In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 16Ȭ3928

WEST SIDE SALVAGE, INC.,

PlaintiffȬAppellant,

v.

RSUI INDEMNITY COMPANY,

DefendantȬAppellee.

____________________

Appeal from the United States District Court for the

Southern District of Illinois.

No. 15ȬcvȬ0442ȬMJRȬSCW — Michael J. Reagan, Chief Judge.

____________________

ARGUED NOVEMBER 1, 2017 — DECIDED DECEMBER 18, 2017

____________________

Before MANION, KANNE, and ROVNER, Circuit Judges.

KANNE, Circuit Judge. In 2014, we held that West Side SalȬ

vage, Inc. was solely liable for the injuries that three workers

suffered in a grainȬbin explosion. We also held that West Side

was liable for $3 million in property damage to the bin, which

was owned by ConAgra Foods, Inc.ȱȱ

West Side had an $11 million excess insurance policy with

RSUI Indemnity Company. West Side sued RSUI, alleging that
2 No. 16Ȭ3928

RSUI breached its duty to settle ConAgra’s propertyȬdamage

claim. The district court granted summary judgment to RSUI.

West Side appeals. We affirm.

I. BACKGROUND

In 2010, ConAgra discovered a hot grain bin—a bin with

rising grain temperatures that poses a risk of fire and exploȬ

sion—at its Chester, Illinois facility. It hired West Side to fix

the problem, but the grain bin exploded while West Side was

working on it. The explosion caused severe burns and injuries

to three workers and damaged the bin. The injured workers

sued West Side and ConAgra, and ConAgra filed a

crossȬclaim against West Side for property damage to the bin.

West Side had a $1 million primary insurance policy with

Colony Insurance and an $11 million excess insurance policy

with RSUI. At the outset of the explosion litigation, Colony

tendered its limits and removed itself from the case. But a ColȬ

onyȬhired attorney continued to represent West Side through

trial after West Side received reservation letters from RSUI.

The letters reflected RSUI’s position that ConAgra’s propȬ

ertyȬdamage claim against West Side may potentially fall outȬ

side of coverage. Relevant to this appeal, West Side’s policy

with RSUI includes a damageȬtoȬproperty clause, which exȬ

cludes certain propertyȬdamage claims from coverage.

The parties tried but never reached a settlement in the exȬ

plosion litigation. After a jury trial, West Side and ConAgra

were found liable for the workers’ injuries, and West Side was

found liable for the property damage to ConAgra’s grain bin.ȱȱ

Both West Side and ConAgra appealed, and in Jentz v.

ConAgra Foods, Inc., 767 F.3d 688 (7th Cir. 2014), we reversed

the personalȬinjury judgment as to ConAgra and held that
No. 16Ȭ3928 3

West Side was solely liable for the workers’ injuries. We afȬ

firmed the judgment against West Side on ConAgra’s propȬ

ertyȬdamage claim. This left West Side with significantly

greater liability than what its insurance policies covered.

Before we decided Jentz, West Side filed a complaint in disȬ

trict court, arguing that RSUI should have settled the exploȬ

sionȬlitigation claims within policy limits and breached its

duty to settle in not doing so. The district court dismissed that

action without prejudice. After we decided Jentz, West Side

and RSUI privately settled West Side’s claim that RSUI should

have settled the injured workers’ claims within policy limits.

But that settlement did not address the propertyȬdamage

claim. Instead, West Side filed the action from which this apȬ

peal was taken, alleging that RSUI breached its duty to settle

the propertyȬdamage claim within policy limits.ȱȱ

RSUI moved for summary judgment, advancing two arguȬ

ments. It principally argued that the insurance policy doesn’t

cover the propertyȬdamage claim, in part because there is a

damageȬtoȬproperty exclusion in the policy that applies. It arȬ

gued in the alternative, though, that even if the claim is covȬ

ered by the insurance policy, West Side could not present evȬ

idence that RSUI breached its duty to settle. The district court

rejected the first argument but accepted the second. The court

reasoned that an insurer only has a duty to settle when there

is an offer to settle all claims against the insured at the same

time that there is a reasonable likelihood the insured will face

liability exceeding the policy limits. The court found that West

Side did not show there was a time when these conditions

were satisfied, and it granted summary judgment to RSUI.

West Side appeals.ȱȱ
4 No. 16Ȭ3928

II.ANALYSIS

We review a district court’s grant of summary judgment de

novo, construing the facts and making reasonable inferences

in favor of the nonmovant, here, West Side. See Perez v.

Thorntons, Inc., 731 F.3d 699, 703 (7th Cir. 2013). We may affirm

“on any ground supported in the record, so long as that

ground was adequately addressed in the district court and the

nonmoving party had an opportunity to contest the issue.”

Cardoso v. Robert Bosch Corp., 427 F.3d 429, 432 (7th Cir. 2005).ȱȱ

In this court, RSUI repeats the two arguments it made in

its motion for summary judgment as alternative bases for afȬ

firmance: that the insurance policy doesn’t cover ConAgra’s

propertyȬdamage claim and that, even if there is coverage,

West Side can’t show RSUI breached its duty to settle.

In support of its first argument, RSUI contends that the

damageȬtoȬproperty clause in the policy excludes ConAgra’s

claim against West Side from coverage. We agree.ȱȱ

We interpret the damageȬtoȬproperty exclusion in accordȬ

ance with the law of the forum state, Illinois. Under Illinois

law, the damageȬtoȬproperty clause excludes ConAgra’s claim

against West Side from coverage. And RSUI had no duty to

settle a claim that the insurance policy doesn’t cover. See Am.

Family Mut. Ins. Co. v. Westfield Ins. Co., 962 N.E.2d 993, 1000

(Ill. App. Ct. 2011).ȱȱ

A. Illinois law applies to the analysis of the damageȬtoȬproperty

exclusion.

As a federal court sitting in diversity, we turn to state law

to determine whether an insurance coverage exclusion apȬ

plies. See, e.g., Neth. Ins. Co. v. Phusion Projects, Inc., 737 F.3d

1174, 1177 (7th Cir. 2013); Cincinnati Ins. Co. v. Flanders Elec.
No. 16Ȭ3928 5

Motor Serv., Inc., 40 F.3d 146, 150 (7th Cir. 1994). But the parties

dispute which state law we should apply, so we turn first to a

choiceȬofȬlaw analysis using the rules of the forum state, here,

Illinois. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).

Illinois courts engage in a choiceȬofȬlaw analysis only if

there is a conflict between Illinois law and the law of another

state such that “a difference in law will make a difference in

the outcome.” Townsend v. Sears, Roebuck & Co., 879 N.E.2d

893, 898 (Ill. 2007). The party who seeks a choiceȬofȬlaw deterȬ

mination must establish the existence of an outcomeȬdetermiȬ

native conflict. Bridgeview Health Care Ctr., Ltd. v. State Farm

Fire & Cas. Co., 10 N.E.3d 902, 905 (Ill. 2014). If the party fails

to establish the existence of such a conflict, the court applies

the law of the forum state. See id.; Gleim v. Roberts, 919 N.E.2d

367, 370 (Ill. App. Ct. 2009).ȱȱ

West Side argues that a conflict exists between Illinois and

Iowa law that affects whether the damageȬtoȬproperty excluȬ

sion bars coverage for ConAgra’s propertyȬdamage claim. In

support of this contention, West Side points to National Surety

Corp. v. Westlake Investments, LLC, 880 N.W.2d 724 (Iowa 2016).

Westlake addressed whether an insurance policy covered a

propertyȬdamage claim arising after construction work was

completed. When a propertyȬdamage claim arises after work is

completed, whether that claim is covered by the policy deȬ

pends on the application of the “damage to ‘your work’” exȬ

clusion. Id. at 739–40 (The “‘your work’ exclusion generally

excludes from coverage property damage arising out of comȬ

pleted work performed by or on behalf of the insured.”).ȱȱ

But ConAgra brought a claim for property damage caused

by ongoing operations, not completed work. When a propȬ

ertyȬdamage claim arises during ongoing operations, whether
6 No. 16Ȭ3928

that claim is covered by the policy depends on the application

of the damageȬtoȬproperty exclusion, instead. See id. at 739

(noting that the damageȬtoȬproperty exclusion generally exȬ

cludes from coverage property damage due to work incorȬ

rectly performed on it, but it generally does not apply if the

property damage arises out of completed work). Thus,

Westlake is not outcomeȬdeterminative in this case.ȱȱ

In the absence of a demonstrated conflict, we apply the

law of the forum state (Illinois) to determine whether the

damageȬtoȬproperty exclusion applies to ConAgra’s propȬ

ertyȬdamage claim against West Side.

B. The damageȬtoȬproperty provision excludes ConAgra’s

claim against West Side from coverage.ȱȱ

Though a court must construe exclusions liberally in favor

of the insured and against the insurer, “if an exclusion is clear

and unambiguous and does not contravene public policy, it

must be applied as written.” Pekin Ins. Co. v. Willett, 704

N.E.2d 923, 925 (Ill. App. Ct. 1998). West Side does not argue

that the damageȬtoȬproperty exclusion is ambiguous or conȬ

travenes public policy. Thus, we apply the exclusion as it is

written.ȱȱ

The damageȬtoȬproperty exclusion eliminates insurance

coverage for property damage to:

“(5) [t]hat particular part of real property on

which you or any contractors or subcontractors

working directly orindirectly on your behalf are

performing operations, if the ‘property damage’

arises out of those operations; or
No. 16Ȭ3928 7

(6) [t]hat particular part of any property that

must be restored, repaired or replaced because

‘your work’ was incorrectly performed on it.”

(R. 1 at 30–31.) The contract defines “property damage” as

“[p]hysical injury to tangible property,” (R. 1 at 40), and it deȬ

fines “your work” as “[w]ork or operations performed by you

or on your behalf,” (R. 1 at 41). This exclusion is “premised on

the theory that liability policies are not intended to provide

protection against the insured’s own faulty workmanship or

product, which are normal risks associated with the conduct

of the insured’s business.” State Farm Fire & Cas. Co. v. TillerȬ

son, 777 N.E.2d 986, 992 (Ill. App. Ct. 2002).

The district courtread these provisions narrowly, concludȬ

ing that the exclusion only applied if the insured was sued for

property damage caused by work on that particular piece of

property. To reach this conclusion, the district court did not

apply Illinois law and instead relied on Columbia Mutual Ins.

Co. v. Schauf, 967 S.W.2d 74 (Mo. 1998) (en banc). In that case,

a painter was hired to paint all interior and exterior surfaces

of a home. Schauf, 967 S.W.2d at 76. After the painter used a

spraying compressor to paint the kitchen cabinets, he began

cleaning the compressor inside the home before he left for the

day. Id. The equipment started a fire that damaged the home,

and the homeowners sued the painter for that damage. Id. In

a declaratory action brought by the painter’s insurer, the court

held that only damage to the kitchen cabinets was excluded

from coverage because that was the only part of real property

on which the painter was performing operations. Id. at 80.

Applying Schauf to this case, the district court found that

“a reasonable interpretation of the facts could lead to the conȬ

clusion” that West Side was not working on the grain bin
8 No. 16Ȭ3928

when it exploded but instead was only handling the grain inȬ

side of it. (R. 65 at 13.) Because ConAgra sued for the damage

to the bin, not for the loss of the grain, a jury could find that

ConAgra’s propertyȬdamage claim was still covered by the inȬ

surance policy despite the damageȬtoȬproperty exclusion.ȱȱ

We decline to adopt the district court’s interpretation and

instead hold that the damageȬtoȬproperty exclusion applies

here. Under Illinois law, the damageȬtoȬproperty exclusion is

not interpreted so narrowly. “The exclusion[] do[es] not exȬ

clude coverage for damage done only to the precise area of

the property being worked on. Rather, the exclusion[]

appl[ies] to property damage caused by poor workmanship.”

Willett, 704 N.E.2d at 926.

In Willett, the homeowners hired a worker to empty their

swimming pool, paint it, and fill it with water and chemicals

to prepare it for use. Id. at 924. After the worker emptied and

painted the pool, but before he filled it, the pool pushed out

of the ground from a heavy rainstorm. Id. The homeowners

filed a complaint against the worker, alleging that he failed to

fill the pool in a timely manner and that this failure caused

damage to the pool while he was working on it. Id. at 926. WilȬ

lett’s insurance company brought an action seeking a declaraȬ

tion that Willett’s insurance policy did not cover the homeȬ

owner’s claim against him. The court held that the policy exȬ

cluded the homeowner’s claim from coverage, resting its

holding on the applicability of damageȬtoȬproperty proviȬ

sions that are identical to the ones here. Id.

Just as Willett’s insurance policy did not cover the damage

to the swimming pool because he “performed his work incorȬ

rectly by failing to fill the pool in a timely manner,” West

Side’s insurance policy does not cover the damage to the grain
No. 16Ȭ3928 9

bin because West Side performed its work incorrectly by failȬ

ing to reduce the grain temperature in a timely manner. Id.

Even if it is true that West Side was only working on the grain

when the explosion occurred, it is immaterial. The damageȬ

toȬproperty exclusion does not apply only to the precise area

of the property being worked on if the work performed was

poor. See id.

Holding otherwise would undermine the basic premise of

the damageȬtoȬproperty exclusion: that general liability poliȬ

cies are not intended to protect the insured from the normal

risks of its business. See Tillerson, 777 N.E.2d at 992. The damȬ

age that West Side caused was one of the normal risks associȬ

ated with its business of remedying hot grain bins before they

explode. See AutoȬOwners Ins. Co. v. Chorak & Sons, Inc., No. 07

C 4454, 2008 WL 3286986, at *4 (Ill. App. Ct. 2008) (noting that

the insured was asking the insurer to provide coverage for

damage that was the result “of the normal risks associated

with” the activity the insured was performing and holding

that the damageȬtoȬproperty exclusion applied to bar such

coverage).

C. Because RSUI didn’t cover ConAgra’s claim against West

Side, RSUI had no duty to settle it.

“[The] duty to act in good faith in responding to settleȬ

ment offers ... only exists where there is coverage under the

policy.” Am. Family Mut. Ins. Co. v. Westfield Ins. Co., 962

N.E.2d 993, 1000 (Ill. App. Ct. 2011). The damageȬtoȬproperty

exclusion removed ConAgra’s claim from coverage under

West Side’s policy with RSUI, so RSUI had no duty to act in

good faith in responding to an offer to settle that claim. West

Side’s three arguments that RSUI should nonetheless be held

accountable for failing to settle the claim are unavailing.ȱȱ
10 No. 16Ȭ3928

West Side first contends that there is an applicable excepȬ

tion to the damageȬtoȬproperty exclusion. In support, it points

to an exception to an entirely different exclusion—the “your

work” exclusion. The exceptions to the damageȬtoȬproperty exȬ

clusion do not apply. (See R. 1 at 30–31.)ȱȱ

Next, West Side argues that “RSUI is estopped from assertȬ

ing lack of coverage as a defense,” because “RSUI took over

[the defense] and insisted on handling the settlement discusȬ

sions.” (Appellant’s Reply Br. at 10–11.) But if “an underlying

complaint presents an issue of potential insurance coverage,

and the insurer believes that the policy does not cover the

claim, the insurer may not refuse to defend the insured, but

must either defend the suit under a reservation of rights or

seek a declaration of no coverage.” See Mobil Oil Corp. v. Md.

Cas. Co., 681 N.E.2d 552, 560 (Ill. App. Ct. 1997). In this case,

RSUI sent West Side reservation letters before it began to deȬ

fend the suit. (Appellant’s Reply Br. at 10.)ȱȱ

Additionally, West Side was represented through trial by

independent counsel hired by its primary insurance carrier,

not RSUI. (R. 59 at 3.) See Home Ins. Co. v. Three I Truck Line,

Inc., 95 F. Supp. 2d 901, 905–06 (N.D. Ill. 2000) (after recognizȬ

ing that a reservation of rights may not insulate a defense of

nonȬcoverage if the insurer prejudices the insured during the

defense of the action, noting that an insured should acquire

its own counsel to avoid the insurer “subvert[ing] the inȬ

sured’s ability to protect its own interests”); see also Twin City

Fire Ins. Co. v. Country Mut. Ins. Co., 23 F.3d 1175, 1179 (7th Cir.

1994) (noting that Illinois’s duty to settle is an “implied correlȬ

ative” of the insurer’s control over the defense). Because RSUI

took sufficient steps to ensure that it would not prejudice

West Side’s defense even though RSUI was involved in it,
No. 16Ȭ3928 11

RSUI is not estopped from asserting a defense of nonȬcoverȬ

age.ȱȱ

Finally, West Side argues that RSUI is liable for ConAgra’s

$3 million judgment against West Side—“even if ConAgra’s

property damage claim was uncovered”—because the judgȬ

ment was a consequential damage arising from RSUI’s bad

faith failure to settle the injured workers’ claims. (Appellant’s

Reply Br. at 12.) But West Side cannot recover any damages,

including consequential damages, for a claim that it did not

even bring: West Side and RSUI privately settled West Side’s

claim that RSUI failed to settle the injured worker’s claims.

(Appellant’s Br. at 27.) West Side’s argument that it is now enȬ

titled to consequential damages from that claim is without

merit.ȱȱ

III.CONCLUSION

We may affirm summary judgment on any basis supȬ

ported by the record, so long as the ground was adequately

addressed below. RSUI advanced two arguments for why it

was entitled to summary judgment on West Side’s claim that

it breached its duty to settle ConAgra’s propertyȬdamage

claim: that the insurance policy does not cover the claim and,

in the alternative, that West Side can’t prove that RSUI

breached its duty to settle even if the policy covers the claim.

Summary judgment was appropriate on the first ground, so

we need not reach the merits of the second.ȱȱ

AFFIRMED.