The plaintiffs, Jess J. Taylor and Taylor Oil Company, a corporation, brought this action against the defendant insurance companies to recover under the terms of liability insurance policies damages sustained by reason of breach of contract in failing to defend an action brought against plaintiffs for injunctive relief and damages. Imperial Casualty & Indemnity Company issued its policy insuring plaintiffs. American Insurance Company insured General Tire and Rubber Company and Taylor Oil Company. The two policies contain identical provisions in all matters herein material. The insuring clauses therein provide:
The policies provide for defense of actions as follows:
Paragraph 13 under "Conditions" reads as follows:
The action which it is claimed insurers were obligated to defend was instituted in January, 1964, by Northwestern Bell Telephone Company and the City of Sioux Falls against Jess J. Taylor, the First National Bank in Sioux Falls, as trustee, and General Tire and Rubber Company, to enjoin them from permitting gasoline escaping from a storage tank on premises described as Lots 8 and 9 in Block 4 of Bennett's First Addition to the City of Sioux Falls, to seep into the underground area of streets and public ways of the city and the adjoining property of the plaintiff telephone company. The Taylor Oil Company was on motion also made a party defendant. The complaint specifically alleged among other things that the property described was subject to a written lease from defendant bank to Jess J. Taylor and to a sublease of the premises to defendant General Tire and Rubber Company; that there was located on this property a service station including gasoline pumps and tanks for the storage of gasoline; that gasoline in large volumes escaped from a storage tank into the underground area of the service station premises and penetrated into the subsoil of streets and premises of plaintiff telephone company; and
Plaintiffs herein tendered the defense of the action to defendants, but insurers denied liability and refused to defend or to pay indemnity on the ground of noncoverage.
The court after hearing in the original action and on the basis of the complaint and supporting affidavits issued an interlocutory injunction requiring the defendants to take affirmative action to prevent escaping gasoline from penetrating public thoroughfares of the city and the abutting premises of the telephone company. The plaintiffs herein immediately employed excavators and intercepting trenches were dug, one on the filling station premises and another near the telephone building. This means was apparently effective to prevent further penetration of gasoline to the property of the telephone company. Plaintiffs incurred expenses in so doing and in effecting a settlement in the action against them. They demanded judgment herein in the amount of $4500 with interest.
Appellants contend that there was no damage because of injury to property caused by accident in the original action and hence there was no liability under the terms of the policies. American Insurance Company also contends that there was no privity of contract between it and respondent Jess J. Taylor.
The terms of the policies fix the right of recovery. Under the language therein contained, appellants are liable only for damages which insured shall become legally obligated to pay because of injury to or the destruction of property, including the use thereof, caused by accident. The generally accepted meaning of the word "accident" in insuring clauses in policies of this kind is the same as the popular understanding or usuage of the word.
It is argued by appellants that the complaint in the original action alleged a condition of a continuing nature in that gasoline
This court in Tegels v. Western Chevrolet Co., S.D., 139 N.W.2d 281, likewise pointed out that a harmful condition which is known and continues over a long period of time is not caused by accident.
We affirm the trial court's judgment of coverage based upon the findings that the leaks in the underground tank and the escape and seepage of gasoline were the result of negligence and that the unintended consequences were caused by accident. Injuries are caused by accident according to the quality of the result rather than the quality of the causes. Johnson v. La Bolt Oil Co., 62 S.D. 391, 252 N.W. 869; Campbell v. City of Chamberlain, 78 S.D. 245, 100 N.W.2d 707; see also Messersmith v. American Fidelity Co., 232 N.Y. 161, 133 N.E. 432, 19 A.L.R. 876. Unlike the Clark v. London & Lancashire Indemnity Co. case, where the harmful condition had been created by the insured who knowingly permitted the condition to exist, the consequences herein resulting from the negligence of General Tire and Rubber Company were unintended and not the probable and natural consequences of the negligence. Vappi & Co. v. Aetna Casualty & Surety Company, 348 Mass. 427, 204 N.E.2d 273; Maryland Casualty Company v. Mitchell, 5 Cir., 322 F.2d 37; Corbetta Constr. Co. v. Michigan Mutual Liability Co., 20 A.D.2d 375, 247 N.Y.S.2d 288, affd. 15 N.Y.2d 888, 258 N.Y.S.2d 423, 206 N.E.2d 357. We conclude that the claims for damages in the original action were covered by the insurance policies issued by appellants and that they were under duty and obligation to the plaintiffs with respect to the action arising therefrom.
Appellant American Insurance Company contends that respondent Jess J. Taylor cannot recover on a contract to which he is not a party. It should be noted that the insurance was effected for the benefit of Taylor Oil Company pursuant to the sublease agreement between it and General Tire and Rubber Company. The policy of insurance refers to Taylor Oil Company, Sioux Falls, South Dakota, as a named insured. As to property damage liability, the policy provides: "The unqualified
All the Judges concur.