General Insurance Co. of America v. Town Pump, Inc.

No. 84-108
IN THE SUPREME COURT OF THE STATE OF MONTANA

1984

GENERAL INSUXAIJCE COMPANY OF AMERICA,

Plaintiff and Respondent,

TOWN PUMP, INC. , and BOZEMAKJ TOWPJ
PUMP, INC.,

Defendant and Appellant,

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Joseph B. Gary, Judge presiding.

COUNSEL OF RECORD:

For Appellant:
R. Lewis Brown, Jr. argued, Butte, Montana

For Respondent :
Wellcome & Frost; G. Page \$Jellcomeargued, Bozeman,
Montana

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Submitted: October 16, 1984
Decided: 3ecernber 11, 1934

Filed: DEC 1!I984
Mr. Chief Justice Frank I. Haswell delivered t . h e Opinion of
the Court.
Town Pump appeals a decision of the Ga.llatin County
District Court in which its insurer, General Insurance, was
found 1-iable for 50 percent of the covered damages resulting
from a gasoline leak at one of its gas stations.
This is the fourth appeal concerning this gasoline
leakage which occurred between 1973 and 1975. The facts of
the matter are set forth in detail in our decision of Town
Pump, Inc. v. Diteman (Mont. 1981), 622 P.2d 212, 38 St.Rep.
54 (hereinafter Diteman). While a second recitation of the
factual circumstances is not necessary, a review of the
Iitigation history will place the present controversy in
perspective.
The first case in this litigation was a suit by several
adjoining neighbors of the Bozema-n Town Pump for damages
resulting from gasoline contamination of their water wells.
The construction company that instal-led the underground
storage tanks and pipes was named as a joint defendant and
alleged to be a joint-tortfeasor. The neighbors prevailed in
the action, and we affirmed. See, Ferguson v. Town Pump,
Inc. (1978), 177 Mont. 122, 580 F.2d 915 (hereinafter
Ferguson). The plaintiffs successfully executed on Town
Pump's bank account and secured the sum of $32,546.92.
In the second action, Town Pump sued the construction
company for indemnity. On appeal we held there was suffi-
cient evidence to support the jury's finding that Town Pump's
own negligence precluded indemnity recovery. See, Diteman,
supra. The storage tanks and pipes were install-ed in 1973,
and Town Pump was aware of potential gasoline leakage as
early as 1974. However, the company did not excavate the
tanks until March 1975. From the time of installa-tion to
that time when the tarlks were uncovered, there was a continu-
ous seepage of gasoline into the surrounding aquifer from a
cross-threaded connection.
At this point, there was a settlement agreement whereby
General Insurance, Town Pump's insurer and respondent in the
present action, paid the original prevailing plaintiffs in
Ferguson $12,837.16. Apparently, Diteman's insurer paid the
same amount to the plaintiffs. The terms of this settlement
are not before this Court, nor are they relevant to the
appeal. What is significant is that the insured Town Pump
contributed $32,546.92 and the insurer General contributed
$1-2,837.16 toward the original damage award.
General represented Town Pump in these actions under a
"non waiver agreement" whereby General reserved the right to
deny coverage for the damages.
The third District Court suit was brought by General
seeking a declaratory judgment that the gasoline leakage was
not covered by its policy and that Town Pump therefore owed
them $12,837.16 for damages previously paid the neighbors.
Town Pump moved for change of venue and the trial court
denied the motion. Town Pump's appeal of this order resulted
in a third Supreme Court opinion, General Ins. Co. of America
v. Town Pump, Inc. (1982), 196 Mont. 531, 640 P.2d 463. We
affirmed the denial of venue change, and the proceeding
remained in Gallatin County.
In this third action, with which we are concerned in
this appeal, the parties filed cross-motions for summary
judgment in the District Court. General argued that the
pollution was not covered by its general liability policy.
The policy provides an exclusion for damage caused by pollu-
tion. The exclusion includes an exception for "sudden,
unexpected and unintentional" discharge of gasoline. Thus,
by the language of the policy, sudden, unexpected and unin-
tentional discharges - covered.
are General argued before the
District Court that the seepaqe was not sudden.
Judge Gary rejected these contentions and concluded
that the gasoline leakage was sudden, unexpected and uninten-
tional "as far as Town Pump was concerned." Although the
court found the leakage "sudden1' and arguably the damages
were fully covered by the policy, the court apportioned
liability equally between the parties.
The decision of the District Court was premised on the
finding that the spillage continued for a period of two years
(summer 1973 through March 1.975) and Town Pump was negligent
in failing to investigate and mitigate the damages during the
second year. The finding of negligence was based on our
orior - -
Diteman opinion in which indemnity recovery against
Diteman was denied due to Town Pump's negligence. The lower
court concluded that the insurer General was liable on the
policy for the first year of leakage and the negligent in-
sured was liable for the second year of damages. Hence,
damages were equally apportioned.
The lower court granted Town Pump "an excess judgment
of $9,854.42 against the plaintiff [General]." Assuming this
judgment was satisfied, Town Pump would have paid $22,692.50
($32,546.92 previously paid minus $9,854.42 judgment re-
ceived). General would have paid approximately the same
amount or $22,691.58 ($12,837.16 previously paid plus
$9,854.42 judgment paid).
Town Pump appeals the District Court judgment raising
the following issues:
1. Did the District Court err by finding Town Pump
negligent for failing to investigate and mitigate damages?
 2. Did the District Court err when it failed to find
the insu-rancepolicy completely covered the damages?
3. Were Town Pump1s claims for punitive damages im-
properly dismissed?
Respondent General has facilitated appellate review in
conceding that the pollution exclusion clause in the policy
is not applicable to the gasoline leakage at issue. Counsel
stated in his brief "that coverage under the policy is appro-
priate under the circumstances of this case." Counsel for
the insurer further stated at oral argument that this was not
a notice case involving allegations that the insured failed
to properly give notice of the claim. Recognizinq these
positions of the insurer for purposes of our review, we
accept that the pollution was sudden, unexpected and uninten-
tional and that coverage was properly invoked by the insured.

T

General argues that the issue of Town Pump's negligence
is governed by the principles of res judicata and collateral
estoppel. T t contends that the precise issue of whether Town
Pump was negligent was decided in Diteman and that Judge Gary
correctly relied upon this decision when he based his 5 0 / 5 0
liability apportionment on the premise that Town Pump
breached a duty to investiqate and mitigate damages. Al-
though no legal support is offered, General proposes the
following rule of law: If the insured is guilty of active
negligence after the loss is or should have been discovered,
then it participates in the loss and total coverage should
not be afforded.
The District Court's judgment confirms that the forego-
ing analysis provides an attractive avenue for resolving this
litigation. However, the principle does not withstand legal
scrutiny. We are unable to support the general proposition
that an insured's continuing negligence cuts off coverage
under a liability policy. Accordingly, the District Court's
decision must be reversed.
Protection against liability for negligence is the
principal purpose of liability policies like the one we are
reviewing here. Tt is well established that mere negligence
on the part of an insured wj.11 not defeat recovery on a
policy. The insurer assumes the risk of negligence and
recovery is permitted even thaugh the negligence of the
insured contributed to the loss. 18 Couch on Insurance 2d
(Revised), § 74:639, 961-962 (1983).
The general rule was set forth in 1957 by the Second
Circuit and remains sound law today: "Negligence, whether or
not gross, but for which the accident would not have occurred
will not serve as a defense" to a policy. New York, New
Haven, and Hartford R. Co. v. Gray (2nd Cir. 1957), 240 F.2d
460, 464. The fact that this case construed a marine insur-
ance policy does not dirnj-nish its import. The insured in
Grav was loading steel reinforcing rods on railroad cars
_1

located on a barge in the Harlem River of New Yark Harbor
when the barge hegan to list and take on water. The barge
was needed the next day so despite the warnings the insured
continued the loading operations. During the night, several
cars broke their chains and rolled into the river, resul-tjng
in damage to the cargo and railroad cars. The federal court
held that any negligence short of willful misconduct was no
defense and the loss was insured.
There have been no allegations that Town Pump acted
willful-ly in disregarding the indications of gasoline leak-
age. At most, the insurer has alleged there was a negligent
failure to investigate and mitigate damages.
 This case does not present a situation where an insured
has acted negligently with respect to property that has been
previously damaged in a separate occurrence. Were this the
case, principl-es of mitigation of damages would be applica-
ble. For instance, Couch - Insurance - states:
on 2d
" 5 74:645. Mitigation of damaqes.
Pistinct from negligence which leads or
contributes to the occurrence of the harm
is negligence in taking steps to remedy
the harm whjch has been done. This
postoccurrence concept is declared in the
rule requiring the mitigation of damages,
with the result that the fact that there
is a loss does not affect the liability
of the insurer therefor, but the fact
that the loss could have been less had
the insured or the plaintiff taken great-
er care after the loss was sustained will.
bar him from recovering for such excess
which could have been so avoided." 18
Couch on Insurance 2d (Revised), 5 74:645
(1983). (Emphasis supplied.)
The cases upon which this principle has been based can be
placed into two broad ca.tegories, neither of which is a
proper resting place for the case at bar.
The first category includes cases interpreting fire
insura-nce policies. Typically in these cases the negligence
of the insured in saving a.nd preserving property damaged by
fire is found to bar recovery for such damage. See, Franklin
Fire Ins. Co. of Philadelphia, PA. v. Sla.ton (1.938), 236 Ala.
565, 183 So. 865 (proper defense that insured failed to use
all reasonable means to preserve property at and after fire);
Delametter v. Home Ins. Co. (1939), 233 M0.App. 645, 126
S.W.2d 262 (it is a duty of insured to use care to extinguish
fire following collision of tractor-trailer); Maravas v.
American Equitable Assur. Corporation (1927), 82 N.H. 533,
136 A. 364 (negligence of insured plaintiff was proper ques-
tion for jury and where final destruction of cheese was not
due to fire but negligence of plaintiff in failing to care
for it after fire, plaintiff could not recover).
 The second category of cases where ~n~tigation damag-
of
es has played a role involves cooperation clauses within the
insurance policy. These cooperation clauses e:rpressly place
an affirmative duty on the insured to prevent further damage
to the property following a loss. For example, in Slay
Warehousing Co., Inc. v. Reliance Ins. Co. f 8th Cir. 1973) ,
471 F.2d 1364, the Eighth Circuit interpreted a clause that
required the insured to take all rea-sonablemeans to protect,
safeguard and salvage damaged property. The insured in Slay
incurred certain expenses preventing damage to stored chemi-
cals that were exposed to the elements when a warehouse roof
an6 wall collapsed. The court held that the insured was
entitled to its costs in protecting the property and noted
that if the insured failed to protect the property, there was
a strong possibility that its liability coverage would be
forfeited altogether. See also, Downing TT. Rockford Dist.
Mutual Tornado Ins. Co. (1969), 112 Ill.App.2d 340, 250
N.E.2d 827 (plaintiff insured breached cooperation clause of
tornado insurance when it did not notify insurer or move
soybeans from storm-damaged corn crib that completely col-
lapsed twenty days later); Chase Inv. Co. v. Mid-Western
Casualty Co. (1942), 232 Iowa 73, 4 N.W.2d 863 (jury verdict

for plaintiff insured upheld where injured truck driver acted
reasonably following truck collision a-lthough the engine
block in the abandoned vehicle later froze causing further
damage) .
General's blanket liability policy in this case con-
tains no such cooperation clause. The pol-icy only states
that the insured shall cooperate with the company. Nor does
this case present a situation analoaous to a fire where the
threatened ha-rm is obvious and salvage of property is of
immediate concern.
 Town Pump's negligence in this case contributed to the
ongoing occurrence of damage. Mere negligence will not
defeat recovery on an insurance policy. Tn the absence of a
cooperation clause or allegations of intentional. wrongdoing,
the benefits of such insurance should not be denied the
insured. Town Pump is entitled to full coverage for its
losses.

Town Pump contends that its claim for punitive damages
was improperly dismissed. It is argued that there were
disputed issues of material fact on the question of whether
General acted fraudulently and that summary judqment was
therefore improper.
Appellant has failed to carry its burden of proof here.
Town Pump has only made a bald assertion that General acted
fraudulently and such does not raise a genuine issue of
material fact. Conclusive or speculative statements are
insufficient to raise a genuine issue of ma.terial fact.
Fauerso v. Maronick Const. Co. (Mont. L 9 8 3 ) , 661 P.2d 20, 40
St.Rep. 327.
The judgment of the District Court is reversed and the
case rema.nded for entry of judgment consistent with this
opinion.

Chief Justice
We concur: