(Reuters) — A federal appeals court on Tuesday said ConAgra Foods Inc. was not liable for a 2010 fire and explosion at an Illinois flour mill that burned three workers, and overturned much of a nearly $180 million jury award against the packaged foods company and a contractor.

The 7th U.S. Circuit Court of Appeals in Chicago said a lower court judge should have granted judgment as a matter of law to ConAgra, whose products include Chef Boyardee pasta, Hunt's ketchup and Peter Pan peanut butter.

ConAgra had hired West Side Salvage Inc. to help save the contents of a wheat pellet silo at a facility in Chester, Illinois, located about 60 miles south of St. Louis.

According to court papers, the silo had been smoldering for several weeks before it exploded on April 27, 2010, injuring Justin Becker, who was employed by West Side, and John Jentz and Robert Schmidt, who were employed by a subcontractor.

Mr. Jentz suffered burns covering more than 70% of his body, while Mr. Becker's lungs were scarred from the inhalation of fumes, the papers show.

In 2012, after a three-week trial, an Illinois federal jury ordered Omaha, Nebraska-based ConAgra to pay $100 million of punitive damages to the workers and share responsibility with West Side for more than $77 million of compensatory damages.

Writing for a three-judge 7th Circuit panel, Circuit Judge Frank Easterbrook agreed that ConAgra was not liable under Illinois law for having hired West Side, an independent contractor, to address an unsafe condition in the silo because the "feared event" — the explosion — occurred.

"West Side could have negotiated for an indemnity or insurance for its benefit (and that of its workers and subcontractors) but did not do so," Judge Easterbrook wrote.

The 7th Circuit upheld compensatory damages awards against West Side but dismissed a punitive damages award. It returned the case to U.S. District Judge Michael Reagan in East St. Louis, Illinois, to decide indemnification issues.

"We are pleased with the outcome of this case," ConAgra spokeswoman Teresa Paulsen said.

ConAgra in court papers had estimated that it could have faced $177 million of liability. In June 2012, it said it believed insurance would cover the damages, minus a deductible.

Lawyers representing the plaintiffs did not immediately respond to requests for comment.

John Schultz, a lawyer for West Side, declined immediate comment, saying he had yet to review the decision.

The case is Jentz et al v. ConAgra Foods Inc. et al., 7th U.S. Circuit Court of Appeals, Nos. 13-1505, 13-1542, 13-1543 and 13-1544.