Liberty Mutual Fire Insurance Company , a Massachusetts mutual insurance company,… v. Statewide Insurance Company , an Illinois stock insurance company

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-2003
L IBERTY M UTUAL F IRE I NSURANCE C OMPANY ,
a Massachusetts mutual insurance company,
individually and as subrogee of Principle
Construction Corp. and Arlington Structural
Steel Co., Inc.,
Plaintiff-Appellant,
v.
S TATEWIDE I NSURANCE C OMPANY , an Illinois
stock insurance company, and P ATRICK C. B OND ,
a disabled person, by and through his father and
guardian, Patrick S. Bond,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 02 C 2471—Charles P. Kocoras, Chief Judge.
____________
A RGUED N OVEMBER 3, 2003—D ECIDED D ECEMBER 10, 2003
____________
Before P OSNER , D IANE P. W OOD , and E VANS , Circuit
Judges.
E VANS , Circuit Judge. Liberty Mutual Fire Insurance
Company filed this action pursuant to the district court’s
diversity jurisdiction, 28 U.S.C. § 1332, seeking a declara-

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2 No. 03-2003
tory judgment that Statewide Insurance Company is obli-
gated to defend and indemnify two companies Liberty
defended in a personal injury lawsuit. The district court
considered cross-motions for summary judgment and
granted judgment for Statewide. Liberty appeals.
Liberty’s insured, Principle Construction Corporation,
entered into a contract to be the general contractor for
the construction of a commercial building in Waukegan,
Illinois. Principle entered into a subcontract with Arlington
Structural Steel Co., Inc. requiring Arlington to furnish and
erect structural steel for the project. Under the contract,
Arlington was required to name Principle as an additional
insured under Arlington’s commercial general liability
policy. Arlington, in turn, entered into a sub-subcontract
with Bond Enterprises. The contract required Bond to name
Principle and Arlington additional insureds under Bond’s
commercial general liability policy. Bond paid a $35
additional premium for the additional-insured coverage
from its insurer, Statewide.
Patrick C. Bond, an employee of Bond, was injured while
working on the project, and he filed a personal injury
lawsuit against Arlington and Principle in the circuit court
of Cook County, Illinois. Liberty Mutual is defending
Principle and Arlington in the lawsuit. At the same time,
Liberty Mutual contends that Statewide is obligated to
defend Principle and Arlington under the additional-in-
sured endorsement in Bond’s policy. Statewide has refused
to defend either company.
In its refusal to defend the companies, Statewide relies on
limitations to the coverage provided in its policy to ad-
ditional insureds. Those limitations are:
1. The coverage afforded to the Additional Insured
under this endorsement is solely limited to liability
specifically resulting from the conduct of the

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No. 03-2003 3
Named Insured which may be imputed to the
Additional Insured by virtue of the conduct of the
Named Insured.
2. This endorsement provides no coverage to the
Additional Insured for liability arising out of the
claimed negligence of the Additional Insured, other
than which is imputed to the Additional Insured by
virtue of the conduct of the Named Insured.
Liberty contends that the limitations are so broad that
Statewide’s additional-insured endorsement furnishes no
tangible coverage that could ever apply in this situation;
therefore the coverage is illusory, and illusory coverage is
against the public policy of Illinois.
As Liberty sees it, the only conceivable coverage for ad-
ditional insureds under the Statewide policy is for claims in
strict liability, and Liberty can imagine no circumstance on
this construction job where strict liability would apply.
Under Illinois law, there are only two types of strict liability
claims: for dangerous products and for ultrahazardous
activity such as blasting or demolition. In its application for
insurance from Statewide, Bond answered detailed ques-
tions about the nature of its business operations. Liberty
argues that the answers revealed that Bond did not engage
in any activity which could possibly give rise to strict
liability. The question posed to us, then, is whether the
additional-insured endorsement in the Statewide policy
provides illusory coverage and as a result Statewide must
defend and indemnify Arlington and Principle. Liberty
would have us answer in its favor or certify the question to
the Illinois Supreme Court pursuant to our Rule 52 and the
Illinois Supreme Court Rule 20.
This question is not appropriate for certification to the
Illinois Supreme Court. In order for a question to be certi-
fied, certain criteria must be met:

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4 No. 03-2003
[C]ertification is appropriate when the case concerns a
matter of vital public concern, where the issue will
likely recur in other cases, where resolution of the
question to be certified is outcome determinative of the
case, and where the state supreme court has yet to have
an opportunity to illuminate a clear path on the issue.
State Farm Mut. Auto. Ins. Co. v. Pate, 275 F.3d 666, 672
(7th Cir. 2001).
The Illinois Supreme Court has not spoken on the issue
presented in this case. But that may be so because Illinois
appellate courts have spoken, and they are not in conflict.
On this record, we see no reason why we should ask the
Illinois Supreme Court to enter the fray.
Because this is a diversity case, we apply the law of
Illinois as we believe the Illinois Supreme Court would
apply it. As we said, although the highest court in Illinois
has not spoken on the issue before us, Illinois appellate
courts have. In that circumstance, we must estimate how
the state supreme court would rule. Commonwealth Ins. Co.
v. Stone Container Corp., 323 F.3d 507 (7th Cir. 2003);
Brunswick Leasing Corp. v. Wis. Cent., Ltd., 136 F.3d 521
(7th Cir. 1998). And the rulings of state appellate courts
“must be accorded great weight, unless there are persuasive
indications that the state’s highest court would decide the
case differently.” Pate, 275 F.3d at 669; see also Lexington
Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087 (7th Cir.
1999).
In American Country Insurance Co. v. Kraemer Brothers,
Inc., 699 N.E.2d 1056 (Ill. App. 1998), the dispute was be-
tween Kraemer, a general contractor, and a masonry
subcontractor for construction work that was not ultra-
hazardous. The limitations clause in the insurance policy
was similar to the one here: there was “no coverage to the
Additional Insured for liability arising out of the claimed
negligence of the Additional Insured, other than which may

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No. 03-2003 5
be imputed to the Additional Insured by virtue of the
conduct of the Named Insured.” The court considered the
argument Liberty makes—that the “coverage was illusory
because it is difficult to imagine any factual scenario
wherein Kraemer could be held vicariously liable for a sub-
contractor’s acts or omissions at the jobsite.” The court
found that there was coverage for claims based in strict
liability and, accordingly, the coverage was not illusory:
“Just because there are fewer strict liability claims than
negligence claims does not make the coverage illusory.
There is real coverage for strict liability claims.”
American Country Insurance Co. v. Cline, 722 N.E.2d 755
(Ill. App. 1999), also involved a clause in a subcontractor’s
comprehensive general liability policy limiting liability for
additional insureds in the same manner as the one before
us. The court rejected a claim that the endorsement was
illusory. Because the additional-insured endorsements were
obtained for a small premium payment, it made sense to the
court that the coverage would be limited. In addition, the
policy had been submitted to the Illinois Department of
Insurance, which had not rejected it. The court said that the
department’s silence (in not rejecting the policy) was
“entitled to great weight.” At 762.
Liberty attempts to convince us that there are persuasive
indications that the Illinois Supreme Court would decide
these cases differently from the appellate courts. Why?
Because Liberty thinks the reasoning of the appellate
courts is flawed. We are not persuaded. Flawed reasoning
is often in the eye of the beholder. Slightly more persuasive
is the dissent in National Union Fire Insurance Co. of
Pittsburgh, Pa. v. Glenview Park District, 632 N.E.2d 1039
(Ill. 1994). Skirting the issue, the Illinois Supreme Court
found it unnecessary to decide whether a similar additional-
insured clause was unenforceable. Two of the justices then
on the court thought that, particularly on the facts of the

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6 No. 03-2003
case, the clause violated public policy. What we learn from
the case is that there may be dissension on the court on the
issue before us, but not necessarily that the dissenting
position will prevail. Liberty has pointed to no authority in
Illinois law which supports its position, nor has it convinced
us that there are indications that the tide is turning in its
favor.
On the other hand, there are reasons for us to follow the
result reached by the Illinois appellate courts. First is the
strong public policy favoring freedom of contract. Braye v.
Archer-Daniels-Midland Co., 676 N.E.2d 1295 (Ill. 1997).
The contracting parties in this case were companies, not
hapless individuals. The contracts required Bond to name
Principle and Arlington as additional insureds and gave
Arlington the right to review the insurance policy. Also,
Bond provided Arlington with a certificate of insurance
which explicitly put Arlington on notice that it should
review the policy. There is no evidence that Arlington
objected to Bond’s policy. In fact, Arlington did not sue
Statewide or Bond; Liberty did. Then there is the matter of
the premium. Bond paid $35 for the coverage for additional
insureds. Apparently, a company gets what it pays for. And
that’s what it got here—very limited coverage for additional
insureds.
The judgment of the district court is A FFIRMED .
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-10-03

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