Regular readers of these pages will recognize Legionnaires Disease as a topic creating insurance issues, and things continue to evolve. Member agents may want to remind their commercial entities with exposures like spas, fountains or air conditioning cooling towers to keep themselves abreast of this growing liability exposure area. Depending on the exact circumstances, trends are pointing to either or both the mold/bacteria or pollution exclusion common on policies today eliminating defense and liability coverage for those facing Legionnaires Disease liabilities. You might also want to point out to clients that reported incidences of Legionnaires Disease are on the rise.
Legionella bacteria last caught your national staff’s attention earlier this year when hundreds of attendees at an Internet business conference went to the infamous Playboy Mansion and were exposed to Legionella bacteria. Then last week on checking in on a Legionella reference made by our newest Wisconsin state association staffer, Matt Banazynski, it was discovered there is a huge new case in Nevada where $340 Million is being sought in a class action along with a major exposure to reported thousands recently at a Milwaukee area hospital. Below is a summary of notable incidences of Legionnaires Disease colliding or potentially colliding with p-c insurance:
- Las Vegas Aria/MGM Hotel: Of interest here is the $337.5 million in damages sought. $50 million usually gets an award in the annual top ten in United States.
- Wisconsin Hospital: Significantly in this case is the exposure of what was reported as possibly thousands as a decorative water fountain was confirmed contaminated in a Milwaukee-area hospital lobby.
- California Playboy Mansion: Significance here, of course, is the notoriety of many persons exposed from a hot tub at the famed Playboy Mansion. IN&V also reported on insurance aspects of this as “Legionnaires' of the Rich and Famous.”
- Illinois Hotel: This 2006 event resulted in a fatality and significantly the 2010 U.S. District Court Case found in summary judgment that the insurer properly denied defense cost and liability coverage based on Fungi or Bacterial Exclusion.
- Orlando Hotel: This 2008 event also involves an insurer seeking summary judgment establishing no duty to defend or to indemnify a hotel. While the insurer was ordered to both defend and indemnify, interesting, it was only after the Mold/Bacteria exclusion was ruled inapplicable because the hot tub was outside building or structure of the hotel. Analysis of the pollution exclusion is also interesting.
- Vermont Hotel: This 2008 case is significant as the lack of insurance coverage presumably at least contributed to the Killington landmark hotel declaring bankruptcy after a $490,000 judgment for Legionnaires Disease. Recently, Vermont District Court filings would seem to indicate the insurer is taking a preemptive path of summary judgment using the courts to confirm a lack of coverage possibly to offset the conservator pursuing action on behalf of the bankrupt hotel and/or its claimant(s).
- Maryland Hotel: This case is interesting for its timing coming as this article was written and it closed down a well-known, historic boardwalk hotel.
What’s going on here?
First, according to the Center of Disease Control and Prevention (CDC), the number of Legionnaires Diseases cases is on the rise. As you can see below under the CDC surveillance system there is a marked increase in reported cases. As the reports are voluntary via the CDC, it’s fair to say the below is only an estimation and below the number of actual cases. Also, while the below graph is based on estimates of total reported cases to the CDC, after adjusting for population the national incidence rate per 100,000 of population increased 192%, from 0.39 per 100,000 persons in 2000 to 1.15 in 2009.
The second trend of note in the sample of cases shown above, is the insurance implications. What is highlighted by the Aria/MGM case is when sickened individuals seek restitution and hotels, hospitals or others seek insurance coverage the dollars involved are large. According to the CDC, a hallmark of Legionnaires Disease is an extremely high fever over 104.5 degrees with reports of higher temperatures, while survivable, fatal in 10-30% of cases. Many have also alleged long-term consequences after recovery. Then, p-c coverage, or the lack thereof, seems to be evolving with two recent court cases in Illinois and Florida finding the mold/bacteria exclusion is clear in excluding coverage. One case also reviews the effectiveness of the pollution exclusion in eliminating coverage but the courts on the pollution exclusion seem more undecided.
So, with the trend pointing to cases increasing and insurance coverage at best uncertain more is likely to come as p-c insurance continues to be confronted with Legionella exposure. Your Big I Professional Liability Committee, Big "I" Markets and underwriting companies for both are watching. Stay tuned to IN&V for further developments. In the interim, if you have a client that is concerned about insurance coverage for mold/bacteria/fungi, specialized insurance coverages are available with customized packages for hotels on Big "I" Markets. If you have an question on agency E&O insurance or are interested in obtaining a policy, please contact your state association representative at www.iiaba.net/eo.
Paul Buse (email@example.com) is president of Big I Advantage® and a licensed p-c agent.