Petroleum Tank Release v. Capitol Indem.

• Decision Date: 13 June 2006
• Docket Number: No. 05-228.,05-228.
• Citation: 332 Mont. 352,137 P.3d 522,2006 MT 133
• Parties: MONTANA PETROLEUM TANK RELEASE COMPENSATION BOARD, Plaintiff and Appellant, v. CAPITOL INDEMNITY COMPANY, Continental Insurance Company and Does 1-25, Defendants and Respondents.
• Court: Montana Supreme Court

137 P.3d 522

2006 MT 133

332 Mont. 352

MONTANA PETROLEUM TANK RELEASE COMPENSATION BOARD, Plaintiff and Appellant, v. CAPITOL INDEMNITY COMPANY, Continental Insurance Company and Does 1-25, Defendants and Respondents.

No. 05-228.

Supreme Court of Montana.

Submitted on Briefs: January 18, 2006.

Decided: June 13, 2006.

Rehearing Denied July 12, 2006.

COPYRIGHT MATERIAL OMITTED

R. Allan Payne, Doney Crowley Bloomquist Payne Uda, P.C., Helena, for Appellant.

Mark A. Vucurovich, Henningsen, Vucurovich & Richardson, P.C., Butte, for Respondent Capitol Indemnity Company.

Maxon R. Davis, Davis, Hatley, Hafferman & Tighe, P.C., Great Falls, for Respondent Continental Insurance Company.

Justice JOHN WARNER delivered the Opinion of the Court.

¶1 The Montana Petroleum Tank Release Compensation Board (Board) appeals from an order of the First Judicial District Court, Lewis and Clark County, granting Defendants' motions for summary judgment and dismissing all claims. We affirm.

¶2 This dispute involves a gas station in Butte, owned and operated by Community Mutual Gasoline Co. (Community Mutual) from 1931 to 1984. Community Mutual was insured by Defendant Capitol Indemnity Co. (Capitol). Capitol issued general commercial liability policies to Community Mutual for approximately seven years, from August 1978 to August 1985.

¶3 In February 1984, Community Mutual leased the station to Leonard Simon and Randy Keller. Simon and Keller ran the gas station through a corporation called Barter Gas and Salvage (Barter Gas). Simon and Keller had a falling out and Simon ran Barter Gas without Keller, until it closed in 1986. Barter Gas purchased a general commercial liability insurance policy from the second named Defendant, Continental Insurance Co. (Continental).

¶4 Three years after Barter Gas went out of business, in 1989, Community Mutual discovered a hole in one of its underground storage tanks at the gas station. Community Mutual notified the Department of Environmental Quality (DEQ) of the leak. Initial excavation of the area indicated that the subsurface soil surrounding the tank had been contaminated with gasoline.¹

¶5 In September 1989 the DEQ ordered Community Mutual to clean up the soil that had been contaminated. The DEQ also advised Community Mutual that the Montana Petroleum Tank Release Cleanup Fund was available to reimburse it for eligible expenses, as determined by the Board, resulting from the remediation of the property.² Community Mutual hired a consulting firm to work on cleaning up the contaminated groundwater and soil. After complying with the DEQ's cleanup requirements, Community Mutual was eventually reimbursed by the Board in the amount of $254,842.

¶6 At no time did Community Mutual inform its insurer, Capitol, of the contamination or of the DEQ mandate to clean up the spilled petroleum. Nor did Community Mutual ever inform Capitol it was expending money on the project.

¶7 Capitol received its first notice of these claims on April 5, 2001, when the Board submitted a claim for reimbursement of the $254,842 it had paid Community Mutual. Capitol denied the Board's claim.

¶8 Barter Gas and its insurer Continental were not notified of the cleanup until July 2001, when the Board filed this suit against Continental and Capitol.

¶9 The District Court granted summary judgment to Capitol, concluding that a "no action" clause in the policy issued to Community Mutual barred any action against it.

¶10 The District Court also granted summary judgment to Continental, concluding that because Community Mutual was not an insured party under the policy between Barter Gas and Continental, the Board had no right to recovery under the Continental policy.

¶11 The Board appeals both conclusions of the District Court.

¶12 This Court reviews a district court's grant of summary judgment de novo. Farmers Union Mut. Ins. Co. v. Staples, 2004 MT 108, ¶ 18, 321 Mont. 99, ¶ 18, 90 P.3d 381, ¶ 18. We apply the criteria contained in Rule 56, M.R.Civ.P. According to this rule, the moving party must establish both the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Grimsrud v. Hagel, 2005 MT 194, ¶ 14, 328 Mont. 142, ¶ 14, 119 P.3d 47, ¶ 14. The burden then shifts to the non-moving party to prove by more than mere denial and speculation that a genuine issue does exist. Grimsrud, ¶ 14. If the court determines that no genuine issues of fact exist, the court must then determine whether the moving party is entitled to judgment as a matter of law. Grimsrud, ¶ 14. We review legal determinations made by a district court to establish whether the conclusions are correct. Grimsrud, ¶ 14.

Claims Against Capitol Indemnity Co.

¶13 The District Court concluded that a "no action" clause in the policy between Capitol and Community Mutual barred any recovery by the Board. This no action clause was included in the 1983-1984 policy between Capitol and Community Mutual, which in effect, provided that Capitol cannot be required to pay any claimed loss unless the claim against the insured is tried in court, or the claimant, the insured, and Capitol all agreed to a settlement.

¶14 The Board contends that Capitol should be barred from asserting its no action clause defense because such a defense was not articulated in Capitol's letter denying the Board's claim for reimbursement. Under Montana's Unfair Trade Practices Act, an insurer has an obligation to inform the "insured" of all policy defenses it intends to rely upon. Portal Pipe Line Co. v. Stonewall Insurance Co. (1993), 256 Mont. 211, 217, 845 P.2d 746, 750 (citing § 33-18-201(14), MCA). We conclude, however, that the Board's argument is inapposite. Even if the Board is correct that § 33-18-201(14), MCA, would have required Capitol to disclose all possible defenses in its denial letter to the Board, Capitol would still be permitted to assert its statute of limitations defense, as such was included in the denial letter.

¶15 Assuming arguendo that the Board would otherwise have a claim against Capitol, through subrogation of Community Mutual's rights, then, as the Board recognizes in its brief, it would stand in the shoes of Community Mutual. See DeTienne v Farmers Union Mut. Ins. Co. (1994), 266 Mont. 184, 189, 879 P.2d 704, 707-08. Any defenses Capitol has against Community Mutual may thus be asserted against the Board. See 16 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 234:67 (3d ed. 2005) ("Since a subrog[ee] . . . stands in the shoes of an insured, it is subject to the same defenses as could be asserted against its insured, including a statute of limitations[.]") (footnote omitted).

¶16 The District Court did not address Capitol's statute of limitations defense in its final order, however, this defense was included in Capitol's answer to the Board's original complaint and has been argued throughout the briefing in this matter.³ Further, if we reach the same conclusion as the district court, but on different grounds, we may nonetheless affirm the district court's judgment. Safeco Ins. Co. of America v. Liss, 2000 MT 380, ¶ 25, 303 Mont. 519, ¶ 25, 16 P.3d 399, ¶ 25.

¶17 A period of limitations begins to run from the time the claim for relief accrues. Section 27-2-102(2), MCA. Capitol claims that the limitations period began to run when Community Mutual could have first filed a claim with its insurer, Capitol, for payment of the cleanup costs. Capitol argues that such date occurred no later than 1989, when Community Mutual began paying for the cleanup. Conversely, the Board claims that the limitations period could not have began to run until July 2001, when Capitol denied the Board's claim for reimbursement of the amount it paid Community Mutual.

¶18 We conclude that the limitations period began to run when all the elements accrued for Community Mutual to file a claim with Capitol. This was sometime in 1989. To conclude otherwise would "effectively nullify the purpose of any statute of limitations." See Nelson v. Twin Bridges High School (1979), 181 Mont. 318, 321, 593 P.2d 722, 724. As we concluded in Nelson, in an insurance setting, if the statute of limitations did not begin to run until the plaintiff's claim had been denied, "[t]here would be no limitation on when the claim could be filed. The [defendant] could be sued at any time in the future at the option of the plaintiff, simply by delaying presentation of a claim[.]" See Nelson, 181 Mont. at 321, 593 P.2d at 724.⁴

¶19 The longest possible period of limitations that could be applicable is eight years. Section 27-2-202(1), MCA. This is well short of the approximately twelve years that passed before the Board made its claim against Capitol. We therefore conclude Capitol is correct that any claim the Board may have had against it was barred by the statute of limitations.

Claims Against Continental Insurance Co.

¶20 Although no policy was located, the District Court found that Continental had issued a commercial liability policy to Barter Gas. Evidence that a policy was issued included a notice of cancellation sent from Continental to Community Mutual in 1985. This notice of cancellation indicated that Barter Gas was the "named insured" while Community Mutual was a "loss payee."

¶21 The status of Community Mutual is significant because the Board's claim is that it has a right to subrogation through Community Mutual to recover its payments from Continental. If Community Mutual was an insured party under the Continental policy, then the Board could have subrogation rights through Community Mutual. However, as explained below, if the Board was a loss payee, then the Board would have no right to subrogation. Therefore, we must first determine whether the District Court erred in its finding that Community Mutual was not an insured party under the Continental Policy.

¶22 The District Court found that Community Mutual was not an insured, but at best was a loss payee,...