BASF AG v. Great American Assur ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 06-3938, 06-3962, 06-3978, 06-4156, 06-4244 & 06-4257
BASF AG,
Plaintiff-Appellee,
v.
GREAT AMERICAN ASSURANCE CO.,
FEDERAL INSURANCE CO., and
WESTCHESTER FIRE INSURANCE CO.,
Defendants-Appellants.
____________
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 6969—Samuel Der-Yeghiayan, Judge.
____________
ARGUED NOVEMBER 30, 2007—DECIDED APRIL 14, 2008
____________
Before BAUER, KANNE, and EVANS, Circuit Judges.Œ
Œ
Following oral argument, Circuit Judge Kenneth F. Ripple
disqualified himself as a member of the panel and had no role
in the preparation of this decision. Circuit Judge Terence T.
Evans was appointed as the third member of the panel, and
was furnished with a transcript and audio recording of oral
argument, as well as the briefs and the record on appeal.
2 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
KANNE, Circuit Judge. This insurance-coverage action
represents the third case in a series of lawsuits
stemming from the marketing of Synthroid, a synthetic
thyroid drug. See In re Synthroid Mktg. Litig., 264 F.3d 712(7th Cir. 2001); Knoll Pharm. Co. v. Auto. Ins. Co., 152 F.
Supp. 2d 1026 (N.D. Ill. 2001). The first case—a multi-
district litigation—consolidated numerous class actions
filed by consumers and health insurers that sought dam-
ages for the alleged monopolization, racketeering, fraud,
and deceptive business practices of Synthroid’s producers.
See Synthroid, 264 F.3d at 714. After the multi-district
litigation settled, the Synthroid defendants filed the sec-
ond case; that insurance-coverage suit sought damages
from the Synthroid defendants’ primary-insurance provid-
ers for the insurers’ alleged failure to defend them in,
and indemnify them for, the settlement of the multi-district
litigation. See Knoll Pharm. Co., 152 F. Supp. 2d at 1031.
While it was pending on appeal, the second case also
settled.
German corporation BASF AG (“BASF”) then filed this
third suit, seeking to recover damages from its umbrella
insurers for their failure to defend and indemnify
BASF, and its related corporate entities, in the initial
Synthroid litigation. The district court in this case de-
cided that the umbrella-insurance policies required the
insurers to defend BASF in the Synthroid litigation, and
granted summary judgment to BASF on the insurers’
liability for breach of contract. We disagree. The terms of
the umbrella policies, as a matter of law, did not obligate
the insurers to defend or indemnify BASF. We therefore
reverse, and remand to the district court for the entry of
summary judgment in favor of the insurers.
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 3
I. HISTORY
Between 1989 and 1995, BASF’s predecessor in interest,
Boots Pharmaceuticals, Inc. (“Boots”), purchased two
layers of liability insurance: primary insurance and um-
brella insurance.1 The primary-insurance policies all
contained similar provisions, which stated that the
insurers would indemnify Boots for lawsuits seeking
damages “arising out of” claims for a “personal injury” or
an “advertising injury.” The primary policies uniformly
defined an “advertising injury” as, among other things,
an “injury arising out of . . . oral or written publication of
material that slanders or libels a person or organization or
disparages a person’s or organization’s goods, products,
or services.” Moreover, the primary policies each out-
lined the insurer’s duty to defend: each primary policy
required the insurer to pay all costs that Boots incurred in
defense of any suit for which the insurer would be obli-
gated to indemnify Boots.
The umbrella-insurance policies provided two additional
types of insurance coverage to Boots: excess coverage and
gap-filling coverage. All of the umbrella policies con-
tained excess-insurance provisions, which required the
1
In March 1995, BASF acquired Boots and its related entities
and completely merged the companies into a new BASF sub-
sidiary, Knoll Pharmaceutical Company (“Knoll”). Incident
to this transaction, Knoll and BASF assumed the benefits of the
liability-insurance policies previously obtained and held by
Boots. BASF sold Knoll to Abbott Laboratories (“Abbott”) in
March 2001. However, pursuant to the Purchase Agreement,
BASF retained its right to recover any damages from Boots’s
insurers for the Synthroid litigation. For clarity, we will refer
to BASF and Knoll collectively as BASF throughout this opinion.
4 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
umbrella insurers to indemnify Boots for sums Boots
became liable for that exceeded the coverage limits of
its primary-insurance policies. Some of the umbrella
policies also included gap-filling-insurance provisions,
which obligated the umbrella insurers to defend Boots
for any loss covered by the terms and conditions of the
umbrella policy, and “not covered as warranted” by the
primary insurers. Other umbrella policies described
this gap-filling coverage as the obligation to defend any
suit or any claim potentially covered by the umbrella
policies to which the primary policies did not apply.
The defendants in this action—Great American Assur-
ance Company (“Great American”), Federal Insurance
Company (“Federal”), and Westchester Fire Insurance
Company (“Westchester”)—hold six of these umbrella-
insurance policies.2 Like the primary-insurance policies,
the umbrella policies covered only lawsuits that sought
damages “arising out of” or “because of” a “personal
injury” or an “advertising injury.” The umbrella policies
all defined personal injury and advertising injury in a
manner that was substantively identical to the primary
policies’ definitions of those terms. Put another way,
exclusions aside, the primary policies’ and umbrella
policies’ coverage of personal injury and advertising
injury was coextensive, and a suit or claim that did not
2
Great American changed its name from Agricultural Insurance
Company (“Agricultural”) sometime after Agricultural origi-
nally issued one umbrella policy to Boots. Westchester holds
three of the six umbrella policies, which were initially pro-
vided to Boots by International Insurance Company and
subsequently novated to Westchester. Federal issued, and
continues to hold, the other two umbrella policies.
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 5
arise out of, or because of, a personal injury or an ad-
vertising injury would not be covered under either the
primary or the umbrella policies.
In 1987, Boots began to manufacture, market, and sell
Synthroid, a synthetic thyroid medication used to treat
various thyroid diseases. In an attempt to prove that
Synthroid was superior to competing synthetic thyroid
hormones on the market, in the late 1980s Boots com-
missioned a study by Dr. Betty Dong of the University
of California-San Francisco (“UCSF”). Boots hoped the
study would prove that Synthroid and its competitors
(among them, cheaper generic hormones) were not
“bioequivalents”—drugs that have the same effect on a
patient in terms of potency and absorption rate when
equal doses are administered. See Synthroid, 264 F.3d
at 714. However, in 1990, Dr. Dong discovered that
Synthroid and its competitors were, in fact, bioequiv-
alents, and that all of the compared synthetic hormones,
including the cheaper generics, were as effective as
Synthroid at treating thyroid diseases.
When provided with these results, Boots immediately
sought to discredit Dr. Dong and her findings. Boots’s
scientists sent letters to Dr. Dong that questioned her
methods and conclusions, and Boots asked UCSF to
terminate the study. UCSF did not comply and in 1994,
Dr. Dong provided her final report to Boots, which stated
that Synthroid and its competitors were bioequivalents.
Even after Boots learned of Dr. Dong’s results, Boots
continued to publicly maintain that Synthroid had no
known bioequivalents, and Boots continued to advertise
and market the drug as such. In early 1995, Boots exercised
its rights under its contract with Dr. Dong to block the
publication of her study.
6 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
In 1996, the Wall Street Journal learned of Dr. Dong’s
study and Boots’s response, and it published an exposé
on Boots and Synthroid. The article revealed to the public
that there were cheaper alternatives to Synthroid, and
that Boots had prevented the publication of Dr. Dong’s
study, which had confirmed that the cheaper alternatives
were equally effective. Dr. Dong’s study was eventually
published in 1997. See Synthroid, 264 F.3d at 714. On the
heels of the Wall Street Journal article and the publication of
Dr. Dong’s study, over 70 lawsuits (mostly class actions)
were filed against BASF and its employees. These suits,
filed by consumers and health insurers, alleged a potpourri
of antitrust, racketeering, fraud, misrepresentation,
deceptive-business-practices, and unjust-enrichment
claims all based on the fact that Boots had deceived
consumers into purchasing Synthroid, which occupied 70%
of the $600 million market for thyroid drugs at the time. In
1997, the lawsuits were consolidated into a multi-district
litigation in the Northern District of Illinois, under
28 U.S.C. § 1407. See In re Synthroid Mktg. Litig., 188 F.R.D.
295 (N.D. Ill. 1999) (certifying Synthroid consumer class);
188 F.R.D. 287 (N.D. Ill. 1999) (certifying Synthroid third-
party payor class).
The gravamen of the consolidated complaints was that
Boots, BASF, and their employees had wrongfully asserted
monopoly control over the market for thyroid medication,
which resulted in consumers and health insurers paying
higher prices for Synthroid rather than purchasing lower-
cost, equally effective alternatives. Both complaints claimed
that the defendants had exercised monopoly control by
suppressing Dr. Dong’s study and criticizing her methodol-
ogy and results, by concealing known facts about
Synthroid, and by marketing Synthroid as a uniquely
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 7
superior drug despite knowledge to the contrary. Both
complaints sought economic damages for the class mem-
bers (consumers and health insurers) who overpaid for
Synthroid. Neither complaint sought damages on behalf
of Dr. Dong or on behalf of the competing thyroid manu-
facturers, and neither complaint alleged defamation,
libel, disparagement, or slander.
In April 1997, BASF tendered the Synthroid complaints
to its primary insurers. The primary insurers each sepa-
rately refused to defend BASF, claiming that they had
no obligation to do so under the primary-insurance poli-
cies’ definitions of personal injury and advertising in-
jury. In late June 1997, BASF notified its umbrella insurers
about the Synthroid litigation, shortly before beginning
formal settlement negotiations with the class-action
plaintiffs. On August 1, 1997, before any of the umbrella
insurers had responded with coverage determinations,
BASF entered into a settlement agreement with the
Synthroid plaintiffs. In 2000, the Synthroid court approved
a settlement that required BASF to pay approximately
$88 million to the consumers and $46 million to the third-
party payors in exchange for a release of all claims. See In
re Synthroid Mktg. Litig., 110 F. Supp. 2d 676, 679-86 (N.D.
Ill. 2000), aff’d in part, rev’d in part, 264 F.3d 712. BASF
spent approximately $39.4 million in defending and
negotiating a settlement to the Synthroid litigation. See
In re Synthroid Mktg. Litig., 325 F.3d 974, 976-80 (7th Cir.
2003) (adjusting attorneys’ fee award after remand).
After settling with the class-action plaintiffs, BASF filed
an insurance-coverage suit against its primary insurers
seeking to recover damages for the insurers’ failure to
defend and indemnify BASF in the Synthroid litigation. See
Knoll Pharm. Co., 152 F. Supp. 2d at 1031. The district court
8 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
in Knoll agreed that the primary insurers should have
defended BASF because the consolidated complaints
had alleged an advertising injury. Id. at 1038-39. Conse-
quently, the Knoll court ordered the primary insurers to
indemnify BASF up to their respective policy limits (a total
of $12 million) and to pay the $39.4 million in defense
costs that BASF incurred from the Synthroid litigation; the
court also added prejudgment interest to both awards.
Knoll Pharm. Co. v. Auto. Ins. Co., 210 F. Supp. 2d 1017, 1025-
28 (N.D. Ill. 2002). The primary insurers appealed the
Knoll decision, which was briefed and argued before our
court, but the parties settled before we could reach a
disposition, for $18 million—just over one-third of the
Knoll court’s total judgment.
After settling the Knoll case with its primary insurers,
BASF filed this diversity lawsuit, see 28 U.S.C. § 1332,
against the umbrella insurers. The complaint alleged that
the umbrella insurers owed BASF over $110 million for
BASF’s unrecovered costs from the Synthroid litigation. The
complaint sought $90 million for BASF’s settlement costs
and $21.4 million in defense costs—BASF arrived at
these amounts by deducting the sums it received in its
settlement of Knoll with the primary insurers from its
total expenditure on the settlement and defense of
Synthroid.
The parties completed discovery and then filed cross-
motions for summary judgment. The district court evalu-
ated the voluminous summary judgment record and held
that Federal, Westchester, and Great American had
breached their respective contractual duties to defend
BASF during the Synthroid litigation. The district court
relied heavily on the Knoll decision, and adopted its
reasoning that the Synthroid class plaintiffs’ claims “may
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 9
have had their origin in slander, libel, or disparagement,”
which fell under the umbrella policies’ definitions of
advertising injury. The district court explained that while
the Synthroid complaints did not allege libel, slander, or
disparagement, the Synthroid litigation “grew out of
various disparaging, defamatory, and libelous state-
ments,” such as Boots’s claims that Synthroid was
superior to other thyroid drugs and Boots’s criticism of
Dr. Dong’s study.
After granting summary judgment to BASF on its breach-
of-contract claims, the district court held that the breach
estopped the umbrella insurers from contesting cover-
age; the court then allowed the case to proceed to trial
on the amount of damages. After a two-day trial, a jury
set damages at $90 million for BASF’s unrecovered costs
of the Synthroid settlement; it allocated $50 million of the
damages to Federal, $30 million to Westchester, and
$10 million to Great American. The jury also held the
umbrella insurers jointly and severally liable for the
remaining $21.4 million of defense costs. The district
court then added over $45 million in prejudgment inter-
est to the amounts awarded by the jury. The umbrella
insurers timely filed this appeal.
II. ANALYSIS
On appeal, Great American, Federal, and Westchester
claim that the district court erred when it granted sum-
mary judgment to BASF on its breach-of-contract claims.
Specifically, the umbrella insurers argue that the class-
action complaints in the consolidated Synthroid litigation
advanced claims that did not fall under the umbrella-
insurance policies’ definitions of personal injury or adver-
10 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
tising injury. The umbrella insurers maintain that, as a
result, their duties to defend and indemnify BASF were
never triggered by the Synthroid litigation, and that the
district court should have entered summary judgment
in their favor. The umbrella insurers raise numerous
additional challenges to the district court’s decisions to
limit discovery, exclude certain evidence at the damages
trial, assess prejudgment interest, and deny the insurers’
post-trial motions.
We review the district court’s decision on cross-motions
for summary judgment de novo. Premcor USA, Inc. v. Am.
Home Assurance Co., 400 F.3d 523, 526 (7th Cir. 2005). “With
cross-motions, we construe the evidence and all reason-
able inferences in favor of the party against whom the
motion under consideration is made.” Id. Summary
judgment is appropriate “if the pleadings, the discovery
and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material
fact and that the movant is entitled to judgment as a mat-
ter of law.” Fed. R. Civ. P. 56(c); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986).
The parties all concede that the substantive law of Illi-
nois governs this diversity action. Under Illinois law, the
interpretation of an insurance policy is a question of law
that is properly decided by way of summary judgment.
Crum & Forster Managers Corp. v. Resolution Trust Corp.,
620 N.E.2d 1073, 1077 (Ill. 1993); see also Conn. Indem. Co. v.
DER Travel Serv., Inc., 328 F.3d 347, 349 (7th Cir. 2003). We
review the district court’s construction of an insurance
policy de novo. See Valley Forge Ins. Co. v. Swiderski Elecs.,
Inc., 860 N.E. 2d 307, 313 (Ill. 2006).
“A court’s primary objective in construing the language
of an insurance policy is to ascertain and give effect to the
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 11
intentions of the parties as expressed by the language of the
policy.” Id. at 314; see also Cent. Ill. Light Co. v. Home Ins.
Co., 821 N.E.2d 206, 213 (Ill. 2004). “In performing that
task, the court must construe the policy as a whole, taking
into account the type of insurance purchased, the nature
of the risks involved, and the overall purpose of the
contract.” Nicor, Inc. v. Associated Elec. & Gas Ins. Servs. Ltd.,
860 N.E.2d 280, 286 (Ill. 2006). Where the terms of an
insurance policy are clear and unambiguous, they must
be applied as written; but where ambiguity exists, the
terms will be strictly construed against the drafter. Id. at
286; Valley Forge Ins. Co., 860 N.E.2d at 314. Policy terms
“are ambiguous if they are reasonably susceptible to more
than one interpretation, not simply if the parties can
suggest creative possibilities for their meaning, and a
court will not search for ambiguity where there is none.”
Valley Forge Ins. Co., 860 N.E.2d at 314 (internal citations
omitted).
“An insurer’s duty to defend is much broader than its
duty to indemnify its insured.” Gen. Agents Ins. Co. of Am.,
Inc. v. Midwest Sporting Goods Co., 828 N.E.2d 1092, 1098
(Ill. 2005); see also Crum & Forster, 620 N.E.2d at 1079. In
order to determine whether the umbrella insurers had a
duty to defend BASF under Illinois law, we must com-
pare the facts alleged in the consolidated Synthroid com-
plaints to the relevant provisions of the umbrella-insurance
policies. See Valley Forge Ins. Co., 860 N.E.2d at 314. In
making this comparison, we construe the allegations
liberally in favor of the insured. Id.; Employers Ins. of
Wausau v. Ehlco Liquidating Trust, 708 N.E.2d 1122, 1136
(Ill. 1999). If the facts alleged in the Synthroid complaints
fell within, or potentially within, the umbrella policies’
coverage, then the umbrella insurers were obligated to
12 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
defend BASF. See Valley Forge Ins. Co., 860 N.E.2d at 314-15;
Gen. Agents Ins., 828 N.E.2d at 1098. This is true even if
the Synthroid complaints contained groundless, false, or
fraudulent allegations, and even if only one of several
theories of recovery fell within the potential coverage of
the umbrella policies. See Valley Forge Ins. Co., 860 N.E.2d
at 315; Gen. Agents Ins. Co., 828 N.E.2d at 1098. The um-
brella insurers’ refusal to defend BASF was only justi-
fied if it was clear from the face of the Synthroid com-
plaints that the allegations failed to state facts that brought
the case within, or potentially within, the coverage of
the umbrella policies. See Valley Forge Ins. Co., 860 N.E.2d
at 315; Gen. Agents Ins. Co., 828 N.E.2d at 1098.
The parties all agree that the only policy definitions that
BASF’s claims could fall (or potentially fall) within are
the umbrella-insurance policies’ coverage of “injury arising
out of” the “offenses” of “[o]ral or written publication of
material that slanders or libels a person or organization
or disparages a person’s or organization’s goods, products,
or services.” The parties also all concede that the Synthroid
class plaintiffs did not plead slander, libel, or disparage-
ment as causes of action in the consolidated complaints.
If Illinois law required that the plaintiff specifically
plead a covered cause of action to trigger an insurer’s
duty to defend, we could end our analysis here. However,
it does not. See, e.g., Cincinnati Ins. v. E. Atl. Ins. Co., 260
F.3d 742, 745 (7th Cir. 2001) (“[T]he insured is covered
against particular conduct alleged against it regardless of
the label placed on that conduct by the pleader.”); W. Cas.
& Surety Co. v. Adams County, 534 N.E.2d 1066, 1068 (Ill.
App. Ct. 1989) (“[T]he question of coverage should not
hinge exclusively on the draftsmanship skills or whims of
the plaintiff in the underlying action.”). Therefore, we
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 13
must determine whether the factual allegations of the
complaint could tacitly “sketch a claim that is within
the scope of the policy.” W. States Ins. Co. v. Wis. Wholesale
Tire, Inc., 184 F.3d 699, 702 (7th Cir. 1999); see also Valley
Forge Ins. Co., 860 N.E.2d at 315. So, in this case, we
must ask whether the Synthroid complaints sketched a
claim for the offenses of slander, libel, or disparagement,
which are covered by the umbrella policies.
We believe that the facts in the Synthroid complaints are
simply insufficient to sketch a claim for the common-law
offenses of libel, slander, or disparagement, which in
Illinois all require that a false statement be made about the
plaintiff. See Solaia Tech., LLC v. Specialty Pub. Co., 852
N.E.2d 825, 839 (Ill. 2006) (“To state a defamation claim, a
plaintiff must present facts showing that the defendant
made a false statement about the plaintiff . . . .”); Imperial
Apparel, Ltd. v. Cosmo’s Designer Direct, Inc., 853 N.E.2d 770,
782 (Ill. App. Ct. 2006) (“[A]n action for commercial
disparagement lies when the quality of [a business’s] goods
is demeaned.”), rev’d on other grounds, 227 Ill.2d 381 (Ill.
Feb. 7, 2008); Thomas v. Fuerst, 803 N.E.2d 619, 623 (Ill.
App. Ct. 2004) (“To establish either slander or libel, plain-
tiff must show that: (1) defendant made a false statement
concerning plaintiff . . . . ”); see also Ptasznik v. St. Joseph
Hospital, 464 F.3d 691, 698 (7th Cir. 2006). Neither the
consumer class-action complaint nor the third-party payor
complaint claimed that Boots or its related entities made
defamatory, libelous, slanderous, or disparaging state-
ments about the class members or their products. And the
Synthroid complaints’ omission of a claim for common-law
libel, slander, or disparagement makes sense because the
only allegedly actionable statements did not “disparage”
thyroid patients or health-insurance providers—
14 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
they targeted Dr. Dong’s study as unreliable, and other
thyroid drugs as unsuitable bioequivalents of Synthroid.
In addition to the requirements of the Illinois common
law, the Synthroid class plaintiffs would have faced a
further obstacle to sketching a claim for libel, slander, or
disparagement based on the statements about Dr. Dong
and Synthroid’s competitors—the class plaintiffs would
not have had standing to do so. See Elk Grove Unified
School Dist. v. Newdow, 542 U.S. 1, 11 (2004) (“In every
federal case, the party bringing the suit must establish
standing to prosecute the action.”). Part of the Article III
standing inquiry is whether the plaintiff has asserted an
injury-in-fact that is particularized to him. See, e.g., id. at 12;
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) (“First,
the plaintiff must have suffered an ‘injury in fact’—an
invasion of a legally protected interest which is . . . concrete
and particularized . . . .”); Warth v. Seldin, 422 U.S. 490, 499
(1975) (“The Art. III judicial power exists only to redress
or otherwise to protect against injury to the complaining
party . . . .” (emphasis added)). But the parties injured by
the allegedly disparaging statements—Dr. Dong, her
research affiliates, and the producers of competing
thyroid drugs—were not part of the Synthroid plaintiff
classes.
Despite the Synthroid complaints’ failure to sketch a
common-law claim for libel, slander, or disparagement,
BASF argues that the umbrella insurers still had a duty
to defend it in the Synthroid litigation because the con-
sumer plaintiff class implicitly advanced a disparage-
ment claim by pleading that Boots violated the Illinois
Consumer Fraud and Deceptive Business Practices Act
(“CFA”), 815 ILCS 505/1, et seq. To advance this conten-
tion, BASF relies on the Illinois Supreme Court’s recent
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 15
decision, Valley Forge Insurance Co. v. Swiderski Electronics
Inc., which interpreted an insurance policy that defined
an advertising injury as: “Oral, written, televised or
videotaped publication of material that violates a person’s
right of privacy.” See 860 N.E.2d at 315. The underlying
complaint in Valley Forge did not assert a common-law
tort for violation of privacy; it only asserted a claim under
the federal Telephone Consumer Protection Act (“TCPA”),
47 U.S.C. § 227 (2000). See Valley Forge Ins., 860
N.E.2d at 315. Notwithstanding the plaintiffs’ failure to
assert a common-law privacy tort in the complaint, the
Illinois Supreme Court required the insurer to defend the
TCPA suit under the policy’s definition of advertising
injury because the statutory claim under the TCPA vindi-
cated the same injuries as a common law action for vio-
lation of privacy: “[t]he receipt of an unsolicited fax
advertisement implicates a person’s right of privacy inso-
far as it violates a person’s seclusion, and such a viola-
tion is one of the injuries that a TCPA fax-ad claim is
intended to vindicate.” Id. The Illinois Supreme Court
stated that though the complaint made “no mention of
the right of privacy,” it was “unproblematic, as a viola-
tion of privacy in the sense of a violation of seclusion is
implicit in a TCPA fax-ad claim.” Id. at 316.
BASF argues that similarly, coverage is warranted under
the umbrella-insurance policies at issue here because a
claim for disparagement is implicit in the Synthroid plain-
tiffs’ statutory claim under the CFA. But we do not believe
that this case is analogous to Valley Forge. The CFA seeks to
vindicate the rights of consumers by creating a cause of
action that protects consumers from deceptive trade
practices, fraud, and other abusive acts by businesses that
market products to the public. See, e.g., Pappas v. Pella Corp.,
16 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
844 N.E.2d 995, 1000 (Ill. App. Ct. 2006) (“ ’The Act was
intended to protect consumers against fraud, unfair
methods of competition, and unfair or deceptive acts or
practices in the conduct of trade or commerce.’ ” (quoting
Elson v. State Farm Fire & Cas. Co., 691 N.E.2d 807, 816 (Ill.
App. Ct. 1998))). In other words, the CFA allows con-
sumers to recover damages for the economic injuries
they suffer. It does not directly advance the interest an-
other business has in preserving the reputation of its
products that a disparagement action protects. Thus, the
CFA does not expand a common-law disparagement
plaintiff’s avenues for legal relief in the manner that the
TCPA bolsters the right to privacy. Instead, the CFA
fortifies the economic interests of consumers, who would
not have standing to pursue relief for the libel, slander,
or disparagement injury of a third party.
Nevertheless, BASF urges us to adopt the expansive
position of the district court—that the Synthroid complaints
did not need to assert every element of an offense delin-
eated by the umbrella-insurance policies in order to trig-
ger the umbrella insurers’ duty to defend, because the
language in the umbrella policies required the umbrella
insurers to cover claims that “may have had their origin
in” the offenses of libel, slander, or disparagement. How-
ever, following this approach would unmoor coverage
determinations from the factual allegations of the
complaint—something that Illinois law will not permit
us to do. See, e.g., Gen. Agents Ins. Co., 828 N.E.2d at 1098;
William J. Templeman Co. v. Liberty Mut. Ins. Co., 735 N.E.2d
669, 676 (Ill. App. Ct. 2000) (“[I]t must be demonstrated
that the facts alleged were sufficient to permit recovery for
the potentially covered cause of action in the same proceed-
ing. . . . ” (emphasis added)); see also Del Monte Fresh
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 17
Produce N.A. Inc. v. Transp. Ins. Co., 500 F.3d 640, 644
(7th Cir. 2007) (“In conducting this analysis [under Illi-
nois law], ‘it is the actual complaint, not some hypothetical
version, that must be considered.’ ” (quoting Conn. Indem.
Co., 328 F.3d at 350-51); Hurst-Rosche Eng’rs v. Commercial
Union Ins. Co., 51 F.3d 1336, 1342 (7th Cir. 1995) (“[The
court] must focus on the allegedly tortious conduct on
which the lawsuit is based.”).
Abandoning focus on the complaint would mean that
the breadth of insurance coverage “could be extended
indefinitely.” See Great Am. Ins. Co. v. Riso, Inc., 479 F.3d
158, 162 (1st Cir. 2007). The consumer and third-party
payor class complaints pursued only economic damages
for the injuries they suffered from the artificially high
prices for Synthroid, which stemmed from the monopoliza-
tion and fraudulent concealment of Boots and others—this
is a paradigmatic antitrust injury. See Serfecz v. Jewel Food
Stores, 67 F.3d 591, 597 (7th Cir. 1995); see also Brunswick
Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).
If we allow BASF to shoehorn these collateral claims
into the umbrella policies’ coverage of slander, libel, or
disparagement, then an insured could easily transform
a run-of-the-mill antitrust or securities action into a suit
seeking redress of libel, slander, or disparagement. As our
sister circuit has noted in a factually similar case: it
would not be far-fetched to “[i]magine a securities fraud
action in which the false boosting of the seller’s stock
involved (or implied) disparagement of a competing
stock that the buyer was considering.” Riso, 479 F.3d at
162. Reading an insurance policy’s coverage provisions as
expansively as BASF desires would be a precarious propo-
sition: it might sweep within the breadth of the policy risks
that the insurer did not and would not contract to
18 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
cover—risks that were not considered when setting the
premiums for the policy. See Nicor, Inc., 860 N.E.2d at 286.
This, in turn, would make insurance contracts less predict-
able and more costly for insurers, who would rationally
pass the additional cost onto their insureds, making
insurance more expensive for everyone.
Insurance is a creature of contract, and as such, Illinois
law is sensitive to the parties’ intentions. Valley Forge Ins.
Co., 860 N.E.2d at 314; Cent. Ill. Light Co., 821 N.E.2d at
213; Crum & Forster, 620 N.E.2d at 1078. It seems extremely
unlikely to us that the parties intended antitrust and
racketeering claims to be covered—or even potentially
covered—by a policy definition that sounds in libel,
slander, and disparagement. See Riso, 479 F.3d at 162.
BASF’s interpretation of the umbrella-insurance policies
could not have been reasonably contemplated by the
parties when they entered into these insurance con-
tracts. See Crum & Forster, 620 N.E.2d at 1079 (“In our
judgment, to construe these . . . policies to cover the claims
made in [the] complaint, as the insureds urge us to do,
would expand the coverage beyond what was con-
tracted for by the parties.”). While we recognize that
umbrella insurance is designed to act as a safety-valve
for deficiencies in primary insurance, that does not mean
that umbrella insurance necessarily covers every risk under
the sun. See Cincinnati Ins. Co., 260 F.3d at 744-45 (“The
discrepancy between the basic and umbrella coverage
may seem disquieting, since most individuals buy an
umbrella policy believing that it provides uniformly
larger limits; this umbrella has holes in it. But the purchas-
ers here are not individuals; they are companies that may
want greater coverage for some risks but not all.”). And it
is true here that certain risks—those not arising from
Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al. 19
personal injury or advertising injury—were not insured
under either the primary or umbrella policies. Boots
bargained for and paid for coverage (and BASF inherited
coverage) only for personal and advertising injuries
arising out of the offenses of slander, libel, or disparage-
ment; had it desired more expansive coverage, it
could have sought it. We therefore decline to adopt the
sweeping definition of “arising out of” that the district
court employed.
In concluding that the Synthroid complaints fell within
the coverage of the umbrella-insurance policies, the dis-
trict court relied almost exclusively on the decision
against the primary insurers in Knoll. See 152 F. Supp. 2d at
1031, 1039. Because it appears that the primary-insurance
policies and umbrella policies utilized the same defini-
tions of personal injury and advertising injury, we are not
certain that the Synthroid complaints alleged claims
within the scope of the primary policies either. But the
appeal of that case settled before we had the opportunity
to adjudicate its merits. Therefore, the district court’s
reliance on the Knoll decision was understandable, if
regrettable.
Because we hold that the umbrella insurers had no
duty to defend BASF from the Synthroid litigation, it
necessarily follows that the umbrella insurers also did
not have a duty to indemnify BASF for the settlement. See
Cent. Ill. Light Co., 821 N.E.2d at 216; Crum & Forster, 620
N.E.2d at 1081. The umbrella insurers were entitled to
judgment as a matter of law and summary judgment
should have been entered for the umbrella insurers on
BASF’s breach-of-contract claims. We, therefore, need not
reach the other issues that the umbrella insurers have
raised in this appeal.
20 Nos. 06-3938, 06-3962, 06-3978, 06-4156, et al.
III. CONCLUSION
We REVERSE the judgment of the district court and
REMAND this case for the entry of summary judgment in
favor of the defendants.
USCA-02-C-0072—4-14-08