In the

United States Court of Appeals

For the Seventh Circuit ____________________ 

No. 23-1854 

GREAT AMERICAN INSURANCE COMPANY, 

Plaintiff-Appellant, 

v.

STATE FARM FIRE AND CASUALTY COMPANY, 

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. 

____________________ 

ARGUED DECEMBER 8, 2023 — DECIDED JUNE 24, 2024 

____________________ 

Before SYKES, Chief Judge, and RIPPLE and ROVNER, Circuit 

Judges. 

ROVNER, Circuit Judge. Great American Insurance Company (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 undisputed that Great American’s assignor provided primary 

insurance coverage and State Farm provided umbrella or 
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 contract 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 assignor 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 Community 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 without 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 
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 defendants violated state laws related to civil conspiracy, tortious 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 district 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. After 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 violation 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], 
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 persons 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” before 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 insured’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 Consortium policy. She was also insured under a personal liability 

umbrella policy issued by State Farm which indemnified 

Hamilton for personal liability damages in certain circumstances. 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” indemnity 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. 
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 behalf 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 “Personal Injury” as (among other things) “injury other than Bodily 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 Consortium’s policies addressed the loss from the Breuder litigation.

The heart of the dispute here comes down to an interpretation of the Defense Provision of State Farm’s policy. That 

provision stated, in relevant part: 

If a suit is brought against any Insured for damages because of a Loss to which this policy applies, 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 covered by any other insurance policy but is covered 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 provide a defense to the defendants pursuant to a reservation of 

rights. Subsequently, State Farm sent Hamilton its own 
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 settled, however, the Consortium assigned to Great American all 

its Breuder-litigation-related rights, claims, and causes of action 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 compulsory 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 Underlying 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 
No. 23-1854 7

in the Breuder litigation, State Farm was estopped from raising 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 Enters., 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 district 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 appear 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 Consortium policy suffered a loss. The loss they suffered was related to conduct whose subject matter was potentially 

3 Great American also asserted claims for equitable contribution, contractual subrogation, and equitable subrogation—claims that are not part 

of this appeal.
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 insureds’ loss, including for legal fees. The Consortium was responsible 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 assessed 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 applies, we look there for guidance. Westfield Ins. Co. v. Vandenberg, 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 purposes—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.” 
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). Ordinarily, because a primary insurance policy provides the insured 

with the first level of protection, it typically assigns to the insurer 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 underlying 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 umbrella policy provides both excess coverage, and in some circumstances may provide broader coverage than that otherwise provided by the underlying primary carrier. Kajima, 227 

Ill. 2d at 115. 

Of course, what animates the desire to distinguish between 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 responsible 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 umbrella coverage also reflect[] an intent that umbrella policies 

serve a different function” than primary coverage). Nevertheless, whatever ordinarily happens in insurance contracts, our

“primary function is to ascertain and give effect to the intention of the parties, as expressed in the policy language.” 

Galarza v. Direct Auto Ins. Co., 2023 IL 129031, ¶38. 
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 provide primary coverage where there was no underlying insurance. And Great American argues that the provision of defense 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 policies. Regardless of what the usual primary policy or the usual 

umbrella policy provides, as with any other contract, the parties 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 undertaken 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.” 
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 illuminating 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-liability loss only if the basis for that suit is a loss that “is covered 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 potentially 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 therefore State Farm had no liability for the costs of the defense.

That should be the end of the story. Great American, however, 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, 
12 No. 23-1854 

either explicitly or implicitly as though it has the word “potential” written in as below:

If a suit is brought against any Insured for damages because of a Loss to which this policy applies, 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 ambiguity in the original language, it simply reflects the inherent 

nature of a defense provision in an insurance contract. Defense provisions depend on an analysis of potential loss because, 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 potentialities. 

Great American does not disagree. In fact, it dedicates several pages to describing the duty to defend, noting that it requires an analysis of potential loss. This is what Great American 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 coverage. Gen. Agents Ins. Co. of Am. v. Midwest Sporting 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 
No. 23-1854 13

N.E.2d 670, 675 (2005). If the alleged facts potentially fall within coverage, reading the allegations 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 (noting that “the threshold for pleading a duty to 

defend is low”). This is true even if the allegations 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 potentially 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 usually 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, therefore, 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 requirements: 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 
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). Nevertheless, as State Farm points out, this is only half of the inquiry. The resolution of this case hangs on the second requirement. State Farm owed a duty to defend only if the basis for 

the Breuder suit was a “Loss” that was “not [potentially] covered 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 indemnity coverage. Stated another way, State Farm’s potential 

defense coverage depended on and was linked to the Consortium’s potential indemnity coverage. For this reason, assessing 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 
No. 23-1854 15

potential coverage is irrelevant: “The reason [the Consortium]

owed no duty to defend is not because the underlying complaint’s factual allegations were outside the scope of coverage, 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 participate 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 possible that no insurance company had a duty to defend at all. 

See Keystone, 456 F.3d at 762 (discussing how the duty to defend 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 indemnify 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. 
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 defend on the absence of any other insurer doing so. “The parties to an insurance contract can incorporate in it such provisions, 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 includes 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 insured 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 example, agree to provide defense costs for automobile accidents, 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 defend are beside the mark. It is true that these duties are distinct 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 indemnification—are distinct”). But as we just noted, the parties can contract to provide a duty to defend however they wish. See Rich, 
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 insurance’ 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 Consortium had both the potential duty to indemnify at the start of 

the suit, and ultimately did indemnify the loss from the underlying settlement. As we explained above at length, however, when assessing a duty to defend, a court looks at potentialities. At the time State Farm was assessing its duty to defend, the Consortium potentially covered the loss (and ultimately 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.