In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 19-1062

LEXINGTON INSURANCE COMPANY,

Plaintiff-Appellee,

v.

CHICAGO FLAMEPROOF & WOOD

SPECIALTIES CORPORATION,

Defendant-Appellant.

____________________

Appeal from the United States District Court 

for the Northern District of Illinois, Eastern Division.

No. 17-cv-03513 — Elaine E. Bucklo, Judge.

____________________

ARGUED FEBRUARY 13, 2020 — DECIDED FEBRUARY 27, 2020

____________________

Before FLAUM, MANION, and BARRETT, Circuit Judges.

FLAUM, Circuit Judge. The district court held that Lexington

Insurance Company (“Lexington”) owed no duty to defend

Chicago Flameproof & Wood Specialties Corporation (“Chicago Flameproof”) in three underlying lawsuits. We affirm. 

The underlying complaints do not allege an “occurrence”—or 

accident—as is required to trigger Lexington’s duty to defend 

under the insurance policy at issue.
2 No. 19-1062

I. Background

Chicago Flameproof is an Illinois-based distributor of 

commercial building materials, including fire retardant and 

treated lumber (“FRT lumber”). During the relevant time, 

Chicago Flameproof maintained a general liability insurance 

policy through Lexington. Under the policy, Lexington has

“the right and duty to defend [Chicago Flameproof] against 

any suit seeking [covered] damages” but no duty to defend 

against a suit seeking uncovered damages.

The policy provides that Lexington will pay sums that 

Chicago Flameproof “becomes legally obligated to pay as 

damages because of ... property damage” that is “caused by 

an occurrence that takes place in the coverage territory.” The 

policy defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general 

harmful conditions.” The policy defines “property damage” 

as “physical injury to tangible property, including all resulting loss of that property,” or “loss of use of tangible property 

that is not physically injured.”

Lexington and Chicago Flameproof dispute whether the 

policy potentially covers damages alleged against Chicago 

Flameproof in three lawsuits—one in federal court in Minnesota and two in Minnesota state courts—all stemming from 

Chicago Flameproof’s sale of lumber to Minnesota-based residential and commercial contractors JL Schwieters Construction, Inc. and JL Schwieters Building Supply, Inc. (collectively, 

“Schwieters”). According to the underlying complaints, 

Schwieters contracted with two building contractors, Big-D 

Construction Midwest, LLC and DLC Residential, LLC (collectively, the “general contractors”), to provide labor and material for the framing and paneling for four building projects 
No. 19-1062 3

in Minnesota. Elness Swenson Graham Architects, Inc. (“Elness”), the architectural firm for all four projects, required 

that FRT lumber meeting the requirements set forth in the International Building Code (“IBC”) be used for the exterior 

walls of each building.

The IBC is a model building code that sets forth standards 

for the construction process, including “detailed labeling 

standards for FRT lumber, requiring that eight specific pieces 

of information be stamped on each piece of FRT lumber.” 

Minnesota and Illinois have adopted the IBC and its testing 

and certification requirements for FRT lumber. All fifty states 

have adopted some version of the IBC.

Schwieters alleges that it contracted with Chicago Flameproof to purchase a particular brand of FRT lumber, D-Blaze 

lumber, for use in the four projects. According to the underlying complaints, “Chicago Flameproof knew or had reason 

to know that [Schwieters] was purchasing FRT lumber for the 

particular purpose of installing it in buildings that required 

IBC-compliant FRT lumber.” Given that “Chicago Flameproof is one of the geographically closest FRT lumber suppliers to Minnesota,” the underlying complaints allege that 

“Chicago Flameproof knew or should have known that the 

IBC and the IBC testing and certification requirements for 

FRT lumber had been adopted by the State of Minnesota.”

Chicago Flameproof nevertheless made a “unilateral decision” to instead deliver its in-house FlameTech brand lumber, 

which purportedly was not IBC-compliant FRT lumber because it had not been tested, certified, listed, or labeled pursuant to IBC requirements. The FlameTech lumber thereby

“did not meet the IBC definition of FRT lumber” and there-
4 No. 19-1062

fore “was not actually FRT lumber.” Chicago Flameproof allegedly “concealed that ... [the] FlameTech lumber had not 

been tested or listed pursuant to IBC requirements for FRT 

lumber.”

Apparently unaware that Chicago Flameproof had delivered uncertified lumber, Schwieters installed the FlameTech 

lumber in all four building projects. After Elness, the general 

contractors, and the building owners discovered that the lumber was not IBC-certified, they instructed Schwieters to remove it and replace it with IBC-certified FRT lumber. Chicago 

Flameproof ultimately “admitted” that it had shipped 

“FlameTech lumber rather than the D-Blaze FRT lumber advertised on its website and ordered by” Schwieters.

The underlying complaints allege that, as a supplier of 

commercial building materials, “Chicago Flameproof was or 

should have been aware of the importance of IBC testing and 

certification requirements for FRT lumber and was or should 

have been aware of the potential consequences associated 

with a failure to comply with IBC testing and certification requirements.” Indeed, Chicago Flameproof displayed on its 

website that it had “expertise in the specification and use of 

treated wood products.” Here, the consequences of Chicago 

Flameproof’s alleged failure to supply IBC-certified lumber 

included that the uncertified FlameTech lumber was ultimately removed and replaced with IBC-certified FRT lumber, 

damaging the surrounding materials into which the lumber 

had been integrated.

Schwieters sued Chicago Flameproof in federal court in 

Minnesota, charging it with negligent misrepresentation, 

fraudulent misrepresentation, deceptive business practices, 

false advertising, consumer fraud, breach of warranties, and 
No. 19-1062 5

breach of contract. Under the federal complaint’s negligent 

misrepresentation count, Schwieters alleges that Chicago 

Flameproofrepresented that it had D-Blaze FRT lumber available for purchase but did not exercise reasonable care when it 

“fail[ed] to communicate to [Schwieters] that it did not have 

sufficient quantity of D-Blaze FRT lumber in stock to fulfill 

[Schwieters]’s orders, fail[ed] to communicate to [Schwieters] 

Chicago Flameproof’s unilateral decision to ship FlameTech 

lumber to [Schwieters] in place of the D-Blaze FRT lumber 

that had been ordered, and fail[ed] to disclose that the FlameTech lumber supplied to [Schwieters] did not comply with 

IBC requirements related to the testing, listing, and labeling 

of FRT lumber and thus was not FRT lumber.” The fraudulent 

misrepresentation count alleges that Chicago Flameproof 

“knew that it did not have sufficient quantities of D-Blaze FRT 

lumber available for purchase and intended to fill orders with 

its own in-house manufactured brand, FlameTech,” and that 

Chicago Flameproof knew its “statements on its website that 

its lumber was tested, listed, and labeled in accordance with 

IBC requirements were false.” Schwieters also brought thirdparty complaints in Minnesota state court against Chicago 

Flameproof seeking contribution and indemnification for the 

same conduct. The damages alleged in the underlying lawsuits include damages to the exterior walls, wiring, and insulation resulting from the process of removing and replacing 

the FlameTech lumber.

Lexington filed this declaratory judgment action, seeking 

a ruling that it owes no duty to defend Chicago Flameproof

for the conduct alleged in the underlying complaints. The district court entered summary judgment for Lexington, holding 

that if “Flameproof knowingly supplied non-IBC-compliant 
6 No. 19-1062

lumber and concealed that it did so,” as the underlying complaints assert, “then the property damage that allegedly resulted from tearing out that non-compliant lumber cannot be 

said to have been caused by an accident. Rather, these damages are the natural and ordinary consequence of knowingly 

supplying a non-compliant product and thus do not potentially fall within the [] policy’s coverage.”

Chicago Flameproof now appeals the district court’s entry 

of summary judgment for Lexington, arguing that Lexington

must defend it because Chicago Flameproof’s shipment of 

lumber and the tearing out of that lumber were occurrences 

that caused property damage. Lexington responds that the 

underlying complaints do not trigger its duty to defend because the complaints do not allege property damage caused 

by an occurrence, and that coverage is otherwise excluded by 

the insurance policy’s business risk exclusions.1

II. Discussion

A. Standard

“We review the district court’s interpretation of the insurance policy at issue and the resulting grant of summary judgment de novo.” Westfield Ins. Co. v. Nat’l Decorating Serv., Inc., 

863 F.3d 690, 694–95 (7th Cir. 2017). To determine whether 

Lexington owes a duty to defend, we liberally construe the 

allegations in the underlying complaints in favor of Chicago 

Flameproof and compare those allegations to the insurance 

policy. Id. at 695.

1 Chicago Flameproof did not respond to Lexington’s invocation of 

the business risk exclusions.
No. 19-1062 7

“The duty to defend is triggered if the allegations in the 

underlying complaint[s] fall within, or potentially within, the 

policy’s coverage.” Id. It is not triggered, however, if it is 

“clear from the face of the underlying complaint[s] that the 

allegations fail to bring the case within or potentially within[] 

the policy’s coverage.” Id. (internal quotation marks and citation omitted).

An insurer must defend an insured even if only one theory 

of recovery in the underlying complaints is within the potential coverage of the policy. U.S. Fidelity & Guar. Co. v. Wilkin 

Insulation Co., 578 N.E.2d 926, 930 (Ill. 1991). But “little weight

is given to the legal label under which a count is brought; rather, the determination regarding whether there is a duty to 

defend focuses on the conduct alleged.” Ill. Cas. Co. v. W. Dundee China Palace Rest., Inc., 2015 IL App (2d) 150016, ¶ 20 (citation omitted). We must read the underlying complaints as a 

whole to assess the true nature of the allegations. Id. “[W]hile

under Illinois law the duty to defend is broad, the duty is not 

limitless.” Westfield, 863 F.3d at 695.

B. “Occurrence”

The underlying complaints do not trigger Lexington’s 

duty to defend because they do not allege an “occurrence.” 

An “occurrence” under the insurance policy is an “accident,” 

which under Illinois law is “an unforeseen occurrence, usually of an untoward or disastrous character or an undesigned 

sudden or unexpected event of an inflictive or unfortunate 

character.” Acuity Ins. Co. v. 950 W. Huron Condo. Ass’n, 2019 

IL App (1st) 180743, ¶ 28, appeal denied, 132 N.E.3d 313 (Ill. 

2019) (citations omitted). If an act results in an injury that “is 

the rational and probable consequence of the act or, stated differently, the natural and ordinary consequence of the act,” 
8 No. 19-1062

then the act “is not an accident.” Stoneridge Dev. Co., Inc. v. 

Essex Ins. Co., 888 N.E.2d 633, 652 (Ill. App. Ct. 2008) (internal 

citations and quotation marks omitted).

The underlying complaints allege that, as a supplier of 

commercial building materials, Chicago Flameproof was or 

should have been aware of the importance of IBC certification 

requirements and the consequences of failing to comply with 

them. Chicago Flameproof nevertheless made a “unilateral 

decision” to ship FlameTech—which had not gone through 

the IBC-certification process—rather than the D-Blaze FRT 

lumber that Schwieters had ordered and that had gone 

through the IBC-certification process. Chicago Flameproof 

then “concealed” that it had shipped lumber that was not IBCcertified. The natural and ordinary consequence of supplying 

and concealing that it had supplied uncertified lumber, given

the IBC certification requirements, was that the lumber would 

need to be removed and replaced with lumber that had been 

certified as IBC-compliant. That, in turn, would damage the

surrounding materials into which the lumber had been integrated.

Hence, according to the underlying complaints, Chicago 

Flameproof deliberately shipped uncertified lumber, concealed that fact, and was aware or should have been aware of 

the consequences of those actions—namely, that the uncertified lumber would need to be ripped and torn from the projects.

[I]f a contractor uses inadequate building materials, ... he takes a calculated business risk that 

no damage will take place. If damage does take 

place, it flows as an ordinary and natural consequence of the contractor’s failure to perform the 
No. 19-1062 9

construction properly or as contracted and there 

can be no coverage for such damage.

Viking Const. Mgmt., Inc. v. Liberty Mut. Ins. Co., 831 N.E.2d 1, 

7 (Ill. App. Ct. 2005) (citation and brackets omitted).

The underlying complaints allege no “unforeseen,” “undesigned,” or “unexpected” event. Acuity, 2019 IL App (1st) 

180743, ¶ 28. The ripping and tearing out of the FlameTech 

lumber was the natural and ordinary consequence of supplying lumber that was not IBC-certified. Cf. Ind. Ins. Co. v. Hydra 

Corp., 615 N.E.2d 70, 73 (Ill. App. Ct. 1993) (“[T]he cracks in 

the floor and the loose paint on the exterior of the building are 

the natural and ordinary consequences of installing defective 

concrete flooring and applying the wrong type of paint.”); Bituminous Cas. Corp. v. Gust K. Newberg Constr. Co., 578 N.E.2d

1003, 1010 (Ill. App. Ct. 1991) (“[T]he allegation of too hot and 

too cold temperatures in the building are no more than the 

natural and ordinary consequences of installing an inadequate HVAC system.”).

Faulty workmanship may constitute an occurrence if it results in damages that exceed the scope of the insured’s work 

product. See, e.g., Certain Underwriters at Lloyd’s London v. 

Metro. Builders, Inc., 2019 IL App (1st) 190517, ¶¶ 46–56 (discussing cases); Acuity, 2019 IL App (1st) 180743, ¶ 43 (holding 

there was occurrence where insured’s allegedly poor workmanship caused damages “to occur to a part of the construction project outside of the [insured]’s scope of work”). There 

also may be an occurrence where the insured “was unaware 

of the defective nature” of its component until after it was incorporated into a finished product. Elco Indus., Inc. v. Liberty 

Mut. Ins. Co., 414 N.E.2d 41, 44 (Ill. App. Ct. 1980).
10 No. 19-1062

Here, however, the underlying complaints are inconsistent with the notion that Chicago Flameproof merely engaged in shoddy workmanship or shipped lumber that had a 

hidden defect resulting in damages that Chicago Flameproof 

could not have reasonably expected. Rather, the underlying 

complaints allege that Chicago Flameproof deliberately

shipped uncertified lumber despite knowing the consequences of doing so.

In Wilkin, the Illinois Supreme Court held that, given the 

requirement to construe pleadings and insurance policies in 

favor of the insured, the insured’s installation of asbestos-containing products was an occurrence even though the underlying complaints included a conclusory allegation that the insured “knew or should have known of the propensity of [its] 

product to release toxic asbestos fibers.” 578 N.E.2d at 932

(emphasis omitted). Conversely, this case includes more than 

a conclusory allegation that Chicago Flameproof knew or 

should have known of the consequences of its deliberate act. 

The underlying complaints provide that, as a supplier of 

commercial building materials, Chicago Flameproof was or 

should have been aware of IBC certification requirements. Indeed, Chicago Flameproof held itself out as having “expertise 

in the specification and use of treated wood products.” The 

state where Chicago Flameproof was based (Illinois) and the 

state where the projects were located (Minnesota) had both 

adopted the IBC certification requirements for FRT lumber. In 

fact, all fifty states had adopted some form of the IBC certification requirements. Based on these allegations, Chicago 

Flameproof was or should have been aware that its domestic 

sales—and its sales relating to these projects in particular—

would need to comply with IBC certification requirements.
No. 19-1062 11

There was nothing regarding the natural and ordinary consequences of supplying uncertified lumber for projects that require certified lumber that was unknown or hidden to Chicago Flameproof at the time it shipped the uncertified lumber.

Chicago Flameproof would likely prefer that Schwieters 

had left the uncertified FlameTech lumber in place pending 

Chicago Flameproof’s efforts to obtain certification for it, but 

that does not mean that Chicago Flameproof could not have 

reasonably expected that Elness, the general contractors, or 

the building owners would require the lumber to be removed

instead of waiting. While Chicago Flameproof may have an 

argument regarding a failure to mitigate damages, we need 

not resolve any such argument here. The underlying complaints highlight that “Chicago Flameproof was or should 

have been aware of the importance of IBC testing and certification requirements for FRT lumber” beyond merely providing lumber that is later found to have met the IBC requirements.

Chicago Flameproof insists it believed that supplying the 

FlameTech lumber would satisfy its contractual obligation to 

supply FRT lumber because the FlameTech lumber satisfied 

the IBC requirements even though it was not yet IBCcertified. This does not square, however, with the allegations 

in the underlying complaints that Schwieters ordered a specific brand of FRT lumber, D-Blaze, and that Chicago Flameproof knew or should have known of the importance of IBC 

certification beyond merely satisfying other IBC requirements.

Although the negligent misrepresentation count in one of 

the underlying complaints uses the label “negligent,” “courts 

give little weight to the label that characterizes the underlying 
12 No. 19-1062

allegations.” Farmers Auto. Ins. Ass’n v. Danner, 2012 IL App 

(4th) 110461, ¶ 39 (internal quotation marks and citation omitted). “The underlying complaint[s] must be read as a whole 

to assess [their] true nature.” W. Dundee, 2015 IL App (2d) 

150016, ¶ 20. Regardless of the labels used, the focus of our 

inquiry remains on whether there was an “unforeseen[,] ... undesigned, sudden, or unexpected event,” and 

whether the injury alleged was the “natural and ordinary”

consequence of Chicago Flameproof’s actions. Stoneridge, 888 

N.E.2d at 650, 652. Acts that give rise to a negligent misrepresentation claim can result in an occurrence “as long as the insured did not expect or intend the injury.” USAA Cas. Ins. Co. 

v. McInerney, 2011 IL App (2d) 100970, ¶ 18. “Expected injuries are those that should have been reasonably anticipated by 

the insured.” Farmers Auto. Ins. Ass’n v. Danner, 2012 IL App 

(4th) 110461, ¶ 34.

Schwieters has not alleged that Chicago Flameproof was 

negligent or failed to exercise reasonable care when it made 

the “unilateral decision” to ship uncertified lumber. Rather, 

the underlying complaints allege in the negligent representation count that Chicago Flameproof did not exercise reasonable care by representing that it had certified D-Blaze FRT lumber available for purchase and by failing to notify Schwieters 

that it had supplied uncertified lumber. As the district court 

explained, when examining the underlying complaints as a 

whole, “the thrust ... is that Chicago Flameproof engaged in 

deliberate conduct—the shipping of the wrong lumber and 

the concealment of that fact—that caused the alleged property 

damage.”

Although some of the allegations used the language of 

“negligence” or “reasonable care,” the injury alleged stems 
No. 19-1062 13

from Chicago Flameproof’s “unilateral decision” to supply 

the uncertified lumber and concealment of having done so. Cf. 

Farmers, 2012 IL App (4th) 110461, ¶ 40 (holding that despite 

negligence label, insured’s conduct could “only be described 

as intentional when considering the complaint as a whole”); 

Pekin Ins. Co. v. Dial, 823 N.E.2d 986, 992 (Ill. App. Ct. 2005) 

(“[E]ven though count I of [the underlying] complaint was 

couched in terms of negligence, the complaint alleged a 

course of conduct that was clearly intentional and not merely 

negligent or accidental.”). While exercising reasonable care by 

informing Schwieters that it had shipped uncertified lumber 

might have provided an opportunity to avoid the installation 

and removal of the FlameTech lumber (and the resulting 

damages), Chicago Flameproof’s failure to avail itself of that 

opportunity does not undermine the conclusion that the damage alleged was the natural and ordinary result of Chicago 

Flameproof’s deliberate decision to supply, and conceal that 

it had supplied, uncertified lumber.2

III. Conclusion

For the foregoing reasons, we AFFIRM the judgment of the 

district court.

2 Chicago Flameproof did not respond in appellate briefing or at oral 

argument to Lexington’s argument that the insurance policy’s business 

risk exclusions also preclude coverage. Because there was no “occurrence,” we need not rely on the business risk exclusions to decide this appeal.