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Court rejects insurer's attempt to use pollution exclusion to avoid fire liability

The Indian Harbor Insurance Company presumed one step too far on Michigan's insurance-friendly appellate courts this month.  When Charlie and Mary Hobson were hurt in an apartment fire by smoke inhalation, the insurer argued that its liability coverage didn't apply to compensate them because the policy contained a pollution damage exclusion.  The insurer's exclusion listed "smoke" among the "irritants and contaminants" in its pollution exclusion, and suggested that since the smoke "seeped, migrated, released or escaped" from a fire caused by the landlord in the Hobson's apartment, they were injured by an excluded cause:  smoke inhalation.

The trial judge called this an "absurd argument" and rejected the insurance company's request for summary disposition.  When the insurer asked for permission to appeal, it was originally denied, but the insurer-dominated Michigan Supreme Court ordered the appellate court to hear the appeal.  When the mid-level court did hear the appeal, the panel unanimously concluded that the trial judge got it right:  the pollution liability exclusion in the parties' insurance contract had never been intended to apply to smoke injuries suffered by business invitees and caused by a fire on the premises.

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