A Work of Art Is Not Consumed

Exceptions to Exclusion Don’t Always Grant Coverage

Lawyers are creative people. They can find an ambiguity in an insurance policy on the the thinnest of rhetorical threads. A creative lawyer litigates to courts of appeal even when its creative interpretation makes no sense when the policy is read as a whole in conjunction with the facts.

In Heinecke v. Aurora Healthcare, Inc., 2012AP2469 (Wis.App. 10/08/2013) the Wisconsin Court of Appeal was called upon to deal with such an interpretation in a dispute between Creative Business Interiors, Inc. (“CBI”), Aurora Healthcare, Inc., and Aurora Health Care Metro, Inc. (collectively “Aurora”), and Continental Casualty Company (“Continental”) who appealed the trial court’s order granting summary judgment and dismissing The Midwestern Indemnity Company (“Midwestern”) and Hawkeye-Security Insurance Company (“Hawkeye”) from this lawsuit.

The sole issue before the Wisconsin Court of Appeal was whether the Consumption Exception to the Fungi or Bacteria Exclusion included in CBI’s insurance policies encompasses a decorative water fountain such that the exception reinstates coverage.


The numerous plaintiffs in this case brought a consolidated lawsuit, alleging that they contracted Legionnaire’s disease after they were exposed to bacteria present in the water of a decorative water fountain (“the Fountain”) located in the lobby of Aurora St. Luke’s South Shore Hospital (“the Hospital”). Legionnaire’s disease is a type of pneumonia caused by the Legionella bacteria. The bacteria grow best in warm water, like the kind found in hot tubs, cooling towers, hot water tanks, large plumbing systems, or parts of air-conditioning systems of large buildings. Legionnaire’s disease is contracted by breathing in mist or vapor that has been contaminated with Legionella bacteria.

CBI contracted with Aurora Healthcare to renovate the Hospital’s lobby. As part of the project, CBI was to construct and install the Fountain at the Hospital. Consequently, after Aurora was sued by the plaintiffs, Aurora and its insurer filed a third-party complaint, naming CBI as a defendant in each of the plaintiff’s actions. Midwestern and Hawkeye, as CBI’s insurers, were later joined as third-party defendants under Wisconsin’s direct-action statute.

CBI purchased a Commercial General Liability Policy from Midwestern (“the Midwestern Policy”). The Midwestern Policy is subject to a number of exclusions, including the Fungi or Bacteria Exclusion, which 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. ¶ 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 includes an exception to the exclusion, which the parties have named the “Consumption Exception.” The Consumption Exception states: “This exclusion does not apply to any “fungi” or bacteria that are, are on, or are contained in, a good or product intended for consumption.”

CBI also purchased an Umbrella policy covering the same time period from Hawkeye (“the Hawkeye Policy”). The Hawkeye Policy contains a nearly identical Fungi or Bacteria Exclusion.


The parties here all agree, for the purposes of this appeal, that the Fungi or Bacteria Exclusion in the Midwestern and Hawkeye insurance policies precludes coverage to CBI for the lawsuits brought by the plaintiffs. However, CBI asked the court of appeal to reverse the circuit court’s decision dismissing Midwestern and Hawkeye from the case because CBI believes that the Fountain, as a decorative art feature, was “intended for consumption” so as to be excepted from the Bacteria or Fungi Exclusion by the Consumption Exception.

When an insurance company’s motion for summary judgment challenges the existence of insurance coverage, a Wisconsin court engages in a three-step inquiry, the last of which is:  “If a particular exclusion does apply, the court looks to see if any exception to that exclusion reinstates coverage.”

The appellate court concentrated on the last step, whether the Consumption Exception reinstates coverage. CBI asserts that the Fountain falls within the exception because it is “consum[ed]” when it is observed and enjoyed by Hospital patrons. Relying on the circuit court’s definition of the word “consumption, ” Midwestern and Hawkeye argue that the plain and ordinary meaning of the word consumption is “to eat, to drink, to use up, to consume.”  These common and ordinary meanings of the word “consume” fail to fit the intended use of the Fountain because the Fountain certainly was not intended to be eaten, drunk, used up, or consumed.

The mere fact that a word has more than one dictionary meaning, or that the parties disagree about the meaning, does not necessarily make the word ambiguous if the court concludes that only one meaning applies in the context and comports with the parties’ objectively reasonable expectations. A court has an obligation to interpret a policy’s terms as they would be understood from the perspective of a reasonable person in the position of the insured, and not simply adhere to any interpretation that is grammatically plausible.

The Consumption Exception’s reference to a good or product intended for consumption clearly did not mean to encompass the observation and enjoyment of art. A reasonable insured reading the policy would understand the word “consumption” to reference a good or product that was intended for a person to eat, drink or or otherwise use up. It makes little sense that a reference to consumption, when discussing exposure to fungi and bacteria, would be referring to the observation and enjoyment of art.

In holding that the Consumption Exception included in the Midwestern and Hawkeye insurance policies does not encompass the observation and enjoyment of art, the court of appeal rejected CBI’s reliance on decisions of other courts. To begin, all of the cases cited hail from foreign jurisdictions and therefore are not binding on a Wisconsin court. Furthermore, none of the cases were persuasive as none of them deal with the issue before this court: Whether a decorative water fountain, constructed in a hospital lobby for the aesthetic enjoyment of hospital patrons, that is, art, is a product a reasonable person would consider to fall within the Consumption Exception to the Fungi or Bacteria Exclusion. In each case cited by CBI, the insured intended the water to be used by guests and guests were expected to have physical contact with the water, unlike the Fountain in Aurora St. Luke’s lobby.


If a party to an insurance contract advances a grammatically plausible interpretation, but that interpretation does not square with what the insured would have understood the policy to mean then that reading should be rejected as unreasonable. An insurance policy is only ambiguous where a policy is susceptible to more than one reasonable interpretation.


As I have written until my fingers are worn to nubs, insurance is nothing more than a contract where an insurer makes promises in return for promises made by the insured. The promises made must be read as an entirety, not separated from context, and given reasonable interpretation based on the intentions and understanding of the insured and the insurer at the time the contract is made.

In this case the lawyers for the insured posited a creative, albeit excessive interpretation of the word “consumption” and ignored the purpose for which the fountain was built. The fountain was not a drinking fountain but was, rather, decorative and designed to be seen, not eaten, drunk, bathed in, or otherwise consumed. To read it otherwise would eliminate the meaning of the contract agreed to by the parties.

Just because insurance companies are not liked by the general public does not mean that creative lawyers can take advantage of the public’s prejudice to obtain coverage that was not agreed to or paid for by the insured.


© 2013 – Barry Zalma

Barry Zalma, Esq., CFE, has practiced law in California for more than 40 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally, for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

Specialty Technical Publishers recently published Mr. Zalma’s new E-Book, “Getting the Whole Truth” which is available at http://www.stpub.com/Getting-the-Whole-Truth_p_254.html.

Mr. Zalma recently published the e-books, “Zalma on California Claims Regulations – 2013″; “Rescission of Insurance in California – 2013;” “Random Thoughts on Insurance” a collection of posts on this blog; “Zalma on Diminution in Value Damages – 2013,”“Zalma on Insurance,” “Heads I Win, Tails You Lose,”  “Arson for Profit”  and others that are available at www.zalma.com/zalmabooks.htm.

Mr. Zalma can also be seen on World Risk and Insurance News’ web based television programing, http://wrin.tv.

About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
This entry was posted in Zalma on Insurance. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.