Background
Bee Quality Inc., a roofing contractor, was sued in state court by the estates of two individuals who died when a building facade collapsed. The collapse occurred after Bee Quality performed repair work on the structure following a windstorm. Bee Quality sought defense and indemnification from Nautilus Insurance Company under a commercial general liability policy. Nautilus refused coverage, citing a Prior Work Exclusion that barred claims arising from work completed before February eighth, two thousand and twenty-two. Bee Quality counterclaimed for breach of contract, arguing the exclusion made the policy illusory. The district court granted judgment on the pleadings in favor of Nautilus, finding the exclusion applied and did not render the coverage illusory.
The court’s reasoning
The Seventh Circuit reviewed the case de novo under Illinois law. The court found that the Prior Work Exclusion clearly barred coverage for work completed prior to the policy’s inception date, as admitted by Bee Quality. The court addressed the argument that the exclusion rendered the policy illusory by swallowing all coverage. Citing recent Illinois appellate decisions, the court held that an exclusion is only illusory if it eliminates coverage entirely. Since the policy still covered operations completed after February eighth, two thousand and twenty-two, the exclusion was enforceable. The court declined to rewrite the contract based on arguments about premium amounts or to allow discovery into underwriting practices, as the issue was a question of law.
As the policy in Mullins Food Products, Bee Quality’s Policy leaves plenty of room for coverage of the main insured hazards.
NAUTILUS INSURANCE COMPANY v. BEE QUALITY INC, No. 25-1912 (7th Cir. July 9, 2026)
What it means going forward
The decision clarifies that commercial general liability policies can validly exclude coverage for prior work without being deemed illusory, provided some coverage remains for future operations. Insurers may rely on clear prior work exclusions to deny claims for pre-policy work, and insureds cannot easily challenge such exclusions based on premium amounts alone.