                               In the

     United States Court of Appeals
                 For the Seventh Circuit
                     ____________________

No. 16-3418
DANIEL J. RATAJCZAK, JR., et al.,
                                               Plaintiffs-Appellants,
                                 v.

BEAZLEY SOLUTIONS LIMITED,
                                                Defendant-Appellee.
                     ____________________

Nos. 16-3490 & 16-3920
LAND O’LAKES, INC.,
                                                 Plaintiff-Appellant,
                                and
FIRST MERCURY INSURANCE COMPANY, et al.,
                            Intervening Plaintiffs, Cross-Appellees,
                                 v.

DANIEL J. RATAJCZAK, JR., et al.,
                       Defendants-Appellees, Cross-Appellants.
                     ____________________

            Appeals from the United States District Court
                 for the Eastern District of Wisconsin.
    Nos. 13-C-45 & 14-C-1388 — William C. Griesbach, Chief Judge.
                     ____________________
2                                              Nos. 16-3418 et al.

      ARGUED MAY 23, 2017 — DECIDED AUGUST 31, 2017
                 ____________________

    Before BAUER, EASTERBROOK, and RIPPLE, Circuit Judges.
    EASTERBROOK, Circuit Judge. Between 2006 and 2012
Packerland Whey Products, Inc., deceived at least one of its
customers about the protein content of a product called
Whey Protein Concentrate. Whey, the watery part of milk
that remains after the removal of curds, is rich in protein.
Removing whey’s nonprotein components generates a con-
centrate that can be used in other products. Land O’Lakes,
Inc., purchased Packerland’s protein concentrate for use in
making foods for calves and other young animals.
    Buyers pay for protein. They infer protein levels from
measuring nitrogen using the Kjeldahl method. This indirect
measure invites adulteration: a seller could add another ni-
trogen-rich substance and so produce higher scores. Adul-
teration adds to profits as long as the substitute source of ni-
trogen is cheaper than whey. Urea, normally used to make
fertilizer, is such a substance. Daniel J. Ratajczak, Jr., Scott A.
Ratajczak, and Angela Ratajczak, who collectively owned
and controlled Packerland, started adding urea to its protein
concentrate in 2006. Land O’Lakes suspected that the con-
centrate was high in nonprotein nitrogen but could not learn
why, in part because the Ratajczaks cooked up excuses that
Land O’Lakes accepted. Land O’Lakes kept buying Packer-
land’s protein concentrate, and none of its own customers
complained. (In the levels Packerland added to the concen-
trate, animal-grade urea is safe to eat.)
   The Ratajczaks sold Packerland in May 2012 to Packer-
land Whey Intermediary Holding Co., which kept them on
Nos. 16-3418 et al.                                         3

as employees—and they kept on adding urea. In November
or December 2012 the buyer learned what was going on. The
Ratajczaks were soon out of jobs, and litigation began. The
buyer threatened suit against the Ratajczaks. They settled for
about $10 million in December 2012, before the buyer filed a
complaint. Land O’Lakes stopped buying Packerland’s
product and asserted three claims in federal court: breach of
contract, fraud, and violation of the Racketeer Influenced
and Corrupt Organizations Act. Each of these claims has
bred ancillary insurance litigation. Packerland’s insurers re-
fused to defend or indemnify it or the Ratajczaks in the Land
O’Lakes suit; the Ratajczaks’ personal insurer refused to in-
demnify them for their settlement with Packerland’s buyer.
    The district court dismissed Land O’Lakes’s suit and
ruled in favor of the insurers. Ratajczak v. Beazley Solutions
Ltd., 2016 U.S. Dist. LEXIS 189240 (E.D. Wis. Aug. 17, 2016);
Land O’Lakes, Inc. v. Ratajczak, 2016 U.S. Dist. LEXIS 186706
(E.D. Wis. Aug. 24, 2016). We have three appeals: (1) Land
O’Lakes contends that it is entitled to treble damages under
RICO and a state-law counterpart (which we do not mention
again); (2) the Ratajczaks contend that Packerland’s insurers
had to defend and indemnify them in Land O’Lakes’s suit;
(3) the Ratajczaks maintain that their own insurer must in-
demnify them for much of what they paid to Packerland’s
buyer in settlement. We tackle the subjects in that order.
    1. At its outset Land O’Lakes’s suit had three claims:
breach of contract, fraud, and treble damages under 18
U.S.C. §1964, RICO’s civil remedies provision. The strongest
of these was breach of contract. Land O’Lakes would have
been entitled to the difference between the price it paid and
the market value of the product Packerland delivered. But
4                                             Nos. 16-3418 et al.

the breach-of-contract claim was settled and the fraud claim
has been abandoned on appeal, leaving only the RICO claim.
The district court granted summary judgment to the
Ratajczaks because Land O’Lakes failed to produce evidence
of injury. RICO gives plaintiffs the benefit of the doubt in
showing loss, see, e.g., Carter v. Berger, 777 F.2d 1173 (7th Cir.
1985), but the district court thought that there is no doubt
that could be resolved in Land O’Lakes’s favor.
    Consider how a firm in Land O’Lakes’s position might
show loss. (For this purpose we disregard the contract theo-
ry mentioned above, which Land O’Lakes does not invoke
with respect to the RICO claim.) Land O’Lakes might con-
tend, for example, that its own customers paid less for an
inferior product made using the adulterated concentrate. It
might contend that its customers paid the same per pound
but bought less. It might contend that its business rivals
raised their own prices between 2006 and 2012, but that
Land O’Lakes could not do so because its customers thought
its baby-animal feed inferior to that of the rivals. It might
contend that it has been sued by its customers for selling
adulterated animal feed and has incurred costs as a result. It
might contend that some customers have threatened suit
and that it is likely to incur future costs of defense. It might
contend that, although none of its customers has threatened
suit, one or more of them is likely to sue unless it offers some
(expensive) inducement not to do so. It might contend that it
recalled batches of animal feed that contained Packerland’s
adulterated protein concentrate and replaced them with
good product at its own expense. It might contend that it in-
curred extra costs of testing Packerland’s product in an effort
to detect the source of the suspiciously high nonprotein ni-
Nos. 16-3418 et al.                                           5

trogen. From this extensive menu, Land O’Lakes chose: none
of the above.
    Land O’Lakes tells us that it did incur some extra testing
costs but concedes that they cannot be quantified. It also
notes that the statute of limitations in Wisconsin is still open
on potential claims by the customers of animal feed that in-
cluded Packerland’s adulterated protein concentrate. That’s
true enough, but without any way to estimate the likelihood
of such a claim, or the cost if one should be made, damages
would be speculative.
    There is a market in retroactive insurance. Once a casual-
ty has occurred, people can buy policies that cover the cost
of defending (and if necessary settling or paying) any future
claims arising from that casualty. Retroactive insurance
spreads the risk of outcomes’ variability should claims be
made. Land O’Lakes might have bought such a policy but
did not, nor did it ask for a price quote. The price of a retro-
active policy might help quantify potential loss. But all Land
O’Lakes offered to the district court, or us, is lawyers’ talk,
which is not an adequate way to estimate the existence, let
alone the size, of injury. And since treble zero is still zero,
Land O’Lakes was doomed to lose its RICO claim.
    2. Packerland had several insurance policies, under
which the Ratajczaks were additional insureds. The insurers
all refused to defend or indemnify them. Their request for a
declaratory judgment gave several reasons, two of which the
district court accepted, but we need mention only one. All of
the policies base coverage on an “occurrence,” and each de-
fines that word this way: “an accident, including continuous
or repeated exposure to substantially the same general
harmful conditions.” Adulteration of a product is deliberate,
6                                           Nos. 16-3418 et al.

not accidental. The Ratajczaks observe that the fraud claim
in the Land O’Lakes complaint says that some of Packer-
land’s statements (those designed to lull Land O’Lakes into
continuing to buy) may have been reckless if they were not
deliberately false, but this does not move any of the underly-
ing conduct (or its effects) into the “accident” category.
    Wisconsin recognizes that deliberate conduct can have ac-
cidental effects that are covered by policies using the defini-
tion we have quoted. See Liebovich v. Minnesota Insurance Co.,
2008 WI 75 ¶52. Think of speeding: the driver intends to go
80 miles an hour but does not intend to plow into another
car, and so a collision still may be called an “accident.” But
adulteration of a commercial product is not in that category.
Packerland set out to fool Land O’Lakes into paying for
more protein than its product contained. It achieved exactly
that. Neither the behavior nor the consequence can be called
an accident. See, e.g., Stuart v. Weisflog’s Showroom Gallery,
Inc., 2008 WI 86; Everson v. Lorenz, 2005 WI 51.
    3. Before selling Packerland, the Ratajczaks purchased a
policy of insurance promising to indemnify them for loss
caused by breach of warranties made to the buyer. The poli-
cy, issued by Beazley Solutions, does not cover fraud but
does cover damages for breach of contract. The contract of
sale provided that a breach of warranty could come in two
forms. One was a false statement in a Fundamental Repre-
sentation—a list of specific representations made by Packer-
land on which the buyer relied. The other was a false state-
ment not included among the Fundamental Representations.
The contract set a cap of $1.5 million in damages for a false
statement in the latter category. Beazley’s policy had a limit
of $10 million with a $1.5 million deductible (called a self-
Nos. 16-3418 et al.                                            7

insured retention). Beazley contended, and the district court
found, that, if there was a nonfraudulent breach of warranty,
the false statement was not among the Fundamental Repre-
sentations, so contractual damages were capped at $1.5 mil-
lion. As that matched the deductible, Beazley had no need to
indemnify the Ratajczaks.
    Insurance coverage usually depends on the nature of the
victims’ claims, and the draft complaint that the buyer
showed to the Ratajczaks did not specify a falsehood in one
of the Fundamental Representations. Instead it accused
Packerland and the Ratajczaks of fraudulently concealing the
adulteration and the fact that Packerland’s profits had been
artificially inflated, which could not continue because the
truth was bound to emerge. The Ratajczaks insist that the
buyer’s complaint implies accusations that could have come
under a Fundamental Representation, such as warranty 3.3
about the accuracy of Packerland’s books and records. The
draft complaint does not mention that representation, but
the Ratajczaks remind us that in federal civil procedure
complaints are liberally interpreted, so that to the extent the
document is ambiguous resolution is handled through mo-
tions for more definite statements, motions for summary
judgment, and briefs. So far, so good. Their problem is that
there was no complaint, and Fed. R. Civ. P. 8 never came in-
to play. The buyer threatened litigation but did not file a suit;
the Ratajczaks settled to avoid suit. There was nothing that
could be liberally construed in their favor vis-à-vis Beazley.
   What the draft complaint did harp on is fraud, including
fraudulent statements and omissions of material facts (such
as the adulteration) necessary to make the statements not
misleading. Fraudulent statements are outside Beazley’s pol-
8                                             Nos. 16-3418 et al.

icy altogether. True enough, some of the draft complaint’s
language might be understood to specify negligent mis-
statements, such as some of the lulling statements the
Ratajczaks used to prevent Land O’Lakes from looking too
closely for the source of nonprotein nitrogen, but even if this
gets past the policy’s fraud exclusion it does not get past the
contract’s $1.5 million damages cap for breach of any war-
ranty other than a Fundamental Representation.
    The Ratajczaks ask rhetorically why they would settle for
$10 million if their contractual liability was capped at $1.5
million, but there is a ready answer: there was no contractual
cap on liability for fraud. And the fact of settlement is itself a
problem for the Ratajczaks. Beazley’s policy provides that it
is not bound by settlements that it did not approve. Beazley
not only didn’t approve the settlement but also was not noti-
fied of the claim until the settlement talks were almost done.
The Ratajczaks insist that Beazley can’t prove prejudice from
the delay—how could one prove that a different sequence of
events, or more time to think things over, investigate, and
make suggestions, would have produced a different out-
come?—but the policy does not demand that Beazley prove
prejudice. The approval requirement is absolute.
    This situation shows why. Beazley received notice of the
claim less than a week before the settlement was concluded.
To be precise, the Ratajczaks notified Beazley after the close
of business on December 24, 2012, and signed the settlement
on December 28. That was two business days’ notice. It may
take an insurer longer just to find the policy and send it to
adjusters or analysts to begin an evaluation. It would require
time after that to study a proposed settlement and make
suggestions, time that the Ratajczaks did not allow. After re-
Nos. 16-3418 et al.                                            9

ceiving notice, Beazley swiftly asked the Ratajczaks for more
information about the adulteration and the proposed settle-
ment; they closed on the settlement before replying. That
haste prevented Beazley from trying to allocate potential loss
among three categories: loss attributable to fraud (not cov-
ered), loss attributable to nonfraudulent breach of a nonspe-
cific warranty (capped at $1.5 million), and loss attributable
to nonfraudulent breach of a Fundamental Representation
(covered to the policy limit). By cutting Beazley out of the
negotiations, the Ratajczaks prevented it from taking steps
vital for self-protection.
    The Ratajczaks’ riposte is that Wisconsin law applies a
prejudice requirement even if the policy does not. Gerrard
Realty Corp. v. American States Insurance Co., 89 Wis. 2d 130,
146–47 (1979). Prejudice might be presumed (which would
make sense here), but the Ratajczaks maintain that a pre-
sumption is not enough. Indeed, the Ratajczaks maintain
that Wisconsin law forbids clauses that give insurers author-
ity to reject settlements, if they have received notice of the
negotiations. They rely on International Flavors & Fragrances
v. Valley Forge Insurance Co., 2007 WI App 187.
    That may or may not be a correct statement of Wisconsin
law, but the controlling law is New York’s. The policy pro-
vides for the application of New York law. This was a multi-
jurisdictional business transaction. Beazley is based in the
United Kingdom. Its adjuster for U.S. claims is located in
New York. It is understandable that Beazley prefers to des-
ignate one state’s law for all of its business in this nation; it
can become familiar with New York law more easily than it
can master (and price) the intricacies of many states’ insur-
ance laws. The Ratajczaks are sophisticated business people
10                                          Nos. 16-3418 et al.

and entered this transaction with eyes open; they cannot es-
cape the choice-of-law clause in this policy. New York per-
mits insurers to insist on having control of settlements. Vigi-
lant Insurance Co. v. Bear Stearns Cos., 10 N.Y.3d 170, 177–78
(2008). So the Ratajczaks lose for two reasons: the deductible
offsets the maximum damages for breach of a general war-
ranty, and they settled without Beazley’s consent.
   Other arguments have been considered but do not re-
quire discussion.
                                                    AFFIRMED
