In the

United States Court of Appeals

For the Seventh Circuit

No. 17-1815

BERRY PLASTICS CORPORATION, n/k/a

Berry Global, Inc.,

Plaintiff-Appellant,

v.

ILLINOIS NATIONAL INSURANCE 

COMPANY,

Defendant-Appellee.

Appeal from the United States District Court for the 

Southern District of Indiana, Evansville Division.

No. 3:15-cv-00170-RLY-MPB — Richard L. Young, Judge.

ARGUED JANUARY 9, 2018 — DECIDED SEPTEMBER 10, 2018

Before FLAUM, KANNE, and ROVNER, Circuit Judges.

ROVNER, Circuit Judge. Berry Plastics Corporation filed this

action seeking indemnity from its excess insurer, Illinois

National Insurance Company, for a multi-million dollar

damage award Berry was ordered to pay to a disappointed
2 No. 17-1815

former customer. The insurance policy covers damages that

Berry is required to pay “because of ... Property Damage.”

R. 42-4 at 11. Berry had supplied defective laminate material to

the customer, which incorporated that material into containers

that subsequently failed. A jury ordered Berry to compensate

the customer for the profits it could have expected to earn on

future sales had the failure caused by Berry’s defective

material not caused buyers to turn away from the containers.

Berry contends that it has been held liable for its customer’s

lost profits because of the property damage its defective

component caused to the customer’s containers. Although we

agree with Berry that some portion of the lost profits theoretically might be attributable to property damage, Berry has

neither undertaken to make that showing nor demanded the

opportunity to do so. For that reason we affirm the district

court’s entry of summary judgment in favor of Illinois National.

I.

Berry is a global manufacturer of (primarily plastic)

packaging products with headquarters in Evansville, Indiana.

Berry produced a foil laminate product for Packgen, a small

firm that manufactures specialized containers for bulk quantities of industrial chemicals, manufacturing byproducts, and

other materials. Over a period of two years, Packgen worked

with one of its customers, CRI Catalyst Company, to develop

a new type of intermediate bulk container (“IBC”)1

 that could

be used to store and ship a chemical catalyst that CRI produced

1

 Packgen has given its IBCs the trade name “Cougars.”
No. 17-1815 3

for use in the refining of crude oil into other petroleum

products. This IBC was innovative in that its outer surface was

comprised primarily of a polypropylene fabric rather than

metal, allowing the container to be collapsed for pre-use

storage and saving users space, several hundred pounds of

weight, and money. The catalyst that CRI produces is a selfheating material that can ignite when exposed to oxygen, so it

poses hazards that require special care in handling. To enhance

the protective characteristics of the IBC’s outer surface,

Packgen engaged Berry to manufacture a laminated product

comprised of a woven polypropylene chemically bonded to a

layer of aluminum foil; the foil would strengthen the IBC’s

exterior and serve as a barrier to oxygen, ultraviolet light, and

infrared radiation. After extensive testing of the final product,

Packgen began to manufacture and ship the IBCs to CRI in

October 2007. By April 2008, Packgen was selling an average of

1,261 IBCs per month to CRI. Packgen anticipated that it would

continue to sell IBCs to CRI in comparable numbers for the

foreseeable future. Packgen was also making overtures to 37

petroleum refiners in North America with ties to CRI; these

refiners had expressed interest in the IBCs for use in disposing

of spent catalyst.

In April 2008, while CRI personnel were lifting an IBC full

of catalyst in order to re-position it on a pallet, the foil layer of

the container’s exterior surface separated from the polypropylene, causing the outer portion of the container to come apart

and expose the interior lining. Several other failures of the foil

laminate followed in short order, some resulting in fires when

the catalyst within the containers was exposed to air. Packgen

was notified of the failures and determined through its own
4 No. 17-1815

testing that the large roll of foil laminate that Berry had

delivered to Packgen in January 2008, and which Packgen had

used to produce some 2,000 IBCs since that time, was defective.

Although Packgen believed it could correct the problem either

by eliminating the foil laminate as a component of the containers or turning to another vendor for the foil laminate, the

damage had already been done: CRI canceled all pending

orders for the IBCs, destroyed the IBCs that Packgen had

already shipped to it, and refused to pay Packgen for those

containers. Word of the product’s failure reached the oil

refineries that had expressed interest in purchasing IBCs, and

they made no purchases from Packgen.

Packgen sued Berry in Maine (where the suit was removed

from state to federal court) on theories of breach of contract,

breach of express warranty, breach of implied warranty for a

particular purpose, and breach of implied warranty of merchantability,2

 all based on the failure of Berry’s foil laminate

product. The jury found in Packgen’s favor on each of these

claims, and pursuant to instructions which directed it to

compensate Packgen for the foreseeable losses (actual, incidental, and consequential) stemming from Berry’s breaches of

contract and warranties (R. 55-4 at 10–11, 13–15) awarded

Packgen the full $7.2 million that it had sought in damages.

The jury did not itemize its damage award, but the award was

obviously based on the testimony of Mark Filler, Packgen’s

expert on damages, who put the company’s out-of-pocket costs

(including unpaid invoices for IBCs that had already been

2

 A negligence claim was dropped before trial.
No. 17-1815 5

shipped to CRI3) at $643,039.30, and its future lost profits at

$6,563,607.00 (producing the total of approximately $7.2

million). To arrive at the latter figure, Filler assumed that, had

the foil laminate not caused the IBCs to fail, CRI would have

continued to sell the containers to CRI at the April 2008 level

for the full 10-year expanse of his projections, yielding profits

to Packgen of $4,606,405.00. Filler also assumed that Packgen

would have made more modest sales of the IBCs to some

petroleum refiners over the same 10-year period, yielding

profits of $1,957,202.00. The Court of Appeals for the First

Circuit subsequently affirmed the judgment in favor of

Packgen. Packgen v. Berry Plastics Corp., 847 F.3d 80 (1st Cir.

2017). 

Berry demanded that Illinois National indemnify it for all

but the first $1 million of the award—which Berry’s primary

liability insurer, Federal Insurance Company, has agreed to

cover—but Illinois National refused, prompting Berry to file

suit. The $25 million liability policy issued to Berry obliged

Illinois National to “pay on behalf of [Berry] those sums in

excess of the Retained Limit [i.e., the $1 million covered by the

Federal policy] that [Berry] becomes legally obligated to pay as

damages by reason of liability imposed by law because of ...

Property Damage ... to which this Insurance applies ... .”

R. 42-4 at 11. The policy in turn defines “property damage” to

include both “physical injury to tangible property, including

all resulting loss of use of that property” and “loss of use of

3

 Packgen would have earned profits of $130,629.93 on these invoices.
6 No. 17-1815

tangible property that is not physically injured.” R. 42-4 at 33.4

Illinois National took the position that because the entirety of

the $6.2 million for which Berry was seeking indemnification

from Illinois National represented Packgen’s lost profits on

IBCs that had yet to be ordered and manufactured, there was

no property damage for which it had the duty under the policy

to indemnify Berry. Berry, on the other hand, contended that

the entirety of the damages it had been ordered to pay

Packgen, including future lost profits, were “because of” the

property damage Berry’s defective foil laminate product had

caused to Packgen’s failed IBCs. Berry sought a declaration of

Illinois National’s obligation to indemnify it; it also asserted

claims for breach of contract and bad faith based on Illinois

National’s refusal to do so.

On the parties’ cross-motions for summary judgment, the

district court entered judgment in favor of Illinois National.

Berry Plastics Corp. v. Ill. Nat’l Ins. Co., 244 F. Supp. 3d 839 (S.D.

Ind. 2017). The court in the first instance rejected Berry’s

contention that collateral estoppel barred Illinois National,

which had declined to participate in Berry’s defense at the

Packgen trial, from re-litigating the nature and extent of the

damages resulting from the failure of Berry’s product. The

court noted, inter alia, that the jury in the Packgen suit had not

been called upon to determine whether and to what extent

Packgen’s future lost profits were “because of” property

4

 The policy excludes any damage to Berry’s own work and product (R. 42-

4 at 16, 34), but it is undisputed that the injury Berry’s defective laminate

caused to Packgen’s containers constitutes “property damage” within the

meaning of the policy.
No. 17-1815 7

damage, which is the question determinative of Illinois National’s duty to indemnify Berry. Id. at 846–47. 

As to that issue, there was no Indiana case law on point,

and so the court was required to predict how the Indiana

Supreme Court would resolve the question. Upon surveying

the case law from other jurisdictions, the district court concluded that “damages for lost profits are not covered as

‘damages because of ... Property Damage’ unless they are a

measure of the actual physical injury to tangible property or

for the loss of use of that property.” Id. at 849. The profits that

Packgen lost on future sales of its IBCs did not constitute such

a measure of physical injury or loss of property. Accordingly,

the court was convinced that the Indiana Supreme Court

would conclude that Illinois National had no duty to indemnify Berry for those lost profits. Id. at 849–50. The court went

on to reject Berry’s contention that the policy language was

ambiguous in this respect and as such should be construed in

its favor. “[T]he court finds the language of the Policy to

unambiguously provide for damages arising from the physical

damage to tangible property. Lost future profits arising from

sales not yet made are not causally related to physical property

damage.” Id. at 850. Given that conclusion, the court also

determined that Illinois National had not breached a contractual obligation to indemnify Berry. Id. at 851. 

Finally, as to the bad faith claim, the court concluded that

because Illinois National was correct in its assessment that it

had no duty to indemnify Berry for Packgen’s lost profits on

future sales, the insurance company had been within its rights

to decline to participate in (i.e. contribute money to) pre-trial
8 No. 17-1815

settlement negotiations; there was otherwise no evidence of “ill

motive” on the part of Illinois National. Id. at 852.

II.

Berry contends that the district court erred in construing

the language of the Illinois National insurance policy to

exclude coverage for lost future profits. Looking to a line of

case law that attributes a broad causal meaning to “because of”

and treats all consequential damages resulting from property

damage to be liability incurred because of property damage,

Berry argues that Packgen’s lost profits on future sales of its

IBCs necessarily are because of the damage Berry’s defective

foil caused to the completed IBCs sold to CRI. Berry therefore

insists that the policy requires Illinois National to indemnify it

for the entirety of the judgment against it over and above the

$1 million covered by Federal. Berry also argues briefly that the

district court was premature in granting summary judgment

to Illinois National on the bad faith claim, as the parties had

not yet completed discovery that, in Berry’s view, was relevant

to that claim.

A.

Indiana law guides our analysis of Berry’s claims in this

diversity suit. Indiana courts construe the terms of insurance

policies employing the same rules they apply to other contracts. E.g., Erie Indem. Co. v. Estate of Harris by Harris, 99 N.E.3d

625, 630 (Ind. 2018). The language is interpreted from the

perspective of an ordinary policyholder of average intelligence.

E.g., Bradshaw v. Chandler, 916 N.E.2d 163, 166 (Ind. 2009). If
No. 17-1815 9

reasonably intelligent persons could differ as to the meaning of

a policy term, then it will be deemed ambiguous, id., and

construed against the insurer, Wagner v. Yates, 912 N.E.2d 805,

811 (Ind. 2009). If, on the other hand, the terms are clear, a

court will give them their plain and ordinary meaning. Id. at

810–11. 

An insured has the burden of demonstrating that its claim

is covered under the policy terms, whereas the insurer has the

burden of showing that an otherwise-covered claim is barred

by an exclusion in the policy. Telamon Corp. v. Charter Oak Fire

Ins. Co., 850 F.3d 866, 869 (7th Cir. 2017) (Indiana law) (collecting cases). By the terms of its policy, Illinois National agreed to

indemnify Berry for damages it is required to pay “because of”

property damage. There is no dispute that property damage

occurred: when Berry’s laminate product failed, a number of

IBCs came apart and any other IBCs assembled with the same

defective laminate were rendered useless. 244 F. Supp. 3d at

845. Berry thus bears the burden of showing that Packgen’s lost

profits—for which the jury required Berry to reimburse

Packgen—occurred “because of” that property damage. The

Indiana Supreme Court has not yet decided under what

circumstances, if any, future lost profits may be said to have

occurred “because of” property damage caused by a manufacturer’s defective product, for purposes of liability coverage.

Our role, then, is to decide that question in the manner that we

predict the Indiana Supreme Court would do so. E.g., SutulaJohnson v. Office Depot, Inc., 893 F.3d 967, 971 (7th Cir. 2018).
10 No. 17-1815

B.

To make an obvious point first, lost profits are a form of

business loss and as such are not the type of injury that the

ordinary commercial general liability policy insures against.

What an insurer like Illinois National undertakes to insure

against in such a policy is property damage or bodily injury

that results from the manufacturer’s product after it leaves the

manufacturer’s hands, which represents a distinctly different

form of risk from the disappointed commercial expectations of

the manufacturer’s customer. See T.R. Bulger, Inc. v. Ind. Ins.

Co., 901 N.E.2d 1110, 1115 (Ind. App. 2009); Weedo v. Stone-EBrick, Inc., 405 A.2d 788, 791-92 (N.J. 1979). A manufacturer’s

liability insurer is not insuring against the risk that a particular

product may not perform as promised or may not meet the

commercial expectations of the manufacturer’s customers.

Especially when a manufacturer has designed a product to

meet the particular needs of one customer, the specifications

the manufacturer has undertaken to meet, and the purposes its

product are intended to serve, are matters of negotiation

between the manufacturer and its customer; and the manufacturer’s liability insurer stands at a remove from that relationship. See Wausau Underwriters Ins. v. United Plastics Grp., Inc.,

512 F.3d 953, 957–58 (7th Cir. 2008) (Illinois law) (citing Robins

Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 308–10, 48 S. Ct.

134, 135–36 (1927) (Holmes, J.)); T.R. Bulger, 901 N.E.2d at 1115;

Roger C. Henderson, Insurance Protection for Products Liability

& Completed Operations—What Every Lawyer Should Know, 50

NEB. L. REV. 415, 441 (1971). An insurance policy intended to

backstop a manufacturer’s warranties and contractual agreements would look quite different from a commercial general
No. 17-1815 11

liability policy. See Am. Home Assur. Co. v. Libbey-Owens Ford

Co., 786 F.2d 22, 27–28 (1st Cir. 1986). To the extent such

undertakings are insurable at all, see Wilder Corp. of Del. v.

Thompson Drainage & Levee Dist., 658 F.3d 802, 805 (7th Cir.

2011) (“[o]ne generally can't insure against a breach of contract,

because of moral hazard (the tendency of an insured to be less

careful about preventing the harm insured against than if it

were not insured)”), one might expect to see temporal limits on

the insurer’s liability for business losses resulting from product

failures, not to mention the types of warranties or agreements

(and whose commercial expectations) that are covered.5 Those

sorts of terms are obviously missing from the standard

commercial general liability policy, which speaks in terms of

property damage and bodily injury. Indeed, we note that

Illinois National’s policy expressly excludes from the scope of

covered property damage “Property Damage to Your Product

arising out of it or any part of it” and defines “Your Product”

to include products manufactured or sold by Berry, as well as

“warranties or representations made at any time with respect

to the fitness, quality, durability, performance or use of Your

Product.” R. 42-4 at 16, 33–34. Those are classic business risk

exclusions that would appear to exclude losses for which Berry

is deemed liable because its product has not functioned as

Berry assured its customer that it would perform. See generally

1 Peter J. Kalis, et al., POLICYHOLDERS’ GUIDE TO THE LAW OF

INSURANCE COVERAGE (Walters Kluwer), § 10.02 (updated

through 2018). Thus, a customer’s business losses, if they are

5

 It strikes us as quite unlikely that warranties on a new product lacking

a history of success in the field would be insured at all.
12 No. 17-1815

recoverable at all under the manufacturer’s liability policy,

may be recovered only if they occur as a consequence of the

property damage that the policy expressly covers. See Wausau,

512 F.3d at 956–57.

This principle has a familiar parallel in tort law, which in

the ordinary case deems economic losses flowing from torts

such as negligence to be unrecoverable, because the tortfeasor

cannot be charged with notice of the consequences his tortious

acts might have on his victim’s commercial arrangements and

expectations. JMB Mfg., Inc. v. Child Craft, LLC, 799 F.3d 780,

785 (7th Cir. 2015) (Indiana law); Wausau, 512 F.3d at 957–58;

see also Indianapolis-Marion Cnty. Pub. Library v. Charlier Clark &

Linard, P.C., 929 N.E.2d 722, 729–30 (Ind. 2010); Gunkel v.

Renovations, Inc., 822 N.E.2d 150, 152–56 (Ind. 2005); Progressive

Ins. Co. v. Gen. Motors Corp., 749 N.E.2d 484, 487–90 (Ind. 2001);

Reed v. Cent. Soya Co., 621 N.E.2d 1069, 1074–75 (Ind. 1993),

modified in other respects on reh’g, 644 N.E.2d 84 (1994). A

disappointed customer instead must resort to a claim for

breach of warranty or breach of contract to recover for injuries

to his goodwill or profit expectations—just as Packgen did in

this case. See Gunkel, 822 N.E.2d at 153; Progressive, 749 N.E.2d

at 489; Reed, 621 N.E.2d at 1075; Thalheimer v. Halum, 973

N.E.2d 1145, 1151–52 (Ind. App. 2012). The exception to this

rule is when the economic losses occur in conjunction with

property damage or bodily injury. Wausau, 512 F.3d at 956–57;

Reed, 621 N.E.2d at 1075.

That said, we have in mind the central lesson of the Indiana

Supreme Court’s decision in Sheehan Const. Co. v. Cont’l Cas.

Co., 935 N.E.2d 160, adhered to in relevant part as modified on

reh’g, 938 N.E.2d 685 (Ind. 2010), which is that coverage under
No. 17-1815 13

a commercial general liability policy depends on the terms of

the policy rather than any distinctions that legal theory draws

between business risk on the one hand and property damage

on the other. The court in Sheehan looked to specific policy

terms in deciding that the costs of repairing and replacing the

damage caused by faulty construction work completed by the

insured’s subcontractor potentially were covered by the policy

at issue, notwithstanding a judicial tradition of characterizing

such costs as a business risk beyond the scope of a typical

liability policy. See id. at 167–72; see also Ind. Ins. Co. v. Kopetsky,

11 N.E.3d 508, 521 (“the Sheehan court soundly rejected the

notion of a general ‘economic loss’ doctrine in the CGL

context”), op. corrected in other respects, clarified & reaff’d on reh’g,

14 N.E.3d 850, 853 (Ind. App. 2014), transfer vacated, 28 N.E.3d

245 (Ind. 2015). Sheehan did not address the possibility that

future lost profits might be covered by such a policy, but the

court’s emphasis on what the policy terms cover, as opposed

to what judicial and public policy doctrines suggest should or

should not be covered, informs our own analysis of what losses

the Illinois National policy might reach.

C.

This brings us to the question whether the damages Berry

was ordered to pay for Packgen’s lost profits on prospective

sales of its IBCs constitute damages imposed “because of

property damage.” Berry contends “because of” should be

taken to connote the same sort of causal, “but for” meaning it

carries in tort law, so as to include all damages that occur as a

foreseeable consequence of the injury to property. Giving it

that reading, Berry reasons that because its defective foil

laminate failed in such a way as to cause property dam-
14 No. 17-1815

age—the IBCs came apart when CRI put them into use—the

lost profits awarded by the jury in Packgen’s breach of contract

suit all occurred “because of” property damage and are

therefore recoverable under the policy. Illinois National, on the

other hand, argues that “because of” should be read more

narrowly in view of the presumption against recovery of

purely economic losses. It, like the district court, reasons that

any category of damages is compensable under the policy only

to the extent it constitutes a measure of the property damage

caused by the defective product. On this view, the profits lost

on the canceled invoices to CRI for IBCs which had already

been manufactured (and were useless because they incorporated Berry’s defective foil laminate) would constitute damages

incurred because of property damage, but the profits lost on

anticipated sales of containers that had not yet been manufactured (and not yet ordered) would not. In our view, the correct

answer (and the one we believe the Indiana Supreme Court

likely would adopt) lies somewhere between these positions

and depends on a fact-sensitive inquiry with which Berry has

not engaged. See Wausau, 512 F.3d at 959.

The district court relied on a series of cases reflecting the

more restrictive understanding advocated by Illinois National

as to what types of damages may be attributed to property

damage. The approach is exemplified by our decision in

Travelers Ins. Cos. v. Penda Corp., 974 F.2d 823, 829–30 (7th Cir.

1992). In that case Penda, the insured, had manufactured

defective polystyrene sheets that its customer, U.S. Sample,

incorporated into sample books that, in turn, it had sold to its

own customer. The styrene yellowed, rendering the assembled

books useless and forcing U.S. Sample to replace them. Penda
No. 17-1815 15

was sued by U.S. Sample for breach of contract and warranty,

seeking recompense not only for the profits lost on the assembled (defective) books, but the profits lost on future sales of

sample books it would have made but for the mishap with

Penda’s defective polystyrene, and additionally damage to its

reputation. Penda tendered defense of the suit to its liability

insurer, Travelers, which took the position that the suit did not

allege any form of covered property damage and that consequently it had no obligation to defend its insured. We disagreed, in part. We concluded that the allegations of lost

profits on the assembled sample books themselves potentially

did fall within the coverage of the policy: Penda’s defective

product had rendered those sample books useless and to that

extent had caused property damage. The profits U.S. Sample

had lost on those books thus could be characterized as a

consequence of that property damage. Id. at 829. By contrast,

“[w]e ha[d] little difficulty in concluding that U.S. Sample’s

broad allegations of future profit and reputational damage are

purely economic losses and beyond the coverage of the

policy.” Id.

In a like vein, the district court in Nat’l Union Fire Ins. Co. of

Pittsburgh, Pa. v. Ready Pac Foods, Inc., 782 F. Supp. 2d 1047

(C.D. Cal. 2011), applying California law, concluded that a lost

patronage claim was not covered under an insured’s commercial and excess liability policies. Ready Pac, the insured,

produced pre-shredded and pre-washed lettuce for Taco Bell

restaurants; and contamination of that lettuce caused foodborne illnesses among Taco Bell customers in the northeastern

United States. Some 500 Taco Bell franchisees from around the

country filed suit against Ready Pac for a nationwide drop-off
16 No. 17-1815

in patronage after the outbreak. There was no dispute that

Ready Pac’s contaminated lettuce had caused property damage

to the extent it tainted the meal items into which it was

incorporated as well as restaurant surfaces and equipment. See

id. at 1050 & n.1, 1056. In Taco Bell’s view, that property

damage was a but-for cause of the lost profits to its franchisees,

such that Ready Pac’s commercial and excess liability carriers

were obliged to cover those losses. The court was not convinced on that point:

Taco Bell’s claim for lost profits is not a measure

of the damage to meals served at Taco Bell

restaurants nor the cost of the destroyed contaminated food items. Taco Bell’s alleged lost

profits as a result of customers deciding not to

eat at Taco Bell restaurants nationwide is not a

measure of the value of the meals and goods

that were destroyed at Taco Bell restaurants not

affected by the Outbreak. Furthermore, Taco

Bell’s claim for lost profits from the decline in

patronage is also not a measure of the costs

incurred to clean up the Taco Bell restaurants

affected by the Outbreak.

Id. at 1055. Accordingly, the court concluded that the claim “for

lost profits at the Taco Bell restaurants that were never shutdown during the E. coli investigation [i]s a claim for purely

economic loss, and not a measure of property damage or

personal injury suffered by Taco Bell and its customers.” Id.

Given what it saw as the strength of California law limiting the

recovery of consequential damages to losses constituting the

measure of damage to tangible property (and the remediation
No. 17-1815 17

thereof), the court rejected as “unpersuasive” Taco Bell’s

reliance on the broader standard articulated in cases such as

our own decision in Wausau, which we discuss momentarily.

Id. at 1056 n.4.

Other courts have employed substantially similar reasoning

in rejecting coverage for intangible economic losses. See St. Paul

Fire & Marine Ins. Co. v. Amsoil, Inc., 51 F. App’x 602, 605 (8th

Cir. 2002) (unpublished) (2–1 decision) (Wisconsin law) (lost

profits and market share resulting from damage insured’s

synthetic oil caused to customer’s gear boxes “are economic

losses and business risks not insured under [insured’s] CGL

policies”); Essex Ins. Co. v. Chem. Formula LLP, 2006 WL

5720284, at * 5–*6 (M.D. Pa. April 7, 2006) (injuries to commercial reputation and goodwill of janitorial cleaning supply firm

after distributing insured’s defective floor care product to

customers whose floors were damaged were not losses because

of property damage; reading liability policy to reach such

intangible losses because they flowed from physical damage to

property would “thwart the reasonable expectations of the

parties” and “open[ ] the door too wide to be considered

reasonable”); Geddes & Smith, Inc. v. St. Paul-Mercury Indemn.

Co., 51 Cal.2d 558, 566 (1959) (Traynor, J.) (allowing recovery

for damage insured’s defective doors caused to houses but

disallowing homebuilder’s lost profits and goodwill because

“such damages .... are not commonly thought of as injuries to

or destruction of property within the meaning of a public

liability insurance policy”).

These cases represent a narrow understanding of the losses

that can be said to occur “because of” property damage to the

extent they exclude any anticipated losses on products not yet
18 No. 17-1815

sold and produced. To be sure, there is a certain logic to this

line of cases. Damaged or impaired property usually can be

replaced; so in the ordinary case, the intangible consequences

of an injury to property will be limited, in contrast to bodily

injuries, which may have more long-lasting consequences. See

Westric Battery Co. v. Std. Elec. Co., 482 F.2d 1307, 1317 (10th Cir.

1973) (Colorado law). Once the assessment of consequential

losses extends beyond the profits lost on existing goods and

sales already made to an estimate of the profits lost on future

anticipated sales, it is arguably enforcing the commercial

expectations of the injured party more so than remediating

property damage. On the other hand, the policy language itself

draws no such distinctions explicitly. The policy indicates that

any damages the insured must pay “because of” property

damage are covered. The Indiana Supreme Court’s Sheehan

decision reminds us to focus on the meaning of such policy

terms as opposed to the rationale of the economic loss doctrine.

935 N.E.2d at 169. 

An ordinary understanding of the phrase “because of”

would include a broad array of consequential damages, not

simply those that constitute a measure of the injury to the

property itself. See Cincinnati Ins. Co. v. H.D. Smith, LLC, 829

F.3d 771, 774 (7th Cir. 2016) (liability policy covering damages

“because of” bodily injury provides broader coverage than

policy that only covers damages “for” bodily injury). And to

the extent that a causal connection can be shown between

property damage and lost profits, nothing in the term “because

of property damage” suggests that such lost profits necessarily

should be excluded. If the delamination of Berry’s defective

product and the disintegration of a Packgen IBC had resulted
No. 17-1815 19

in a fire that shut down CRI’s catalyst-manufacturing facility

for a substantial period of time, for example, why should the

profits and market share lost to CRI as a result of this incident

not be considered a measure of the injury to CRI’s property, in

the sense that it addresses the entirety of a loss CRI would not

have suffered but for the concrete property damage that

occurred?

Given that there is no language in Illinois National’s policy

that on its face excludes any category of losses that are incurred “because of” property damage, we are willing to

assume, consistent with Berry’s argument, that the Indiana

Supreme Court might well leave the door open to coverage of

future losses, including lost profits and loss of goodwill, so long

as the insured can establish a causal relationship between the

property damage and those losses. We summarized this

broader understanding of the “because of” language in

Wausau: “As in tort law, so in liability-insurance law[:] once

there is damage to property[,] the victim can recover the

nonproperty, including business, losses resulting from that

damage and not just the diminution in the value of the property.” 512 F.3d at 956–57 (citations omitted). See 3 Allan D.

Windt, INSURANCE CLAIMS AND DISPUTES, § 11.1 at 11–19 (6th

ed. 2013) (“Liability policies cover not only damages for

property damage, but damages because of, on account of, or by

reason of property damage. Accordingly, once covered property

damage exists, all consequential damages are covered.”)

(emphasis in original) (collecting cases); 1 Barry R. Ostrager &

Thomas R. Newman, HANDBOOK ON INSURANCE COVERAGE

DISPUTES, § 7.03[b][2][D] (2011) (“[T]he most sensible reading

of the ... phrase, ‘damages because of ... property damage,’
20 No. 17-1815

requires the insurer to pay all damages which are causally

related to an item of ‘property damage’ which satisfies either

of the policy’s definitions.”) (quoting Federated Mut. Ins. Co. v.

Concrete Units, Inc., 363 N.W.2d 751, 757 (Minn. 1985)); 12

COUCH ON INSURANCE 3D, § 172:32 at 172–76 through 172–77

(updated through 2018) (“absent an express provision

excluding coverage for consequential damages, a liability

policy insuring against all sums which insured became legally

obligated to pay because of bodily injury or property damage

includes a claim for loss of business and profits arising from

property damage”) (citing Great Am. Ins. Co. v. Lerman Motors,

Inc., 491 A.2d 729 (N.J. App. Div. 1984)); Laurie Vasichek, Note,

Liability Coverage for “Damages Because of Property Damage”

Under the Comprehensive General Liability Policy, 68 Minn. L.

Rev. 795, 818 (1984) (“[t]his reading of the phrase ‘because of’

limits coverage of consequential and tangible losses to situations where the insured can show a causal connection linking

the losses to covered property damage and, concurrently,

renders coverage highly elastic, with its scope adjusting to the

causal connection with the ‘property damage’ and other

injuries”); Am. Home Assur. Co. v. Libbey-Owens Ford Co., supra,

786 F.2d at 26 (“the term ‘because of property damage’ can

reasonably be interpreted to mean all liability arising from

such damage”); see also, e.g., Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Puget Plastics Corp., 532 F.3d 398, 403 (5th Cir.

2008) (Texas law) (excess liability policy covers consequential

damages, including lost profits and diminution in value of

company, which were result of property damage); Ferrell v.

West Bend Mut. Ins. Co., 393 F.3d 786, 795 (8th Cir. 2005)

(Wisconsin law) (“That the damages at trial [for breach of
No. 17-1815 21

warranty] were measured in terms of lost profits or diminished

gross receipts does not change the fact that property was

damaged. The measure of damages is distinct from the

question whether there was ‘property damage’ under the

policy.”); Aetna Cas. & Sur. Co. v. Gen. Time Corp., 704 F.2d 80,

83–84 (2d Cir. 1983) (New York law) (lost profits resulting from

physical injury insured’s motors caused to customer’s zone

valves were among the consequential damages covered by

liability policy); Todd Shipyards Corp. v. Turbine Serv., Inc., 674

F.2d 401, 418, 423 (5th Cir. 1982) (La. law) (loss of use of ship

due to damage inflicted by insured’s faulty repair work to

turbine covered), called into doubt in other respects by Nathaniel

Shipping, Inc. v. Gen. Elec. Co., 932 F.3d 366, 367–68 (5th Cir.

1991); Cent. Armature Works, Inc. v. Am. Motorists Ins. Co., 520

F. Supp. 283, 289 (D. D.C. 1980) (lost profits stemming from

loss of use of scrap metal shredder damaged by insured’s

negligent repair efforts covered); Fitness Equip. Co. v. Pa. Gen.

Ins. Co., 493 So.2d 1337, 1343 (Ala. 1985) (treadmill manufacturer’s lost profits and lost contracts resulting from treadmill

damage caused by insured’s faulty motors were damages

“because of” property damage). 

Our decision in Wausau illustrates the application of this

broader rule. The insured in that case, United Plastics Group

(UPG), had manufactured defective water heating chambers

that were incorporated into tankless water heaters produced

by another company, Microtherm. Roughly 600 of the UPG

chambers ruptured, in some cases leaking onto the heater’s

control board and causing it to short out, in other instances

causing water to leak out of the heater and damage the consumers’ carpets and floors, and in a minority of cases simply
22 No. 17-1815

causing the heater not to work. Customer dissatisfaction

ensued, and sales of the Microtherm heaters suffered significantly. Microtherm sued UPG, alleging that UPG had misrepresented the quality of its heating chambers. A Texas jury

agreed and awarded Microtherm $25 million in lost profits,

among other losses. UPG in turn sued its excess liability

insurer, Ohio Casualty, seeking indemnity on the ground that

the lost profits were due to property damage. The district court

held Ohio Casualty liable for the full amount, but we remanded for a trial to determine (a) the extent to which the 65

to 75 heater failures that occurred during the time period

during which the Ohio Casualty policy was in force contributed to Microtherm’s lost profits; and (b) the extent to which

those lost profits were due to the property damage caused by

UPG’s defective heating chambers, as opposed to their failure

to perform up to warranted specifications. We agreed that

property damage had occurred in at least some instances,

specifically when leaking water from the defective heating

chambers either shorted out heaters’ circuit boards or spoiled

consumers’ floors. But we also pointed out that the defective

heating chambers could cause the heaters to fail without

causing property damage in these ways: “only about 80

percent of the water-chamber ruptures shorted the circuit

board; the other 20 percent just caused the water heater to stop

working, and that we know is not property loss.” Id. at 958.

The deeper problem is that the business losses

for which Microtherm sued might well have

occurred even if no [heating chamber] had

ruptured. From the consumer’s standpoint, the

precise mechanism that causes his hot-water
No. 17-1815 23

heater to stop working is irrelevant; all he cares

about is that he has no hot water. No doubt if

the broken heater leaks and ruins its owner’s

carpet, there is added fury against Microtherm;

but we do not even know how many of the

broken heaters caused such damage. The question how much of Microtherm’s business losses

were due to the rupture of some 52 to 60 failed

water chambers that damaged a circuit board

(80 percent of the 65 to 7[5] total failures) was

not presented to the jury in Texas because it is

an issue related only to insurance coverage,

which was not the subject of the Texas case. But

not all the business-loss damages awarded in

that case could have been due to the 10 percent

or fewer ruptures (52–60 out of 600) that both

caused damage to property (either to the circuit

board or the owner’s other property, but as we

do not know how many of the ruptures caused

damage to the owners’ other property we are

stuck with our 52–60 estimate) and occurred

during the coverage period. That incremental

damage may have been less than 10 percent of

the total damages. ...

Id. at 958–59. We left it to the district court to sort out these

questions on remand.

D.

Assuming that Indiana law would permit the recovery of

lost future profits, Wausau makes clear that whether the Illinois
24 No. 17-1815

National policy covers an award of such business losses

depends on whether those losses were specifically due to

property damage or instead to the failure of Berry’s foil

laminate product to function as expected and warranted. The

verdict against Berry in the Packgen litigation does not answer

this question, as the contract and warranty theories on which

Packgen prevailed turned on the failure of Berry’s product to

satisfy agreed-upon or implied criteria rather than the occurrence and consequences of any property damage. Berry’s briefs

elide the distinction between the two possible causes of

Packgen’s losses,6 but the distinction is critical to Berry’s case

for indemnification. Berry’s own argument is that the “because

of” language in the policy requires that Berry be indemnified

for Packgen’s business losses so long as they were caused by

property damage. Certainly it is possible to imagine a set of

facts in which this causal nexus could be established, but it is

equally possible to imagine scenarios in which none or only a

portion of Packgen’s profits were due to property damage as

opposed to the failure of Berry’s product to function as

warranted, just as we explained in Wausau. 

To begin with the latter possibility: Imagine that CRI, when

it received its very first shipment of IBCs from Packgen, had

performed its own precautionary inspection and testing of one

or more containers (not yet filled with catalyst) and discerned

6

 See, e.g., Berry Br. 14 (treating damages caused by insured’s failed product

and damages caused by covered property damage as identical); Berry Reply

Br. 30 (treating Packgen jury’s findings as to damages resulting from

“Berry’s alleged failure to supply [a] compliant product” as dispositive of

Illinois National’s duty to indemnify Berry).
No. 17-1815 25

that the foil laminate was not up to the task for which it was

designed. Perhaps CRI would only be able to reach this

conclusion if the foil product actually delaminated and

“damaged” the container by causing it to begin coming apart,

just as we know it did come apart in multiple instances when

CRI put the containers into use. But in the testing/inspection

scenario we are hypothesizing, any actual property damage

would necessarily be limited. What would matter, from CRI’s

perspective, is that the container (and, in particular, Berry’s

foil/polypropylene laminate) failed to perform as expected.

Given the nature of CRI’s business and the purposes for which

it intended to use the IBCs—carrying a flammable material—the reliability of the containers would be of the utmost

concern to CRI. Once inspection and testing revealed that the

containers might fail, expose the catalyst, and thereby present

the risk of fire or explosion, CRI might well decide to cancel its

orders for the IBCs, just as it did after multiple failures occurred in practice. In our scenario, it would be easy to see why

Packgen’s ensuing commercial losses would be due largely, if

not exclusively, to the failure of the product to perform as

warranted rather than any limited property damage that

occurred in testing. A jury might very well still hold Berry

liable for breach of contract and warranty in that scenario, but

Illinois National would not be required to indemnify Berry for

an award of Packgen’s lost profits, as those losses would not be

attributable to property damage.

On the other hand, it is possible to imagine scenarios in

which Berry’s component (and the IBCs into which it was

incorporated) does not simply fail to perform, but fails in a

disastrous way resulting in grievous injury to Packgen’s
26 No. 17-1815

customer. We know from the Packgen trial record, for example,

that some of the IBC failures resulted in fires when the catalyst

within those containers was exposed to air. Suppose as we

hypothesized earlier that such a fire spread and burned out of

control, causing extensive damage to CRI’s facility and existing

stock of catalyst—all of that constituting “property damage”

within the meaning of the Illinois National policy. (A similar

fire occurring at a petroleum refinery upon receipt of an IBC

containing fresh catalyst from CRI might produce even more

devastating results.) CRI, naturally, would tell Packgen to drop

dead in the wake of such a disaster. In such a scenario it would

not be difficult to make the case that Packgen’s lost future sales

to CRI were due to the property damage that CRI experienced

as opposed to the simple failure of product to perform as

expected. And if the fire and damage achieved notoriety within

the petroleum refining industry, one might say the same as to

lost sales to other prospective customers. 

But Berry has made no effort, below or on appeal, to make

such a case. Its primary contention in that regard is that

collateral estoppel, or issue preclusion, bars Illinois National

from attempting to contest the proposition that the losses

awarded in the Packgen suit were “because of” property

damage.7

 That contention is a non-starter, because the Packgen

7

 Below, in opposing Illinois National’s motion for summary judgment, and

in support of its own cross-motion for summary judgment, Berry asserted

that the underlying Packgen litigation had already resolved the question

whether the losses for which Berry was ordered to compensate Packgen

were “because of” property damage and that Illinois National was thus 

barred from re-litigating that question in this suit. See R. 55 at 22. 
No. 17-1815 27

jury was not presented with the questions that are dispositive

of Illinois National’s duty to indemnify Berry.

A fundamental prerequisite for treating a prior adjudication

as conclusive in subsequent litigation is that the former

necessarily resolved the same issue presented in the latter. Earl

v. State Farm Mut. Auto. Ins. Co., 91 N.E.3d 1066, 1074 n.5 (Ind.

App. 2018) (quoting Afolabi v. Atl. Mortg. & Inv. Corp., 849

N.E.2d 1170, 1175 (Ind. App. 2006)); see, e.g., Frankenmuth Mut.

Ins. Co. v. Williams by Stevens, 690 N.E.2d 675, 678–79 (Ind.

1997) (where insured babysitter had consented to judgment on

claim that her negligent supervision of child was cause of

injuries child suffered when molested by babysitter’s husband,

insurer, having declined to defend insured in underlying

action, was estopped from denying coverage on ground

injuries to victim were result of intentional act; consent

judgment embodied legal conclusion that injuries were result

of insured’s negligence).

The Packgen jury decided that Berry breached its agreement

with Packgen as well as the implicit and explicit warranties it

made to Packgen regarding its foil laminate and determined

the losses that resulted from these breaches; the jury was not

called upon to decide whether Berry’s defective product

resulted in property damage, let alone whether the losses that

Packgen suffered were “because of” such damage. See Nat’l

Union Fire Ins. Co. of Pittsburgh, Pa. v. Puget Plastics Corp., supra,

532 F.3d at 404 (jury in underlying action had no reason to

consider whether damages constituted property damage

within meaning of liability policy); Wausau Underwriters Ins.

Co. v. United Plastics Grp., Inc., 2010 WL 538544, at *3 (N.D. Ill.

Feb. 10, 2010) (on remand from this court’s decision in Wausau,
28 No. 17-1815

supra) (“While an underlying trial and verdict may certainly

bear upon an insurer’s duty to indemnify, issues exclusively

relevant to coverage, as opposed to liability, are typically not

litigated in an underlying case. As a result, courts may consider additional evidence when deciding later indemnification

actions.”) (citations omitted); Nat’l Union Fire Ins. Co. of

Pittsburgh, Pa. v. Reichhold, 2009 WL 3125483, at *5 (M.D.N.C.

Sep. 30, 2009) (“while neither party may ‘relitigate’ issues that

have been determined in the underlying cases, the Court

concludes that the underlying cases did not resolve whether

the damages were for ‘property damage’ and it will be for the

jury in this present case to determine what proportion of

Reichhold’s liability in the underlying claims was because of

‘property damage’ under the terms of the policies”). 

Whether and to what extent Packgen’s losses were due to

property damage, as opposed to the failure of Berry’s product

to perform as promised, are the questions dispositive of Illinois

National’s duty to indemnify Berry, and our decision in

Wausau leaves no doubt that these are issues which must be

independently resolved here: Wausau expressly held that the

incremental harm attributable to property damage “was a key

issue that the district judge should have tried” in the indemnity action “rather than supposing it to have been resolved by

the Texas jury” in the underlying liability action. 512 F.3d at

959.

Apart from its meritless invocation of issue preclusion,

Berry has not outlined a case for the notion that some or all of

the lost profits awarded by the Packgen jury were the result of

property damage, nor has it asked for the opportunity to

present such a case to the factfinder as our decision in Wausau
No. 17-1815 29

envisions. Berry implicitly presumes that because its product

failed in such a way as to cause property damage (i.e., the

foil/polypropylene product delaminated and rendered the

IBCs useless), all damages resulting from the failure of its

component were necessarily “because” of property damage.

Equating the failure of its product to perform as expected

(and warranted) with property damage is both wrong, for the

reasons we have already discussed, and inconsistent with our

reasoning in Wausau. For purposes of establishing its right to

indemnity, Berry may well have a case to make for the notion

that the property damage its product caused incrementally

increased Packgen’s losses. In contrast to the defective waterheating chamber at issue in Wausau, for example, Berry’s foil

laminate was an integral part of the IBC and it is difficult to

imagine ways in which it could fail without damaging the

overall container. Cf. Konrad Marine, Inc. v. Marine Assocs., Inc.,

831 N.W.2d 825 (table), 2013 WL 1580354, at *5 (Wis. Ct. App.

April 16, 2013) (non-precedential decision) (declining to parse

source of consequential lost profits) (“Here, there was physical

injury to some or all of the stern drives when the teeth sheared

off the gears. One can reasonably infer that the additional

harm, above and beyond the gear failure, contributed to

customers’ perceptions regarding the stern drives.”). But Berry

does not endeavor to make such a case. We point out in this

regard that the fires which accompanied some of the IBC

failures lend additional plausibility to the notion that it may

have been the property damage, and not the simple failure of

Berry’s foil laminate to perform as expected, that frightened

CRI and petroleum refiners away from Packgen’s containers;

but Berry’s briefs barely mention these incidents. As we have
30 No. 17-1815

said, Berry equates the failure of its product to perform with

property damage, and presumes that all of the six-plus million

dollars in lost profits the Packgen jury awarded for the former

are damages “because of” the latter. That premise is incorrect,

and because Berry’s appeal is founded on that premise alone,

it has waived any contention that we should, as in Wausau,

remand for further proceedings.

There is another point to be made before we conclude with

this subject. The Packgen jury award was based on the expert

Filler’s 10-year projection. Apparently Filler, in consultation

with Packgen’s president, estimated that it would take five

years for the petroleum industry to forget about the failure of

Packgen’s IBCs and another five years beyond that for Packgen

to attain the same level of IBC sales it was making in April

2008. Part of Berry’s burden in establishing that the monetary

damages the Packgen verdict required it to pay were “because

of”property damage is to show that the full 10 years of

projected losses were attributable to such damage. That task

becomes more difficult the further one projects out from the

April 2008 failure of Berry’s product. It might be reasonable to

attribute a shorter period of Packgen’s business losses to the

property damage inflicted by Berry’s bad run of laminate. But

to retroactively guarantee Packgen’s profits for such a lengthy

period of time—particularly for a new product without a

record of reliable service and sales—looks much more like the

policy is being used to insure the commercial expectations

Packgen harbored based on Berry’s representations and

warranties as to how its laminate product would perform.

Absent proof that the property damage itself was so egregious

as to ruin Packgen’s reputation in the industry, such a result
No. 17-1815 31

would be inconsistent with the scope, terms, and purpose of

the policy.

These are the sorts of considerations that would have to be

sorted out in a trial on the question of coverage. But as we have

said, Berry has not asked for such a trial, nor has it laid out

what case it would make at such a trial to warrant indemnity,

in whole or in part, for the Packgen jury’s award of lost profits.

E.

We need finally say only a relative few words about Berry’s

bad faith claim. The Indiana Supreme Court recognized in Erie

Ins. Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993), that an insurer

may be held liable in tort for a failure to deal with its insured

in good faith. Berry’s claim that Illinois National breached its

duty of good faith is premised on Illinois National’s refusal to

participate in (and pledge money toward) pre-trial discussions

of a possible settlement of the Packgen suit, notwithstanding

Federal’s own tender of its $1 million policy limit toward such

a settlement. That refusal, Berry contends, nixed the prospects

for settlement and instead left Berry on the hook for the

substantial award of damages later imposed by the Packgen

jury. Berry adds that the district court’s rejection of this claim

was premature, as Berry had not yet had the opportunity to

engage in discovery as to what Illinois National knew about

the meaning of the policy’s “because of” language and its

(private) reasons for refusing to contribute funds toward a

possible settlement of the Packgen litigation. 

Like the district court, however, we are not convinced that

Berry has a plausible claim of bad faith to pursue. From the

start, Illinois National’s position has been that Packgen’s loss
32 No. 17-1815

of future business was not the sort of loss that could be

attributed to property damage. Given precedents such as Penda

and Ready Pac, and the unsettled nature of Indiana law on this

point, this was not an objectively unreasonable position for

Illinois National to take. Morever, even under the more liberal

approach to commercial losses reflected in cases like Wausau,

Berry would still have to demonstrate a causal link between

any such losses and the property damage that its defective

component caused.

The Hickman decision indicates that a genuine dispute as to

whether an insured has a valid claim under the policy or as to

the amount of such a claim will not establish breach of the

insurer’s duty of good faith; such a breach occurs when the

insurer “denies liability knowing that there is no rational,

principled basis for doing so.” 622 N.E.2d at 520; see also

Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 40 (Ind. 2002). Our

decision here leaves open the possibility that the Indiana

Supreme Court might treat an award of lost profits or injury to

goodwill as compensable under a liability policy when those

losses are indeed caused by property damage as opposed to

the simple failure of the insured’s product to perform as

expected. Whether Berry could make that showing (and as to

what portion of Packgen’s losses) was never a foregone

conclusion and even now remains open to reasonable debate

given Berry’s failure to make a case on this point. See id. at

42–43. Remanding for discovery, as Berry insists we should do

in the hope that it might discover evidence that Illinois

National privately believed something contrary to its public

position as to its liability for lost profits, cf. Monroe Guar. Ins.

Co. v. Magwerks Corp., 829 N.E.2d 968, 976–77 (Ind. 2005)
No. 17-1815 33

(insurer had essentially acknowledged prior to insured’s suit

that roof collapse met criteria for coverage), would be a license

for a pointless fishing expedition. The district court did not

resolve this claim prematurely.

III.

For all of the foregoing reasons, the district court properly

entered summary judgment in favor of Illinois National.

AFFIRMED