Certain Underwriters at Lloyds v. Creagh, 2014 U.S. App. LEXIS 6853 (3d Cir. 4/14/14) (not precedential)

A commercial and general liability policy’s microorganism exclusion applied because the fluids that had escaped from the decedent’s body and damaged the insured’s property contained bacteria, which constituted a microorganism.

In this property damage action, the insured owned a four-story apartment building in which a tenant died. Unfortunately, his body was not immediately discovered. As a result, the body decomposed and severely damaged the unit. The insurer filed a declaratory judgment action with the district court claiming that the policy did not require it to indemnify the insured for the property damage. The insured counterclaimed for compensatory damages, bad faith and violation of the UTPCPL. The district court entered summary judgment in favor of the insurer for each claim. On appeal, the Third Circuit ruled that the Eastern District was correct in its conclusion that the commercial and general liability policy’s microorganism exclusion applied because the fluids that had escaped from the decedent’s body and contaminated the premises contained bacteria, which constitute a microorganism. The Third Circuit also concluded that the district court had properly held that the policy’s seepage exclusion likewise precluded coverage.

Case Law Alerts, 3rd Quarter, July 2014