Application of “Fungi/Bacteria” Exclusion may not be as broad as you think

The “Fungi/Bacteria” Exclusion in a standard CGL policy reads:

[This insurance does not apply to]

1. Bodily injury or property damage arising out of, in whole or in part, the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any fungi or bacteria, whether airborne or not, on or within a building or structure, including its contents. This exclusion applies whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.
   This exclusion shall not apply to any fungi or bacteria that are on, or are contained in, a good or product intended for human consumption. (emphasis added).

In Westport Ins. Corp. v. VN Hotel Grp., LLC, 513 F. App’x 927, 932 (11th Cir. 2013), the Eleventh Circuit affirmed the district court’s finding that the fungi/bacteria exclusion was inapplicable where the plaintiff alleged he contracted Legionnaires’’ disease from an outdoor spa, because the legionella bacteria did not occur on or within a building or structure. The court found that the term “building” modified the term “structure” and must be narrowly construed in the exclusion. The court held that under Florida law, the outdoor spa was not a “structure” within the fungi/ bacteria exclusion of the CGL policy, which excluded coverage for bacteria occurring on or within a building or structure. Therefore, the court found that the exclusion did not apply to bar coverage for the claim.

The take away—be mindful of the limitations of CGL policy exclusions, and the effect the limitation may have under the specific facts of the claim at issue.