Farm Bureau Must Defend Insured in Deadly Legionnaires’ Disease Outbreak in Carolina

What started out as festive time at the North Carolina Mountain State Fair in 2019 ended with 96 people hospitalized with Legionnaires’ disease. Four of them died.

The tragedy in Fletcher, North Carolina, made national headlines. Multiple victims filed suit after state health authorities found that the Legionella bacteria probably came from a spa company’s working hot tub display, according to court records and news reports.

“This outbreak most likely resulted from exposure to Legionella bacteria in aerosolised water from hot tubs on display in the Davis Event Center at the fair,” the North Carolina Department of Public Health concluded. It added that people sickened with the respiratory disease were 23 times more likely to have spent at least an hour in the event centre and at least nine times more likely to have reported walking by or spending time at the hot tubs.

Now, the hot tub company’s insurer must defend the firm in the 11 lawsuits, despite the insurance company’s contention that a bacteria and fungus exclusion in the policy applied, the state Court of Appeal said in an opinion published Tuesday.

In North Carolina Farm Bureau Mutual Insurance Co. vs. Joshua Carpenter, owner of Asheville-based All Pro Billiards and Spas, and others, the court upheld a lower court ruling and found that the wording of the exclusion was somewhat ambiguous. The judges also said that an exception to the exclusion requires a duty to defend, even before it’s determined if Farm Bureau owes coverage.

“Today the North Carolina Court of Appeals joined every other court who has heard similar cases by answering with an emphatic ‘yes,’” that the insurer has a duty to defend, said Christopher Brook, a former appeals court judge himself and one of the lawyers for the claimant-appellees. “The court’s opinion not only is the best reading of the Farm Bureau insurance policy at issue but also serves the interests of justice.”

At first reading, the exclusion wording appears straightforward enough: “Insurance does not apply to … bodily injury which would not have occurred, but for the … exposure to any fungi or bacteria on or within a building or structure, including its contents…”

But the Oct. 18 appeals court opinion, written by Judge April Wood, said that Farm Bureau did not make it clear that the germs were “on or within” the building, and those terms were not defined in the exclusion. The bubbling water in the tubs created mist that could have been breathed in by fairgoers, although the Health Department was unable to obtain complete maintenance records to determine if chemicals in the tub water were adequate to prevent bacterial growth.

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