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Ruling for insurer in Evansville firm’s $7.2M indemnity suit upheld

September 11, 2018

An Evansville-based plastic supplier’s insurer is not required to indemnify the company against a $7.2 million jury award for producing a defective product, the 7th Circuit Court of Appeals affirmed Monday.

The court affirmed entry of summary judgment for Illinois National Insurance Co. in a suit filed by Berry Plastics Corp. — now known as Barry Global Inc. — stemming from a case dating back more than a decade. 

Berry supplied a foil laminate product to Packgen, which manufactures specialized containers for bulk quantities of industrial chemicals, manufacturing byproducts, and other materials. Packgen worked with a customer, CRI Cataylst Co., to develop a new type of intermediate bulk container to store and ship a catalyst used in refining crude oil. The containers could be collapsed for pre-use storage, saving space and money, and CRI had interest in the containers from other companies.

By April 2008, Packgen was selling more than 1,200 containers a month to CRI and anticipated comparable future sales, when a container full of catalyst failed and other failures followed, some resulting in fires when highly flammable catalyst was exposed to air. Packgen determined the foil laminate Berry delivered was defective, and CRI canceled all future orders.

Packgen then sued Berry in Maine, winning a federal jury trial damages verdict of $7.2 million — the full amount Packgen sought for its out-of-pocket costs and for lost future sales. Berry then demanded Illinois National indemnify it for all for the first $1 million of the damages, which was covered under a separate policy, under the Illinois National policy’s property damage clause.

Judge Richard Young in the Southern District of Indiana, Evansville Division, last year granted summary judgment to Illinois National, and the 7th Circuit affirmed in Berry Plastics Corporation v. Illinois National Insurance Company,17-1815.

“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,” Judge Ilana Rover wrote for the panel. “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.”

The 7th Circuit also rejected Berry’s bad-faith claim against Illinois National, noting that remanding for further discovery on that argument would be “a license for a pointless fishing expedition.” 


 

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