No. 84-108 IN THE SUPREME COURT OF THE STATEOF MONTANA 1984

GENERAL INSUXAIJCE COMPANY OF AMERICA, Plaintiffand Respondent,

TOWN PUMP, INC.

### ,and BOZEMAKJ TOWPJ PUMP, INC., DefendantandAppellant,

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

COUNSEL OF RECORD:

ForAppellant: R. Lewis Brown,Jr. argued, Butte,Montana

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

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

Filed: 

## DEC1!

## I984Mr. Chief Justice Frank I. Haswell delivered t.he Opinion of the Court. Town Pump appeals a decision of the Ga.llatinCounty District Court in which its insurer, General Insurance,was found 1-iablefor 50 percent of the covered damages resulting froma 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 (hereinafterDiteman). 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 firstcase in this litigationwas a suitby several adjoining neighbors of the Bozema-nTown 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 tobe a joint-tortfeasor. Theneighborsprevailed 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 accountand secured the sumof $32,546.92. In the second action, Town Pump sued the construction company for indemnity. On appeal we held there was sufficient evidence to support the jury's finding thatTownPump's

own negligence precluded indemnity recovery. See, Diteman, supra. The storage tanks and pipes were install-edin 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-tiontothat timewhen the tarlks were uncovered, therewas a continuous seepage of gasoline into the surrounding aquifer from a cross-threadedconnection. At this point, therewas 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 $1-2,837.16toward the original damage award. General represented Town Pump in these actions under a "nonwaiver 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 leakagewas 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 themotion. Town Pump's appeal of this order resulted in a third Supreme Court opinion,General Ins. Co. ofAmerica

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 pollution. The exclusion includes an exception for "sudden, unexpected and unintentional" discharge of gasoline. Thus,

### by the language of the policy, sudden,unexpected and unintentional discharges - are covered. General argued before the District Court that the seepaqewas not sudden. Judge Gary rejected these contentions and concluded that the gasoline leakagewas sudden,unexpected and unintentional "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 theparties. The decision of the District Courtwas premised on the finding that the spillagecontinued for aperiod of two years (summer 1973 through March 1.975) and Town Pump was negligent in failing to investigateandmitigate the damages during the second year. The finding of negligence was based on our orior 

## -- Diteman opinion in which indemnity recovery against Ditemanwas 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 insured was liable for the second year of damages. Hence, damageswere equally apportioned. The lower court granted Town Pump "an excess judgment of $9,854.42 against theplaintiff [General]." Assuming this judgmentwas satisfied,Town Pumpwould have paid $22,692.50 ($32,546.92 previously paid minus $9,854.42 judgment received). General would have paid approximately the same amount or $22,691.58 ($12,837.16 previously paid plus $9,854.42 judgmentpaid). 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 completelycovered the damages? 3. 

### Were Town Pump1 s 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 inhisbrief "thatcoverage under thepolicy is appropriate 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 thepollutionwas sudden,unexpected and unintentional and that coveragewasproperly invokedby the insured.

T 

### General argues that the issue of Town Pump'snegligence is governed by the principles of res judicata and 

### collateral estoppel. Tt

### contends that the precise issue ofwhether Town Pumpwas negligentwas decided inDiteman and thatJudgeGary correctly relied upon this decision when he based his 50/50 

### 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 notbe afforded. TheDistrictCourt's judgment confirms that the foregoing analysisprovides an attractive avenue forresolving this litigation. However, the principle does notwithstand 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 iswell established thatmere 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 forwhich the accident would nothave occurred will not serve as a defense" to a policy. New York, New Haven, and Hartford R. Co. v. Gray (2ndCir. 1957), 240 

### F.2d 460, 

### 464. The fact that this case construed amarine insurance policy does not dirnj-nishits 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 losswas insured. There have been no allegations that Town Pump acted willful-lyin disregarding the indications of gasoline leakage. At most, the insurerhas alleged therewas 

### a negligent failure to investigateandmitigate damages.

### This casedoesnot present a situation where an insured has acted negligentlywith respect to property that has been previously damaged in a separate occurrence. Were this the case,principl-esof mitigation of damages would be applicable. For instance, Couch on Insurance 2d states: 

### - - "5

### 74:645. Mitigation ofdamaqes. Pistinct from negligencewhich leads or contributes to the occurrenceof theharm is negligence in taking steps to remedy the harm whjch has been done. This postoccurrence concept is declared in the rule requiring the mitigation ofdamages, 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 theplaintiff taken greater care after the losswas sustainedwill. bar him from recovering for such excess which could have been so avoided." 18 Couch on Insurance 2d (Revised),5 74:645

(1983). (Emphasissupplied.) 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 atbar. The first category includes cases interpreting fire insura-ncepolicies. Typically in these cases the negligence of the insured in saving a.ndpreserving property damaged by fire is found to bar recovery for suchdamage. 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 topreserveproperty at and after fire); Delametter 

### v. Home Ins. Co. (1939), 233 M0.App. 645, 126 S.W.2d 

### 262 (itis 

### 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 (negligenceof insured plaintiffwas proper question 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 ofcases where ~n~tigation of damages has played a role involves cooperation clauses within the insurancepolicy. 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. f8th Cir. 1973)

## , 471 F.2d 1364, the Eighth Circuit interpreted a clause that required the insured to take all rea-sonable means toprotect, safeguard and salvage damaged property. The insured in Slay incurred certain expenses preventing damage to stored chemicals that were exposed to the elements when awarehouse 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, therewas
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 (plaintiffinsured breached cooperation clause of tornado insurance when it did not notify insurer or move soybeans from storm-damaged corn crib that completely collapsed twenty days later); Chase Inv. Co. v. Mid-Western Casualty Co. (1942),232 Iowa 73, 4N.W.2d 863 (jury verdict forplaintiff insuredupheld 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 contains no such cooperation clause. The pol-icyonly 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 insurancepolicy. 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. Appellanthas failed to carry itsburden 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. L983), 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 JusticeWe concur: