In Hot Tub Case, Farm Bureau Must Defend Insured in Deadly Legionnaires’ Disease Outbreak in North 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 aerosolized 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 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 in October.

In North Carolina Farm Bureau Mutual Insurance Co. vs. Joshua Carpenter, owner of Asheville-based All Pro Billiards and Spas, 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.

“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.

At first reading, the exclusion wording appears straightforward enough. But the Oct. 18 appeals court opinion said that Farm Bureau did not make it clear that the germs were “on or within” the building.