This argument has been met with mixed success. While at least one federal district court held that the Coxsackie virus constitutes a “pollutant,” at least two other federal district courts have held that the Legionella bacteria is not a “pollutant.” In reaching that latter conclusion, the U.S. District Court for the Eastern District of Louisiana explained that the relevant bacteria “are significantly different than a typical environmental pollutant …. Rather, these bacteria are simply microorganisms existing in a natural environment.”
These are just some of the issues that may arise when a policyholder seeks coverage under a CGL policy for a third-party claim relating to a disease outbreak. As these issues often require court involvement, a prudent policyholder should consider involving insurance-coverage counsel from the outset to ensure that its interests are adequately represented.