Great American Insurance Company v. State Farm Fire and Casualty Company

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 23-1854
GREAT A MERICAN I NSURANCE C OMPANY ,
Plaintiff-Appellant,
v.
S TATE F ARM F IRE AND C ASUALTY C OMPANY ,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:22-cv-03765 — Thomas M. Durkin, Judge.
____________________
A RGUED DECEMBER 8, 2023 — DECIDED J UNE 24, 2024
____________________
Before S YKES , Chief Judge, and R IPPLE and R OVNER , Circuit
Judges.
R OVNER , Circuit Judge. Great American Insurance Com-
pany (Great American) and State Farm Fire and Casualty
Company (State Farm) disagree about who had the duty to
pay the defense costs of an underlying lawsuit against board
members at the College of DuPage. For most claims, it is un-
disputed that Great American’s assignor provided primary
insurance coverage and State Farm provided umbrella or

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2 No. 23-1854
excess coverage, but the parties dispute whether this was true
for all claims. Great American sued State Farm to recoup
losses from defense costs that it claimed State Farm had the
duty to provide on behalf of one board member. The answer
to this dispute lies in the plain language of the insurance con-
tract which provides that State Farm would pay defense costs
only for losses covered by its policy, but not covered by any
other insurance policy. We conclude, as did the district court,
that the primary policy provided by Great American’s as-
signor covered the underlying loss, and therefore, pursuant
to the terms of State Farm’s policy, it had no duty to provide
defense costs. We therefore affirm the decision of the district
court.
I.
In 2015, Robert Breuder, the former president of the Com-
munity College District No. 502, DuPage County, Illinois (the
College of DuPage) sued the Board of Trustees (“Board”) and
certain of its members, including Kathy Hamilton, after the
Board terminated his employment. In this underlying federal
court suit, Breuder alleged that he was harmed by defamatory
statements implying that he engaged in unprofessional and
unethical conduct, as well as by the Board’s actions of placing
him on administrative leave, and later terminating him with-
out adequate notice or an opportunity to be heard. He alleged
that these Board actions damaged his reputation, caused him
to lose other employment opportunities, and humiliated him.
His complaint did not specify which of the Board’s acts
caused which of the injuries.
Breuder’s complaint set forth a multitude of claims under
federal and state law, including two federal claims under 42
U.S.C. §1983 against all the defendants in their personal and

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No. 23-1854 3
official capacities, alleging the deprivation of property and
liberty interests in his employment without adequate due
process. Three other claims alleged that the individual de-
fendants violated state laws related to civil conspiracy, tor-
tious interference with contract, and defamation. Finally,
Breuder alleged one state law claim for breach of contract
against the Board alone.
In response to the defendants’ motion to dismiss, the dis-
trict court judge in the underlying action denied the motion
as to the breach of contract and §1983 claims, but dismissed
all the claims against the individual defendants except the
defamation claims made against the Board members in their
personal capacity based on statements made to the media. Af-
ter several years of litigation, the parties reached a settlement
agreement in 2022, in which Breuder agreed to dismiss all
pending claims in exchange for $4 million. The settlement
agreement did not apportion this payment among the legal
claims Breuder had asserted in the litigation or among the
various injuries he had alleged.
When Breuder filed his suit in 2015, the College of DuPage
and its employees were insured under a policy issued by the
Illinois Community College Risk Management Consortium
(Consortium). The policy indemnified the insureds—the
Board and its members—for losses due to legal liability for
employment practice violations such as discrimination,
wrongful termination, libel, slander, defamation, and viola-
tion of civil rights, among other things.
The Consortium policy required that the insurer pay the
“Ultimate Net Loss” covered under the policy—that is, “the
total sum which the Member is obligated to pay, because of
loss or damage covered under any Section of [the policy],

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4 No. 23-1854
either through adjudication or compromise.” R. 6-2 at 24,
¶23.1,2 Under the terms of the policy, this total sum included,
among other things, “expenses of lawyers … and other per-
sons for litigation, settlement, adjustment and investigation of
Suits which are paid as a consequence of any loss or damage
covered” by the policy. Id. The policy also provided that the
Consortium could, in its discretion, “advance payments” be-
fore the Ultimate Net Loss was reached. Id. at 14, ¶9. In short,
the Consortium policy did not include a duty to defend a suit,
but rather an obligation to pay legal fees as part of an in-
sured’s total net loss.
Kathy Hamilton was a member of the Board of Trustees of
DuPage College during the relevant times of this litigation. As
a member of the Board, she was insured under the Consor-
tium policy. She was also insured under a personal liability
umbrella policy issued by State Farm which indemnified
Hamilton for personal liability damages in certain circum-
stances. That policy contained an “Other Insurance” clause
stating that “[t]he coverage provided by this policy is excess
over all other insurance and self insurance.” R. 6-3 at 16, ¶12.
The State Farm policy provided “Personal Liability” in-
demnity coverage as follows:
1 Page number references are to the district court record page numbers
stamped at the top of the page by the district court.
2 The Consortium policy indicates that a word or term is a defined
term in the contract by using all capital letters and bold font. The State
Farm policy indicates that a word is a defined term by using bold font. In
order to avoid distraction, and distinguish between defined terms and our
own emphases, we indicate defined terms by capitalizing the first letter(s)
of the word or term.

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No. 23-1854 5
If a claim is made or suit is brought against an
Insured for damages because of a Loss for
which the Insured is legally liable and to which
this policy applies, [State Farm] will pay on be-
half of the Insured, the damages that exceed the
Retained Limit.
R. 6-3 at 11.
The policy defined “Loss” as (among other things) “the
commission of an offense which first results in Personal Injury
during the policy period.” Id. at 7, ¶7. And it defined “Per-
sonal Injury” as (among other things) “injury other than Bod-
ily Injury arising out of … libel, slander, [or] defamation of
character.” Id. at 7, ¶8. In short, at least as far as the subject
matter was concerned, both the State Farm and the Consor-
tium’s policies addressed the loss from the Breuder litigation.
The heart of the dispute here comes down to an interpre-
tation of the Defense Provision of State Farm’s policy. That
provision stated, in relevant part:
If a suit is brought against any Insured for dam-
ages because of a Loss to which this policy ap-
plies, we will provide a defense to the Insured
at Our expense by counsel of Our choice when
the basis for the suit is a Loss that is not cov-
ered by any other insurance policy but is cov-
ered by this policy.
Id. at 11 (emphasis ours).
After Breuder sued, Hamilton informed State Farm of the
litigation, and later, that the Consortium had agreed to pro-
vide a defense to the defendants pursuant to a reservation of
rights. Subsequently, State Farm sent Hamilton its own

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6 No. 23-1854
reservation-of-rights letter setting forth its position that, in
light of the Consortium’s involvement, the litigation did not
trigger State Farm’s defense obligation.
Eventually the parties settled the Breuder suit, and the
Consortium indemnified the underlying settlement, covering
the defendants’ loss, including legal fees. Before the suit set-
tled, however, the Consortium assigned to Great American all
its Breuder-litigation-related rights, claims, and causes of ac-
tion as against State Farm. In short, Great American acquired
the right to sue State Farm to recoup some or all of the costs
of the defense of the underlying Breuder litigation against
Hamilton, which it did in July 2022, in this federal diversity
suit.
In its complaint in the district court in this case, Great
American alleged that State Farm breached its duty to defend
Hamilton. Specifically, Great American sought a declaration
that, among other things, (1) the Consortium had “made com-
pulsory payments exceeding its fair share of the purported
common obligation or burden of defending Hamilton in the
Underlying Lawsuit,” and (2) the Consortium (and now Great
American as its assignee) was “entitled to recoup from State
Farm a “fair and proportionate share of all defense costs and
expenses that it has paid on behalf of Hamilton in the Under-
lying Lawsuit.” R. 6 at 16, ¶5–6. Great American also asserted
a claim of estoppel, seeking a declaration that because State
Farm had not defended Hamilton under a reservation of
rights or sought a judgment that it had no duty to defend her

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No. 23-1854 7
in the Breuder litigation, State Farm was estopped from rais-
ing defenses to coverage.3
We review the district court’s grant of State Farm’s motion
to dismiss de novo. Citizens Ins. Co. of Am. v. Wynndalco En-
ters., LLC, 70 F.4th 987, 994 (7th Cir. 2023). The district court
rejected Great American’s arguments that the language of the
State Farm insurance contract was ambiguous and concluded
that, under the plain language of the umbrella policy,
“[b]ecause the Consortium covered the only loss at issue, that
loss was ‘covered by any other insurance policy,’ as provided
in the State Farm policy. And because the loss was covered by
an insurance policy other than State Farm’s, State Farm has
no liability for the costs of the defense.” R. 30 at 4. The district
court also rejected Great American’s claim that State Farm’s
coverage was primary as it related to Hamilton’s liability for
conduct committed in her individual capacity. And because
State Farm did not have a duty to defend Hamilton, the dis-
trict court held that Great American’s other claims also failed
and entered judgment for State Farm. Great American timely
appealed.
Because both parties spend some time on matters that ap-
pear to be undisputed, we begin with the following summary
of a few matters we do not need to untangle: As a member of
the Board, Hamilton was insured by the Consortium policy
for, at least, some matters. The members insured by the Con-
sortium policy suffered a loss. The loss they suffered was re-
lated to conduct whose subject matter was potentially
3 Great American also asserted claims for equitable contribution, con-
tractual subrogation, and equitable subrogation—claims that are not part
of this appeal.

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8 No. 23-1854
covered both by the Consortium and State Farm policies—
defamation, employment wrongs, and civil rights violations.
The Consortium policy did not include a duty to defend, but
rather required the insurer to pay the total amount of the in-
sureds’ loss, including for legal fees. The Consortium was re-
sponsible for indemnifying members for the loss incurred
from the underlying settlement of the Breuder litigation, and
did, in fact, indemnify that loss. The duty to defend is as-
sessed at the beginning of a lawsuit before anyone can know
if there is a loss. Net loss can only be determined at the end of
a lawsuit or settlement. State Farm’s policy included a duty to
defend in certain circumstances.
II.
In reviewing the district court’s motion to dismiss under
Federal Rule of Civil Procedure 12(b)(6), we look to see
whether Great American’s complaint “contain[s] sufficient
factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). The interpretation of an insurance policy is a matter
of state law, and because the parties agree that Illinois law ap-
plies, we look there for guidance. Westfield Ins. Co. v. Vanden-
berg, 796 F.3d 773, 777 (7th Cir. 2015).
The parties spend some time arguing over whether the
State Farm policy was an excess or umbrella policy across the
board, or whether it acted as a primary policy for some pur-
poses—such as in the duty to defend Hamilton. Typically, a
primary policy covers the first dollar of an insured’s loss. See,
e.g., Lamorak Ins. Co. v. Kone, Inc., 2018 IL App (1st) 163398,
¶27. An excess insurance policy, on the other hand, “attaches
only after [the] primary insurance … has been exhausted.”

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No. 23-1854 9
Kajima Constr. Servs., Inc. v. St. Paul Fire & Marine Ins. Co., 879
N.E.2d 305, 313 (Ill. 2007) (internal citation omitted). Ordinar-
ily, because a primary insurance policy provides the insured
with the first level of protection, it typically assigns to the in-
surer not only a duty to indemnify for any loss, but also a duty
to defend the insured. Lamorak, 2018 IL at ¶28. And in the
usual course of events, the excess policy follows the underly-
ing coverage and does not broaden it, but simply, “increases
the amount of coverage available to compensate for a loss.”
West Bend Mut. Ins. Co. v. DJW-Ridgeway Bldg. Consultants,
Inc., 2015 IL App (2d) 140441, ¶34 (citation omitted). An um-
brella policy provides both excess coverage, and in some cir-
cumstances may provide broader coverage than that other-
wise provided by the underlying primary carrier. Kajima, 227
Ill. 2d at 115.
Of course, what animates the desire to distinguish be-
tween primary and excess coverage is cost and risk. Umbrella
or excess insurers take on less risk, as they place reliance on
the fact that the primary insurer will ordinarily be the one re-
sponsible for indemnifying most losses or paying defense
costs. Consequently, insureds generally pay less in premiums
for excess or umbrella insurance than they do for primary
coverage. See generally Ill. Emcasco Ins. Co. v. Cont'l Cas. Co.,
487 N.E.2d 110, 112 (1985) (explaining the role of umbrella
coverage and how “the premiums generally charged for um-
brella coverage also reflect[] an intent that umbrella policies
serve a different function” than primary coverage). Neverthe-
less, whatever ordinarily happens in insurance contracts, our
“primary function is to ascertain and give effect to the inten-
tion of the parties, as expressed in the policy language.”
Galarza v. Direct Auto Ins. Co., 2023 IL 129031, ¶38.

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10 No. 23-1854
Great American objects to labelling State Farm’s policy as
a per se excess or umbrella policy, as part of its theory of the
case is that the State Farm policy required State Farm to pro-
vide primary coverage where there was no underlying insur-
ance. And Great American argues that the provision of de-
fense costs for Hamilton was just such an instance. We are not
concerned with the labels—primary, excess, or umbrella—
however, but rather with the expectations of the parties—that
is, what each insurer has agreed to cover in the respective pol-
icies. Regardless of what the usual primary policy or the usual
umbrella policy provides, as with any other contract, the par-
ties to an insurance agreement have the power to define the
terms, including the limits of the defense obligations. Vill. of
Lombard v. Intergovernmental Risk Mgmt. Agency (IRMA), 681
N.E.2d 88, 92 (Ill. App. Ct. 1997). See generally Travelers Ins. Co.
v. Eljer Mfg., Inc., 757 N.E.2d 481, 491 (2001) (explaining that a
court must interpret an insurance contract by giving effect to
the intent of the parties to the contract).
This means that we can eschew the labels and just look to
State Farm’s contract with Hamilton. In doing so, “we ‘must
construe the policy as a whole, taking into account the type of
insurance for which the parties have contracted, the risks un-
dertaken and purchased, the subject matter that is insured
and the purposes of the entire contract.” Westfield, 796 F.3d at
778 (quoting Crum & Forster Managers Corp. v. Resol. Tr. Corp.,
620 N.E.2d 1073, 1078 (1993)).
Our analysis of the State Farm agreement begins with the
indemnity provision which obligates the insurer to indemnify
Hamilton for a personal liability “Loss” only to the extent that
damages for the “Loss” exceed the “Retained Limit” which is
the “amount paid or payable by any other insurance policy.”

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No. 23-1854 11
R. 6-3 at 9, ¶14, and 11. In common parlance, State Farm will
only cover loss not covered by another insurer. The most illu-
minating language, for purposes of this decision, comes from
the Defense Provision, which provides that State Farm will
defend Hamilton in a suit seeking damages for a personal-li-
ability loss only if the basis for that suit is a loss that “is cov-
ered by [State Farm’s] policy” but “is not covered by any other
insurance policy.” Id. at 11.
That language makes our task simple. We merely have to
look to see whether any other insurance policy covered the
potential loss. In plain language, we ask, “was there another
insurance company potentially on the hook?” If yes, State
Farm had no duty to defend. If no, it was required to defend
against that loss. In this case we conclude that the Consortium
policy covered the potential loss. Great American concedes
that the Consortium was responsible for indemnifying the
members for the loss incurred from the Breuder litigation.
Great American Br. at 41 (stating that Great American does
not seek to shift the loss for the underlying settlement to State
Farm); Reply Br. at 7 (agreeing that the Consortium policy po-
tentially covered the underlying action and noting that this is
why the Consortium ultimately indemnified the underlying
settlement). Because the Consortium policy covered the only
loss at issue, that loss was “covered by any other insurance
policy” as provided in the State Farm agreement, and there-
fore State Farm had no liability for the costs of the defense.
That should be the end of the story. Great American, how-
ever, raises several arguments that we will address, including
an objection to State Farm’s insertion of the word “potential”
into the language of the Defense Provision. That is, State Farm
and the district court have discussed the Defense Provision,

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12 No. 23-1854
either explicitly or implicitly as though it has the word “po-
tential” written in as below:
If a suit is brought against any Insured for dam-
ages because of a Loss to which this policy ap-
plies, We will provide a defense to the Insured
at Our expense by counsel of Our choice when
the basis for the suit is a [potential] Loss that is
not covered by any other insurance policy but is
[potentially] covered by this policy.
See State Farm Br. at 22–26, and R. 6-3 at 11. Contrary to Great
American’s argument, this addition does not indicate an am-
biguity in the original language, it simply reflects the inherent
nature of a defense provision in an insurance contract. De-
fense provisions depend on an analysis of potential loss be-
cause, of course, at the time an insurer is assessing its duty to
defend—at the start of a lawsuit—it cannot know whether its
insured will suffer a loss through adjudication or settlement.
This is the very premise of insurance. It is based on potential-
ities.
Great American does not disagree. In fact, it dedicates sev-
eral pages to describing the duty to defend, noting that it re-
quires an analysis of potential loss. This is what Great Amer-
ican has to say about the duty to defend:
The duty to defend is broad, arises at the outset
of the underlying action, and exists where the
alleged facts create the mere potential for cover-
age. Gen. Agents Ins. Co. of Am. v. Midwest Sport-
ing Goods Co., 215 Ill. 2d 146, 155 & 165, 828
N.E.2d 1092, 1098 & 1103 (2005); United Servs.
Auto. Ass’n v. Dare, 357 Ill. App. 3d 955, 961, 830

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No. 23-1854 13
N.E.2d 670, 675 (2005). If the alleged facts poten-
tially fall within coverage, reading the allega-
tions liberally, the duty to defend is triggered.
Nationwide Prop. & Cas. Ins. Co. v. State Farm Fire
& Cas. Co., 2022 IL App (1st) 210267, ¶ 24; see also
United Servs. Auto. Ass’n, 830 N.E.2d at 678 (not-
ing that “the threshold for pleading a duty to
defend is low”). This is true even if the allega-
tions are groundless or false, even if the insurer
may have no duty to indemnify, and even if
only one of several theories of recovery is poten-
tially covered. Gen. Agents, 828 N.E.2d at 1098;
Certain Underwriters at Lloyd’s, London v. Boeing
Co., 385 Ill. App. 3d 23, 39, 895 N.E.2d 940, 954
(2008).
Great American Br. at 23–24 (italics in original; boldface
ours). We agree. The duty to defend is a broad one and usu-
ally arises not just when the allegations of the underlying
complaint “fall within … the policy’s coverage,” but also
when those allegations “potentially” fall within that coverage.
Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204,
1208, 1220 (Ill. 1992) (emphasis omitted). In short, the duty to
defend depends on an analysis of the potential for loss.
To assess whether State Farm had a duty to defend, there-
fore, we must look to the language of its policy to see if the
Breuder complaint raised claims that could potentially cause
a loss that fell within State Farm’s coverage. The language of
the State Farm contract is clear that a claim potentially falls
within the coverage if it meets the following two require-
ments: First, the “basis for the suit is a Loss that is … covered
by this policy.” R. 6-3 at 11. This is an obvious point. An

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14 No. 23-1854
insurer will not provide a defense to a lawsuit about a slip and
fall in the home, for example, where the policy covers only
injuries related to automobile accidents. Second, and far more
importantly for our purposes, the loss must be one that is “not
[potentially] covered by any other insurance policy.” Id.
Great American spends some time in its brief proving the
first point—that the subject matter of the underlying Breuder
suit was such that State Farm potentially covered the loss. See
Great American Br. at 29–38. But State Farm concedes that this
is true, so we need not belabor this point. See State Farm Br. at
26 (“State Farm agrees that its umbrella policy potentially
covered the Breuder ‘Loss,’” citing R. 14 at 15–16, ¶60). Nev-
ertheless, as State Farm points out, this is only half of the in-
quiry. The resolution of this case hangs on the second require-
ment. State Farm owed a duty to defend only if the basis for
the Breuder suit was a “Loss” that was “not [potentially] cov-
ered by” another policy. R. 6-3 at 11 (emphasis added). In
other words, the language of State Farm’s insurance contract
linked its duty to defend to the primary insurer’s potential in-
demnity coverage. Stated another way, State Farm’s potential
defense coverage depended on and was linked to the Consor-
tium’s potential indemnity coverage. For this reason, as-
sessing State Farm’s duty to defend requires an additional
layer: assessing the Consortium’s duty to indemnify.
We have already noted that Great American concedes, as
it must, that “the [Consortium] policy ‘potentially’ covered
the underlying action.” Great American Reply Br. at 7. The
Consortium policy indemnified the insureds for losses from
the very kinds of employment practice violations, defamation
torts, and civil rights violations that Breuder alleged in his
complaint. Great American argues instead that its own

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No. 23-1854 15
potential coverage is irrelevant: “The reason [the Consortium]
owed no duty to defend is not because the underlying com-
plaint’s factual allegations were outside the scope of cover-
age, but because [the Consortium] did not contractually agree
to defend any claims at all.” Great American Reply Br. at 8
(original emphasis omitted). It is true that the Consortium did
not contractually have a duty to defend, only a right to partic-
ipate in the defense and an ultimate duty to indemnify the net
loss which included legal fees. This, however, is neither here
nor there. State Farm’s duty to defend did not depend on
whether the Consortium had a duty to defend or not. It is pos-
sible that no insurance company had a duty to defend at all.
See Keystone, 456 F.3d at 762 (discussing how the duty to de-
fend and the duty to indemnify can be linked, but also how
they can, by contract, be separate and independent duties);
Sokol & Co. v. Atl. Mut. Ins. Co., 430 F.3d 417, 421 (7th Cir. 2005)
(describing the distinction between the duty to defend and
the duty to indemnify and noting that “while the duty to in-
demnify may sometimes nest inside the duty to defend, that
will not always be the case.”). The language of the policy
makes clear that State Farm’s duty to defend was linked to the
Consortium’s duty to cover a loss, not the Consortium’s duty
to defend. The Consortium’s duty to defend, or not, therefore
was irrelevant to the assessment of whether State Farm had a
duty to defend.
State Farm could have contracted to premise its duty to
defend on the absence of any other insurer’s duty to defend.
This was the case in Indemnity Insurance v. Westfield Insurance,
where Indemnity’s insurance agreement stated, “we will have
no duty under Coverages A or B to defend the insured against
any ‘suit’ if any other insurer has a duty to defend the insured
against that ‘suit.’” Indem. Ins. Co. of N. Am. v. Westfield Ins.

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16 No. 23-1854
Co., 58 F.4th 276, 281 (7th Cir. 2023). State Farm had the option
to write a similar insurance contract, premising its duty to de-
fend on the absence of any other insurer doing so. “The par-
ties to an insurance contract can incorporate in it such provi-
sions, not in violation of law, as they choose.” Rich v. Principal
Life Ins. Co., 875 N.E.2d 1082, 1095 (2007) (quoting Pioneer Life
Ins. Co. v. All. Life Ins. Co., 30 N.E.2d 66, 73 (1940)). This in-
cludes the power to define the limits of the duty to defend.
Sheckler v. Auto-Owners Ins. Co., 2022 IL 128012, ¶25 (quoting
Zurich Ins. Co. v. Raymark Indus., Inc., 514 N.E.2d 150, 161 (Ill.
1987) (explaining that “[t]he insurer’s duty to defend its in-
sured arises from the undertaking to defend as stated in the
contract of insurance.”)). Consequently, State Farm could
have contracted to limit defense coverage or link it to other
provisions in any number of ways. An insurer could, for ex-
ample, agree to provide defense costs for automobile acci-
dents, but not for defamation. In short, no matter how broad
a duty to defend might be, it is still limited by the terms of the
insurance contract to which the parties agreed. And thus we
circle right back to where we started—the language of the
contract in which State Farm linked its duty to defend, not to
another insurance company’s absence of a duty to defend, but
to whether another insurance policy potentially covered the
loss.
For this reason, Great American’s arguments about the
distinction between the duty to indemnify and the duty to de-
fend are beside the mark. It is true that these duties are dis-
tinct and command different obligations at different times.
Sokol, 430 F.3d at 421 (applying Illinois law and noting that
“[t]he two duties of the insurer—defense and indemnifica-
tion—are distinct”). But as we just noted, the parties can con-
tract to provide a duty to defend however they wish. See Rich,

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No. 23-1854 17
875 N.E.2d at 1095; Zurich Ins. Co., 514 N.E.2d at 161. And in
this case, State Farm contracted to link its duty to defend to
the Consortium’s lack of a duty to indemnify the loss.
We can also lay to rest Great American’s argument that
there is “no other insurance to which State Farm’s ‘other in-
surance’ clause could apply.” Great American Br. at 40. Great
American’s argument seems to be that, at the start of the
Breuder suit, when State Farm was obligated to assess its duty
to defend, there was no “other insurance” covering the loss,
because the Consortium’s duty to indemnify “did not arise
until the settlement occurred.” Id. Again, Great American
identifies a truism about insurance law, but one that does not
apply here. The duty to indemnify arises once an insured has
incurred a liability in the underlying claim against it. Outboard
Marine, 607 N.E.2d at 1221. All parties agree that the Consor-
tium had both the potential duty to indemnify at the start of
the suit, and ultimately did indemnify the loss from the un-
derlying settlement. As we explained above at length, how-
ever, when assessing a duty to defend, a court looks at poten-
tialities. At the time State Farm was assessing its duty to de-
fend, the Consortium potentially covered the loss (and ulti-
mately did cover the loss). The ultimate determination of the
indemnity obligation therefore was irrelevant.
III.
Because State Farm had no duty to defend at the outset of
the underlying Breuder litigation, we need not address Great
American’s argument that State Farm is now estopped from
raising coverage defenses, and any remaining arguments are
likewise inapplicable. The judgment of the district court is
therefore AFFIRMED.

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