Soaking in risk - hot tubs and the consumption exception

However, the exclusion contains exceptions stating that the exclusion does not apply to fungi or bacteria that “are, are on or are contained in, a good or product intended for bodily consumption”.

Tracking the language of the endorsement, the exclusion precludes coverage for a claim against the insured, alleging that the claimant suffered bodily injury as a result of inhaling bacteria (Legionella) while in the insured’s building or structure.² Yet several courts suggest that “good[s] and product[s] intended for bodily consumption” goes beyond conventional food items.

The case law: “Bodily consumption” keeps bubbling up

In 2009, the Northern District of Georgia faced a dispute on this exception (“Consumption Exception”) arising from an underlying claim where the claimant allegedly contracted Legionnaires’ from a hot tub at the Dillard House hotel and, sadly, died. (See Nationwide Mut. Fire Ins. Co. v. Dillard House, Inc., 651 F.Supp.2d 1367 (N.D. Ga. 2009).) Reviewing the language of the Consumption Exception, the court found: (1) a “good” is something that has economic utility; (2) “consumption” can be reasonably interpreted as utilization of an economic good to satisfy wants; (3) “bodily” could be reasonably interpreted to mean “of or relating to the body”; and (4) the hot tub contraction of Legionella may fall within the exception because the water had economic utility and was used to satisfy a want of or relating to the body. Id. As such, the court found that the exclusion did not bar coverage at the duty to defend stage.

Four years later, the court in Heinecke v. Aurora Healthcare, Inc., 351 Wis. 2d 463 (Wis. Ct. App. 2013), drew a line in the sand and found that the exception to the “bodily consumption” exclusion did not apply where the claimant alleged he contracted Legionnaires’ disease after exposure to a decorative water fountain in a hospital lobby. The court held that the exception did not apply because “a good or product intended for consumption” did not mean to encompass the observation and enjoyment of art. Id.

However, in subsequent cases, other courts followed similar lines of reasoning as the Dillard decision. In N.C. Farm Bureau Mut. Ins. Co., Inc. v. Carpenter, 286 N.C. App. 51 (N.C. Ct. of App. 2022), an outbreak of Legionnaires’ disease occurred that was allegedly traced to exposure from a hot tub display at the State Fair. The court held that the bodily consumption exception applied, as the water vaporized from the display of hot tubs “was a good which was intended to satisfy a patron’s wants by allowing them to touch the water and inhale and ingest the water vapor.” Id.

One year later, the Western District of Virginia revisited the issue in Brethren Mut. Ins. Co. v. Jai Dev, Inc., No. 21-cv-316, 2023 WL 1991582 (W.D. Va. Feb. 14, 2023). There, the claimant alleged he contracted Legionnaires’ disease from the Best Western hot tub or pool. One insurer relied on the ISO exclusion, stating that “good or product intended for bodily consumption” meant a good that was intended for eating or drinking. Borrowing from the reasoning in Dillard House, the Brethren court acknowledged that the provision could reasonably be interpreted to include water in a hot tub or pool—even if not specifically sold as a beverage—because the phrase “good or product intended for bodily consumption” is susceptible to more than one reasonable interpretation, and ambiguity must be construed against the insurer. It’s plausible that hot tub water can be viewed as something intended for bodily use and enjoyment, particularly where it is used, inhaled or (even unintentionally) swallowed by guests. Again, coverage was not precluded at the duty to defend stage. Notably, in Brethren, there was another insurer with excess coverage and a different exclusion for “Organic Pathogens-with Exception for Food and Beverages.” That exclusion included a stated exception for “any food or beverages sold, distributed, served or handled by any insured.” When looking at this exception, the court determined that the hot tub water was not a “beverage,” which was defined as a liquid intended for drinking. Thus, there, the Organic Pathogens exclusion applied and the “food and beverages” exception was not triggered.

The conclusions: Learning to love the “Consumption Exception”

As with Cupid’s arrow, it's important to see the point: while hot tubs can increase the insured’s Valentine’s Day bookings, they also increase the risk of guests’ health and may ultimately increase the frequency or severity of claims. Further, “bodily consumption” is more than just eating and drinking, according to some courts. While this interpretation is not established law in every state, it seems possible that other state courts will draw on Dillard House and its progeny if faced with similar facts and policy wording. Underwriters would be wise to consider the goods and products of their insureds more broadly to assess potential risks posed by bacterial or fungi related “bodily consumption.” While this discussion is about hot tubs, it is not impossible to consider other goods that are consumed by the body that may pose a bacterial or fungal risk. Underwriting collaboration with Claims associates to brainstorm additional potential risks under this interpretation of “good”, “product” and “bodily consumption” may generate additional considerations, which may guide underwriting in manuscription away from the ISO language to match intent of insured risk or inform on premium. Ultimately, as the above cases show, one should not overlook the heart of the language—because there's nothing less romantic than a coverage dispute.