IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ILLINOIS NATIONAL INSURANCE )

COMPANY, )

)

Plaintiff, )

)

v. ) No. 12 C 2300

)

TRAVELERS PROPERTY CASUALTY )

COMPANY OF AMERICA, )

)

Defendant. )

MEMORANDUM OPINION AND ORDER

JAMES F. HOLDERMAN, Chief Judge:

In June 2007, three construction workers were injured and one was killed when they fell 

from scaffolding while working on the exterior of a building in Indianapolis, Indiana. A tort 

lawsuit followed against the site manager, Messer Construction Co. (“Messer”) and the lessor of 

the scaffolding equipment, Hi-Lo Climbers LLC (“Hi-Lo”). Both were insured under a policy 

issued by Travelers Property Casualty Company of America (“Travelers”), and also under a 

secondary umbrella insurance policy issued by Illinois National (“Illinois National”). Travelers 

defended Messer from the employees’ tort claims but did not defend Hi-Lo. Illinois National 

ultimately stepped in to pay a portion of Hi-Lo’s defense costs, and seeks in this action to 

recover the full amount of those expenses from Travelers. Illinois National has now moved for 

summary judgment on its claims. (Dkt. No. 31.) Illinois National’s motion is granted in part and 

denied in part, as stated below. 

BACKGROUND

On June 9, 2007, four construction workers were performing plaster work on the exterior 

of a new movie theater in Indianapolis, Indiana. (Dkt. No. 32 (“Pl.’s 56.1(a)(3) SMF”) ¶¶ 14, 
2

19.) The men were working on scaffolding, which was suspended by a wire rope. (Id. ¶ 19.) 

When that rope broke, one end of the scaffolding fell approximately thirty feet to the ground, 

injuring three of the men and killing a fourth. (Id. ¶¶ 19, 21.)

All of the men were employees of either Gibson-Lewis LLC or Gibson-Lewis of 

Indianapolis LLC (collectively, “Gibson-Lewis”). (Id. ¶ 19.) Gibson-Lewis, the prime contractor 

on the movie theater job, was insured for the accident under a policy issued by Travelers to cover 

the period from September 30, 2006, to September 30, 2007. (Id. ¶¶ 5, 6, 19.) The policy (the 

“Travelers Policy”) has a per occurrence limit of $1 million. (Id. ¶ 5.) This coverage was 

supplemented by Illinois National, which issued an umbrella liability policy (the “Illinois 

National Policy”) that covered Gibson-Lewis for the same period. (Id. ¶ 11.) The Illinois 

National Policy provided coverage only in excess of that provided under the Travelers Policy. 

(Id. ¶ 12.)

Gibson-Lewis hired Messer, a construction site manager, to perform plaster work on the 

exterior of the movie theater. (Id. ¶ 14.) Messer was also insured under the Travelers Policy. (Id.

¶ 36.) Gibson-Lewis also leased scaffolding equipment for this project from Hi-Lo, a company 

that provides scaffolding equipment for construction and maintenance sites. (Id. ¶ 15.) At the 

time of the accident, Burlington Insurance Company (“Burlington”) was Hi-Lo’s general liability 

carrier. (Dkt. No. 35 (“Def.’s 56.1(a)(3) SMF”) ¶ 24.) (The court will refer to Burlington’s 

insurance contract with Hi-Lo as the “Burlington Policy.”) 

Hi-Lo and Gibson-Lewis agreed to the terms of the scaffolding equipment rental in a 

May 31, 2007, lease agreement (the “Rental Agreement”). (Pl.’s 56.1(a)(3) SMF ¶ 16.) The 

Rental Agreement contains two relevant provisions. First, Gibson-Lewis agreed to defend and 

indemnify Hi-Lo against liabilities related to or arising out of the use of the equipment. (Id.
3

¶ 17.) Second, Gibson-Lewis agreed to designate Hi-Lo as an additional insured under its 

insurance policies. (Id. ¶ 18.) 

Gibson-Lewis complied with the second provision by designating Hi-Lo as an additional 

insured under the “Contractors Xtend Endorsement” to the Travelers’ Policy.1 The Contractor’s 

Xtend Endorsement provides blanket additional insured coverage for lessors of equipment 

designated by Gibson-Lewis in a written contract as additional insureds. (Id. ¶ 9.) Coverage 

under the Contractor’s Xtend Endorsement is limited to injury “caused, in whole or in part, by 

[Gibson-Lewis’s] acts or omissions in the maintenance, operation or use of equipment leased to 

you by such additional insured,” and constitutes “excess over any valid and collectible ‘other 

insurance’ available to such additional insured.” (Id.)

On June 9, 2007, the construction site accident at issue occurred, injuring three 

employees and killing a fourth. (Id. ¶ 19.) Within one day of the accident, Messer conducted an 

investigation, and found that the failure of two Gibson-Lewis employees to use independent fall 

protection equipment was a contributing factor in the accident. (Id. ¶¶ 24–26.)2 On September 

17, 2007, a final post-accident report by the Indiana Occupational Safety and Health 

Administration (“IOSHA”) cited “lack of proper training for the operator of this hoist and other 

employees on the scaffold” and “lack of inspections” as contributing factors in the accident. 

(Id. ¶ 29–33.) The report concluded that Gibson-Lewis was responsible for “serious” violations 

of the U.S. Occupational Safety and Health Administration’s Safety and Health Regulations for 

Construction. (Id. ¶ 35.) On September 24, 2007, IOSHA issued a safety order and penalty 

 1 Throughout the rest of this opinion, the court’s references to the Travelers Policy should 

be understood to include the Contractors Xtend Endorsement. 

2 Although the Messer report does not contain a date, a note repeated on two of the 

document’s three pages states that “this report must be transmitted to the safety department 

within 24 hours of the accident/incident.” (Dkt. No. 32, Ex. 4.) Travelers does dispute that the 

report was filed “immediately” after the accident. (See Dkt. No. 36 ¶ 24.)
4

against Gibson-Lewis. (Id. ¶ 34.) The safety order cited Gibson-Lewis’s failure to properly train 

its employees and its failure to ensure that each employee working on a scaffold was protected 

by a fall arrest system. (Id.) 

On June 27, 2007, the three injured employees3 and the wife of the deceased employee 

brought suit against Messer and Hi-Lo in Indiana state court. (Id. ¶¶ 22, 23.) Messer sought 

coverage under the Travelers Policy, and on July 31, 2007, Travelers agreed to defend Messer in 

the lawsuit. (Id. ¶ 36; Def.’s 56.1(a)(3) SMF ¶ 9.)4

On July 10, 2007, Hi-Lo sent a letter to Gibson-Lewis seeking defense and 

indemnification for the employees’ lawsuit in accordance with the Rental Agreement, and sent a 

copy of that letter directly to Travelers. (Pl.’s 56.1(a)(3) SMF ¶ 37; Def.’s 56.1(a)(3) SMF ¶¶ 3–

6.) On July 16, 2007, Travelers acknowledged receipt of Hi-Lo’s tender letter to Gibson-Lewis

(Def.’s 56.1(a)(3) SMF ¶ 7.), but verbally denied coverage to Hi-Lo, in part based on 

“conflicting indemnity clauses” in the Rental Agreement. (Pl.’s 56.1(a)(3) SMF ¶ 38; see also 

id., Ex. 10–12.) The parties do not agree on the exact grounds of the denial. 

On September 17, 2007, Hi-Lo filed a third-party complaint against Gibson-Lewis

seeking enforcement of the provisions in the Rental Agreement providing that Gibson-Lewis 

would defend and indemnify Hi-Lo. (Pl.’s 56.1(a)(3) SMF ¶ 39.) Travelers agreed to defend 

Gibson-Lewis in the third-party suit, but continued to refuse coverage for Hi-Lo in the 

underlying litigation. (Id.) 

On June 15, 2010, Travelers settled the claims by the employees against Messer in the 

underlying suit, paying out the entire $1 million per occurrence policy limit on the Travelers 

 3 One of these three employees did not join the action until May 19, 2009. 

4 Note that under the Travelers Policy, defense costs do not count toward the limits of the 

insurance. (Pl.’s 56.1(a)(3) SMF ¶ 8.)
5

Policy. (Id. ¶ 40.) Upon exhaustion of the Travelers Policy, Illinois National assumed the defense 

of Gibson-Lewis in Hi-Lo’s third-party lawsuit pursuant to the Illinois National Policy. (Id.

¶ 41.) 

On September 9, 2010, Burlington, which had defended Hi-Lo in the underlying suit by 

the employees against Hi-Lo as Hi-Lo’s general liability carrier, sought reimbursement from 

Travelers for expenses incurred in Hi-Lo’s defense from July 10, 2007, the date it sought 

coverage from Gibson-Lewis, through June 15, 2010, the date the Travelers Policy was 

exhausted. (Pl.’s 56.1(a)(3) SMF ¶ 43; Def.’s 56.1(a)(3) SMF ¶ 26.) Burlington sought 

$275,242.63 in defense expenses. (Pl.’s 56.1(a)(3) SMF ¶ 43.) On October 22, 2010, Travelers, 

by letter, refused to reimburse Burlington, mentioning for the first time the excess coverage 

provision in the Contractors Xtend Endorsement as a reason for its refusal to defend Hi-Lo. 

(Def.’s 56.1(a)(3) SMF ¶ 27; Dkt. No. 34 (“Def.’s Resp.”) at 8; Dkt. No. 35, Ex. O (“In addition, 

this coverage is excess unless agreed in writing to be primary or non-contributory.”).) According 

to Travelers, the Travelers Policy thus would not cover Hi-Lo unless Hi-Lo’s policy with 

Burlington was first exhausted. 

Subsequently, on November 1, 2010, Burlington sought reimbursement from Illinois 

National, as Gibson-Lewis’s excess insurance provider, for its expenses in defending Hi-Lo in 

the underlying litigation. (Def.’s 56.1(a)(3) SMF ¶ 28.) On December 15, 2010, Illinois National 

sought to compel Travelers to cover Burlington’s pre-exhaustion defense costs incurred while 

defending Hi-Lo in the underlying litigation, and Travelers again refused. (Pl.’s 56.1(a)(3) SMF 

¶¶ 45, 46.) 
6

On March 14, 2012, Illinois National settled Hi-Lo’s claims against Gibson-Lewis for its 

defense costs for $250,000. In return, Illinois National acquired from Hi-Lo and Burlington the 

right to sue Travelers to enforce Travelers’ alleged obligation to defend Hi-Lo. (Id. ¶ 47.)5

LEGAL STANDARD

A movant is entitled to summary judgment if the movant can show that “there are no 

genuine issues of material fact and judgment as a matter of law is warranted for the moving 

party.” Gross v. PPG Indus., Inc., 636 F.3d 884, 888 (7th Cir. 2011) (citing Fed. R. Civ. P. 56(a); 

Anderson v. Liberty Lobby Inc., 477 U.S. 242, 255 (1986)). A “material” fact is one identified by 

the substantive law as affecting the outcome of the suit. Anderson, 477 U.S. at 248. All of the 

evidence is viewed in the light most favorable to the non-movant, and the court must draw all 

reasonable inferences in favor of the non-movant. O’Leary v. Accretive Health, Inc., 657 F.3d 

625, 630 (7th Cir. 2011).

“The construction of an insurance policy and a determination of the rights and obligations 

thereunder are questions of law for the court which are appropriate subjects for disposition by 

way of summary judgment.” W. Suburban Bank of Darien v. Badger Mut. Ins. Co., 141 F.3d 

720, 723-24 (7th Cir. 1998) (citation and quotation marks omitted). 

DISCUSSION

Illinois National seeks summary judgment on the ground that Travelers breached its duty 

to defend Hi-Lo, and is therefore estopped from relying on the excess coverage provision in its 

policy. (Dkt. No. 31, at 1.) Before addressing the estoppel issue, however, the court must 

determine which state’s law applies to interpret the Travelers’ policy. 

 5 Travelers asserts that the settlement was actually a “settlement of Illinois National and 

Gibson-Lewis’ potential indemnity exposure with respect to the Hi-Lo Third Party Lawsuit.” 

(Dkt. No. 36 ¶ 47.)
7

I. Choice of Law

A federal court exercising diversity jurisdiction must look to the substantive law of the 

state in which the district court sits. Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). This is true 

in the choice of law context as well, where a district court looks “to the choice-of-law rules of 

the state in which it sits to determine which state’s substantive law should apply.” Valentine v. 

Founders Ins. Co., No. 08 C 3302, 2010 WL 3713687, at *4 (N.D. Ill. Sept. 13, 2010) (Zagel, J.). 

Under Erie, a federal court resolves a dispute “about state law the way the state’s highest court 

would resolve it.” LaPlant v. N.W. Mut. Life Ins. Co., 701 F.3d 1137, 1141 (7th Cir. 2012).

Under Illinois law, the court must make a choice-of-law determination only when the 

application of a different state’s law would make a difference in the outcome. Townsend v. Sears, 

Roebuck & Co., 879 N.E.2d 893, 898 (Ill. 2007); see also Barron v. Ford Motor Co. of Can.

Ltd., 965 F.2d 195, 197 (7th Cir. 1992) (“[B]efore entangling itself in messy issues of conflict of 

laws a court ought to satisfy itself that there actually is a difference between the relevant laws of 

the different states.”). Here, the parties agree that, assuming Travelers breached its duty to 

defend Hi-Lo, Illinois law would estop Travelers from asserting the applicability of the excess 

clause. (See Def.’s Resp. at 4 (“Illinois follows the minority rule wherein an insurer is estopped 

from asserting coverage defenses if it wrongfully refused to defend.”).) But the parties disagree 

about the applicability of estoppel under Michigan law. The court therefore must analyze the 

application of Michigan’s estoppel law to this case to determine if it leads to a different outcome 

than Illinois law. 

A. Michigan Estoppel Law 

Under Michigan law, the general rule is that “once an insurance company has denied 

coverage to an insured and stated its defenses, the insurance company has waived or is estopped 
8

from raising new defenses.” Kirschner v. Process Design Assocs., Inc., 592 N.W.2d 707, 709 

(Mich. 1999); see also Mich. Twp. Participating Plan v. Fed. Ins. Co., 592 N.W.2d 760, 767

(Mich. Ct. App. 1999); Smit v. State Farm Mut. Auto. Ins. Co., 525 N.W.2d 528, 530 (Mich. Ct. 

App. 1994). However, “the application of waiver and estoppel is limited and, usually, the 

doctrines will not be applied to broaden the coverage of a policy to protect the insured against 

risks that were not included in the policy or that were expressly excluded from the policy.” 

Kirschner, 592 N.W.2d at 709-10. This rule stems from the Michigan Supreme Court’s holding 

in Ruddock v. Detroit Life Ins. Co., 177 N.W. 242, 248 (Mich. 1920). The Ruddock court 

justified the rule as follows:

To apply the doctrine of estoppel and waiver here would make this contract of 

insurance cover a loss it never covered by its terms, to create a liability not 

created by the contract and never assumed by the defendant under the terms of the 

policy. In other words, by invoking the doctrine of estoppel and waiver it is 

sought to bring into existence a contract not made by the parties, to create a 

liability contrary to the express provisions of the contract the parties did make. 

Id. To put it another way, “an insurance company should not be required to pay for a loss for 

which it has charged no premium.” Kirschner, 592 N.W.2d at 710.

Michigan courts have recognized two classes of cases that form exceptions to the 

Ruddock rule. Lee v. Evergreen Regency Coop. & Mgmt. Sys., Inc., 390 N.W.2d 183, 186 (Mich. 

Ct. App. 1986). One exception involves cases in which “the inequity of forcing the insurer to pay 

on a risk for which it never collected premiums is outweighed by the inequity suffered by the 

insured because of the insurance company’s actions.” Smit, 525 N.W.2d at 531 (citation 

omitted). That exception generally applies only when the insurance company has 

“misrepresented the terms of the policy to the insured,” or “defended the insured without 

reserving the right to deny coverage.” Lee, 390 N.W.2d at 287. Accordingly, that exception is 
9

plainly not applicable here. Illinois National has not argued that Travelers misrepresented the 

policy terms to Hi-Lo, nor did Travelers defend Hi-Lo without a reservation of rights.

The next exception “involves companies which have rejected claims of coverage and 

declined to defend their insureds in the underlying litigation. In these instances, the [Michigan 

Supreme] Court has held that the insurance company cannot later raise issues that were or should 

have been raised in the underlying litigation.” Smit, 525 N.W.2d at 531 (citations omitted).

“These cases are closely akin to the principle behind collateral estoppel.” Id. (citation omitted). 

In Morrill v Gallagher, the Michigan Supreme Court described this exception as follows: 

As a general rule and in the absence of fraud and collusion, if a liability insurer 

who has a right to defend actions against the insured has timely notice of such an 

action and defends or elects not to defend, the judgment in such case is binding 

upon the insurer, as to issues which were or might have been litigated therein, 

when the insurer is later sued by the injured person. In several cases, it has been 

held or stated that where an insurer conducts the defense of an action for personal 

injuries against the insured, it becomes bound by the judgment as to all matters at 

issue in such action even though it is not a formal party, so that it cannot 

subsequently deny that the claim was covered by its policy where the issue was 

settled adversely to it in the action for damages.

122 N.W.2d 687, 691 (Mich. 1963) (quotation marks and citation omitted). In Morrill, for 

example, an insurance company failed to defend its insured in tort litigation. After winning a 

judgment, the plaintiff sought to collect from the insurance company, claiming that the policy 

covered the claim. Id. at 689. In its defense, the insurer attempted to raise for the first time issues 

that would have defeated the underlying judgment against the insured. Id. at 691. The Morrill 

court held that the insurance company was estopped from “challeng[ing] the validity of the 

judgment entered in the original action instituted by plaintiff,” because it should have raised 

issues challenging that judgment in the underlying litigation. Id.

The Morrill exception is inapplicable here because it applies only in the situation in 

which an insurer is later sued by the injured person in an attempt to collect a prior judgment of 
10

liability against the insured from the insurer. In that case, the injured party has already litigated 

the question of liability to a final judgment, and principles of repose and finality require that the 

insured not have the opportunity to litigate those issues again merely because it wrongfully 

refused to participate in the underlying action by defending the insured. See Lee, 390 N.W.2d at 

287 (explaining the exception’s connection to the doctrine of collateral estoppel). 

Here, by contrast, the four Gibson-Lewis employees (the plaintiffs in the underlying suit) 

are not suing Travelers to collect a judgment against Hi-Lo. Instead, Illinois National is suing 

Travelers in the shoes of Hi-Lo in an attempt to collect the cost of defending Hi-Lo. In other 

words, the insured, rather than the injured party, is attempting to assert estoppel against the 

insurance company. Moreover, the insured has no interest in finality or repose, because the 

disputed question in the present suit (Travelers’ duty to defend Hi-Lo in light of the excess 

coverage provision) has not been fully litigated to a final judgment in any previous action. 

Indeed, the excess coverage provision was never at issue in the underlying action between the 

injured parties and Hi-Lo, or in the third-party complaint filed by Hi-Lo against Gibson-Lewis. 

Far from being potentially dispositive, Travelers’ assertion of the excess coverage 

provision was irrelevant to both the underlying action and the third-party complaint, as it could

not have defeated a judgment against either Hi-Lo or Gibson-Lewis. The underlying complaint 

was a tort action that put Hi-Lo and Messer’s negligence at issue. (See Dkt. No. 32, Ex. 1, Tab 

E.) The third-party complaint addressed Gibson-Lewis’s duty to defend and indemnify Hi-Lo

under the Rental Agreement. (See Dkt. No. 32, Ex. 1, Tab G (“Wherefore the Defendant/Third 

Party Plaintiff, Hi-Lo Climbers, L.L.C. requests that this court find Gibson-Lewis responsible for 

defending and indemnifying Hi-Lo against Plaintiffs’ claims herein . . . .”).) Neither action 
11

implicated Travelers’ obligation to cover Hi-Lo under the Travelers Policy.6 Accordingly, there 

is no reason that Travelers should have raised the excess coverage provision in either the 

underlying action or the third-party complaint.

The court therefore finds that the Ruddock exception for issues that “were or should have 

been raised in the underlying litigation” is inapplicable. Smit, 525 N.W.2d at 531. Under 

Michigan law, Travelers would be allowed to assert the excess coverage provision to challenge 

the existence of its duty to defend Hi-Lo. Under Illinois law, by contrast, Travelers would be 

estopped from asserting the excess coverage provision. The court therefore must apply Illinois 

conflict of law rules to decide which law governs in this case. 

B. Conflict of Laws Determination

The Travelers Policy lacks a choice of law provision. In that situation, the Illinois 

Supreme Court has stated that an insurance policy is generally

governed by the location of the subject matter, the place of delivery of the 

contract, the domicile of the insured or of the insurer, the place of the last act to 

give rise to a valid contract, the place of performance, or other place bearing a 

rational relationship to the general contract.

Lapham-Hickey Steel Corp. v. Prot. Mut. Ins. Co., 655 N.E.2d 842, 845 (Ill. 1995). These factors 

are not to be weighed equally; case-by-case analysis might inflate or diminish the importance of 

each one. Emerson Electric Co. v. Aetna Cas. & Sur. Co., 743 N.E.2d 629, 640 (Ill. App. Ct. 

2001). 

 6 As Illinois National points out, the third-party complaint alleges that Travelers, at the 

time the third-party complaint was filed, had not accepted the defense and indemnification of HiLo. (See Dkt. No. 32, Ex. 1, Tab G.) The court disagrees with Illinois National that this language 

“put Travelers’ duty to defend [Hi-Lo] at issue.” (Pl.’s Reply at 4.) Travelers is not listed as a 

defendant in the complaint, which specifically asks for relief only against Gibson-Lewis. The 

Travelers Policy, and specifically the excess provision, were irrelevant to adjudication of the 

third-party complaint.
12

In this case, as Illinois National admits, the Travelers Policy was issued in Michigan to a 

named insured based in Michigan. (See Pl.’s Reply at 3; see also Dkt. No. 33, at 7.) Moreover, 

the insurance policy was delivered to Michigan, and the insurance agent who arranged the sale of 

the policy was based in Michigan. (See Dkt. No. 35, Ex. A.) Illinois National nonetheless 

contends that Illinois law should apply because Hi-Lo is an Illinois business and the Rental 

Agreement between Gibson-Lewis and Hi-Lo contains a choice of law provision directing that 

Illinois law apply.

The choice of law provision in the Rental Agreement is not germane to the conflict of law 

question here. That provision would govern litigation between Gibson-Lewis and Hi-Lo about

the Rental Agreement, but this case is a dispute over the Travelers Policy. The Rental 

Agreement’s choice of law provision is thus irrelevant. Hi-Lo’s status as an Illinois LLC is 

relevant, but it has limited probative value, because Hi-Lo was insured under the Travelers 

Policy merely as an additional insured in relation to a single construction project. The insurance 

policy as a whole has many more connections to Michigan than to Illinois. Weighing Hi-Lo’s 

status as an Illinois LLC against the multiple Michigan contacts, the court finds that Michigan 

law applies in this case. 

Because Michigan law applies, Travelers is not estopped from asserting the applicability 

of the excess coverage provision. The court thus turns to applying the excess coverage provision. 

II. Application of the Excess Coverage Provision

Even if Travelers is not estopped from asserting the excess coverage provision, Illinois 

National contends for the first time in its reply that the indemnity provisions of the Rental 

Agreement require Travelers to cover Hi-Lo “‘notwithstanding the existence of [the excess 

coverage provision].’” (Pl.’s Reply at 5 (quoting Am. Indem. Lloyds v. Travelers Property & 
13

Cas. Ins. Co., 335 F.3d 429, 436 (5th Cir. 2003)).) Arguments raised for this first time in reply 

are waived. See Harper v. Vigilant Ins. Co., 433 F.3d 521, 528 (7th Cir. 2005) (“[Defendant] did 

not develop this argument in his initial brief before this court, raising it in a meaningful way only 

in his reply brief, so it is waived.”) Accordingly, Illinois National’s argument is waived.

The excess coverage provision in the Contractors Xtend Endorsement thus applies. The 

Contractors Xtend Endorsement provides that the “insurance afforded to the additional insured is 

excess over any valid and collectible ‘other insurance’ available to such additional insured.” 

(Dkt. No. 35, Ex. A, at 51.) “Other insurance” is defined by the Contractors Xtend Endorsement 

as “insurance, or the funding of losses, that is provided by, through or on behalf of . . . another 

insurance company.” (Id. at 49-50.) Travelers contends that Hi-Lo’s primary insurance came 

through the Burlington Policy, and that the excess coverage provision thus means that it had no 

duty to defend Hi-Lo. 

There is no dispute that Burlington—another insurance company—was Hi-Lo’s general 

liability carrier. As Illinois National points out, however, the Burlington Policy contains a similar

excess coverage provision. That provision states: “This insurance is excess over . . . [a]ny other 

primary insurance available to you covering liability for damages arising out of the premises or 

operations for which you have been added as an additional insured by attachment of an 

endorsement.” (See Dkt. No. 35, Ex. L, at 28.)

Both the Burlington Policy and the Travelers Policy would be primary but for the 

presence of the other policy. There is therefore a conflict between the two policies, because both

policies, “if given literal effect, would lay the responsibility to defend and indemnify [Hi-Lo] on 

the other company . . . . [T]his would, ironically, leave [Hi-Lo], an ‘insured’ under both policies, 
14

without a defense or indemnification.” Pioneer State Mut. Ins. Co. v. TIG Ins. Co., 581 N.W.2d 

802, 806 (Mich. Ct. App. 1998).

Travelers attempts to distinguish the excess provisions by arguing that Burlington’s 

excess provision is triggered only when Hi-Lo has other primary insurance but, because of the 

presence of the Burlington Policy, Travelers’ coverage of Hi-Lo is only excess, not primary. 

Travelers raises this argument only in an unsupported footnote (Dkt. No. 34, at 11 n.7), and it is 

thus waived. See Schrock v. Learning Curve Int’l, Inc., 744 F. Supp. 2d 768, 770 (N.D. Ill. 2010) 

(Kocoras, J.) (“Undeveloped arguments and arguments raised in footnotes are waived.” (citing 

Goren v. New Vision Int’l, 156 F.3d 721, 726 n.2 (7th Cir. 1998); United States v. White, 879 

F.2d 1509, 1513 (7th Cir. 1989))). 

Even if the argument were not waived, it fails because Burlington (or Illinois National, 

standing in Burlington’s shoes) could make the same argument, leaving Hi-Lo with no coverage 

at all. That result is foreclosed by Pioneer, which addressed a conflict between two excess 

clauses substantially similar to those at issue here. The court held that Travelers’ argument, if it 

were accepted, would lead to a circularity problem, because “the decision as to which clause is 

primary depends on which policy is read first.” Pioneer, 581 N.W.2d at 805 (citing Fed. Kemper 

Ins. Co. v. Health Ins. Admin., Inc., 383 N.W.2d 590, 592 (Mich. 1986)). To avoid that

circularity problem, the court held that when two excess provisions conflict, “liability is to be 

apportioned on the basis of the policy limits.” Pioneer, 581 N.W.2d at 807. 

In this case, the policy limits per occurrence under both the Travelers Policy and the 

Burlington Policy are $1 million. (See Dkt. No. 35, Ex. L, at 16; Pl.’s 56.1(a)(3) SMF ¶ 5.) 

Burlington and Travelers therefore both had a duty to defend Hi-Lo and to split the costs of that 
15

defense equally. Accordingly, Travelers and Illinois National should split the $250,000 in 

defense costs that Illinois National is seeking evenly at $125,000 apiece.

III. Assignment 

Travelers’ final argument against that result is that Illinois National is not entitled to 

recover any of its payment to Burlington for Hi-Lo’s defense costs from Travelers. In response, 

Illinois National asserts that it is entitled to recover its payment to Burlington because Burlington 

and Hi-Lo assigned their claims against Travelers to Illinois National, and that it is thus suing in 

their shoes.7 Specifically, Illinois National paid $250,000 to settle Hi-Lo and Burlington’s claims 

against it. In exchange, Hi-Lo and Burlington assigned to Illinois National “all claims, causes of 

action, rights, and/or defenses that Hi-Lo and Burlington have against Travelers in connection 

with, relating to, or arising out of the underlying lawsuit and/or Hi-Lo’s Third-Party Lawsuit.” 

(Pl.’s 56.1(a)(3) SMF ¶ 49.)

Travelers argues that Illinois National, as an assignee, can have rights no greater than 

those enjoyed by Burlington or Hi-Lo. Travelers then contends that Burlington could not recover 

from Travelers because of the excess coverage provision. The court has already rejected that 

argument, holding that Burlington had the right to pursue Travelers for half of Hi-Lo’s defense 

expenses incurred before the Travelers Policy was exhausted. Because Burlington could have 

brought that suit against Travelers, it could also assign that cause of action to Illinois National, 

regardless of whether Hi-Lo could make that assignment.

Travelers further contends that Illinois National’s $250,000 payment merely fulfilled its 

own obligation to defend Hi-Lo because of its own obligations to Gibson-Lewis as a secondary 

 7

 Illinois National also asserts that it has a right to sue under the doctrine of equitable 

subrogation. In light of the court’s holding that the assignment from Hi-Lo and Burlington gives 

Illinois National the right to sue Travelers, the court need not address the equitable subrogation 

theory. 
16

insurer. Even assuming that contention is true, however, it does not affect the validity of the 

settlement agreement’s assignment to Illinois National of Hi-Lo’s and Burlington’s claims 

against Travelers. Travelers’ argument fails. 

CONCLUSION

For the reasons explained above, the summary judgment motion of plaintiff Illinois 

National (Dkt. No. 31) is granted in part and denied in part, as stated above. Because Travelers 

and Illinois National should split the $250,000 defense costs equally, the court hereby enters 

judgment in favor of Illinois National against Travelers in the amount of $125,000. Payment 

should be made forthwith. Civil Case Terminated.

ENTER:

_______________________________

JAMES F. HOLDERMAN

Chief Judge, United States District Court

Date: March 22, 2013