Where There is Fire, There is Smoke

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In Hobson v. Indian Harbor Insurance Co., No. 316714, 2015 WL 1069242 (Mich. Ct. App. Mar. 10, 2015), the appellate court in Michigan rejected the insurers’ interpretation of the pollution exclusion in the landlord’s commercial general liability (“CGL”) insurance policy to deny the tenants’ bodily injury claim.

The dispute arose when the plaintiffs sustained bodily injuries from a fire that broke out in the apartment building where they resided. Subsequently, the plaintiffs sued the landlord and its insurers, alleging that the fire was caused by the negligence of the landlord’s employee.

The landlord’s CGL contained a pollution exclusion that precluded coverage of bodily injury caused solely by “the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” Further, the “pollutants” included “smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

In support of their motion for summary judgment, the insurers argued that since the plaintiffs alleged they suffered from “smoke inhalation injuries,” their recovery was barred by the pollution exclusion provision. The trial court, however, found the argument “absurd” because under the insurers’ reading of the exclusion, the tenants who sustained burns in a fire but also inhaled smoke would not be covered.

Explaining that smoke cannot be separated from fire, the appeals court agreed with the trial court. The court reasoned that although the policy included smoke as a pollutant, the exclusion “applie[d] to occurrences involving the pollutant as a pollutant.”  It further held that the exclusion provision did not intend that “any ‘pollutant’ involved in the casual chain [of the injuries would] negate[] [the insurers’] liability.” The court concluded that “the fire and smoke engulfed them . . . not pollute[d] them.”