Facing claims that it “allowed a dangerous substance—mold” to grow in a resident’s apartment, an insured sought coverage under its “businessowners insurance” coverage. In denying a duty to defend the underlying wrongful death suit, the insurer relied on two exclusions: (1) the “Fungi or Bacteria Exclusion” and (2) the Pollution Exclusion. After analyzing the plain meaning of both exclusions, the U.S. District Court for the Northern District of Georgia agreed with the insurer, held that it owed no duty to defend the insured, and granted the insurer’s motion for judgment on the pleadings.
The court began by applying basic principles under Georgia law. It noted, “[i]f the terms of the insurance contract are plain and unambiguous, the Court must ‘simply [] apply [them] as written, regardless of whether doing so benefits the carrier or the insured.’” Reed v. Auto Owners Ins. Co., 284 Ga. 286, 287 (2008). “This rule holds even for policy exclusions, which ‘must be given effect’ when unambiguous, ‘even if ‘beneficial to the insurer and detrimental to the insured.’” Cont’l Cas. Co. v. Winder Lab’ys, LLC, 73 F.4th 934, 941 (11th Cir. 2023) (quoting Fid. Nat’l Title Ins. Co. of N.Y. v. OHIC Ins. Co., 275 Ga. App. 55, 57 (2005)).
The policy provided coverage for sums “that the insured becomes legally obligated to pay as damages because of ‘bodily injury’” to which the insurance applies. “Bodily injury” includes “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” In “any suit” seeking damages covered by the policy, the insurer has a “duty to defend the insured.” The court then turned to the relevant exclusions.
The policy’s Fungi or Bacteria Exclusion excluded coverage for bodily injury arising out of a “fungi or bacteria incident.” That “incident” was defined to mean:
an incident which would not have occurred, in whole or in part, but for the actual, alleged or threated 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.
The policy defined “fungi” to include “any type or form of fungus, including mold or mildew[.]”
The court held that the Fungi or Bacteria Exclusion applies. It explained, “[t]he Underlying Complaint’s allegations—that mold at least in part caused Decedent’s bodily injury—unambiguously exclude the incident from coverage” and thus relieve the insurer of its duty to defend the suit. Rejecting the insured’s argument that the underlying complaint created an ambiguity, the court explained that even though “the Underlying Complaint does make five references to ‘mold and/or other toxic substances,’ these vague and occasional references to ‘other toxic substances’ are not sufficient to create the ambiguity [the insured seeks to present. The repeated and specific references to mold throughout the entirety of the Underlying Complaint make clear that the Underlying Complaint alleges that mold at least in part caused Decedent’s illness.”
The court held that the Pollution Exclusion also applied. The policy’s Pollution Exclusion excluded coverage for any bodily injury “arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants[.]’” The court found that the underlying complaint’s repeated reference to “mold and other toxic substances” as causing the decedent’s injuries “clearly qualife[d]” as an “irritant or contaminant” under the Pollution Exclusion. The court also rejected the insured’s argument that interpreting “mold” as “pollutant” would render the Fungi or Bacteria Exclusion meaningless. The court held that Georgia law “instruct[s] … that exclusions in insurance policies are to be read independently of one another such that no exclusion ‘can properly be regarded as inconsistent with another exclusion, since they bear no relationship with one another.’” Fid. Nat’l Title, 275 Ga. App. at 58 (citing Weedo v. Stone-E-Brick, Inc., 405 A.2d 788, 795 (N.J. 1979)); Nautilus Ins. Co. v. Chiaha Guild of Arts & Crafts, Ltd., 2024 WL 2785316, at *3 (N.D. Ga. Mar., 7, 2024).
Decided by U.S. District Judge Thomas W. Thrash, the case is Nationwide Property & Casualty Ins. Co. v. Hampton Court, L.P., et al., Cas No. 1:23-cv-4726.