                                  In the

      United States Court of Appeals
                    For the Seventh Circuit
No. 17-1224

ATLANTIC CASUALTY INSURANCE
COMPANY,
                                                       Plaintiff-Appellee,

                                     v.


JUAN GARCIA and MARIA GARCIA,
                                                 Defendants-Appellants.


         Appeal from the United States District Court for the
           Northern District of Indiana, Hammond Division.
       No. 2:15-cv-00066-JEM — John E. Martin, Magistrate Judge.



    ARGUED OCTOBER 23, 2017 — DECIDED DECEMBER 22, 2017


   Before BAUER and HAMILTON, Circuit Judges, and DARROW,*
District Judge.



*
    Of the United States District Court for the Central District of Illinois,
sitting by designation.
2                                                   No. 17-1224

    BAUER, Circuit Judge. Defendants-appellants, Juan and
Maria Garcia (“the Garcias”), filed a claim with plaintiff-
appellee, Atlantic Casualty Insurance Company (“Atlantic”),
for insurance coverage. Atlantic responded by seeking declara-
tory judgment. The Garcias replied with counterclaims for
breach of the policies and bad faith for denial of their claim.
The district court granted summary judgment in favor of
Atlantic. The Garcias now seek reversal.
                     I. BACKGROUND
    The Garcias purchased commercial property at 2316 Ripley
Street, Lake Station, Indiana (“the Property”), on August 9,
2004. During the Garcias’ ownership, the Property was used
to operate an automobile repair shop and a day spa. Prior to
their ownership, the Property was used as a dry cleaning
facility from approximately 1946 until 2000. The site contained
six underground storage tanks used by the dry cleaning
company. Four of these tanks were used for petroleum-based
Stoddard solvent, one was used for gasoline, and the last for
heating oil.
    In 1999, the dry cleaning company reported a newly
discovered leak from the Stoddard solvent tanks to the Indiana
Department of Environmental Management (“IDEM”). In 2000,
a site investigation was conducted, an Initial Site Characteriza-
tion Report was prepared, and five groundwater monitoring
wells were installed. On February 9, 2001, IDEM requested
additional investigation to fully delineate the nature and extent
of the petroleum pollution, as well as testing for volatile
organic compounds. Due to a lack of information provided
No. 17-1224                                                  3

from the February 2001 request, IDEM requested additional
testing on April 8, 2004.
    The Garcias claim they had no knowledge of the preexisting
environmental contamination before insuring with Atlantic.
In September 2014, a letter from Environmental Inc., dated
July 10, 2014, brought the contamination to the Garcias’
attention. In the spring of 2015, the Garcias hired Environmen-
tal Inc. to investigate the Property. This investigation showed
that the chemicals from the Stoddard solvent tanks,
Perchloroethylene solvent, and heating oil still affected the
Property.
    Atlantic insured the Property with two policies that
ran consecutively, starting on June 25, 2009, and ending on
June 25, 2011. Both were substantially similar Commercial
General Liability Coverage (“CGL”) policies. Both contained
relevant exclusion provisions that modified the CGL policies
through a “Claims in Process” exclusion and a “Total Pollution
Exclusion.”
    The “Insuring Agreement” language under the “Bodily
Injury and Property Damage Liability” coverage states:
       We will pay those sums that the insured be-
       comes legally obligated to pay as damages
       because of “bodily injury” or “property dam-
       age” to which this insurance applies. We will
       have the right and duty to defend the insured
       against any “suit” seeking those damages.
       However, we will have no duty to defend the
       insured against any “suit” seeking damages for
       “bodily injury” or “property damage” to which
4                                                    No. 17-1224

       this insurance does not apply. We may, at our
       discretion, investigate any “occurrence” and
       settle any claim or “suit” that may result.
   The relevant language from the “Claims in Process”
exclusion states:
       1. any loss or claim for damages arising out
          of or related to “bodily injury” or “prop-
          erty damage”, whether known or un-
          known:
          a. which first occurred prior to the
             inception date of this policy; or
          b. which is, or is alleged to be, in the
             process of occurring as of the in-
             ception date of this policy.
       2. any loss or claim for damages arising out
          of or related to “bodily injury” or “prop-
          erty damage”, whether known or un-
          known, which is in the process of settle-
          ment, adjustment or “suit” as of the in-
          ception date of this policy.
    The relevant language from the “Total Pollution Exclusion”
states:
       This insurance does not apply to:
       f. Pollution
        (1) “Bodily injury” or “property damage”
            which would not have occurred in
            whole or in part but for the actual,
No. 17-1224                                                       5

              alleged or threatened discharge, dis-
              persal, seepage, migration, release or
              escape of “pollutants” at any time.
    Atlantic filed a complaint seeking declaratory relief after
the Garcias tendered the IDEM claim to Atlantic. The Garcias
responded with a counterclaim for breach of the CGL policies
and for bad faith denial of their IDEM claim. Atlantic then
moved for summary judgment and the Garcias responded with
a partial motion for summary judgment. The court interpreted
the “Claims in Process” exclusion to preclude coverage for
losses or claims for damages arising out of property dam-
age—known or unknown—that occurred or was in the process
of occurring before the policy’s inception. Both parties agreed
that the damage happened before inception of the policies.
Thus, the district court granted summary judgment in favor of
Atlantic and held that coverage for the Garcias’ claim was
excluded. Since there was no coverage, the court granted
summary judgment in favor of Atlantic over the Garcias’ bad
faith claim as well. The Garcias now seek reversal.
                       II. DISCUSSION
    We review de novo a district court’s interpretation of an
insurance policy and its decision to grant summary judgment.
W. Bend Mut. Ins. Co. v. U.S. Fid. & Guar. Co., 598 F.3d 918, 921
(7th Cir. 2010). A federal court sitting in diversity “applies the
choice-of-law rules of the forum state to determine which
state’s substantive law applies.” Auto-Owners Inc. Co. v.
Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009). Thus,
we must apply Indiana law and turn to the “most intimate
contacts” rule. Carlisle v. Deere & Co., 576 F.3d 649, 563 (7th Cir.
6                                                    No. 17-1224

2009). Under the “most intimate contact” rule, the Supreme
Court of Indiana has “recognized that ‘[a]n insurance policy is
governed by the law of the principal location of the insured
risk during the term of the policy.’” Nat’l Union Fire Ins. Co. of
Pittsburgh, PA v. Standard Fusee Corp., 940 N.E.2d 810, 814 (Ind.
2010) (quoting Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249,
251 (Ind. 2005)). With the Property located and the policies
delivered in Indiana, Indiana’s substantive law applies here.
    “In Indiana, the meaning of an insurance policy is a matter
of law, and in general the same rules of construction apply to
insurance policies as to other contracts.” Home Fed. Sav. Bank v.
Ticor Title Ins. Co., 695 F.3d 725, 729 (7th Cir. 2012). “’Policy
terms are interpreted from the perspective of an ordinary
policyholder of average intelligence,’ and if reasonably
intelligent persons may honestly differ as to the meaning of the
policy language, the policy is ambiguous.” Allgood v. Meridian
Sec. Ins. Co., 836 N.E.2d 243, 246-47 (Ind. 2005) (quoting Burkett
v. Am. Family Ins. Grp., 737 N.E.2d 447, 452 (Ind. Ct. App.
2000)). “Ambiguities are construed strictly against the insurer
to further the general purpose of the insurance contract to
provide coverage.” Id. at 247. This is particularly true where an
exclusion provision is involved. State Auto. Mut. Ins. Co. v.
Flexdar, Inc., 964 N.E.2d 845, 848 (Ind. 2012). While exclusions
limiting coverage are allowed, “such limitations must be
clearly expressed to be enforceable.” Id. “Interpretation of the
contract should harmonize its provisions, rather than place the
provisions in conflict.” Allgood, 836 N.E.2d at 247.
   The Garcias argue that the “Claims in Process” exclusion is
ambiguous. In so arguing, the Garcias state that the three
parallel conditions following the phrase, “whether known or
No. 17-1224                                                  7

unknown,” could modify “any loss or claim for damages,”
rather than “’bodily injury’ or ‘property damage,’” as the
district court found. Accepting the Garcias’ interpretation
would exclude coverage for a claim for damages that occurred
or was in the process of occurring before inception of the
policy. On the other hand, accepting the district court’s
interpretation would exclude coverage for any injury or damage
that occurred or was in the process of occurring before incep-
tion of the policy.
    We disagree with the Garcias and find the exclusion
language unambiguous. Looking at the form of the exclusion,
which states, “any loss or claim for damages arising out of or
related to ’bodily injury’ or ‘property damage,’ whether known
or unknown,” a comma would follow “claim for damages” if
the exclusion sought to modify the timing of the claim rather
than the damage. This would turn the “’bodily injury’ or
‘property damage’” into a dependent clause. If that were the
case, the independent clause would read, “any loss or claim for
damages, […] whether known or unknown,” and we would
interpret it as the Garcias attempt to do here. With the omis-
sion of this comma, the “whether known or unknown”
language clearly modifies what precedes it—“’bodily injury’ or
‘property damage.’”
    Furthermore, the Garcias’ interpretation would make the
third condition redundant. If we accepted the Garcias’ inter-
pretation, the second condition, which reads, “which is, or is
alleged to be, in the process of occurring,” would exclude any
claims “in the process of occurring.” The third condition,
which reads, “which is in the process of settlement, adjustment
or ‘suit,’” would exclude any claims “in the process of settle-
8                                                   No. 17-1224

ment, adjustment or ‘suit.’” Claims in the process of settlement,
adjustment or suit, are also claims in the process of occurring.
Thus, the second condition, the broader of the two, would
completely encompass the third condition, and create a
redundancy.
    Therefore, we read the exclusion to preclude coverage for
losses or claims for damages arising out of property dam-
age—known or unknown—that occurred or was in the process
of occurring before the policy’s inception. Thus, if the property
damage happened before the policy period, but the damage
had not been discovered, the exclusion bars coverage. With no
dispute that the damage to the Property began before the
inception of the policies, we find that the “Claims in Process”
exclusion bars recovery on behalf of the Garcias.
    Because the “Claims in Process” exclusion bars recovery,
we find no need to address the “Total Pollution Exclusion”
issue. Additionally, because the “Claims in Process” exclusion
bars recovery, we find a lack of bad faith as to Atlantic’s claim
denial.
                     III. CONCLUSION
   For the foregoing reasons, we AFFIRM the district court’s
findings.
