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 \$Jellcome argued, Bozeman, 

Montana 

-- - 

Submitted: October 16, 1984 

Decided: 3ecernber 11, 1934 

Filed: DEC 1 ! I984 
Mr. Chief Justice Frank I. Haswell delivered t.he 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 

Iitiga tion 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 sufficient 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 continuous 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 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 seepaqe was not sudden. 

Judge Gary rejected these contentions and concluded 

that the gasoline leakage was 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 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 insured 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 received). 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-rance policy completely covered the damages? 

3. Were Town Pump1 s claims for punitive damages improperly 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 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 the pollution was sudden, unexpected and unintentional 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. Tt 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 50/50 

liability apportionment on the premise that Town Pump 

breached a duty to investiqate and mitigate damages. Although 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 foregoing 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 insurance policy does not dirnj-nish its import. The insured in 

_1 

Grav was loading steel reinforcing rods on railroad cars 

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 leakage. 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 applicable. For instance, Couch on Insurance - - 2d states: 

"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 greater 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 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 of cases where ~n~tigation of damages 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-sonable means to protect, 

safeguard and salvage damaged property. The insured in Slay 

incurred certain expenses preventing damage to stored chemicals 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 collapsed 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 contains 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. 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 Justice 
We concur: