Berry Plastics Corporation v. Illinois National Insurance Co
903 F.3d 630
7th Cir.2018Background
- Berry Plastics manufactured a foil laminate used by Packgen in intermediate bulk containers (IBCs) sold to CRI; the laminate delaminated, causing container failures and some fires.
- Packgen sued Berry for breach of contract and warranties and obtained a jury verdict for ~$7.2 million (≈$6.56M future lost profits + ~$643K out‑of‑pocket). The First Circuit affirmed.
- Berry’s primary insurer (Federal) covered the first $1M; Berry sought indemnity from its excess carrier, Illinois National, for the remainder.
- Illinois National refused, arguing the lost‑profits award was not “because of…Property Damage” under the CGL policy and was thus not covered; Berry sued for declaratory relief, breach of contract, and bad faith.
- The district court granted summary judgment to Illinois National, holding lost future profits were not, as a matter of law, property‑damage measures unless tied to actual property loss or loss of use; it also rejected collateral estoppel and Berry’s bad faith claim.
Issues
| Issue | Plaintiff's Argument (Berry) | Defendant's Argument (Illinois National) | Held |
|---|---|---|---|
| Whether Packgen’s awarded future lost profits are "damages because of…Property Damage" under the policy | "Because of" is broad (but‑for); consequential damages flowing from property damage (including future lost profits) are covered | "Because of" should be read narrowly: only damages that measure physical injury or loss of use of tangible property are covered; purely economic future sales are not | Court affirmed: coverage depends on causal link to property damage; Berry failed to prove (or seek to prove) that lost profits were specifically attributable to property damage rather than product nonperformance |
| Whether collateral estoppel prevents Illinois National from litigating coverage | The underlying verdict settled that Packgen’s losses were caused by Berry’s defective product and thus by property damage | The Packgen jury was not asked whether losses were "because of" property damage; coverage is a distinct issue requiring its own resolution | Collateral estoppel rejected: underlying trial did not resolve the specific coverage questions |
| Whether remand/trial is required to apportion how much of the verdict is attributable to property damage | Berry implicitly seeks indemnity for entire award without proving causal apportionment; asks for opportunity to develop coverage evidence | Illinois National argues absence of any showing that future lost profits stemmed from property damage and summary judgment appropriate | Court: coverage may be possible for some losses, but Berry did not present factual proof or request a coverage trial/remand; summary judgment affirmed on that basis |
| Bad faith for refusing to participate in settlement | Illinois National’s refusal to contribute to settlement negotiations (despite Federal’s $1M tender) was unreasonable and cost Berry a settlement | Under Indiana law, insurer’s genuine, debatable coverage position negates bad faith; reasonable dispute existed | Court affirmed dismissal: insurer’s stance was legally reasonable given precedent and unsettled law, so no bad faith shown |
Key Cases Cited
- Packgen v. Berry Plastics Corp., 847 F.3d 80 (1st Cir. 2017) (affirming underlying liability verdict against Berry)
- Wausau Underwriters Ins. Co. v. United Plastics Grp., Inc., 512 F.3d 953 (7th Cir. 2008) (coverage for lost profits depends on apportioning amounts caused by property damage versus nonperformance; remand for factual determination)
- Travelers Ins. Cos. v. Penda Corp., 974 F.2d 823 (7th Cir. 1992) (lost profits tied to assembled defective goods may be covered; speculative future profits and reputational harm excluded)
- Sheehan Constr. Co. v. Cont'l Cas. Co., 935 N.E.2d 160 (Ind. 2010) (coverage governed by policy language, not by general economic‑loss doctrine)
- Erie Ins. Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993) (standards for insurer bad‑faith liability)