United States District Court, S.D. Indiana, Evansville Division
ENTRY ON CROSS MOTIONS FOR SUMMARY JUDGMENT
RICHARD L. YOUNG, JUDGE
case arises out of a lawsuit between Plaintiff, Berry
Plastics Corporation, and its former customer, Packgen, which
resulted in a $7.2 million jury verdict against Berry.
Packgen v. Berry Plastics Corp., et al., Cause No.
2:12-cv-80-JAW (D. Maine). At the time of the events alleged
in the Packgen lawsuit, Berry had $1 million in
commercial general liability (or “CGL”) insurance
coverage with Federal Insurance Company and an additional $25
million in commercial umbrella liability insurance coverage
that was issued by the Defendant herein, Illinois National
Insurance Company. Federal agreed to defend and indemnify
Berry in the Packgen lawsuit; Illinois National did
Count I of Berry's Complaint for Declaratory Relief and
Damages, Berry seeks a declaration that Illinois National had
a duty to defend and indemnify it against the
Packgen lawsuit, including the judgment and appeal.
Berry brings two additional claims against Illinois National:
breach of contract (Count II) and bad faith (Count III).
National moves for summary judgment on Counts I-III of
Berry's Complaint or, in the alternative, moves for
summary judgment on Count II and III. Berry, in turn,
cross-moves for summary judgment on Counts I-II. The court,
having read and reviewed the parties' written
submissions, the designated evidence, and the applicable law,
now GRANTS Illinois National's Motion for Summary
Judgment and DENIES Berry Plastics' Cross-Motion for
manufactures and sells intermediate bulk containers
(“IBCs”) that are used, among other applications,
by petroleum refineries to transport and store catalyst, a
chemical agent used to refine crude oil. (Filing No. 1-2,
Packgen Complaint ¶ 4). Packgen manufactured the subject
IBCs out of a woven polypropylene fabric that is chemically
bonded to a layer of foil laminate. (Id. ¶ 6).
The design was custom-made for CRI, one of Packgen's
customers and a producer of fresh catalyst. (Filing No. 41-1,
Trial Transcript of John Lapoint (“Lapointe Tr.”)
at 34). Berry manufactured and sold the foil laminate to
Packgen. (Id. at 17).
October 2007 to March 2008, CRI purchased 7, 567 IBCs for
nearly $1.5 million, and it placed an order for 1, 359 IBCs
to be delivered in April 2008. See Packgen v. Berry
Plastics Corp., 847 F.3d 80, 84 (1st Cir. 2017). Packgen
also marketed its newly-designed IBC to other refineries in
North America, focusing on thirty-seven refineries where CRI
supplied catalyst containers. (Lapointe Tr. at 83).
Packgen lawsuit arises out of an incident that
occurred at CRI on April 4, 2008. (Id. at 43, 59).
While CRI was lifting an IBC to reposition the container, the
foil laminate separated from the woven fabric such that the
liner of the IBC was exposed. (Id. at 59, 65). The
liner is meant to work as an oxygen barrier to the catalyst
to prevent the catalyst from self-heating. (Id. at
65). After the incident, CRI cancelled its pending order for
1, 359 IBCs with Packgen and has not purchased any IBCs since
that time. (Id. at 81-82). In addition, the
thirty-seven refineries did not order IBCs as Packgen had
anticipated. (Id. at 105).
December 9, 2011, Packgen brought suit against Berry for
breach of contract, breach of express warranty, breach of
implied warranty of fitness for a particular purpose, breach
of implied warranty of merchantability, and negligence, in
the Superior Court for Androscoggin County, Maine. (Filing
No. 1-2, Packgen Complaint at 84-91). The
Packgen lawsuit was subsequently removed to the
United States District Court for the District of Maine, under
Cause No. 2:12-cv-80-JAW.
timely notified Federal and Illinois National of the
Packgen lawsuit. (Filing No. 55-8, Declaration of
Allyson Claybourn (“Claybourn Decl.”) ¶ 5).
Federal agreed to defend and indemnify Berry. (Id.
¶ 6). Illinois National assigned a claims administrator
who monitored and received regular updates on the
Packgen lawsuit. (Id. ¶ 7). In June
2013, Illinois National retained coverage counsel to provide
legal advice, and in October 2013, sent a reservation of
rights letter to Berry. (Filing No. 42-3, Responses of
Illinois National to Berry's First Set of Interrogatories
September 2014, Illinois National's claims administrator
contacted Berry to advise that the investigation to date
indicated covered exposure was within the limits of the
Federal Policy and thus, the Illinois National Policy was not
implicated. (Id. at 23). In November 2014, Illinois
National sent a supplemental reservation of rights to Berry.
December 10, 2014, Illinois National's coverage counsel
sent a letter to Berry explaining its position that
“lost anticipated profits due to anticipated orders
that never materialized” are not property damages
within the meaning of the Policy. (Filing No. 55-10, Letter
dated December 10, 2014). On December 12, 2014, Illinois
National attended a mediation of the Packgen lawsuit
with Federal. (Filing No. 55-9, Claim Notes). Although
Federal offered its $1 million policy limits, Illinois
National explained its coverage position to the mediator.
(Id.). The mediation unsuccessfully concluded.
case went to trial in November 2015. As is relevant to the
present motion, Packgen's President, John Lapointe,
testified that Packgen's out-of-pocket losses due to
Berry's defective product totaled $643, 039.30. (Lapointe
Tr. at 92). Packgen's damages expert, Mark Filler,
testified that Packgen's lost profits from cancelled
orders from CRI would have netted Packgen future profits of
$130, 629.93. Had CRI continued to do business with Packgen,
Filler opined, its sales over the succeeding ten-year period
would have earned Packgen future profit of $4, 606, 405.00.
(Filing No. 41-2, Trial Transcript of Mark Filler
(“Filler Tr.”) at 26). With regard to the
thirty-seven oil refineries which expressed interest in
purchasing IBCs from Packgen but changed their minds after
the incident, Filler testified that Packgen would have earned
future profits of $1, 957, 202.00 over a ten year period.
(Id. at 48). In Filler's opinion, anticipated
lost profits damages totaled $6, 563, 607.00. (Id.
at 42, 48). In addition, the jury was instructed on legal
cause; in particular, whether Packgen's damages were
“either a ‘direct result' or a
‘reasonably foreseeable consequence' of the act or
failure to act.” (Filing No. 55-4, Jury Instructions at
10). The jury was also instructed on the following:
If you should find for Packgen in accordance with these
instructions, then you must determine the amount of damages
to which Packgen is entitled as a result of injuries
proximately caused by Berry . . . . The elements of damages
at issue in this case may include: Actual damages; Incidental
damages; and Consequential damages.
(Id. at 13-14).
jury returned a verdict in favor of Packgen and against Berry
on November 12, 2015, in the amount of $7, 206, 646.30 ($643,
039.30 $6, 563, 607.00). (Filing No. 55-5, Special Verdict
Form). The district court entered judgment in favor of
Packgen and against Berry the following day.
November 23, 2015, Berry notified Illinois National of the
verdict and requested coverage for the verdict and subsequent
judgment. (Claybourn Decl. ¶ 8; Filing No. 55-11, Nov.
23, 2015 Letter). Illinois National maintained that its
Policy did not cover Berry's exposure beyond the limits
of the Federal Policy. (Claybourn Decl. ¶ 8).
appealed the judgment to the First Circuit Court of Appeals,
contending that the district court erred by: (1) denying its
motion to exclude Filler's testimony, (2) allowing
Packgen employees to testify concerning potential
customers' intent to purchase Packgen's IBCs, and (3)
denying Berry's motion for judgment as a matter of law, a
new trial, or to alter or amend the judgment. Packgen
Corp., 847 F.3d at 83. On February 1, 2017, the First
Circuit Court of Appeals affirmed the judgment of the
district court. Id. at 91.
Berry's Insurance Coverage
time of the events alleged by Packgen, Berry had two
commercial general liability policies to protect it against
any liability it may face stemming from its products: the
Federal commercial general liability policy covering the
first $1 million in liability, and the Illinois National
commercial umbrella liability policy covering the next $25
million. (Claybourn Decl. ¶ 4; Filing No. 42-2, Federal
Policy at ¶ 000087; Filing No. 42-4, Illinois National
Policy at ¶ 0017914). Both policies are occurrence-based
and include “products-completed operations”
coverage. (Federal Policy at ¶ 000118; Illinois National
Policy at ¶ 0017924).
Federal Policy provides that it will “pay damages that
[Berry] becomes legally obligated to pay by reason of
liability: imposed by law; or assumed in an insured contract;
for . . . property damage caused by an occurrence.”
(Federal Policy at ¶ 000091). The Illinois National
Policy provides that it will “pay on behalf of [Berry]
those sums in excess of the Retained Limit [the $1 million in
the Federal Policy] that [Berry] becomes legally obligated to
pay as damages by reason of liability imposed by law because
of . . . Property Damage . . . to ...