IN THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
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No. 09–2022
R.C. WEGMAN CONSTRUCTION COMPANY,
Plaintiff‐Appellant,
v.
ADMIRAL INSURANCE COMPANY and BRIAN BUDRIK,
Defendants‐Appellees.
__________________________
On Petition for Rehearing.
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FEBRUARY 4, 2011
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Admiral’s petition for rehearing contends that we held that
“where there is a possibility of a verdict in excess of policy lim‐
its, there is a conflict of interest between the insurer and the in‐
sured.” This characterization ignores the facts that led us to find
a conflict (actually just alleged facts, since the complaint was
dismissed by the district court). We said that “the conflict in this
case arose when Admiral learned that an excess judgment (and
therefore a settlement in excess of the policy limits, as judgment
prospects guide settlement) was a nontrivial probability in
Budrik’s suit” (emphasis added). Among the facts supporting
that characterization were (1) the nature and severity of the
No. 09–2022 2
plaintiff’s injury, (2) the settlement demand in excess of policy
limits, (3) the fact that the case had been slated for trial (and in
fact tried), (4) the plaintiff’s securing at trial an award double the
policy limit, (5) Admiral’s admission that its primary litigating
strategy was to downplay Wegman’s responsibility rather than
to deny liability, and (6) Admiral’s failure to warn Wegman that
it had adopted a strategy that placed Wegman in jeopardy of an
excess judgment. Admiral’s attorney has admitted taking a
gamble by proceeding to trial in hopes of a ruling that Weg‐
man’s share of liability was below 25 percent, which would turn
a $2 million damages award into a $500,000 award, well below
Admiral’s $1 million policy limit. Rather than being warned by
Admiral, Wegman discovered that the case was going to trial
only through an accidental conversation just days before the
trial began.
The case is thus like Nandorf, Inc. v. CNA Ins. Cos., supra,
which involved a compensatory damages claim and a punitive
damages claim; the insured wanted to minimize its total liabil‐
ity while the insurer sought to minimize merely the compensa‐
tory damages claim because its insurance policy didn’t cover
punitive damages. Admiral made a similar strategic move
when faced with the likelihood of an excess judgment; instead
of notifying Wegman and allowing it to negotiate its own set‐
tlement, or at least notify its excess‐insurance carrier, Admiral’s
lawyer gambled on obtaining a reduction in damages, on the
basis of Illinois’s joint‐and‐several liability statute, that would
bring the damages award against Wegman below Admiral’s
policy limit. Admiral’s gamble created a conflict of interest that
entitled Wegman to choose its own attorney to represent its in‐
terests, yet Admiral failed to warn Wegman of what it was do‐
ing. If Wegman can prove these allegations, it will have demon‐
strated a conflict of interest under Illinois insurance law
Of course the facts of Nadorf are not identical to the facts of
this case, and this leads Admiral to argue that unless the facts of
No. 09–2022 3
a case are identical to those of a case decided by an Illinois
court, a federal court sitting in diversity cannot find a conflict of
interest because the conflict has not yet been “recognized” by
Illinois case law. That is not correct. The role of the federal court
in a diversity case is to predict how a court of the state whose
law supplies the rule of decision would decide the case; Nadorf
is relevant to that prediction.
DENIED.