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West Side Salvage, Inc. v. RSUI Indemnity Co.

United States Court of Appeals, Seventh Circuit

December 18, 2017

West Side Salvage, Inc., Plaintiff-Appellant,
v.
RSUI Indemnity Company, Defendant-Appellee.

          Argued November 1, 2017

         Appeal from the United States District Court for the Southern District of Illinois. No. 15-cv-0442-MJR-SCW - Michael J. Reagan, Chief Judge.

          Before Manion, Kanne, and ROVNER, Circuit Judges.

          KANNE, CIRCUIT JUDGE.

         In 2014, we held that West Side Salvage, Inc. was solely liable for the injuries that three workers suffered in a grain-bin 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.

         West Side had an $11 million excess insurance policy with RSUI Indemnity Company. West Side sued RSUI, alleging that RSUI breached its duty to settle ConAgra's property-damage 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 explosion-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 cross-claim 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 Colony-hired 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 property-damage claim against West Side may potentially fall outside of coverage. Relevant to this appeal, West Side's policy with RSUI includes a damage-to-property clause, which excludes certain property-damage claims from coverage.

         The parties tried but never reached a settlement in the explosion 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.

         Both West Side and ConAgra appealed, and in Jentz v. ConAgra Foods, Inc., 767 F.3d 688 (7th Cir. 2014), we reversed the personal-injury judgment as to ConAgra and held that West Side was solely liable for the workers' injuries. We affirmed the judgment against West Side on ConAgra's property-damage 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 district court, arguing that RSUI should have settled the explosion-litigation 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 property-damage claim. Instead, West Side filed the action from which this appeal was taken, alleging that RSUI breached its duty to settle the property-damage claim within policy limits.

         RSUI moved for summary judgment, advancing two arguments. It principally argued that the insurance policy doesn't cover the property-damage claim, in part because there is a damage-to-property exclusion in the policy that applies. It argued in the alternative, though, that even if the claim is covered by the insurance policy, West Side could not present evidence 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 ...


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