Nationwide Mutual Fire Insurance v. Dillard House, Inc.

ORDER

The captioned case is before the court for consideration of plaintiff’s motion for summary judgment [23-1], defendant Madeline Hecht’s cross motion for summary judgment [42-1], and defendants Dillard House, Inc. and John P. Dillard’s (“Dillard Defendants”) cross motion for summary judgment [47-1].

I. Introduction

This insurance coverage dispute arises out of the death of defendant Hecht’s husband, Stuart Hecht, on August 8, 2008. Stuart Hecht died after he and defendant Hecht vacationed at the Dillard House, a hotel and restaurant complex owned and operated by the Dillard Defendants. Shortly thereafter, defendant Hecht, a Florida citizen, brought a diversity suit in this court against the Dillard Defendants, Georgia citizens, alleging nine counts of liability under Georgia law. 1 That case, identified as case number 2:08-cv-186-WCO, is still be pending on the court’s docket. On December 19, 2008, plaintiff filed this declaratory judgment action, seeking a ruling as to whether plaintiff may avoid liability to defend and indemnify the Dillard defendants under two insurance policies — a commercial general coverage policy (“CGL Policy”) and an umbrella policy (“Umbrella Policy”). 2 Hecht and the Dillard Defendants have cross-moved for summary judgment. The court held a hearing on the parties’ summary judgment motions on June 25, 2009.

II. Factual Background

The factual background of this case is straightforward and undisputed. In her amended complaint in the underlying case (“Amended Complaint”), Hecht alleges that her husband died of legionnaire’s disease, which he allegedly contracted by bathing in a hot tub in “Eddie’s Cottage,” a standalone structure at the Dillard House. The policies provide coverage for, inter alia, liability stemming from “bodily injury” 3 that “is caused by an ‘occurrence’ that takes place in the ‘coverage territory.’ ” (CGL Policy, Ex. B to Pl.’s Compl. § 1.1(b)(1)); see also Umbrella Policy Insurance Agreements, Ex. C to Pl.’s Compl. § B.l. An occurrence is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (CGL Policy, Ex. B to Pl.’s Compl. § V.13; Umbrella Policy Definitions, Ex. C to Pl.’s Compl. § C. 12(a)).

*1370 Both the CGL Policy and the Umbrella Policy include an exclusion (“Bacteria Exclusion”) that is at the heart of this case. In relevant part, the Bacteria Exclusion in the CGL Policy reads:

This insurance does not apply to:

Fungi Or Bacteria

a. “Bodily injury” or “property damage” which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any “fungi” or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.

(Fungi or Bacteria Exclusion, CGL Policy, Ex. B to Pl.’s Compl.). 4 The equivalent exclusion in the Umbrella Policy is virtually identical, excluding:

Any liability which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any “fungi” or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.

(Fungi or Bacteria Exclusion, Umbrella Policy, Ex. C to PL’s Compl.).

In both policies, the Bacteria Exclusion is limited by an exception included in nearly identical form in both policies (“Consumption Exception”), which provides that the Bacteria Exclusion does not “apply to any ‘fungi’ or bacteria that are, are on, or are contained in, a good or product intended for bodily consumption.” 5 (Fungi or Bacteria Exclusion, CGL Policy, Ex. B to PL’s Compl.).

Hecht’s Amended Complaint alleges, inter alia, that Stuart Hecht bathed in a

spa tub, the water for which was intended for the use and consumption of [hotel] guests ... and [which] was distributed through the inn’s potable water and plumbing system. The plumbing and spa tub environment was of such type and character as to create a reasonable foreseeable risk of the growth, promotion, cultivation and presence of legionella bacteria in the spa tub water.

(Hecht’s Compl. ¶ 16). Additionally, the amended complaint alleges that

the water in the spa tub in which STUART HECHT was immersed was used and consumed by him, and the quality of the water was deteriorated by his use and consumption; the water was, at the time, heated, and was subject to rapid circulation via the spa tubs [sic] whirlpool jets, thereby causing the water *1371 in the spa tub to steam, vaporize and otherwise become aerosolized, allowing it to be inhaled and ingested by Stuart Hecht.

(IcL). The amended complaint claims that the Dillard Defendants

knew or should have known of the dangerous conditions that could arise from their negligence, recklessness and/or wanton misconduct in failing to take adequate steps to ensure that dangerously unsanitary conditions were not present ... in the spa tub in Eddie’s Cottage, and in the water in the spa tub in Eddie’s Cottage.

(Id.).

To date, plaintiff has provided the Dillard Defendants with a defense subject to a reservation of rights notice.

III. Discussion

A. Legal Standard

Summary judgment will be granted “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). Only those claims for which there is no need for a factual determination and for which there is a clear legal basis are properly disposed of through summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A court considering a motion for summary judgment must view the evidence in a light most favorable to the nonmoving party. See Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir.1988). It is important to recognize, however, that this principle does not require the parties to concur on every factual point. Rule 56 “[b]y its very terms ... provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48,106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Consideration of a summary judgment motion does not lessen the burden on the nonmoving party. The nonmoving party still bears the burden of coming forth with sufficient evidence. See Earley v. Champion Int’l Corp., 907 F.2d 1077, 1080 (11th Cir.1990). However, it is important to note the difference “between direct evidence and inferences that may permissibly be drawn from that evidence. Where a nonmovant presents direct evidence that creates a genuine issue of material fact, the only issue is one of credibility; thus, there is no legal issue for the court to decide.” Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir.1996). On the other hand, “[a] court need not permit a case to go to a jury ... when the inferences that are drawn from the evidence, and upon which the nonmovant relies, are ‘implausible.’ ” Id. at 743. Adopting language from one of its sister circuits, the Eleventh Circuit explained:

If the nonmoving party produces direct evidence of a material fact, the court may not assess the credibility of this evidence nor weigh against it any conflicting evidence presented by the moving party. The nonmoving party’s evidence must be taken as true. Inferences from the nonmoving party’s “specific facts” as to other material facts, however, may be drawn only if they are reasonable in view of other *1372 undisputed background or contextual facts and only if such inferences are otherwise permissible under the governing substantive law. This inquiry ensures that a “genuine” issue of material fact exists for the factfinder to resolve at trial.

Id. (citation omitted). “Where the evidence is circumstantial, a court may grant summary judgment when it concludes that no reasonable jury may infer from the assumed facts the conclusion upon which the nonmovant’s claim rests.” Id.

B. Analysis

1. Issues Presented

As an initial matter, the court notes that “an insurer’s duty to pay and its duty to defend are separate and independent obligations.” Penn- America Ins. Co. v. Disabled Am. Veterans, Inc., 268 Ga. 564, 490 5.E.2d 374, 376 (1997) (quotation marks and citation omitted). 6 Thus, “[although an insurer need not indemnify an insured for a liability the insured incurs outside the terms of the insurance contract, an insurer must provide a defense against any complaint that, if successful, might potentially or arguably fall within the policy’s coverage.” Elan Pharmaceutical Research Corp. v. Employers Ins. of Wausau, 144 F.3d 1372, 1375 (11th Cir.1998) (applying Georgia law). Of course, an insurer is not required to defend against allegations that are expressly excluded under the policy. See, e.g., Bituminous Cas. Corp. v. N. Ins. Co. of N.Y., 249 Ga.App. 532, 548 S.E.2d 495, 498 (2001).

Although the parties have largely failed to distinguish between plaintiffs potential obligations to defend and indemnify, the court must determine whether both questions are appropriate for review at this time or whether they are premature. See Am. Fid. & Cas. Co. v. Penn. Threshermen & Farmers’ Mut. Cas. Ins. Co., 280 F.2d 453, 461 (5th Cir.1960). 7 In American Fidelity, the former Fifth Circuit considered the merits of a declaratory judgment petition asking whether an insurance company had a duty to defend under an insurance policy. See id. at 455-60. The court determined, however, that the question of whether the same insurance company had a duty to indemnify was not yet mature. Id. at 461 (explaining that “[u]n-like the demand to take over the defense, ... this request [for a ruling on the duty to indemnify] sought a declaration on a matter which might never arise.”). 8 After discussing the various issues that might affect the question of indemnification— chiefly among them the question of whether the insurance company’s defense would succeed, thus defeating liability in the first *1373 place — the court flatly proclaimed that “it is not the function of a United States District Court to sit in judgment on these nice and intriguing questions which today may readily be imagined, but may never in fact come to pass.” 9 Id.; see also Allstate Ins. Co. v. Employers Liab. Assurance Corp., 445 F.2d 1278, 1281 (5th Cir.1971) (“[N]o action for declaratory relief will lie to establish an insurer’s liability until a judgment has been rendered against the insured since, until judgment comes into being, the liabilities are contingent and may never materialize.”); Canal Ins. Co. v. Cook, 564 F.Supp.2d 1822, 1325 (M.D.Ala. 2008) (“No court has determined ... whether Bear Creek and McGriff are liable for Cook’s injuries; therefore, any determination as to indemnification is premature.”); Smithers Constr., Inc. v. Bituminous Cas. Corp., 563 F.Supp.2d 1345, 1349 (S.D.Fla.2008) (“[A]n insurer’s duty to indemnify is not ripe for adjudication in a declaratory judgment action until the insured is in fact held liable in the underlying suit.”) (citations omitted); Employers Mut. Cas. Co. v. All Seasons Window & Door Mfg., Inc., 387 F.Supp.2d 1205, 1211-12 (S.D.Ala.2005) (“It is simply inappropriate to exercise jurisdiction over an action seeking a declaration of the plaintiffs indemnity obligations absent a determination of the insureds’ liability.”); Northland Cas. Co. v. HBE Corp., 160 F.Supp.2d 1348, 1360 (M.D.Fla.2001) (“Because an insurer’s duty to indemnify is dependent on the outcome of the case, any declaration as to the duty to indemnify is premature unless there has been a resolution of the underlying claim.”); Sphere Drake Ins., P.L. C. v. Shoney’s, Inc., 923 F.Supp. 1481, 1493 (M.D.Ala.1996) (“Because the duty to indemnify will arise only after the underlying cases are resolved, this contention is premature.”); Great N. Paper Co. v. Babcock & Wilcox Co., 46 F.R.D. 67, 70 (N.D.Ga.1968) (“The court should not pass on questions of insurance coverage and liability for indemnification when the contingencies giving rise to them may never occur. To do so would amount to an advisory opinion.”).

Here, “any number of eventualities” could change the analysis of whether plaintiff owes a duty to indemnify under the policies. All Seasons Window & Door, 387 F.Supp.2d at 1211. Thus, the court will follow the “wealth of authority” counseling against exercising jurisdiction over the premature issue of the duty to indemnify and will confine its discussion to the question of whether plaintiff owes a duty to defend under the CGL and Umbrella Policies. Id. at 1212. In considering this question, the court is mindful that

[t]o excuse the duty to defend[,] the petition must unambiguously exclude coverage under the policy ..., and thus, the duty to defend exists if the claim *1374 potentially comes within the policy. Where the claim is one of potential coverage, doubt as to liability and [the] insurer’s duty to defend should be resolved in favor of the insured.

Disabled Am. Veterans, Inc., 490 S.E.2d at 376 (alteration in original, emphasis added) (quoting 7C Appleman, Insurance Law and Practice § 4684.01). Finally, the court notes that “[u]nless otherwise defined in the contract, terms in an insurance policy are given their ordinary and customary meaning.” W. Pac. Mut. Ins. Co. v. Davies, 267 Ga.App. 675, 601 S.E.2d 363, 367 (2004) (quotation marks and citation omitted).

Here, two basic issues frame the parties’ debate: (1) whether the Amended Complaint alleges facts that constitute an “occurrence” within the meaning of the contracts of insurance; and (2) whether the Bacteria Exclusion precludes coverage.

2. Whether the Amended Complaint Alleges Facts that Constitute an “Occurrence”

Under the contracts, an “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (CGL Policy § V.13; Umbrella Policy Definitions § C.12(a)). Plaintiff argues that “[b]ecause the underlying claims arise from the conscious, voluntary failure by the Dillard [Defendants to maintain sanitary conditions at the Dillard House, their alleged actions do not constitute an occurrence within the meaning of the policies” and, accordingly, that “[n]o coverage exists under either the CGL or Umbrella Policy because the decedent’s injury and death was not caused by an ‘occurrence.’ ” (Pl.’s Consol. Resp. To Defs.’ Mots. Summ. J. 2-3). Defendants insist that “accident” — the key word used to define “occurrence”' — ■ should be read broadly, limited only by conduct that is intentional. Defendants then argue that because the word “accident” is not defined in the policies, the policies are ambiguous, requiring the court to construe “occurrence” against plaintiff and, accordingly should find coverage. The court, however, finds it unnecessary to identify an ambiguity in determining that the allegations in the Amended Complaint allege conduct that falls within the policies’ definition of “occurrence.”

“An insurer’s duty to defend is determined by comparing the allegations of the complaint with the provisions of the policy.” Nationwide Mut. Fire Ins. Co. v. City of Rome, 268 Ga.App. 320, 601 S.E.2d 810, 812 (2004) (quotation marks and citation omitted). In arguing that the allegations in the Amended Complaint do not constitute an occurrence, plaintiff takes a position that, if adopted, would immunize plaintiff from liability in nearly every case where a plaintiff alleges that an insured acted negligently. If, as urged by plaintiff, the Amended Complaint is interpreted to allege that the Dillard Defendants acted consciously and voluntarily, nearly every complaint alleging negligence could be construed in such a way. If a grocery store customer slips on a banana peel, a standard negligence claim arising out of the fall could be seen as averring conscious and voluntary action — under plaintiffs interpretative approach, the grocery store must have consciously and voluntarily failed to adopt a practice of frequently monitoring its floors, or a grocery store employee might have consciously and voluntarily overlooked the peel during a routine sweep of the aisle. Here, viewing the Amended Complaint as alleging conscious and voluntary acts — and therefore not constituting an “occurrence” — is no more of a *1375 stretch than taking a garden-variety banana peel slip-and-fall case to allege conscious and voluntary acts. Moreover, the causes of action alleged in the Amended Complaint are, on their face, common law negligence claims. 10 Simply, and contrary to plaintiffs insistence, the allegations in the Amended Complaint do not describe a “conscious, voluntary failure by the Dillard [Defendants to maintain sanitary conditions.” Rather, the Amended Complaint alleges facts that constitute an “occurrence” — “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (CGL Policy § V.13; Umbrella Policy Definitions § C.12(a)). Plaintiffs duty to defend turns on the allegations in the Amended Complaint, and the court finds that those allegations constitute an “occurrence” within the meaning of the policies; plaintiffs “occurrence” argument fails.

3. Whether the Amended Complaint Alleges Facts that Fall Within the Bacteria Exclusion

Plaintiff next argues that the court should declare plaintiff not liable to defend the underlying suit because legionella pneumophila is a bacterium and, accordingly, falls squarely within the Bacteria Exclusion. For the most part, defendants do not contest that the general language of the Bacteria Exclusion applies to the allegations in the Amended Complaint. 11 Rather, defendants argue that the Consumption Exception also applies, removing the allegations from the scope of the Bacteria Exclusion. The court must therefore determine whether bacteria in a hot tub “are, are on, or are contained in, a good or product intended for (bodily) consumption.” There does not appear to be any dispute that bacteria in a hot tub are not, themselves, a good or product intended for any type of consumption. The question is, therefore, whether bacteria in a hot tub “are on, or are contained in, a good or product intended for (bodily) consumption.” Because the complaint alleges that the source of the alleged legionella bacteria was the hot tub water, the court may narrow the focus of its inquiry even further, asking only whether water in a hotel hot tub is a good or product intended for (bodily) consumption.

Defendants argue that the existence of multiple reasonable interpretations of “consumption” renders the provision am *1376 biguous, and that the court should therefore apply defendants’ urged definition. 12 Plaintiff calls defendants’ ambiguity argument “tortured,” arguing that water in a hot tub is not intended for consumption, bodily or not, and, accordingly, that the *1377 Consumption Exceptions are not ambiguous. (PL’s Consol. Resp. 8).

It is well settled that “[i]f an insurance contract is capable of being construed two ways, it will be construed against the insurance company and in favor of the insured.” Claussen v. Aetna Cas. & Sur. Co., 259 Ga. 333, 380 S.E.2d 686, 688 (1989); see also Cincinnati Ins. Co. v. Magnolia Estates, Inc., 286 Ga.App. 183, 648 S.E.2d 498, 500 (2007) (“If a provision of an insurance policy is susceptible to more than one interpretation, [the court] construes such provision against the insurer.”). This principle is “especially” true with respect to “exclusions from coverage sought to be invoked by the insurer.” Yeomans & Assocs. Agency, Inc. v. Bowen Tree Surgeons, Inc., 274 Ga.App. 738, 618 S.E.2d 673, 679 (2005). Thus, although the court is less than confident that the Consumption Exception was intended to apply to water in a hot tub, the court must approach the policy language with an eye toward whether the relevant language is facially susceptible to multiple interpretations. See Magnolia Estates, Inc., 648 S.E.2d at 500.

Defendants proffer multiple definitions of “consumption” in arguing that water in a hot tub is a “good or product intended for bodily consumption.” 13 In doing so, defendants rely heavily on a recent unpublished district court opinion from the District of South Carolina in which the court examined a fungi and bacteria exclusion nearly identical to the one at issue here, including an exception based on goods or products intended for consumption. See Union Ins. Co. v. Soleil Group, No. 2:07-CV-3995 (D.S.C. May 13, 2009). Plaintiff challenges several aspects of the Soleil Group court’s reasoning and urges the court to instead look to another recent unpublished district court decision, AMCO Insurance Co. v. Swagat Group, LLC, No. 07-3330, 2009 WL 331539 (C.D.Ill. Feb. 10, 2009). In Swagat Group, the district court for the Central District of Illinois relied on a fungi and bacteria exclusion equivalent to the one at issue in this case in holding that an insurance company did not have a duty to defend two underlying lawsuits arising out of harm caused by legionnaire’s disease in a hotel hot tub and swimming pool. In Swagat Group, however, the court did not discuss whether the bacteria exclusion contained a consumption exception similar to the one at issue here and, accordingly, analysis of that case is necessarily incomplete as applied to this case. 14 Regardless, this court finds reliance on *1378 those decisions unnecessary to conclude that “consumption” is susceptible to multiple reasonable interpretations.

Webster’s Third New International Dictionary, Unabridged, 15 defines “consumption” in multiple ways:

1 a: the act or action of consuming or destroying

1 b: the wasting, using up, or wearing away of something

2: the utilization of economic goods in the satisfaction of wants or in the process of production resulting in immediate destruction (as in the eating of foods), gradual wear and deterioration (as in the habitation of dwellings), no change aside from natural decay (as in the enjoyment of art objects), or transformation into other goods (as in manufacturing)

Webster’s Third New International Dictionary, Unabridged (2002) (emphasis added). Plaintiff insists that in the context of the Consumption Exception, “consumption” has a meaning within the first dictionary definition: “the wasting, using up, or wearing away of something.” Although the Soleil Group court found that water in a hot tub is “used up,” this court finds it unnecessary to frame the question in that way. 16 See Soleil Group, No. 2:07-CV-3995, at *9-10. Rather, the second definition guides the court’s analysis because it represents a reasonable alternative as applied to the allegations in the Amended Complaint: “the utilization of economic goods in the satisfaction of wants.” As discussed, water in a hot tub is a good— indeed, it may most specifically be considered an “economic good,” since it gives economic utility to the hot tub and because water is a commodity for which hotels and other users pay. Surely, a hotel guest who bathes in a hot tub does so as a mean of indulging, or “satisfying,” a desire, or “want.” Given the second Webster’s definition, the court finds that water in a hot tub falls squarely within a reasonable in *1379 terpretation of the phrase “good ... intended for consumption.”

The court is left with a single question: whether water in a hot tub is a “good ... intended for bodily consumption,” as used in the CGL Policy. The court returns to Webster’s Third New International Dictionary, Unabridged, which defines “bodily” as

1: having a body or a material form:

PHYSICAL, CORPOREAL

2 a: of or relating to the body

2 b: concerning the body

Webster’s Third New International Dictionary, Unabridged (2002) (emphasis added). Having already determined that the relevant good, water in a hot tub, is intended for consumption — because it is intended for the “utilization ... in the satisfaction of wants” — the court need only decide whether the particular type of consumption intended is “relating to the body.” Hot tubs are created for the purpose of bathing one’s body, making it difficult to conceive of any modifier of “consumption” that would more aptly describe the type of “utilization ... in the satisfaction of wants” facilitated by a hot tub. The Consumption Exception in the CGL Policy therefore applies to the allegations in the Amended Complaint.

In sum, the court finds that a reasonable interpretation of the Consumption Exception supports Defendants’ position that the allegations of the complaint in the underlying case fall within the scope of coverage under both the CGL Policy and the Umbrella Policy. The Consumption Exception allows for coverage under both policies for allegations of harm caused by “bacteria that are, are on, or are contained in, a good or product intended for (bodily) consumption.” The Amended Complaint alleges that Stuart Hecht contracted legionnaire’s disease by inhaling or otherwise ingesting legionella bacteria found in the water in which he was bathing in a hot tub at the Dillard House. Thus, the allegations fall within the exception, and coverage exists, if water is a “good or product intended for (bodily) consumption.” Water in a hot tub is a “good” because it is “something that has economic utility”; it is intended for “consumption” because it is meant for the “utilization ... in the satisfaction of wants”; and, specifically, it is intended for “bodily consumption” because it is specifically meant for the “utilization ... in the satisfaction of wants ... relating to the body.” Cf. United States v. Midway Heights County Water Dist., 695 F.Supp. 1072, 1076 (E.D.Cal.1988) (finding “human consumption” of water “to include such normal uses as bathing and showering”).

IV. Conclusion

For the foregoing reasons, the court finds that the allegations in the Amended Complaint fall within the duty to defend of both the CGL Policy and the Umbrella Policy. Because it is premature to determine whether the policies impose a duty to indemnify the Dillard Defendants for any liability that might arise out of the underlying case, this order does not express any opinion as to that issue. The court will dismiss this case without prejudice on the issue of plaintiffs duty to indemnify.

Because plaintiff has a duty to defend ' under the policies, plaintiffs motion for summary judgment [23-1] is hereby DENIED in part, defendant Madeline Hecht’s cross motion for summary judgment [42-1] is hereby GRANTED in part, and the Dillard Defendants’ cross motion for summary judgment [47-1] is hereby

*1380 GRANTED in part. The remainder of this case is hereby DISMISSED without prejudice as premature.