NC insurance must defend Legionnaires’ suits
A North Carolina court has determined that the insurance company of a hot tub manufacturer has a duty to defend the manufacturer against lawsuits stemming from a massive Legionnaire’s Disease outbreak.
The outbreak took place in 2019 at the North Carolina Mountain State Fair in 2019 and ended with 96 people hospitalized with Legionnaires’ Disease. By the final count, 135 people had contracted the disease; four of them died.
State Health authorities traced the outbreak to an actively working hot tub display owned by Joshua Carpenter, of Asheville-based All Pro Billiards and Spas.
“This outbreak most likely resulted from exposure to Legionella bacteria in aerosolized water from hot tubs on display in the Davis Event Center at the fair,” the North Carolina Department of Public Health stated. It added that people sickened with the respiratory disease were 23 times more likely to have spent at least an hour in the event center and at least nine times more likely to have reported walking by or spending time at the hot tubs.
Eleven lawsuits were brought against All Pro Billiards and Spas and Carpenter, each arguing that the company was negligent in maintaining their hot tub displays and that such negligence caused the outbreak of Legionnaire’s Disease at the fair.
At the time of the incident, All Pro was insured By North Carolina Farm Bureau Mutual Insurance Company, Inc. with a per occurrence limit of $1,000,000. The insurance company denied coverage, however, arguing that the policy’s Fungi or Bacteria Exclusion bars insurance coverage. Based on the Fungi or Bacteria Exclusion, the insurance company alleged it had no “duty to defend or indemnify Carpenter [or] All Pro” from their present suits.
On October 18, the North Carolina Court of Appeals disagreed that the insurance company had no “duty to defend” on the basis of the Consumption Exclusion. The Consumption Exclusion is an exception to the Fungi or Bacteria Exclusion that provides that the exclusion does not apply to fungi and bacteria that are on or contained in any good or product intended for bodily consumption. Using this argument, all that was left was for the court to determine if the hot tub and its water within are a “good” intended for “bodily consumption.” Ultimately, the court found that it is both, and therefore the insurance company has a duty to defend All Pro Billiards and Spas.
As to whether the insurance company has a duty to indemnify, or compensate for harm or loss, the court found that the insurance company does indeed have a duty to indemnify, if All Pro is ultimately found liable for the Legionnaire’s outbreak. Their logic is that since the duty to defend is a broader concept than the duty to indemnify, and since they had already found that the insurance company has a duty to defend, it must also have a duty to indemnify.
With the exception of the very first recognized outbreak of Legionnaire’s Disease, which occurred in 1976 at the American Legion Convention in Philadelphia and resulted in 221 cases and 34 deaths, the North Carolina Mountain Fair Legionnaire’s outbreak was the largest outbreak in the U.S.
