The Brethren Mut. Ins. Co. v. Jai Dev, Inc.

• Decision Date: 14 February 2023
• Docket Number: Civil Action 7:21-cv-00316
• Parties: THE BRETHREN MUTUAL INSURANCE COMPANY, et al, Plaintiffs, v. JAI DEV, INC., et al, Defendants.
• Court: U.S. District Court — Western District of Virginia

THE BRETHREN MUTUAL INSURANCE COMPANY, et al, Plaintiffs,
v.
JAI DEV, INC., et al, Defendants.

Civil Action No. 7:21-cv-00316

United States District Court, W.D. Virginia, Roanoke Division

February 14, 2023

MEMORANDUM OPINION

Elizabeth K. Dillon United States District Judge

The Brethren Mutual Insurance Company (“Brethren”) and Great American Alliance Insurance Company (“Great American”) brought this diversity action against Jai Dev, Inc., and David L. Wise. Plaintiffs seek a declaratory judgment that an alleged injury caused by Wise's inhalation of Legionella bacteria while staying at a hotel owned by Jai Dev is not a covered loss under either of the insurance policies plaintiffs issued to Jai Dev and, as a result, that neither Brethren nor Great American owes a duty to indemnify or defend Jai Dev for such a loss. Wise answered the complaint and brought a counterclaim seeking a declaratory judgment that both policies provide coverage to Jai Dev with respect to his suit.

The matter is before the court on plaintiffs' motions for summary judgment. (Dkt. Nos. 30, 32.) Because the court concludes that Wise's alleged injury is a covered loss under Brethren's policy, Brethren's motion will be denied. As such, having determined that there are no factual issues to resolve and that defendants are entitled to judgment as a matter of law on Brethren's claim, the court will grant summary judgment in favor of defendants sua sponte

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pursuant to Federal Rule of Civil Procedure 56(f)(1). However, because the court concludes that Wise's alleged injury is not a covered loss under Great American's policy, Great American's motion will be granted. Lastly, the court will decline to exercise jurisdiction over, and therefore dismiss, Wise's counterclaim because it is effectively a “mirror image” of plaintiffs' complaint that “merely restate[s] issues already before the court as part of [plaintiffs'] affirmative case.” See Atl. Recording Corp. v. Serrano, No. 07-CV-1824 W(JMA), 2007 WL 4612921, at *4 (S.D. Cal. Dec. 28, 2007).

I. BACKGROUND

A. Factual and Procedural History

In March 2019, Jai Dev owned and operated a hotel in Radford, Virginia, then known as the Best Western Radford Inn (the “Best Western”). (Stip., Dkt. No. 28 ¶ 1.) Brethren and Great American both issued insurance policies to Jai Dev in relation to the Best Western effective from May 8, 2018 to May 8, 2019. (Id. ¶¶ 2-3.) Brethren was Jai Dev's primary insurer, and Great American was Jai Dev's excess insurer.

On July 2, 2020, Wise sued Jai Dev in this court, claiming personal injuries arising out of his alleged inhalation of a bacteria during his previous stay at the Best Western. (See Dkt. No. 1-5; see also Wise v. Jai Dev, Inc., No. 7:20-cv-00384 (W.D. Va.).) That case (the “underlying action”) remains pending. In the underlying action, Wise alleges that he stayed at the Best Western from February 28, 2019, through March 3, 2019, (Stip. ¶ 5) and that he used the hot tub and pool at the hotel on March 1 and 2, 2019 (id. ¶ 6). Wise further submits that he contracted Legionnaires' disease because the hot tub and pool at the Best Western were contaminated with

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Legionella bacteria. (Id. ¶ 7.) As Wise states in his complaint in the underlying action, “[a]ccording to the U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, Legionnaires' disease is a very severe type of pneumonia that is caused by inhalation of Legionella bacteria from a water source.” (See Dkt. No. 1-5 ¶ 11 (italics omitted).) “Legionella is found in warm water, particularly hot tubs that are not adequately cleaned and disinfected.” (Id. (same).) “A person can become infected with Legionella when they breathe in steam or mist from a contaminated hot tub.” (Id. (same).)

Wise does not allege that Jai Dev sold or served any beverage that had Legionella bacteria in it or that otherwise contributed to his injuries during his visit to the Best Western. (Stip. ¶ 14.) Wise did not intentionally ingest any of the water in the pool or hot tub during his visit to the Best Western (id. ¶ 11) but does not know if he unintentionally swallowed any water while in the pool or hot tub (id. ¶ 12). During Wise's visit to the Best Western, the hot tub and pool were located indoors in an enclosed edifice with walls and a roof. (Id. ¶ 13.)

On May 20, 2021, Brethren and Great American filed this action against Jai Dev and Wise, requesting that the court declare the parties' rights and obligations under both the Brethren and Great American policies with respect to the underlying action. (Compl., Dkt. No. 1.) Wise then answered the complaint and asserted a counterclaim, likewise requesting that the court declare the parties' rights and obligations under these insurance policies and issue a declaration that both Brethren and Great American have a legal duty to defend and indemnify Jai Dev in relation to the underlying action. (Dkt. No. 12.) Due to an inadvertent error in the listing of Brethren's legal name in the complaint, plaintiffs filed, upon the court's order (Dkt. No. 18), an

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amended complaint that was otherwise identical in substance. (Am. Compl., Dkt. No. 19.) Plaintiffs now move for summary judgment (Dkt. Nos. 30, 32), which Wise opposes (Dkt. Nos. 35, 36).^[1]

B. The Brethren Policy

Brethren issued Policy No. BOP0076884 02, effective May 8, 2018 to May 8, 2019, to Jai Dev in relation to the Best Western. (See Dkt. No. 19-3 [hereinafter “Brethren Policy”]; Stip. ¶ 2.) Under Section II.A.1.a of the “Businessowners Coverage Form” of the Brethren Policy, Brethren agreed to insure, in relevant part, the following:

We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury”, “property damage” or “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury”, “property damage” or “personal and advertising injury”, to which this insurance does not apply. We may at our discretion investigate any “occurrence” and settle any claim or “suit” that may result.

(Brethren Policy 78.) Section II.B.1.f of the Brethren Policy includes a Pollution Exclusion that excludes from liability coverage, in relevant part, the following:

(1) [This insurance does not apply to] [b]odily injury” or “property damage” arising out of the actual, alleged or threatened

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discharge, dispersal, seepage, migration, release or escape of “pollutants”:

(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured. However, this subparagraph does not apply to:

(i) “Bodily injury” if sustained within a building and caused by smoke, fumes, vapor or soot produced by or originating from equipment that is used to heat, cool or dehumidify the building, or equipment that is used to heat water for personal use, by the building's occupants or their guests.

(Id. 81.) Section II.F.15 of the Brethren Policy defines the term “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” (Id. 92.)

The Brethren Policy also includes an endorsement which added a “fungi or bacteria” exclusion as Section II.B.1.t of the Policy; this endorsement excluded from coverage, in relevant part, the following:

(1) [This insurance does not apply to] “[b]odily injury”, “property damage” or “personal and advertising injury” 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.

(Id. 104 (emphasis added).)^[2] Importantly, however, the endorsement also included an exception (the “bodily consumption exception”) which mandates that this exclusion does not apply to “any ‘fungi' or bacteria that are, are on, or are contained in, a good or product intended for bodily

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consumption.” (Id. (emphasis added).)

C. The Great American Policy

Great American issued Policy No. UM1743916/Cert. No. 3887, effective May 8, 2018, to May 8, 2019, to Jai Dev through a risk purchasing group (Select Hospitality Insurance Company, Inc.) that provides umbrella and excess liability coverage. (Dkt. No. 19-4 [hereinafter “Great American Policy”]; Stip. ¶ 3.) Great American's policy generally provides excess liability coverage over a retained limit, which here includes $1 million of underlying general liability coverage. (Great American Policy 12, 36.)

The Great American Policy includes an endorsement that added an exclusion for “Organic Pathogens - with Exception for Food and Beverages” to Section IV of the “Commercial Umbrella Coverage Form.” (Id. 64.) The organic pathogens exclusion excludes from coverage any “‘[b]odily injury . . . arising out of any actual, alleged or threatened infectious, pathogenic, toxic or other harmful properties of any ‘organic pathogen.'” (Id.) The exclusion further defines “organic pathogen” as, in relevant part, any “[b]acteria . . . other microorganisms; or mycotoxins, spores or other by-products [thereof].” (Id.).

However, the Great American Policy also includes an exception to the organic pathogen exclusion (the “beverage exception”), under which the exclusion “does not apply to ‘bodily injury' caused by any ‘organic pathogen' in or on any food or beverages sold, distributed, served or handled by any insured.” (Id. (emphasis added).) Further, the...