In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 11‐3158
NATIONAL CASUALTY COMPANY, et al.,
Plaintiffs‐Appellees,
v.
WHITE MOUNTAINS REINSURANCE COMPANY OF AMERICA, now
known as SIRIUS AMERICA INSURANCE COMPANY,
Defendant‐Appellant.
____________________
Appeal from the United States District Court for the
Central District of Illinois.
No. 2:09‐cv‐02278‐HAB‐DGB — Harold A. Baker, Judge.
____________________
ARGUED NOVEMBER 27, 2012 — DECIDED OCTOBER 30, 2013
____________________
Before FLAUM and TINDER, Circuit Judges, and THARP, Dis‐
trict Judge.*
TINDER, Circuit Judge. The wrongful convictions of Gor‐
don Randy Steidl and Herbert Whitlock are a sad chapter in
the history of Edgar County, Illinois. Steidl and Whitlock
* Of the Northern District of Illinois, sitting by designation.
2 No. 11‐3158
were convicted in 1987 of murdering a local married couple,
and their convictions were largely based on the testimony of
two supposed eyewitnesses who connected the two men to
the crimes. Only long after Steidl’s and Whitlock’s convic‐
tions did a subsequent investigation reveal that much of the
key testimony had been perjured, and furthermore, a great
deal of exculpatory evidence had been withheld from the
two men’s defenses. Eventually, these revelations led to the
release of the two men as well as dismissal of all charges
against them. By then, Steidl had spent almost seventeen
years in an Illinois prison; Whitlock had spent close to twen‐
ty‐one.
This unfortunate tale of Steidl’s and Whitlock’s wrongful
imprisonment has provided the backdrop for much litiga‐
tion in the years following their release from prison. Steidl
was the first to file a lawsuit on May 27, 2005—
approximately one year after his release from prison—
against the City of Paris, Illinois, the city in Edgar County
where the murders occurred; Edgar County, Illinois; several
Illinois State Police officers; two Paris police officials; and
Michael McFatridge, the former Edgar County State’s Attor‐
ney who had been responsible for prosecuting him, and
whom Steidl alleged had been the mastermind behind the
plot to frame him for murder. Against these defendants,
Steidl alleged false imprisonment, due process, malicious
prosecution, intentional infliction of emotional distress, and
conspiracy claims under state and federal law. Whitlock fol‐
lowed Steidl’s lead and filed a similar lawsuit upon his re‐
lease from prison three years later. By March 2013, both
Steidl and Whitlock had settled their lawsuits with all de‐
fendants.
No. 11‐3158 3
Although Steidl’s and Whitlock’s lawsuits have entirely
settled, the involved parties have not yet been able to put
this matter fully behind them. Steidl’s and Whitlock’s suits
proved to be only the tip of the litigation iceberg. Because
the defendants in the two lawsuits were all public officials
and public entities, disputes soon arose over who bore the
responsibility for paying the defense costs. The disputes
have been particularly heated with regard to the costs in‐
curred by two defendants, Michael McFatridge and Edgar
County. Indeed, three different cases have been litigated re‐
garding who is responsible for paying McFatridge’s and Ed‐
gar County’s defense costs. This case is the last one remain‐
ing of the three.
The first of the three spinoff defense‐cost cases was
brought in 2007 by National Casualty Company (hereinafter
“National Casualty”), the plaintiff in the present case, in fed‐
eral district court. In that case, National Casualty Co. v.
McFatridge, 604 F.3d 335, 337 (7th Cir. 2010) (hereinafter
“McFatridge I”), National Casualty sought a declaratory
judgment that it was not liable for the defense costs of either
McFatridge or Edgar County under a 1989 insurance policy
that its predecessor had issued to “County of Edgar S.D.” Id.
Although National Casualty contested its liability for
McFatridge’s and Edgar County’s defense costs, National
Casualty nonetheless agreed to pay for the defense costs of
both McFatridge and Edgar County under a reservation of
rights until the coverage issue was resolved. In 2010, after
reading the language of the National Casualty policy in
question, our court agreed with National Casualty that nei‐
ther McFatridge nor Edgar County were covered by the 1989
policy, and as a result, we held that National Casualty had
4 No. 11‐3158
“no duty to defend or indemnify McFatridge or Edgar Coun‐
ty.” Id. at 345.
The second of the three spinoff defense‐cost cases was
brought by McFatridge himself in Illinois state court in 2010.
There, McFatridge asked the court to order the Illinois At‐
torney General “to approve all of McFatridge’s reasonable
litigation expenses and attorney fees in defense of the Steidl
and Whitlock suits as they are incurred by him.” McFatridge
v. Madigan, 989 N.E.2d 165, 168–69 (Ill. 2013). In May of this
year, the Illinois Supreme Court affirmed the state trial
court’s dismissal of McFatridge’s case, finding that
McFatridge had failed to show “a clear duty on the part of
the Attorney General to approve payment by the state of
[his] defense expenses.” Id. at 173.
The third of the three spinoff defense‐cost cases—and the
case at hand—was filed by National Casualty in 2009. In its
complaint, National Casualty asked the federal court for an‐
other declaratory judgment. But instead of asking the court
to find National Casualty not liable for McFatridge’s and
Edgar County’s defense costs, National Casualty asked the
court to find another insurer liable for these costs. Specifical‐
ly, National Casualty asked the court to find that White
Mountains Reinsurance Company (hereinafter “White
Mountains”) had “a duty to defend Edgar County and
McFatridge” under a policy issued by its predecessor to
“Edgar County Sheriff’s Department & Edgar County” in
1986. In addition to seeking a court order for White Moun‐
tains to “assume the defense of Edgar County and
McFatridge … and assume all costs of defense,” National
Casualty further sought a court order for White Mountains
to reimburse National Casualty for its defense expenditures
No. 11‐3158 5
on Edgar County and McFatridge prior to the resolution of
McFatridge I. Appealing to equity, National Casualty pointed
out in its complaint that it had heretofore paid the defense
costs for Edgar County and McFatridge under a reservation
of rights. But once a district court had declared National
Casualty not liable for these defense costs, and particularly
once our court affirmed the district court in the McFatridge I
decision, National Casualty believed it was entitled to reim‐
bursement by the entity actually liable for McFatridge’s and
Edgar County’s defense costs. White Mountains, according
to National Casualty, was the insurer actually liable.
This third spinoff case is perhaps the most procedurally
complicated one. Unfortunately, the procedural complica‐
tions have only continued to multiply throughout the case’s
pendency. National Casualty principally sought relief from
White Mountains, but it also sued McFatridge, Edgar Coun‐
ty, Steidl, and Whitlock since it had expended funds on
McFatridge’s and Edgar County’s behalf in the Steidl and
Whitlock lawsuits despite the fact that National Casualty
had no duty to defend either party. White Mountains, in
turn, filed a cross‐claim against McFatridge and Edgar
County, asking the court to declare that it had no duty to de‐
fend them under the 1986 policy. White Mountains also filed
a counterclaim against National Casualty, asking the court to
declare that it had no duty to reimburse National Casualty
for its prior expenditures on McFatridge’s and Edgar Coun‐
ty’s defense costs.
Several months into the litigation, McFatridge and Edgar
County filed a motion for summary judgment against White
Mountains, asking the court to find that, as a matter of law,
“White Mountains ha[d] a duty to defend Mr. McFatridge
6 No. 11‐3158
and the County in the lawsuits filed by plaintiffs Steidl and
Whitlock.” White Mountains responded a month later by
filing a cross‐motion for summary judgment against
McFatridge, Edgar County, and National Casualty, asserting
that White Mountains had no duty to pay McFatridge’s and
Edgar County’s defense costs, and thus no duty to reimburse
National Casualty. Not to be left behind, National Casualty
filed its own cross‐motion for summary judgment the fol‐
lowing month, arguing that White Mountains owed a legal
duty to defend McFatridge and Edgar County, and as a re‐
sult, “must immediately assume paying all costs of [their]
defense” and “must reimburse [National Casualty] for all
defense costs.”
Confronted with six parties and three cross‐motions for
summary judgment, the district judge, in his own words,
faced a “thicket of filings.” After sorting through the thicket,
however, the judge realized that the motions all asked him
to address the same legal issues: whether White Mountains
had a duty to defend McFatridge and/or Edgar County un‐
der the 1986 policy, and if so, whether White Mountains had
a duty to reimburse National Casualty for its previous ex‐
penditures on McFatridge’s and/or Edgar County’s defense
costs. On August 31, 2011, the district judge decided both
legal issues against White Mountains. In granting summary
judgment for McFatridge, Edgar County, and National Cas‐
ualty, the district court reached the following conclusions:
1. White Mountains owes a duty to defend
McFatridge and Edgar County in the Steidl
and Whitlock lawsuits,
2. That this duty to defend exists under White
Mountains’ 1986 Policy (83LE006626);
No. 11‐3158 7
3. That White Mountains must immediately
begin paying all costs of defense in the
Steidl and Whitlock lawsuits, and
4. That White Mountains must reimburse Na‐
tional Casualty for all defense fees and
costs expended since White Mountains was
on notice of the underlying claims.
As such, the district court entered judgment in favor of
McFatridge, Edgar County, and National Casualty and
against White Mountains. Shortly thereafter, the district
court determined that no further proceedings were warrant‐
ed with respect to defendants Steidl and Whitlock, dis‐
missed the two men from the action, and terminated the
case. White Mountains, in turn, filed a timely appeal.
During the two years that have passed since White
Mountains filed its appeal with our court, the case has only
become more complicated. The appeal began in a normal
fashion: White Mountains filed its first brief with our court
in July 2012, and by early August, McFatridge, Edgar Coun‐
ty, and National Casualty had all filed their response briefs.
But on August 14, 2012, White Mountains filed an unex‐
pected motion with our court. Styled as a motion for an ex‐
tension of time to file a reply brief, White Mountains notified
us that it had entered into an agreement with defendant‐
appellee McFatridge, “which settled all issues on appeal be‐
tween the parties.” Although we granted White Mountains’
motion the same day, White Mountains filed a second mo‐
tion with our court ten days later, requesting “to voluntarily
withdraw its appeal as to Michael McFatridge” pursuant to
Fed. R. App. P. 42(b). Because White Mountains reaffirmed
in this motion that it had resolved all issues between itself
8 No. 11‐3158
and McFatridge, we again granted White Mountains’ motion
the same day and dismissed McFatridge from the appeal.
After McFatridge’s dismissal in August 2012, the appeal
proceeded in a routine manner for the next several months.
The parties concluded their briefing in September, and we
heard oral argument on November 27, 2012, with White
Mountains as the appellant and Edgar County and National
Casualty as the only two remaining appellees. Then in April
of this year, we received another unexpected filing. This
time, White Mountains filed a joint motion with defendant‐
appellee Edgar County to voluntarily dismiss the appeal
with respect to Edgar County because “the claims between
these parties ha[d] been resolved by settlement.” We granted
their motion on April 8, 2013.
Without a doubt, White Mountains’ voluntary dismissals
had significantly diminished the number of appellees. Yet
we soon began to wonder whether White Mountains’ volun‐
tary dismissals had also significantly diminished the case
before our court. With just one of the three initial appellees
remaining, it appeared that just one of the four original is‐
sues remained for our court to decide on appeal—whether
White Mountains must reimburse National Casualty for its
expenditures on McFatridge’s and Edgar County’s defense.
At first glance, the first three conclusions of the district court
appeared to no longer be in dispute. White Mountains had
voluntarily chosen to dismiss McFatridge and Edgar County
from this appeal; any controversy regarding White Moun‐
tains’ liability for their defense costs now appeared to be
moot. National Casualty had already raised similar concerns
with our court on October 4, 2012, shortly after White Moun‐
tains voluntarily dismissed McFatridge from this appeal. As
No. 11‐3158 9
such, we ordered the parties to submit supplemental brief‐
ing addressing these concerns.
After evaluating the parties’ supplemental briefs, we
conclude that our jurisdiction to review the first three con‐
clusions in the summary judgment order remains intact. The
law of the case doctrine binds a tribunal to its prior decisions
regarding the case, as well as a higher tribunal’s decisions
about the matter, but it can never serve to bar a higher
court’s review of a lower court’s decision. Accordingly, we
proceed to review all four of the district court’s holdings on
the merits.
In so reviewing, we conclude that White Mountains
owed a duty to defend McFatridge and Edgar Country in the
Steidl and Whitlock lawsuits, and that this duty arose from
White Mountain’s 1986 policy. Therefore, we affirm the
judgment of the district court.
I
White Mountains has privately resolved all controversies
over the first three holdings of the district court with
McFatridge and Edgar County through settlement. The exact
terms of the two settlement agreements remain undisclosed,
so we have no idea how the parties actually resolved the ex‐
tent of White Mountains’ duty to defend McFatridge and
Edgar County. National Casualty argues that under the doc‐
trine of law of the case, we may not review the district
court’s judgment for McFatridge. It asserts that because
White Mountains voluntarily dismissed its appeal against
McFatridge and Edgar County, the part of the district court’s
judgment as to these two parties must stand as we adjudi‐
cate the dispute between White Mountains and National
10 No. 11‐3158
Casualty, lest the district court be required to enter a judg‐
ment that is “impermissibly inconsistent” on remand.
But that is incorrect. While the doctrine of the law of the
case “creates a presumption against a court’s reexamining its
own rulings in the course of a litigation … [i]t has no applica‐
tion to the review of rulings by a higher court.” Marseilles
Hydro Power LLC v. Marseilles Land & Water Co., 481 F.3d
1002, 1004 (7th Cir. 2007) (holding that a district court judg‐
ment regarding a party that settled out of the case could not
prejudice the remaining parties in the litigation on appeal).
Indeed, we have repeatedly held that “[t]he doctrine of law
of the case never blocks a higher court from examining a de‐
cision of an inferior tribunal.” Belbachir v. County of McHenry,
726 F.3d 975, 978 (7th Cir. 2013) (quoting Payne v. Churchich,
161 F.3d 1030, 1038 n.9 (7th Cir. 1998)) (internal quotation
marks omitted). Furthermore, a party’s decision “to abandon
[an opposing party] on appeal, when other [opposing par‐
ties] remain in the case, is not an acknowledgement that” the
judgment as to the dropped opposing party “was sound,
and is therefore not a basis on which the remaining [oppos‐
ing parties] can plead waiver or forfeiture.” Id.
National Casualty further argues that Supreme Court
precedent requires us to bind White Mountains to the terms
of the district court’s ruling, since White Mountains’ settle‐
ment could have been—but was not—conditioned on vaca‐
tur of the district court’s holdings as to Edgar County and
McFatridge. However, the nature of the case appealed here
is clearly different from the posture of the case National
Casualty relies on: U.S. Bancorp Mortgage Co. v. Bonner Mall
Partnership, 513 U.S. 18, 19–20 (1994). There, a creditor had
settled its entire claim against a debtor after the Supreme
No. 11‐3158 11
Court had granted the creditor’s petition for certiorari but
before oral argument was heard in the Court. Even though
the merits of the case were mooted by the settlement agree‐
ment, the creditor realized after settlement that the judgment
of the Ninth Circuit still stood and could have a deleterious
effect on the creditor’s subsequent claims. The Court refused
to vacate the claims, holding that “[w]here mootness results
from settlement, … the losing party has voluntarily forfeited
his legal remedy by the ordinary processes of appeal or cer‐
tiorari, thereby surrendering his claim to the equitable rem‐
edy of vacatur. The judgment is not unreviewable, but simp‐
ly unreviewed by his own choice.” Id. at 25 (citations omit‐
ted). Bonner Mall stands for the principle that suitors enter‐
ing complete settlement should forge thoughtful settlements
before relinquishing legal remedy by appeal or certiorari;
but it does not stand for the principle that a partial settle‐
ment among several, but not all, parties should tie the hands
of the reviewing court. Indeed, such a principle would lead
to the absurd result where White Mountains would be una‐
ble to request appellate review of the substantive underpin‐
nings of its case against National Casualty. Unlike the credi‐
tor in Bonner Mall, White Mountains did not draft its settle‐
ment agreements poorly in not requesting that the judgment
of the lower court be vacated. It did so in order that this live
appeal could still move forward.
Furthermore, we agree with the public policy considera‐
tions raised by White Mountains. We want to encourage
“the strong public policy and substantial public investment
supporting the settlement process on appeal.” And indeed,
our circuit has held that “[t]he law generally favors and en‐
courages settlements.” Metro. Hous. Dev. Corp. v. Vill. of Ar‐
lington Heights, 616 F.2d 1006, 1013 (7th Cir. 1980).
12 No. 11‐3158
In reviewing White Mountains’ appeal, we have—as we
must—the latitude and responsibility to review the district
court’s decisions thoroughly. We thus proceed to the merits.
II
We first consider whether White Mountains owes a duty
to defend McFatridge and Edgar County, and whether this
duty originates from the 1986 policy. The construction of an
insurance policy is a question of law, so we review the dis‐
trict court’s finding de novo. Premcor USA, Inc. v. Am. Home
Assurance Co., 400 F.3d 523, 526–27 (7th Cir. 2005). To con‐
strue insurance policies, Illinois courts “take into account the
type of insurance purchased, the nature of the risks in‐
volved, and the overall purpose of the contract.” Am. States
Ins. Co. v. Koloms, 687 N.E.2d 72, 75 (Ill. 1997). The Illinois
Supreme Court has held:
Our primary objective in construing the
language of a policy is to ascertain and give ef‐
fect to the intentions of the parties as expressed
in their agreement. If the terms of the policy
are clear and unambiguous, they must be giv‐
en their plain and ordinary meaning, but if the
terms are susceptible to more than one mean‐
ing, they are considered ambiguous and will be
construed strictly against the insurer who
drafted the policy. Courts will not strain to find
ambiguity in an insurance policy where none
exists.
McKinney v. Allstate Ins. Co., 722 N.E.2d 1125, 1127 (Ill.
1999) (internal citations omitted).
No. 11‐3158 13
And it is also a generally accepted canon of construction
that “[w]here an inconsistency arises between a clause that is
general and one that is more specific, the latter prevails.” Al‐
berto‐Culver Co. v. Aon Corp., 812 N.E.2d 369, 380 (Ill. App.
Ct. 2004). However, for insurance policies, at least some Illi‐
nois courts have adopted the canon that “[i]f two or more
clauses within a policy conflict or are inconsistent, then the
clause affording greater coverage will govern.” Abram v.
United Servs. Auto. Ass’n, 916 N.E.2d 1175, 1179 (Ill. App. Ct.
2009). This canon is consistent with the tendency of Illinois
to treat “provisions that limit or exclude coverage” with
some skepticism and interpret contracts “liberally in favor of
the insured and against the insurer.” Koloms, 687 N.E.2d at
75.
Against this backdrop, we are asked to interpret the
White Mountains policy language to determine if it would
cover Edgar County. The 1986 policy provides the following
terms:
The 1986 Policy Declaration Page, Item 1,
states that the “Named Insured and Ad‐
dress” is “Edgar County Sheriff’s Depart‐
ment & Edgar County, 228 North Central
Avenue, Paris, Illinois 61955.” The address
is for the Sheriff’s department.
The “Additional Named Insured” space is
blank.
The policy, on its first page, states that
“[White Mountains] will pay on behalf of
the Insured all sums which the Insured
shall become legally obligated to pay as civ‐
14 No. 11‐3158
il damages because of wrongful acts arising
out of Law Enforcement activities”.
Additionally, the policy provides the following
relevant definitions:
NAMED INSURED Means the law en‐
forcement agency named in Item 1 of the dec‐
larations.
INSURED Means (A) Named Insured and
all paid full or part time employees; (B) unpaid
volunteers or reserves while performing law
enforcement functions for the Named Insured
at the Insured’s request; (C) the political sub‐
division in which the Named Insured is locat‐
ed, should such subdivision be named in any
action or suit against the Named Insured or
any employee for any act, error or omission for
which this policy affords protection, and elect‐
ed or appointed officials or other personnel or
units of the political subdivision of which the
Named Insured is a unit thereof, with respect
to their responsibilities to law enforcement.
OCCURRENCE Means an accident, includ‐
ing continuous or repeated exposure to condi‐
tions, which results in bodily injury, personal
injury, or property damage neither expected
nor intended from the standpoint of any In‐
sured.
WRONGFUL ACT Means only or all of the
following: Actual or alleged error, misstate‐
ment or misleading statement, omission, ne‐
No. 11‐3158 15
glect or breach of duty by the Insured individ‐
ual or collectively, while acting or failing to act
within the scope of his employment or official
duties pertaining to the law enforcement func‐
tions of the Insured.
We are asked to decide if Edgar County and McFatridge
are covered by a contract with this language. We believe the
answer to both questions is yes. National Casualty ekes out a
narrow victory here, in large part due to the Illinois canon of
construction that favors the insured in cases of ambiguity.
(a) Edgar County
While we reach the same outcome as the district court
and conclude that Edgar County is covered by the 1986 poli‐
cy, we disagree with the district court’s reading of the
“Named Insured” section of the declaration and the defini‐
tion of the term. As National Casualty notes, Edgar County
is named in the “Named Insured” section of the policy dec‐
laration. The definition section states that “Named Insured”
refers to “the law enforcement agency named in Item 1 of
the declarations.” The district court concluded that Edgar
County cannot be a law enforcement agency, and relied on a
general canon of construction that “[w]here an inconsistency
arises between a clause that is general and one that is more
specific, the latter prevails.” Alberto‐Culver Co., 812 N.E.2d at
380. However, there is a more specific canon of interpreta‐
tion to be applied here: Illinois law states that “[i]f two or
more clauses within [an insurance] policy conflict or are in‐
consistent, then the clause affording greater coverage will
govern.” Abram, 916 N.E.2d at 1179. This canon comports
with the general policy Illinois follows in interpreting insur‐
ance contracts “liberally in favor of the insured and against
16 No. 11‐3158
the insurer.” Am. States Ins. Co., 687 N.E.2d at 75. Applying
the Abram canon to the declaration, we can straightforward‐
ly reach the determination that Edgar County is a named in‐
sured.
This reading is preferable to the district court’s reading
for two more reasons. First, the text indicating “Edgar Coun‐
ty Sheriff’s Department & Edgar County” are both Named
Insureds was typed into this particular contract, while the
definition clause comes from a preprinted form contract. To
us, this indicates that the typed language—the language ac‐
tually specific to this contract—should control, and indeed
Illinois has the sensible canon that “[a] typed portion of a
document prevails over a printed portion in determining the
construction of a contract.” ETA Trust v. Recht, 574 N.E.2d 4,
9 (Ill. App. Ct. 1991). Besides being sensible, the canon also
squares with the policy implicit in the Illinois Supreme
Court’s instruction to read insurance contracts “liberally in
favor of the insured” and “strictly against the insurer who
drafted the policy.” Am. States Ins. Co., 687 N.E.2d at 75.
The second reason we interpret Edgar County to be a
Named Insured is that not doing so reads the phrase “& Ed‐
gar County” completely out of the declaration, and this runs
against the plain text of the contract. Illinois case law does
not support reading language out of an insurance policy; in
fact, it supports giving language contained within the policy
its “plain and ordinary meaning.” McKinney, 722 N.E.2d at
1127. And we agree with National Casualty’s assertion that
“to accept the district court’s interpretation,” we would have
to stand by the assertion that “White Mountains specifically
listed Edgar County by name under the heading ‘Named In‐
sured’ for no reason at all. No conceivable reason exists for
No. 11‐3158 17
listing Edgar County as a Named Insured if Edgar County is
not, in fact, a Named Insured.” (Appellee’s Br. 22‐23.) At
worst, this is a contractual ambiguity to be construed against
White Mountains. See id.
White Mountains asserts as a secondary argument that it
is not responsible for Edgar County’s defense costs because
Edgar County’s liability is not due to an occurrence that
triggered coverage. It makes this assertion on the basis of
our decision in McFatridge I, specifically our analysis of the
Scottsdale law enforcement policy in that case. There, we
held that Scottsdale’s law enforcement policy did not pro‐
vide coverage for McFatridge or Edgar County because the
policy contained language limiting coverage to when “trig‐
gering” events occurred as well as other language limiting
coverage to liability arising out of the law enforcement activ‐
ities of the sheriff’s department. McFatridge I, 604 F.3d at
339–41.
White Mountains’ policy, too, is a law enforcement poli‐
cy. But for reasons known best to White Mountains, the 1986
policy contains language that is quite a bit broader than the
language in the Scottsdale law enforcement policy. Where
Scottsdale specifies that it will pay all sums “which the in‐
sured shall become legally obligated to pay … because of
wrongful acts … caused by an occurrence and arising out of the
performance of the insured’s duties to provide law enforcement,”
McFatridge I, 604 F.3d at 339 (second emphasis added), White
Mountains agrees to “pay on behalf of the Insured all sums
which the Insured shall become legally obliged to pay … be‐
cause of wrongful acts arising out of Law Enforcement activities
… .” (S.A. 139) (emphasis added.) In other words, the lan‐
guage provides support for a reading that the policy covers
18 No. 11‐3158
not just the wrongful acts of Edgar County and the sheriff’s
department, but also the wrongful acts of others. Unlike the
Scottsdale policy in McFatridge I, this language could validly
be read to provide coverage for “all law enforcement activity
simply by virtue of its taking place within Edgar County.”
McFatridge I, 604 F.3d at 340. Certainly, this is not the only
reading that the policy affords; but Illinois law requires that
we err on the side of interpreting the policy strictly against
White Mountains in cases of ambiguity.
The more compelling argument distinguishing the White
Mountains policy from the Scottsdale policy is that the
Scottsdale policy is an “occurrence”‐based policy, McFatridge
I, 604 F.3d at 345, while the White Mountains policy is not
occurrence‐based, and instead provides professional liability
coverage for claims arising out of “wrongful acts.” (S.A.
139.) By its terms, it does not require an “occurrence” or “ac‐
cident” to trigger coverage. “Occurrence” and “wrongful
act” have distinct definitions under the White Mountains
policy, and the policy declaration makes clear that it will pay
for Edgar County’s and the sheriff department’s obligations
resulting from “wrongful acts arising out of Law Enforce‐
ment activities.” (S.A. 139.) Steidl’s and Whitlock’s claims
against McFatridge arise out of covered “wrongful acts”: the
policy explicitly covers claims for false arrest, false impris‐
onment, malicious prosecution, and deprivation of rights.
For these reasons, we conclude that Edgar County is
clearly insured by White Mountains under the 1986 policy.
We turn to the question of whether McFatridge is covered.
No. 11‐3158 19
(b) McFatridge
McFatridge is an elected state official. McFatridge I, 604
F.3d at 341 (“McFatridge is not an employee of the sheriff’s
department or the county … . The best characterization of
the state’s attorney is that he is a state constitutional official
with jurisdiction in the county in which he is elected.”) (em‐
phasis omitted); Madigan, 989 N.E.2d at 171 (describing
McFatridge as an “elected state official”). As applied to him,
subsection (C) of the definition of “Insured” could be read
two ways:
1. “elected … officials … of the political sub‐
division …”
or
2. “elected … officials … or units of the politi‐
cal subdivision …”
Under the first, we do not think McFatridge would be
covered, as he is a state elected official and not an elected of‐
ficial of Edgar County—although we suppose that would
hinge on the level of generality at which one defines the “po‐
litical subdivision” in which Edgar County is located. Under
the second, McFatridge—as an elected official—would be
covered by the policy. But we need not determine which of
the readings is correct, as both readings are plausible. “[I]f
the terms [of a policy] are susceptible to more than one
meaning, they are considered ambiguous and will be con‐
strued strictly against the insurer who drafted the policy.”
McKinney, 722 N.E.2d 1127. For this reason, we easily con‐
clude that White Mountains owes McFatridge the duty of
representation under the 1986 policy.
20 No. 11‐3158
III
Having determined that White Mountains owes Edgar
County and McFatridge the duty of representation, we re‐
view the district court’s finding that White Mountains must
reimburse National Casualty for all defense fees and costs
expended since White Mountains was on notice of the un‐
derlying claims. To recover under a theory of unjust enrich‐
ment, National Casualty “must show that defendant [White
Mountains] voluntarily accepted a benefit which would be
inequitable for [it] to retain without payment.” People ex rel.
Hartigan v. E & E Hauling, Inc., 607 N.E.2d 165, 177 (Ill. 1992).
Under Illinois law, “[t]he theory of unjust enrichment is
based on a contract implied in law… . Because unjust en‐
richment is based on an implied contract, ‘where there is a
specific contract which governs the relationship of the par‐
ties, the doctrine of unjust enrichment has no application.’”
Id. (quoting La Throp v. Bell Fed. Savs. & Loan Ass’n, 370
N.E.2d 188, 195 (Ill. 1977)). Here, the dispute involves two
independent insurance companies with two independent
policies. National Casualty and White Mountains never en‐
tered into a contract with each other regarding the insurance
coverage of either Edgar County or McFatridge. This case
presents an appropriate situation for National Casualty to
invoke this equitable doctrine.
In March 2008, when Edgar County and McFatridge first
made a claim for their defense costs under the 1986 policy,
White Mountains’ predecessor, Folksamerica, agreed to con‐
tribute to McFatridge’s defense under a reservation of rights
but flatly refused to contribute to Edgar County’s defense
costs. By June 2010, White Mountains had fully withdrawn
from the limited contributions it was making to
No. 11‐3158 21
McFatridge’s defense costs—and still persisted in its refusal
to contribute to Edgar County’s defense costs. White Moun‐
tains never paid any of Edgar County’s defense costs, and it
only paid some of McFatridge’s defense costs. Meanwhile,
instead of fulfilling its own obligations to McFatridge and
Edgar County, White Mountains allowed National Casualty
to foot the bill for McFatridge’s and Edgar County’s defense
costs. National Casualty continued to pay these defense
costs under a reservation of rights until our court declared
National Casualty not liable for these costs under the terms
of its 1989 policy in McFatridge I, 604 F.3d at 345.
White Mountains has contributed an insufficient amount
toward McFatridge’s and Edgar County’s defense costs de‐
spite being liable for these costs. Since White Mountains is
liable for these defense costs, but National Casualty is not,
National Casualty’s contributions to the defense costs before
the McFatridge I decision constitute a benefit to White Moun‐
tains. National Casualty made clear from the start that its
contributions to McFatridge’s and Edgar County’s defense
costs were made under a reservation of rights until its legal
duties were clarified under the McFatridge I declaratory
judgment action, so National Casualty never waived its right
to recoup its contributions. See Standard Mut. Ins. Co. v. Lay,
989 N.E.2d 591, 596 (Ill. 2013) (holding that “when the insur‐
er takes the position that the policy does not cover the com‐
plaint, the insurer must: (1) defend the suit under a reserva‐
tion of rights; or (2) seek a declaratory judgment that there is
no coverage. If the insurer fails to take either of these actions,
it will be estopped from later raising policy defenses to cov‐
erage”). National Casualty has gone above and beyond its
legal obligations; White Mountains has fallen short. See
Maxum Indem. Co. v. Eclipse Mfg. Co., 848 F. Supp. 2d 871, 884
22 No. 11‐3158
(N.D. Ill. 2012) (noting that Illinois “law encourages insurers
to [defend under a reservation of rights] when faced with a
situation of debatable coverage”).
As a result, we agree with the district court that it would
be inequitable for White Mountains to benefit from National
Casualty’s attempt to do the right thing, especially since
White Mountains did not do the right thing in a situation of
questionable coverage and contribute to the defense costs
under a reservation of rights. White Mountains is liable for
the defense costs of McFatridge and Edgar County as found
by the district court. National Casualty is not liable for the
defense costs under McFatridge I, 604 F.3d at 345. We also
note that there appear to be no other parties liable for
McFatridge’s and Edgar County’s defense costs. McFatridge
had previously claimed that the State of Illinois was also re‐
sponsible for his defense costs, but as noted earlier, the Illi‐
nois Supreme Court has recently clarified that the State is
not liable for these costs. Madigan, 989 N.E.2d at 173. There‐
fore, White Mountains alone was unjustly enriched by Na‐
tional Casualty’s expenditures on McFatridge’s and Edgar
County’s defense costs, and White Mountains must reim‐
burse National Casualty for these expenditures.
IV
For these reasons, we AFFIRM the judgment of the district
court.