Kentucky Federal Court Grants Declaratory Judgment on Pleadings in Coverage Suit Over Fungus Exposure
Case Study

Kentucky Federal Court Grants Declaratory Judgment on Pleadings in Coverage Suit Over Fungus Exposure

December 3, 2020

The U.S. District Court for the Western District of Kentucky granted a motion for declaratory judgment on the pleadings in a coverage dispute stemming from an underlying negligence lawsuit, sparing the carrier, Scottsdale Insurance Company, from the threat of defense and indemnity exposure and the expense of further litigation.

The plaintiffs in the underlying matter were residents of units owned by Good Karma Holdings and Alltrade, Scottsdale’s named insured and an additional insured, respectively. Claiming negligence, the plaintiffs alleged that the property owners failed to construct, remodel, or maintain the property in a safe and habitable condition, and as a result, caused the claimants to contract Histoplasmosis, an infection triggered by breathing in spores of a fungus found in bird and bat droppings.

The claimants were seeking damages for alleged bodily injuries, incurred medical expenses, lost wages, and mental suffering, as well as attorneys’ fees and costs.

Prior to any discovery in the action, Goldberg Segalla’s Samantha S. Rhayem, a member of the firm’s Global Insurance Services practice based Miami, moved for judgment on the pleadings, citing exclusions in Scottsdale’s commercial general liability policy. Sam argued that the policy’s “fungi or bacteria” exclusion applied to the alleged bodily injuries in the underlying lawsuit.

Despite creative arguments under Kentucky law by counsel for both the claimants and the insured, the court granted Sam’s motion and entered judgment in favor of Scottsdale, stating it had no duty to defend or indemnify its insured.



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