N.C. Farm Bureau Mut. Ins. Co.

IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-677
No. COA21-588
Filed 18 October 2022
Wake County, No. 20 CVS 11158
NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY, INC.,
Plaintiff,
v.
JOSHUA CARPENTER; ALL PRO BILLIARDS & SPAS, LLC; JAMES BANKS;
KENNETH BARRETT; MARY BELUE AS PERSONAL REPRESENTATIVE OF
THE ESTATE OF DELMER EUGENE BELUE; SHANE BIDDIX; DOUGLAS C.
BROWDER; JERRY BUCKNER; CHRISTOPHER A. CHURCHILL AS EXECUTOR
OF ESTATE OF DAVID CHURCHILL; PAUL CLAUS; JAMES CLIMO, JR.;
MEGAN CLIMO; JACK CLINARD; LOUIS ELDERS; KIMBERLY FERGUSON;
ANNA FRANKS; WILLIAM GOOD; KIMBERLY GRANT; LINDA HARTLEY;
CLIFTON HOYLE HELMS, JR.; CANDIA HIGGINS; ROGER HIGGINS; DAWSON
HUNTER; EDWARD INGLE; MARILYN P. INGLE; ROBERT LAUGHTER; TINA
LEDFORD; VICKI MCCARSON; VANESSA METCALF; SHELBY NIX; ANTHONY
GLENN OWNBEY; WILLIAM PARKER; STEPHEN PARRIS; BRANDON PAYNE;
MARCIA REITZ; ALBER RIOUX; MICHAEL ROGERS; ELIZABETH ROPER;
JIMMY RUMFELT; MARVIN SCOTT; DELMAR SHERMAN; JOHN SHERMAN;
ROSE SHETLEY; JAMIN SKIPPER; JUDY SMATHERS; JIMMY THOMAS; TERRI
TOLLEY; RANDAL WEIS; HAROLD WOMICK; LINDA WOODY; PHYILLIS
MARIE YOUNG; NORTH CAROLINA DEPARTMENT OF AGRICULTURE &
CONSUMER SERVICES; STEPHEN BALDWIN; MAXINE CRAWFORD; JEREMY
EDMONDS; JOHN GAVIN; VERONICA GRIER; ALBERT ISOM; JOHN LYDA;
TIMOTHY MCFALLS; DEBORAH PARHAM; MICHAEL PETREY; SHARON
SMITH; BRETT TEMPLE; RONAL MONSON; PEGGY DUNCAN; DENICE
WILLIAMS; CRYSTAL HOLDER; RANDY HOUSTON; JAMES CLOW; MAYLON
ARRINGTON; DARELL DOUGLAS CABLE; and NATHAN DREW WALKER,
Defendants.
Appeal by Plaintiff from order entered 9 June 2021 by Judge George Collins in
Wake County Superior Court. Heard in the Court of Appeals on 26 April 2022 in
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2022-NCCOA-677
Opinion of the Court
session at Elon University School of Law in the City of Greensboro pursuant to N.C.
Gen. Stat. § 7A-19(a).
Young Moore and Henderson, P.A., by Walter E. Brock, Jr., David W. Early,
and William F. Lipscomb, for plaintiff-appellant.
Patterson Harkavy LLP, by Christopher A. Brook and Narendra K. Ghosh, for
defendants-appellees.
Barbour, Searson, Jones & Cash, PLLC, by W. Bradford Searson, for Joshua
Carpenter and All Pro Billiards & Spa, LLC, defendants-appellees.
WOOD, Judge.
¶1 Plaintiff appeals from an order entered by the trial court denying its motion
for judgment on the pleadings. The trial court concluded Plaintiff has a duty under
an insurance policy it issued to defend certain underlying claims and stayed this
action pending additional determinations relevant to the scope of any duty of
Plaintiffs to indemnify for losses under its insurance policy. On appeal, Plaintiff
argues 1) its Fungi or Bacteria Exclusion bars the underlying claims; 2) Defendant
Joshua Carpenter (“Defendant Carpenter”) and Defendant All Pro Billiards & Spas,
LLC’s (“Defendant All Pro”) hot tubs were intended for display, and thus its
Consumption Exception does not apply; and 3) it does not have a duty to indemnify
Defendant Carpenter or Defendant All Pro. After a careful review of the record and
applicable law, we affirm the order of the trial court.
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I. Factual and Procedural Background
¶2 Plaintiff is an insurance company organized under the laws of North Carolina
and whose principal place of business is also North Carolina. Plaintiff issued a
Commercial General Liability Policy (the “Policy”) to Defendant Carpenter for the
period of May 16, 2019, to May 16, 2020. This Policy had a per occurrence limit of
$1,000,000.00 for Defendant Carpenter’s business, All Pro, of which he is a co-owner.
North Carolina Mountain State Fair is also named as an additional insured.
¶3 From September 6 to 15, 2019, the Western North Carolina Mountain State
Fair was held at the North Carolina Agricultural Center. Thereat, various
attractions and exhibits were displayed at the Davis Center. Defendant All Pro
displayed hot tubs actively circulating water in the Davis Event Center.
¶4 Shortly after the fair concluded, the Buncombe County Department of Health
and Human Services and Henderson County Health Department notified the North
Carolina Division of Public Health (“NCDPH”) that there had been an increase in
cases of Legionnaires’ disease on September 23, 2019.1 All reported cases of
Legionnaires’ disease were connected to the North Carolina Mountain State Fair.
The same day, the NCDPH, along with other health agencies, initiated an
1Legionnaires’ disease is a serious form of legionellosis, an infection caused by the
microorganism Legionella. “Legionellosis is caused by inhaling airborne droplets of water
containing Legionella.”
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epidemiological and microbiological investigation to determine the source of the
Legionnaires’ disease. The NCDPH created a comprehensive list of aerosolized water
sources at the fair which may have caused the outbreak of Legionnaires’ disease. The
NCDPH identified Defendants All Pro and Carpenter’s hot tubs as possible sources
of aerosolized water.
¶5 From September 25 to 27, 2019, the NCDPH collected twenty-seven water and
environmental samples from the fair. The NCDPH’s epidemiological investigation
revealed,
individuals who were sickened at the [f]air were twelve
times more likely to have visited the Davis Event Center;
twenty-three times more likely to report spending more
than an hour in the Davis Event Center; more than nine
times more likely to report walking by or spending time by
the hot tubs; and more than thirty-six times more likely to
have attended the [f]air during the last five days of the
[f]air (September 11 to September 15, 2019).
Ultimately, the NCDPH concluded “that 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 NDCPH was unable to obtain complete
maintenance records for the hot tubs; as such, it was “impossible to determine if the
chemicals in the hot tubs were adequate to prevent bacterial growth for the duration
of the fair.” As a result of the outbreak of Legionnaires’ disease at the fair, one
hundred and thirty-five cases of the disease were reported, ninety-six individuals
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were hospitalized, and four individuals died.
¶6 Thereafter, eleven separate lawsuits were filed against, inter alai, Defendants
All Pro and Carpenter between September 15, 2019 and February 16, 2021.
Additionally, one suit was filed against only Defendant All Pro.2 Most of the
claimants in these suits visited the Davis Center and fell ill because of, or relating to,
Legionnaires’ disease and suffered damages arising therefrom.3 These suits alleged
Defendants Carpenter or All Pro were negligent in maintaining their hot tub
displays, and such negligence caused the outbreak of Legionnaires’ disease at the fair.
¶7 On October 5, 2020, Plaintiff brought an action for declaratory relief, arguing,
in relevant part, the Policy’s Fungi or Bacteria Exclusion bars insurance coverage.
The Policy’s Fungi or Bacteria Exclusion provided,
2 Each Defendant in the case sub judice except Mary Belue as personal
representative of the estate of Delmer Eugene Belue, Jack Clinard, N.C. Dep’t of
Agriculture & Consumer Serv.’s, Peggy Duncan, Denice Williams, Crystal Holder, Randy
Houston, and James Clow, was a party to these original suits.
3 Claimant Kimberly Grant (“Defendant Grant”) was the only claimant who did not
specify whether she did or did not enter the Davis Event Center. Defendant Grant’s
“Damages” section provided little information, only stating she “attended the 2019 NCMSF
on September 15, 2019.” Thus, this Court is unable to determine whether Defendant Grant
entered the Davis Event Center.
Additionally, we note the only record information regarding damages incurred by
Defendants Mary Belue as personal representative of the Estate of Delmer Eugene Belue,
Jack Clinard, Peggy Duncan, Denice Williams, Crystal Holder, Randy Houston, and James
Clow is found in Plaintiff’s amended complaint: “The above-identified persons and estates
have filed suit and/or asserted claims against Carpenter and/or All Pro for injury or death
due to Legionnaires’ disease allegedly contracted from Carpenter’s hot tub display located
in the Davis Event Center at the 2019 NC Mountain State Fair.”
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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.
b. Any loss, cost or expenses arising out of the abating,
testing for, monitoring, cleaning up, removing, containing,
treating, detoxifying, neutralizing, remediating or
disposing of, or in any way responding to, or assessing the
effects of, “fungi” or bacteria, by any insured or by any
other person or entity.
However, the Policy’s Consumption Exception provided the Fungi or Bacteria
Exclusion did “not apply to any ‘fungi’ or bacteria that are, are on, or are contained
in, a good or product intended for bodily consumption.” Based on the Fungi or
Bacteria Exclusion, Plaintiff alleged in its complaint it had no “duty to defend or
indemnify Carpenter [or] All Pro” from their present suits.
¶8 On November 16, 2020, after Plaintiff filed its original complaint, various
Defendants filed a motion to change venue to Buncombe County, North Carolina.
Additional claimants filed suits against Defendants All Pro and Carpenter, and as a
result, Plaintiff filed an amended complaint on December 1, 2020, to include these
additional claimants. Defendants filed a motion to stay the proceeding on December
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31, 2020. On January 11, 2021, Defendants All Pro and Carpenter filed another
motion to change venue with the trial court, again requesting the venue be moved to
Buncombe County “[f]or the convenience of witnesses and to promote the ends of
justice.” Shortly thereafter, on March 22, 2021, Plaintiff moved for judgment on the
pleadings. On May 17, 2021, Plaintiff withdrew its motion for judgment on the
pleadings solely as it related to Defendant North Carolina Agriculture & Consumer
Services.
¶9 All of the parties’ motions came on for hearing before the trial court on May
25, 2021. By order entered June 7, 2021, the trial court denied Defendants’ motion
to change venue but granted Defendants’ motion to stay the proceedings. The trial
court denied Plaintiff’s motion for judgment on the pleadings, finding “the exception
to the bacteria exclusion in the insurance policy in question is ambiguous as applied
to the facts alleged in the underlying cases” and thus, “there is at least a mere
possibility that the policy covers this situation and the facts alleged, giving the
Plaintiff a duty to defend in the underlying cases.” Plaintiff filed a timely notice of
appeal of the trial court’s order.
II. Jurisdiction
¶ 10 At the outset, we note that “an appeal of an order denying . . . [a] motion for
judgment on the pleadings is an interlocutory appeal.” Paquette v. County of Durham,
155 N.C. App. 415, 418, 573 S.E.2d 715, 717 (2002); see Webb v. Nicholson, 178 N.C.
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App. 362, 363, 634 S.E.2d 545, 546 (2006). Since “there is no right of appeal from an
interlocutory order,” we must first determine whether Plaintiff’s appeal is properly
before us. Larsen v. Black Diamond French Truffles, Inc., 241 N.C. App. 74, 76, 772
S.E.2d 93, 95 (2015); see also Waters v. Qualified Personnel, Inc., 294 N.C. 200, 207,
240 S.E.2d 338, 343 (1978) (explaining the purpose of this rule “is to prevent
fragmentary, premature and unnecessary appeals by permitting the trial divisions to
have done with a case fully and finally before it is presented to the appellate
division”).
¶ 11 As a general rule, a party may appeal an interlocutory order if
(1) the order is final as to some claims or parties, and the
trial court certifies pursuant to N.C.G.S. § 1A-1, Rule 54(b)
that there is no just reason to delay the appeal, or (2) the
order deprives the appellant of a substantial right that
would be lost unless immediately reviewed.
Currin & Currin Constr., Inc. v. Lingerfelt, 158 N.C. App. 711, 713, 582 S.E.2d 321,
323 (2003).
¶ 12 “[A]n interlocutory order concerning the issue of whether an insurer has a duty
to defend in the underlying action ‘affects a substantial right that might be lost absent
immediate appeal.’ ” Cinoman v. Univ. of N.C., 234 N.C. App. 481, 483, 764 S.E.2d
619, 621-22 (2014) (quoting Lambe Realty Inv., Inc. v. Allstate Ins. Co., 137 N.C. App.
1, 4, 527 S.E.2d 328, 331 (2000)); see Integon Nat’l Ins. Co. v. Villafranco, 228 N.C.
App. 390, 392, 745 S.E.2d 922, 925 (2013); Enter. Leasing Co. Southeast v. Williams,
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177 N.C. App. 64, 67-68, 627 S.E.2d 495, 498 (2006); Carlson v. Old Republic Ins. Co.,
160 N.C. App. 399, 401, 585 S.E.2d 497, 499 (2003). Here, the trial court’s denial of
judgment on the pleadings also determined that Plaintiff had a duty to defend against
the underlying claims and stayed this action until the scope of Plaintiff’s alleged duty
to indemnify could be resolved. Since the issue of whether Plaintiff actually has a
duty to defend the underlying actions is directly implicated in this matter, it affects
a substantial right. As such, Plaintiff’s appeal is properly before us.
III. Standard of Review
¶ 13 This court reviews a trial court’s denial of a motion for judgment on the
pleadings de novo. CommScope Credit Union v. Butler & Burke, LLP, 369 N.C. 48,
51, 790 S.E.2d 657, 659 (2016); see Fisher v. Town of Nags Head, 220 N.C. App. 478,
480, 725 S.E.2d 99, 102 (2012); see also Bauman v. Pasquotank Cnty. ABC Bd., 270
N.C. App. 640, 642, 842 S.E.2d 166, 168 (2020) (“Under a de novo standard of review,
this Court considers the matter anew and freely substitutes its own judgment for that
of the trial court.”).
¶ 14 A motion for a judgment on the pleadings “must be carefully scrutinized lest
the nonmoving party be precluded from a full and fair hearing on the merits.”
Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974). “On a motion
for judgment on the pleadings, all well pleaded factual allegations in the nonmoving
party’s pleadings are taken as true and all contravening assertions in the movant’s
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pleadings are taken as false.” CommScope Credit Union, 369 N.C. at 51, 790 S.E.2d
at 659 (cleaned up) (quoting Daniels v. Montgomery Mut. Ins. Co., 320 N.C. 669, 682-
83, 360 S.E.2d 772, 780 (1987)); see Ragsdale, 286 N.C. at 137, 209 S.E.2d at 499. For
the purpose of the motion, “[a]ll allegations in the nonmovant’s pleadings, except
conclusions of law, legally impossible facts, and matters not admissible in evidence
at the trial, are deemed admitted by the movant for purposes of the motion.”
Ragsdale, 286 N.C. at 137, 209 S.E.2d at 499 (citations omitted). Judgment on the
pleadings is proper when “the pleadings fail to reveal any material issue of fact with
only questions of law remaining.” Fisher, 220 N.C. App. at 480, 725 S.E.2d at 102
(citing Ragsdale, 286 N.C. at 137, 209 S.E.2d at 499).
¶ 15 We note that the construction and interpretation of an insurance contract is a
question of law, and thus the question of Plaintiff’s “duty to defend may be resolved
by judgment on the pleadings.” Erie Ins. Exch. v. Builders Mut. Ins. Co., 227 N.C.
App. 238, 244, 742 S.E.2d 803, 809 (2013); see Crandell v. Am. Home Assurance Co.,
183 N.C. App. 437, 440, 644 S.E.2d 604, 606 (2007) (“This duty to defend is ordinarily
measured by the facts as alleged in the pleadings.” (cleaned up)).
IV. Discussion
¶ 16 Plaintiff’s arguments on appeal are premised upon its assertion it has no duty
to defend Defendants All Pro and Carpenter’s underlying suits. As a general rule, an
“insurer’s duty to defend the insured is broader than its obligation to pay damages
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incurred by events covered by a particular policy.” Waste Management of Carolinas,
Inc. v. Peerless Ins. Co., 315 N.C. 688, 691, 340 S.E.2d 374, 377 (1986). Our courts
determine whether an insurer has a duty to defend by examining the facts of the
pleadings. Id. “When the pleadings state facts demonstrating that the alleged injury
is covered by the policy, then the insurer has a duty to defend, whether or not the
insured is ultimately liable.” Crandell v. Am. Home Assurance Co., 183 N.C. App.
437, 440, 644 S.E.2d 604, 606 (2007) (quoting Waste Management of Carolinas, Inc.,
315 N.C. at 691, 340 S.E.2d at 377). The “mere possibility that the insured is liable
(and that the potential liability is covered) suffice[s] to impose a duty to defend upon
the insurer.” Naddeo v. Allstate Ins. Co., 139 N.C. App. 311, 319, 533 S.E.2d 501, 506
(2000) (quoting Waste Management of Carolinas, Inc., 315 N.C. at 691 n.2, 340 S.E.2d
at 377 n.2). Notwithstanding this, “if the facts are not even arguably covered by the
policy, then the insurer has no duty to defend.” Waste Management of Carolinas, Inc.,
315 N.C. at 692, 340 S.E.2d at 378; see also Crandall, 183 N.C. App. at 440, 644
S.E.2d at 606.
¶ 17 To determine whether an insurer has a duty to defend an underlying lawsuit
against an insured, we utilize a “comparison test.” Crandell, 183 N.C. App. at 440,
644 S.E.2d at 606; Holz-Her U.S. Inc. v. United States Fid. & Guar. Co., 141 N.C.
App. 127, 128, 539 S.E.2d 348, 349 (2000); Smith v. Nationwide Mut. Fire Ins. Co.,
116 N.C. App. 134, 135, 446 S.E.2d 877, 878 (1994). Under the comparison test, “the
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pleadings are read side-by-side with the policy to determine whether the events as
alleged are covered or excluded.” Erie Ins. Exch., 227 N.C. App. at 244-45, 742 S.E.2d
at 809.
¶ 18 It is important to note that, in this case, Plaintiff’s Fungi or Bacteria Exclusion
operates to exclude coverage. Our Supreme Court, in State Capital Insurance
Company v. Nationwide Mutual Insurance Company, explained the different rules of
construction for an insurance policy provision which extends coverage and an
insurance policy provision which excludes coverage:
provisions of insurance policies and compulsory insurance
statutes which extend coverage must be construed liberally
so as to provide coverage, whenever possible by reasonable
construction. See Moore v. Hartford Fire Insurance Co., 270
N.C. 532, 155 S.E. 2d 128 (1967); Jamestown Mutual
Insurance Co. v. Nationwide Mutual Insurance Co., 266
N.C. 430, 146 S.E. 2d 410 (1966). On the other hand, . . .
provisions which exclude liability of insurance companies
are not favored and therefore all ambiguous provisions will
be construed against the insurer and in favor of the
insured. Wachovia Bank & Trust Co. v. Westchester Fire
Insurance Co., 276 N.C. 348, 172 S.E. 2d 518 (1970).
State Capital Ins. Co. v. Nationwide Mut. Ins. Co., 318 N.C. 534, 538, 350 S.E.2d 66,
68 (1986). The Fungi or Bacteria Exclusion falls into the latter category, and thus,
we review it accordingly.
A. Fungi or Bacteria Exclusion
¶ 19 Plaintiff first argues the Fungi or Bacteria Exclusion fully applies to all of
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Defendants’ pleadings. We disagree.
¶ 20 Plaintiff’s Fungi or Bacteria Exclusion states,
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.
As such, Plaintiff is not obligated to defend the underlying suits if 1) “bodily injury”
was caused by “ ‘fungi’ or bacteria,” and 2) this “ ‘fungi’ or bacteria” was “on or within
a building or structure.”
¶ 21 The terms of the Policy define “bodily injury” as “bodily injury, sickness, or
disease sustained by a person, including death resulting from any of these at any
time.” We define “bodily injury,” then, as set out in the Policy. Cf. Holz-Her U.S.
Inc., 141 N.C. App. at 129, 539 S.E.2d at 350 (defining the term “occurrence” as
defined in the insurance policy). Both Plaintiff and Defendants concede Legionnaires’
disease is a form of legionellosis, which is caused by inhaling water droplets
containing the Legionella bacteria. Thus, it is undisputed the bodily injuries alleged
in the underlying suits arose due to the “actual, alleged, or threatened inhalation of,
ingestion of, contact with, exposure to, existence of, or presence of” the Legionella
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bacteria.
¶ 22 The key to this case, however, is whether the pleadings allege Legionella
bacteria was “on or within a building or structure” so as to subject the underlying
suits to the Bacteria and Fungi Exclusion. The Fungi or Bacteria Exclusion’s terms
“on,” “within,” “building,” and “structure” are not defined within the Policy. We
presume these terms to be nontechnical and, thus, “can be given the same meaning
they usually receive in ordinary speech.” Waste Management of Carolinas, Inc., 315
N.C. at 694, 340 S.E.2d at 379; see Allstate Ins. Co. v. Chatterton, 135 N.C. App. 92,
95, 518 S.E.2d 814, 817 (1999) (“Use of the ordinary meaning of a term is the preferred
construction . . . .”).
¶ 23 Here, Plaintiff concedes the Davis Event Center is a “building.” Thus, we must
determine if the underlying complaints allege the Legionella bacteria was “on” or
“within” the Davis Event Center. After a careful review of the record, we find all but
one of the underlying claimants specifically state they entered the Davis Event center
where Defendants All Pro and Carpenter’s hot tubs were on display. Notably,
Kimberly Grant (“Defendant Grant”) is the only claimant who did not claim she
entered the Davis Event Center. Defendant Grant stated she only “attended the 2019
NCMSF on September 15, 2019.” (emphasis added). Moreover, the record offers little
information regarding whether Defendants Mary Belue as personal representative of
the Estate of Delmer Eugene Belue, Jack Clinard, Peggy Duncan, Denice Williams,
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Crystal Holder, Randy Houston, and James Clow entered the Davis Event Center.
Indeed, the only pertinent information for these Defendants is found in Plaintiff’s
amended complaint: “The above identified persons and estates have filed suit and/or
asserted claims against Carpenter and/or All Pro for injury or death due to
Legionnaires’ disease allegedly contracted from Carpenter’s hot tub display located
in the Davis Event Center at the 2019 NC Mountain State Fair.” This is not
sufficient.
¶ 24 Without acknowledgment from these eight Defendants, the lack of specificity
within the pleadings and underlying complaints as to whether Defendants actually
entered the Davis Event Center or where they encountered Legionella bacteria
creates ambiguity. The trial court was left to consider if Legionella bacteria was “on”
or “within” the Davis Event Center. These “pleadings . . . disclose a mere possibility
that . . . [Defendants All Pro and Carpenter are] liable and that the potential liability
is covered.” Naddeo, 139 N.C. App. at 319, 533 S.E.2d at 506. The bodily injuries
resulting from the Legionella bacteria, therefore, potentially are not barred by the
Fungi or Bacteria Exclusion, and thus potentially covered by the Policy. See Crandell,
183 N.C. App. at 443, 644 S.E.2d at 608 (“Since we cannot conclude that the facts
alleged in the underlying complaint are not even arguably covered by the policy, we
must hold that American Home had a duty to defend . . . .” (internal quotation marks
omitted)). Furthermore, Plaintiff “could reasonably ascertain facts that, if proven,
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would be covered by its policy” by inquiring of these eight Defendants whether they
entered the Davis Event Center. Waste Management of Carolinas, Inc., 315 N.C. at
691, 340 S.E.2d at 374-75. Consequently, the trial court did not err in its denial of
Plaintiff’s motion for judgment on the pleadings.
B. Consumption Exception
¶ 25 Even if the pleadings did not show the possibility that the underlying suits are
not barred by the Fungi or Bacteria Exclusion, Plaintiff nonetheless has a duty to
defend under the Consumption Exception.
¶ 26 The Consumption Exception is an exception to the Fungi or Bacteria Exclusion.
It provides: “[The Fungi or 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.” Because there is no disagreement that Legionnaires’ disease is caused
by a bacterium, the question before us becomes what constitutes a “good intended for
bodily consumption.” Since the Policy does not define “good” or “bodily consumption,”
we look to their ordinary meanings to deduce the definition of each term. Eerie Ins.
Exch., 227 N.C. App. at 245, 742 S.E.2d at 810.
¶ 27 Turning first to “good[,]” Black’s Law Dictionary defines a “good” as “1.
[t]angible or moveable personal property other than money; esp., articles of trade or
items of merchandise . . . 2. Things that have value, whether tangible or not . . . .”
Goods, BLACK’S LAW DICTIONARY (11th ed. 2019). Here, the “good” in question is a
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hot tub and, more specifically, the water therein. This Court has not yet addressed
whether the water within a hot tub is considered a “good”; therefore, we are guided
by the analysis in other jurisdictions’ judicial decisions. In Nationwide Mutual Fire
Insurance Company v. Dillard House, Inc., plaintiff filed a declaratory judgment
action arguing it was not liable to defend an underlying suit wherein a man died from
legionnaires’ disease after bathing in a hotel’s hot tub. 651 F. Supp. 2d 1367, 1369
(N.D. Ga. 2009) [hereinafter Dillard House]. The primary insurance and umbrella
insurance policy offered by the plaintiff in Dillard House both contained bacteria
exclusions and consumption exceptions like the one in the case sub judice. Id. at
1370. The court, analyzing whether the hot tub’s water constituted a “good” for the
purpose of the consumption exceptions, concluded: “[W]ater 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.” Id. at 1378; see also Acuity v. Reed & Assocs. of TN, LLC, 124 F.
Supp. 3d 787, 795 (W.D. Tenn. 2015); Westport Ins. Corp. v. VN Hotel Group, LLC,
761 F. Supp. 2d 1337, 1346 (M.D. Fla. 2010), remanded on other grounds, 513 Fed.
App’x 927 (11th Cir. 2013) (unpublished) (“At the outset, the court determined that
bathing water in a hotel hot tub is a good, and there is no basis for deviating from
that reasoning here.”).
¶ 28 By concluding that a patron’s use of and bathing in a hot tub gives the water
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economic utility, Dillard House established that the water within a hot tub
constitutes a “good.” We find the reasoning within Dillard House persuasive and
adopt it herein. Surely, the water within Defendants All Pro and Carpenter’s hot tub
provided economic utility. Indeed, Defendants All Pro and Carpenter could have
displayed their hot tubs without water, but the sight of the swirling water, smell of
steam, and evaporation of vapors within the atmosphere of the Davis Event Center
was utilized as a marketing device to attract customers to purchase a hot tub. The
water within the hot tubs, by virtue of its marketing connection with the final
product, was a part of the commodity for which purchasers of the hot tub paid when
purchasing a hot tub from Defendants’ All Pro and Carpenter. Therefore,
notwithstanding that patrons did not bathe within Defendants All Pro and
Carpenter’s hot tubs at the Davis Event Center, the water therein constituted a
“good” as it provided value to Defendants All Pro and Carpenter’s selling of the hot
tubs. Accordingly, the primary issue then becomes whether Defendant All Pro and
Carpenter’s hot tubs were intended for “bodily consumption.” “Bodily” is defined as
“1: having a body or a material form: PHYSICAL, CORPOREAL[;] 2 a: of or relating
to the body[;] 2 b: concerning the body.” Dillard House, 651 F. Supp. 2d at 1379(emphasis omitted).
¶ 29 The term “consumption,” however, is susceptible to multiple reasonable
interpretations. Black’s Law Dictionary defines “consumption” as “[t]he act of
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destroying a thing by using it; the use of a thing in a way that exhausts it.”
Consumption, BLACK’S LAW DICTIONARY (11th ed. 2019). Dillard House relies on
Webster’s Third New International Dictionary, Unabridged and defined
“consumption” as
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).
Dillard House, 651 F. Supp. 2d at 1378 (emphasis omitted) (quoting WEBSTER’S THIRD
NEW INTERNATIONAL DICTIONARY, UNABRIDGED (2002)); accord Westport Ins. Corp.,
761 F. Supp. 2d at 1347-48. The Dillard House court found the second definition of
“consumption” to be applicable, explaining “[s]urely, 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 interpretation of the phrase ‘good . . . intended for consumption.’ ” Dillard
House, 651 F. Supp. 2d at 1378-79.
¶ 30 We are persuaded by Dillard House’s definition of “consumption” and adopt it
here. Moreover, the term “bodily” as used in the Consumption Exception is properly
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viewed as a modifier to “consumption.” Westport Ins. Corp., 761 F. Supp. 2d at 1347.
Therefore, this Court finds Dillard House’s and Westport Insurance Corporation’s
conclusion that “bodily consumption” is defined as “the utilization of economic goods
in the satisfaction of wants which relate to the body” is applicable in the case sub
judice. Id. at 1348 (internal quotation marks omitted).
¶ 31 We pause to note Plaintiff asserts that, because Defendant All Pro and
Carpenter’s hot tubs were intended for marketing, it falls outside the definition of
“consumption.” Plaintiff’s argument misses the point. The question is not whether
Defendant All Pro and Carpenter’s hot tubs were intended for consumption or
marketing, but whether the water therein was.4 Thus, having established that the
water within the hot tubs is a “good,” we next must determine whether the water was
intended for the utilization of economic goods in the satisfaction of wants which relate
to the body.
¶ 32 After a careful review of the record, we conclude the water within Defendant
All Pro and Carpenter’s hot tubs was intended to satisfy the wants which relate to
the patrons’ bodies. Although Defendant All Pro and Carpenter could have chosen to
4It is the water inside the hot tub, not the hot tub itself, which was the culprit of
creating Legionella Bacteria. See MAYO CLINIC, https://www.mayoclinic.org/diseases-
conditions/legionnaires-disease/symptoms-causes/syc-20351747 (last visited July 14, 2022)
(“Most people catch Legionnaires’ disease by inhaling the bacteria from water or soil.”
(emphasis added)).
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display their hot tubs without water, they did not. Rather, the circulating water
within the hot tubs was intended to attract patrons to Defendant All Pro and
Carpenter’s display at the Davis Event Center by offering an experience to interact
with the hot tub in operation. Patrons could feel the mist and heat of the hot tubs,
put their hands into the water, and smell its mist. Surely experiencing and
possessing the ability to touch the water and inhaling and ingesting the water vapor
caused patrons to satisfy their bodily wants by interacting with the hot tubs’ water.
¶ 33 Our holding today is not novel in its conclusion. In Wesport Insurance
Corporation v. VN Hotel Group, LLC, the underlying complaints alleged hotels caused
an accumulation of Legionella bacteria when they negligently maintained their
potable water and plumbing system, and, thus, the underlying complainants “were
infected with Legionnaires’ disease when they inhaled and ingested water vapor from
the guest room showers and hotel spa tub.” 761 F. Supp. 2d at 1340 (emphasis added).
Examining the insurance policy offered by plaintiff, the trial court found “the facts
alleged . . . satisfy the Consumption Exception.” Id. at 1348. The patrons in this case,
likewise, were infected with Legionnaires’ disease after inhaling and ingesting the
water vapor from Defendants All Pro and Carpenter’s hot tubs.
¶ 34 In sum, a reasonable interpretation of the Consumption Exception illustrates
the underlying pleadings fall under this provision. The water within Defendants All
Pro and Carpenter’s hot tubs is a good which was intended to satisfy a patron’s wants
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by allowing them to touch the water and inhale and ingest the water vapor. As such,
Plaintiff has a duty to defend the underlying suits per the terms of the Consumption
Exception.
C. Duty to Indemnify
¶ 35 Finally, Plaintiff argues since it has no duty to defend the underlying suits, it
therefore has no duty to indemnify Defendants All Pro and Carpenter. The insurer’s
duty to defend is
broader than the duty to indemnify only “in the sense that
an unsubstantiated allegation requires an insurer to
defend against it so long as the allegation is of a covered
injury; however, even a meritorious allegation cannot
obligate an insurer to defend if the alleged injury is not
within, or is excluded from, the coverage provided by the
insurance policy.”
Kubit v. MAG Mut. Ins. Co., 210 N.C. App. 273, 279, 708 S.E.2d 138, 145 (2011)
(quoting Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, L.L.C., 364 N.C. 1, 7,
692 S.E.2d 605, 610-11 (2010)). Thus, “[b]ecause the duty to defend may be broader
than the duty to indemnify we address the duty to defend because if it fails, so too
does the duty to indemnify.” N.C. Farm Bureau Mut. Ins. Co. v. Phillips, 255 N.C.
App. 758, 764, 805 S.E.2d 362, 366 (2017). In the case sub judice, we are holding
Plaintiff does have a duty to defend Defendants All Pro and Carpenter; as such, we
need not reach the merits of whether Plaintiff has a duty to indemnify Defendants
All Pro and Carpenter.
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V. Conclusion
¶ 36 Based on the foregoing, we conclude ambiguity exists as to whether the
Legionella bacteria was “on” or “within” the Davis Event Center, and, as a result,
there is a mere possibility that the underlying suits are not barred by the Fungi or
Bacteria Exclusion. Accordingly, Plaintiff has a duty to defend the underlying suits.
Moreover, because the water within Defendants All Pro and Carpenter’s hot tubs was
a good intended for the satisfaction of wants which relate to the body, Plaintiff’s duty
to defend is also triggered by the Consumption Exception. Accordingly, we affirm the
order of the trial court.
AFFIRMED.
Judges MURPHY and HAMPSON concur.