Michigan Supreme Court

Lansing, Michigan

Robert P. Young, Jr., Chief Justice

Stephen J. Markman

Brian K. Zahra

Bridget M. McCormack

David F. Viviano 

Richard H. Bernstein

Joan L. Larsen, Justices

Order 

May 27, 2016

151447

CHARLIE B. HOBSON AND

MARY L. HOBSON,

Plaintiffs-Appellees,

v

INDIAN HARBOR INSURANCE COMPANY, SC: 151447

XL INSURANCE AMERICA, INC., and XL COA: 316714

INSURANCE COMPANY OF NEW YORK, INC., Wayne CC: 12-008167-CK

Defendant-Appellants,

and

WILSON INVESTMENT SERVICE & 

CONSTRUCTION, INC., WILSON INVESTMENT

SERVICE, CRESCENT HOUSE APARTMENTS,

CRESCENT HOUSE APARTMENTS, L.L.C., W-4

FAMILY LIMITED PARTNERSHIP, W-4 FAMILY

L.L.C., and JAMES P. WILSON,

Defendant-Appellees. 

__________________________________________/

On May 4, 2016, the Court heard oral argument on the application for leave to 

appeal the March 10, 2015 judgment of the Court of Appeals. On order of the Court, the 

application is again considered, and it is DENIED, because we are not persuaded that the 

question presented should be reviewed by this Court.

ZAHRA, J. (concurring).

 Although the question whether the total pollution exclusion endorsement (the 

Endorsement) of the underlying commercial general liability (CGL) policy precludes 

coverage when applied to the facts presented in this case is an interesting one, I 

nonetheless conclude the application of the defendant insurers1 for leave to appeal should 

be denied.

Defendant is correct that this Court has made it abundantly clear that Michigan 

does not interpret insurance contracts under the rule of reasonable expectations or any 

rule of construction comparable to it. Rory v Continental Ins Co, 473 Mich 457, 469-470 

(2005); Wilkie v Auto-Owners Ins Co, 469 Mich 41, 63 (2003). Insurance contracts are 

 

1 Although there were numerous defendants, only Indian Harbor Insurance Company, XL 

Insurance America, Inc., and XL Insurance Company of New York, Inc., appealed. For 

the sake of simplicity, I will refer to the appellants in the singular as “defendant” 

throughout this statement.
2

interpreted according to their plain terms. “Well-settled principles of contract 

interpretation require one to first look to a contract’s plain language. If the plain 

language is clear, there can be only one reasonable interpretation of its meaning and, 

therefore, only one meaning the parties could reasonably expect to apply.” Singer v 

American States Ins, 245 Mich App 370, 381 n 8 (2001). 

Under this rule of interpretation, defendant has presented a colorable argument 

that the Endorsement, which altered “Exclusion f” and removed the “hostile fire” 

exception from that exclusion, operates literally to exclude any damage from smoke. Yet 

I also believe that under the same rule of contract interpretation, a reasonable argument 

can be advanced that, notwithstanding the removal of the hostile fire exception, smoke 

did not discharge, disperse, seep, migrate, release, or escape in relation to the insured 

property. The CGL policy insures the entire apartment building in which the fire began. 

Before the Endorsement, damage caused by smoke wholly within the apartment building 

was excluded unless it was the result of a “hostile fire.”[2]

 

Exclusion f originally provided:

f. Pollution 

(1) “Bodily injury” or “property damage” arising out of the actual, 

alleged or threatened discharge, dispersal, seepage, migration, release or 

escape of “pollutants”: 

(a) At or from any premises, site or location which is or was at any 

time owned or occupied by, or rented or loaned to, any insured. However, 

this subparagraph does not apply to: 

* * *

(iii) “Bodily injury” or “property damage” arising out of heat, 

smoke or fumes from a “hostile fire”[.] [Emphasis added.]

The Endorsement at issue provides that Exclusion f “is replaced by the following”:

This insurance does not apply to:

f. Pollution

 

2 Under the CGL policy, “ ‘[h]ostile fire’ means one which becomes uncontrollable or 

breaks out from where it was intended to be.”
3

(1) “Bodily injury” or “property damage” which would not have 

occurred in whole or part but for the actual, alleged or threatened discharge, 

dispersal, seepage, migration, release or escape of “pollutants” at any time.

Under the original Exclusion f, damage caused by “smoke” was excluded only 

when it was discharged, was dispersed, seeped, migrated, was released, or escaped “[a]t 

or from any premises . . . owned or occupied by . . . any insured.” (Emphasis added.) 

The original provision went on to except from this exclusion damage caused by “heat, 

smoke or fumes from a ‘hostile fire’[.]” 

Defendant points out that the Endorsement removed the hostile-fire exception to 

Exclusion f that otherwise would have allowed coverage in this case for smoke damage at 

the insured property. But the Endorsement also removed the restriction that had initially 

excluded smoke damage only if it had moved “at or from” the insured property. 

Although the Endorsement still requires the discharge, dispersal, seepage, migration, 

release, or escape of pollutants, the Endorsement no longer requires that the pollutants do 

so at the insured property. 

Had the smoke been discharged, been dispersed, seeped, migrated, been released, 

or escaped from the apartment building or into the apartment building, the CGL policy 

would very likely exclude the resulting damage. But because the CGL policy no longer 

expressly excludes smoke damage if the smoke had moved “at” the insured property, 

defendant’s argument that the “smoke from the fire that started in another unit had to 

have dispersed, seeped, or migrated into the Plaintiffs [sic] unit, and had to have been 

released or escaped from the unit where the building manager allegedly started the fire” is 

questionable and without any support in the language of the policy. The CGL policy 

does not differentiate between individual units within the apartment building. Under the 

Endorsement, once smoke has been produced “at” the insured premises, it must still be 

discharged, be dispersed, seep, migrate, be released, or escape from the insured premises. 

Otherwise, the Endorsement would simply have been phrased to exclude “ ‘[b]odily 

injury’ or ‘property damage’ which would not have occurred in whole or part but for 

actual, alleged or threatened ‘pollutants’ at any time.” 
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the

foregoing is a true and complete copy of the order entered at the direction of the Court.

 May 27, 2016

a0524

4

Clerk

As noted by defense counsel during oral argument, this particular aspect of the 

insurance policy and its Endorsement were not developed by plaintiffs in the lower 

courts.3

 Relying on its criticisms of the unpublished opinion of the Court of Appeals,4

defendant would have this Court limit its review of the policy and Endorsement to the 

removal of the hostile-fire exception to Exclusion f and ignore the other changes to the 

policy brought about by the Endorsement. I decline to accept defendant’s invitation. 

Thus, while this case presents an interesting question of contract interpretation, because 

the record is undeveloped with regard to what constitutes a discharge, dispersal, seepage, 

migration, release, or escape under the Endorsement, I agree with my colleagues that 

leave should be denied.

BERNSTEIN, J., not participating due to his prior relationship with The Sam 

Bernstein Law Firm.

 

3 Not only was there no legal development of this particular aspect of the Endorsement, 

there also was no factual development of the instant case because defendant insurer 

denied its insured a defense to plaintiffs’ claims. Defendant denied its duty to defend its 

insured because, it maintained, the underlying claim was based exclusively on damages

caused by smoke, which is defined as an excluded pollutant under the policy. Stated 

more simply, defendant denied its duty to defend because it believed the underlying claim 

in no way alleged damages resulting from fire. Defendant’s position is puzzling. While 

the complaint does in large part allege smoke inhalation injuries, it also alleges damages 

“due to fire.” 

4 Hobson v Indian Harbor Ins Co, unpublished opinion per curiam of the Court of 

Appeals, issued March 10, 2015 (Docket No. 316714).