Court Opinion

ID: 6344680
Source: CourtListenerOpinion
Date Created: 2022-05-27 06:05:49.336483+00
Date Added: 2024-06-11T09:04:50.906460
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                          STATE OF MICHIGAN

                            COURT OF APPEALS

ATAIN INSURANCE COMPANY,                                             UNPUBLISHED
                                                                     May 26, 2022
               Plaintiff/Counterdefendant-Appellant,

and

NATIONAL SURETY CORPORATION,

               Intervening Plaintiff/Third-Party
               Plaintiff,

v                                                                    No. 355928
                                                                     Oakland Circuit Court
WARREN HOSPITALITY SUITES INC., doing                                LC No. 2020-178861-CB
business as HAWTHORNE SUITES,

               Defendant/Counterplaintiff/Third-
               Party Defendant-Appellee,

and

JOHN FAY AND JANICE FAY,

               Defendants/Third-Party Defendants.

Before: GLEICHER, C.J., and K.F. KELLY and PATEL, JJ.

PER CURIAM.

        Establishing that a trial court has abused its discretion is a high burden. Because we
conclude that the trial court did not abuse its discretion by granting a stay of proceedings pending
the outcome of the collateral federal tort litigation, we affirm.

                                                -1-
                     I. FACTUAL AND PROCEDURAL BACKGROUND

        John and Janice Fay were seriously injured due to carbon monoxide poisoning while
staying at a hotel owned and operated by Warren Hospitality Suites, Inc. They filed a tort suit
against Warren Hospitality in the United States District Court for the Eastern District of Michigan.1
That tort suit is still pending. Atain Insurance Company insures Warren Hospitality and is
providing a defense in the tort suit under a reservation of rights. Atain filed this declaratory action
seeking an adjudication that it does not have a duty to defend or indemnify in the federal action
due to an exclusion in the policy.

        The commercial liability policy issued by Atain to Warren Hospitality contains a “Total
Pollution Exclusion with Hostile Fire Exception” that excludes coverage for injuries or damages
caused by or arising out of “the actual, alleged or threatened discharge, dispersal, seepage,
migration, release or escape of ‘pollutants’ ” except for injuries or damages caused by “heat,
smoke, or fumes from a hostile fire.” The policy defines “hostile fire” and “pollutants” as:

       As used in this exclusion, a hostile fire means one which becomes uncontrollable
       or breaks out from where it was intended to be.

                                               * * *

       Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant
       including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste
       includes material to be recycled, reconditioned or reclaimed. Pollutants also
       includes carbon dioxide and any other substance that contributes to climate change.

        The Fays’ tort complaint alleges that the carbon monoxide was caused by “an
uncontrollable fire”2 in the hotel’s HVAC system. Atain maintains that carbon monoxide is a
“pollutant” and coverage is excluded under its policy, but acknowledges that the pollutant
exclusion would not apply if the Fays’ injuries arose out of “heat, smoke, or fumes from a hostile
fire.” Hence, it is undisputed that the four corners of the tort complaint obligate Attain to provide
a defense to Warren Hospitality, even if it is under a reservation of rights.

       Warren Hospitality moved to stay the declaratory action pending the outcome of the
underlying tort action because the central issue of fact in both actions is the cause of the carbon
monoxide discharge. The Fays concurred that a stay was warranted. Atain argued that whether
carbon monoxide was a “pollutant” and whether there was evidence of a “hostile fire” had no
impact on the liability in the underlying tort action. The trial court disagreed with Atain and stayed

1
 Fay v Akram Namou d/b/a Namou Hotel Group, United States District Court for the Eastern
District of Michigan, Case No. 2:19-cv-10902.
2
  The Fays’ complaint refers to the fire as an “uncontrollable fire,” while the policy references a
“hostile fire.” However, the parties have, throughout the proceedings, used the terms
interchangeably. For clarity, this opinion will refer to the alleged fire as a “hostile fire.”

                                                 -2-
the declaratory action “[t]o prevent any inequity in this matter and in the interest of judicial
economy[.]” Atain filed a motion for reconsideration, which was denied.

        Unsatisfied with the stay of the declaratory action, Atain filed a motion to intervene in the
federal case to allow it to participate in discovery, participate at trial, and submit a special verdict
form or special interrogatories to the jury. First, the court considered the timeliness of the motion.
Because Atain chose to file a declaratory action in the state court when it was fully aware that
common issues of fact would be litigated in two different forums with possibly different outcomes,
and it did not seek to intervene in the federal action until “its legal strategy took an unexpected
turn,” the federal court determined these factors weighed against a finding of timeliness. The
federal court also held that Atain could not intervene as a matter of right because it did not have a
direct interest in the subject matter of the tort action. The federal court concluded that the interests
of judicial economy were not served by intervention because allowing Atain to conduct discovery
in the federal case would bloat the process and cause needless delay. The court also reasoned that
the jury could make the relevant findings of fact without Atain’s participation.

         After the federal court denied Atain’s motion to intervene in the federal case, Atain filed
this interlocutory appeal challenging the trial court’s order staying the declaratory action.

                                           II. ANALYSIS

       Atain argues the trial court abused its discretion when it granted a stay of proceedings
pending the conclusion of the tort case. We disagree.

        “A trial court has the inherent authority to control its own docket.” Baynesan v Wayne State
Univ, 316 Mich App 643, 651; 894 NW2d 102, 106 (2016), citing to Maldonado v Ford Motor
Co, 476 Mich 372, 376; 719 NW2d 809 (2006) (“[T]rial courts possess the inherent authority ... to
manage their own affairs so as to achieve the orderly and expeditious disposition of cases.”). “An
exercise of the court's ‘inherent power’ may be disturbed only upon a finding that there has been
a clear abuse of discretion.” Brenner v Kolk, 226 Mich App 149, 160; 573 NW2d 65 (1997). An
abuse of discretion occurs when a court chooses an outcome outside the range of principled
outcomes. Maldonado, 476 Mich at 388.

        Two trial courts have independently concluded that the tort action and the declaratory
action have common issues of fact regarding the cause of the alleged carbon monoxide discharge.
The trial court properly exercised its discretion by staying the proceedings in the declaratory action
“[t]o prevent any inequity in this matter and in the interest of judicial economy[.]” Because of the
overlap of the factual issues, the outcome of the tort action could impact the declaratory action.
For example, if Warren Hospitality prevails in the tort action, then the declaratory action would
become moot. It is therefore within the range of principled outcomes for the trial court to wait for
the cause of the carbon monoxide poisoning to be litigated in the underlying tort action.3 This

3
  The dissent maintains that “the Fays have no legal duty, for purposes of proving the elements of
their negligence claims, to prove the carbon monoxide poisoning was caused by a fire,
uncontrolled, hostile, or otherwise.” We respectfully disagree. This argument disregards the

                                                  -3-
approach clearly serves judicial economy. The trial court likewise did not abuse its discretion
because Atain would not suffer any prejudice by the stay. Atain’s legal interests remain intact and,
if not rendered moot by the litigation of the factual issues, can be litigated in full later.

                                        III. CONCLUSION

       We affirm the trial court’s order staying the proceedings and we do not retain jurisdiction.

                                                              /s/ Elizabeth L. Gleicher
                                                              /s/ Sima G. Patel

allegations in the underlying tort complaint that the carbon monoxide poisoning was caused by
“an uncontrollable fire” in the HVAC system and that the Fays have the burden of proving
proximate causation as an element of their negligence claim. See Loweke v Ann Arbor Ceiling &
Partition Co, LLC, 489 Mich 157, 162; 809 NW2d 553 (2011). “To establish proximate cause, the
plaintiff must prove the existence of both cause in fact and legal cause.” Weymers v Khera, 454
Mich 639, 647; 563 NW2d 647 (1997). Establishing cause in fact requires the plaintiff to “present
substantial evidence from which a jury may conclude that more likely than not, but for the
defendant's conduct, the plaintiff's injuries would not have occurred.” Id. at 647-648 (quotation
marks and citation omitted). “To establish legal cause, the plaintiff must show that it was
foreseeable that the defendant's conduct may create a risk of harm to the victim, and . . . [that] the
result of that conduct and intervening causes were foreseeable.” Id. at 648 (quotation marks and
citation omitted; alteration in original). The Fays must establish the source of the carbon monoxide
that they were exposed to (which they allege was an uncontrollable fire) in order to satisfy the
causation element of their negligence claim.

                                                 -4-