Helping to Insure Against Legionella Outbreaks

Helping to Insure Against Legionella Outbreaks


Since 1976, when the disease infamously received its moniker from an American Legion convention in Philadelphia resulting in 212 reported illnesses and 34 confirmed deaths, between 8,000–18,000 Americans are hospitalized each year with Legionellosis or “Legionnaires disease” - a bacterial infection (typically pneumonia) caused primarily by the species of bacteria Legionella pneumophila.. (Source: http://wwwnc.cdc.gov/eid/article/20/11/pdfs/13-1872.pdf). Pontiac fever is a milder illness that does not involve pneumonia.

The Legionella bacteria is found naturally in the environment, usually in water, and grows best in warm water like the kind found in hot tubs, hot water tanks, large plumbing systems, decorative fountains, and cooling towers. Indeed, the source of the most recent outbreak in the South Bronx was recently confirmed to be a cooling tower at the Opera House Hotel. The South Bronx outbreak, the worst in New York City’s history, sickened more than 120 people and has claimed 12 lives since early July 2015.

According to a recent press release on August 20, 2015, the New York State Department of Health (DOH) confirmed the outbreak in the South Bronx as officially over and that epidemiologic and environmental investigations had indicated that a cooling tower was the source of the outbreak. The DOH continues to investigate noting “inadequate maintenance and inadequate levels of biocide may have contributed…” (Source: http://www.nyc.gov/html/doh/html/pr2015/pr034-15.shtml).

As a result of this outbreak, Mayor De Blasio and the New York City Council announced new regulations for the registration, testing, inspection and certification of cooling towers. The regulations mandate timeframes and processes for each of these requirements. The legislation, which was officially signed into law on August 18, 2015 and takes effect immediately, requires:

  • Registration of all existing cooling towers within 30 days of the law’s enactment;
  • Registration of any new cooling towers prior to becoming operational;
  • Quarterly inspection and reporting of increased microbes to the DOH;
  • Annual inspection certification;
  • Development and implementation of a maintenance plan and program conforming with current engineering standards to prevent Legionella contamination;
  • Disinfection of cooling towers with levels of microbes that pose potential health risks.

Violations of registration, certification and inspection requirements are subject to civil penalties of up to $10,000. Failure to disinfect towers where increased microbes are detected is classified as a misdemeanor, and is punishable with penalties of up to $25,000. (Source: http://www1.nyc.gov/office-of-the-mayor/news/566-15/mayor-bill-de-blasio-signs-first-in-nation- legislation-cooling-tower-maintenance#/0)

New York’s Governor Cuomo announced similar statewide legislation observing that: “New York State should have the strongest laws possible when it comes to protecting public health. Today’s action by our partners in New York City is a positive step forward in achieving that goal. In the coming days we will adopt statewide regulations to ensure the same, rigorous uniform standard protects every community from the Bronx to Buffalo.” (Source: http://council.nyc.gov/html/pr/081315ld.shtml).

The increased regulatory rigor will undoubtedly carry a hefty price tag for building owners and operators. In addition to the challenge of identifying and retaining licensed contractors to conduct the required cooling tower inspections and certifications, the presence of the bacteria will necessitate disinfection, which may result in suspension of business operations during any such disinfection as well as the potential for reputational damages. In addition, we are likely to see additional third party bodily injury claims from this recent outbreak. Indeed, several New York area law firms have already launched outreach campaigns trolling for legionella plaintiffs and within the past day, there has already been one lawsuit filed against the Opera House Hotel. (http://newyork.cbslocal.com/2015/08/24/legionnaires-disease-lawsuit/.)

Building owners and operators, particularly hotels and hospitals, in New York and beyond should take a hard look at all of their insurance policies to determine whether such policies might provide coverage for losses associated with responding to disinfections prompted by the recent legislation, or responding to claims from an outbreak of legionella from sources other than cooling towers. For example, in some jurisdictions bacteria such as legionella may not be considered to be a “pollutant” for purposes of a pollution exclusion in a Commercial General Liability policy. (See e.g., Westport Ins. Corp. v. VN Hotel Group, LLC, 513 Fed. Appx. 927 (11th Cir. Fla. 2013) (applying Florida law, court found insurer had a duty to defend). However, commercial policies may contain additional exclusions for bacteria or communicable diseases which might independently exclude coverage. (See e.g., Paternostro v. Choice Hotel Int'l Servs. Corp., 2014 U.S. Dist. LEXIS 161157 (E.D. La. Nov. 14, 2014).

Many pollution legal liability policies contain express coverage for Legionella bacteria within the scope of their triggering “pollution conditions” definition. Such coverage may extend not only to defense and indemnification for bodily injury claims, but may provide coverage for disinfection costs where the insured is required by a governmental authority to undertake a cleanup, as well as protection from first party business interruption losses. In addition, many of these policies offer protection against reputational damages – and may include access to resources to help manage the public’s perception of the building and/or brand.

All potentially applicable insurance policies should be carefully reviewed as they may contain unique and specific reporting conditions in order to trigger coverage. In addition, most policies typically require that an insured obtain the insurer’s consent prior to undertaking any cleanup. With the pressure to get the cleanup conducted and the property restored to its operating condition, that requirement may be overlooked, and in turn, compromise the availability of that coverage.

As is clearly the import of the New York City legislation, the best way to manage these situations is to avoid them in the first place, or else mitigate the impact by making routine inspections of a building’s cooling towers (or hot tubs, spas, fountains, plumbing systems and other warm water sources) as part of standard building operating protocols. This allows a more thorough and reasoned assessment of any potential problem and the ability to make a careful selection of the disinfection contractor, manage costs, and mitigate the interruption to guests, patients, tenants and other building occupants. Prior to undertaking any such cleanup, have a discussion with your broker or other insurance advisors to obtain advice and guidance on reporting the claim timely and in accordance with the policy conditions and obtaining carrier consent to the cleanup to ensure that valuable insurance protections are not prejudiced by hasty action.

Disclaimer: This document has been provided as an informational resource for Aon clients and business partners. It is intended to provide general guidance on potential exposures, and is not intended to provide medical advice or address medical concerns or specific risk circumstances. Due to the dynamic nature of infectious diseases, Aon cannot be held liable for the guidance provided. We strongly encourage our clients and business partners to seek additional information from credible sources such as the Centers for Disease Control and Prevention. As regards insurance coverage questions, whether coverage applies or a policy will respond to any risk or circumstance is subject to the specific terms and conditions of the insurance policies and contracts at issue and underwriter determinations.