The opinion
In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 25-1067, 25-1134, 25-1285, 25-1336
CONSOLIDATED CHASSIS MANAGEMENT LLC and CHICAGO-
OHIO VALLEY CONSOLIDATED CHASSIS POOL LLC,
Plaintiffs-Appellees/Cross-Appellants,
v.
NORTHLAND INSURANCE COMPANY,
Defendant-Appellant/Cross-Appellee.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:19-cv-05287 — Jeremy C. Daniel, Judge.
____________________
ARGUED FEBRUARY 24, 2026 — DECIDED AUGUST 5, 2026
____________________
Before BRENNAN, Chief Judge, and EASTERBROOK and
TAIBLESON, Circuit Judges.
TAIBLESON, Circuit Judge. This protracted insurance dis-
pute arises from a 2016 traffic accident in Will County, Illinois,
involving a car and a commercially owned and operated
semi-tractor. The car’s driver sued, and all the defendants to
that suit—the owner and driver of the semi-tractor and the
2 Nos. 25-1067, 25-1134, 25-1285, 25-1336
companies that controlled the chassis—were insured by
Northland Insurance Company. Northland retained separate
attorneys to represent its insureds. But the chassis companies
(Consolidated Chassis Management LLC and Chicago-Ohio
Valley Consolidated Chassis Pool LLC, which we refer to col-
lectively as “Consolidated”) did not want Northland’s chosen
counsel, and Consolidated instead retained and paid for in-
dependent counsel. Consolidated then sued Northland in fed-
eral court, seeking reimbursement from Northland for the
cost of that independent counsel as well as penalties under
§ 155 of the Illinois Insurance Code.
The district court entered judgment in favor of Consoli-
dated as to its declaratory relief and breach of contract claims,
concluding that under Illinois law, Consolidated was entitled
to its own choice of independent counsel at Northland’s ex-
pense. But the district court entered judgment in favor of
Northland as to the § 155 claim, finding that Northland did
not engage in vexatious and unreasonable conduct prohibited
by that statute.
We affirm in part and reverse in part. Illinois law creates a
narrow exception to the insurer’s right to control its insured’s
defense where there are serious, actual conflicts between the
interests of the insurer and insured. No such conflict arose
here, so Consolidated is not entitled to recover from North-
land for its expenditures on independent counsel. Because
Northland fulfilled its duty to defend, it neither breached its
contract with Consolidated nor violated § 155 of the Illinois
Insurance Code.
Nos. 25-1067, 25-1134, 25-1285, 25-1336 3
I. Background
This case arises out of a separate lawsuit, in which Ryan
Gilliam-Nault—who is not a party here—sued Consolidated,
a trucking company named Midvest Transport Corporation,
and a driver for Midvest named Bakari Lambert (the “Gilliam-
Nault suit”). In that lawsuit, Gilliam-Nault brought negli-
gence claims arising from injuries he suffered in a traffic acci-
dent involving his car and Midvest’s semi-tractor. At the time
of the accident, the semi-tractor, driven by Lambert, was pull-
ing an intermodal chassis that was part of a chassis pool es-
tablished and managed by Consolidated. 1
Northland had issued Midvest a commercial insurance
policy that also covered anyone “liable for the conduct of an
‘insured’” or the “owner or … anyone else from whom
[Midvest] hire[d] or borrow[ed]” a qualifying trailer, such as
a chassis. Northland was therefore the insurer for all defend-
ants to the Gilliam-Nault suit. The policy covered damages up
to a $1 million limit.
Under Illinois law, Northland had “a broad duty to defend
its insured[s]” in the Gilliam-Nault suit. Nat’l Cas. Co. v. Forge
Indus. Staffing Inc., 567 F.3d 871, 874 (7th Cir. 2009). Ordinar-
ily, that duty to defend carries with it the “right to control and
direct the defense.” Id. The policy at issue here memorialized
that principle, stating that the insured parties must “[a]ssume
1 An intermodal chassis is the wheeled under-frame that attaches to
the back of a semi-tractor, providing support for shipping containers in
transit. Chassis are interchangeable and commonly sourced through chas-
sis pools, which operate a centralized hub for intermodal carriers, such as
Midvest, to rent them. Midvest owned the semi-tractor and rented the
chassis from the pool established and managed by Consolidated.
4 Nos. 25-1067, 25-1134, 25-1285, 25-1336
no obligation, make no payment or incur no expense without
[Northland’s] consent, except at the ‘insured’s’ own cost,”
and must “[c]ooperate with [Northland] in the investigation
or settlement of the claim or defense against the ‘suit.’”
Consolidated retained the law firm Schuyler, Roche & Cri-
sham, P.C. (“SRC”) to represent it in the Gilliam-Nault suit. A
few weeks later, Northland sent Consolidated a letter stating
that Northland would defend Consolidated, subject to a res-
ervation of rights to disclaim coverage if Northland later de-
termined that Consolidated was not an insured under its pol-
icy. Northland also informed Consolidated that it had re-
tained an attorney at the law firm Litchfield Cavo to represent
Consolidated in the Gilliam-Nault suit. But Consolidated con-
tinued to work with SRC, which filed Consolidated’s answer
to Gilliam-Nault’s complaint and asserted crossclaims for
contribution against Midvest and Lambert. Those claims al-
leged, strictly in the alternative, that Midvest and Lambert
had been negligent in their operation of the semi-tractor.
In response to Northland’s letter, Consolidated asserted
that it was entitled to counsel of its choice (i.e., SRC) at North-
land’s expense. Under Illinois law, certain serious, actual con-
flicts of interest—which ones, specifically, we address further
below—require an insurer to “pay the costs of independent
counsel for the insured” rather than to “participat[e] in the
defense itself.” Murphy v. Urso, 88 Ill. 2d 444, 452 (1981); see
Emps. Ins. of Wausau v. Ehlco Liquidating Tr., 186 Ill. 2d 127, 156
(1999). Here, Consolidated pointed to two conflicts of interest:
one based on Northland’s reservation of rights, and another
based on Northland’s defense of both Consolidated and
Midvest/Lambert, whose interests in the Gilliam-Nault suit
were not fully aligned. The next day, Northland informed
Nos. 25-1067, 25-1134, 25-1285, 25-1336 5
Consolidated that it was withdrawing its reservation of rights,
thereby (according to Northland) eliminating any conflict of
interest that would entitle Consolidated to its own choice of
counsel.
SRC continued to represent Consolidated, although Litch-
field Cavo also appeared in the case on Consolidated’s behalf.
As discovery progressed, Consolidated asserted that another
conflict of interest existed because damages in the Gilliam-
Nault suit could exceed the $1 million policy limit. Northland
disagreed and refused to reimburse Consolidated for SRC’s
legal services.
While the Gilliam-Nault suit was pending, Consolidated
filed this action against Northland. Consolidated sought de-
claratory and compensatory relief for Northland’s alleged
breach of contract, and it also claimed that Northland’s vexa-
tious and unreasonable conduct entitled Consolidated to at-
torneys’ fees (arising from this action) and penalties under
§ 155 of the Illinois Insurance Code. The parties cross-moved
for judgment on the pleadings.
The district court at first granted Northland’s motion, con-
cluding that no conflict of interest existed that required
Northland to reimburse Consolidated for its chosen counsel.
But the court subsequently granted Consolidated’s motion for
reconsideration, concluding that such a conflict did in fact ex-
ist. Around the same time, the underlying Gilliam-Nault suit
settled, and Northland paid the entire settlement (which was
within policy limits) on behalf of its four insureds.
In this case, meanwhile, multiple motions for reconsider-
ation, cross-motions for summary judgment, and judicial re-
assignments followed. For our purposes, it suffices to
6 Nos. 25-1067, 25-1134, 25-1285, 25-1336
describe only the bottom line: Based on its prior ruling on re-
consideration that Consolidated was entitled to independent
counsel, the district court granted Consolidated’s motion for
summary judgment and entered judgment in its favor in the
stipulated sum of $115,000. But the district court found that
Northland did not engage in vexatious and unreasonable con-
duct prohibited under § 155, so it entered judgment in favor
of Northland as to that claim.
Northland appealed the district court’s judgment as to
Consolidated’s breach of contract and declaratory relief
claims. Consolidated cross-appealed as to its claim for attor-
neys’ fees and penalties under § 155 of the Illinois Insurance
Code.
II. Discussion
Although its procedural history is complex, this appeal
turns on one question of Illinois law: Did the conflicts among
Consolidated, Midvest, Lambert, and Northland in defending
the Gilliam-Nault suit entitle Consolidated to its choice of in-
dependent counsel at Northland’s expense? We review de
novo the district court’s assessment of that question in its or-
ders on the motions for judgment on the pleadings, motions
for summary judgment, and three-fold motions for reconsid-
eration. See Bannon v. Univ. of Chi., 503 F.3d 623, 627–28 (7th
Cir. 2007); ACLU of Ill. v. Alvarez, 679 F.3d 583, 589 (7th Cir.
2012).
We begin by reviewing the insurance policy in this case,
which is the contract that governs the relationship between
insurer and insured. All agree that the policy covered the
Gilliam-Nault accident and covered Consolidated specifically
as an “additional insured.” See Am. Fam. Ins. Grp. v. Cleveland,
Nos. 25-1067, 25-1134, 25-1285, 25-1336 7
356 Ill. App. 3d 945, 950 (2005). As a result, the policy obli-
gated Northland to “pay all sums an ‘insured’ legally must
pay as damages” in the Gilliam-Nault suit, up to the $1 million
limit. And the policy imposed a “right and duty [upon North-
land] to defend any ‘insured’ against a ‘suit’ asking for such
damages.” Significantly, the policy also stated that Consoli-
dated must “[a]ssume no obligation, make no payment or in-
cur no expense without [Northland’s] consent, except at the
‘insured’s’ own cost,” and must “[c]ooperate with [North-
land] in the investigation or settlement of the claim or defense
against the ‘suit.’”
Here, Consolidated retained its own counsel without
Northland’s consent and now seeks reimbursement for that
expense. While Consolidated does not dispute that the plain
language of the policy gave Northland the right to control
Consolidated’s defense, Consolidated contends that a conflict
of interest triggered an exception to that provision under Illi-
nois law. We exercise caution before departing from the clear
and unambiguous terms of a contract, and we will not do so
unless those terms are “clearly contrary” to Illinois law or
public policy. Am. Access Cas. Co. v. Reyes, 2013 IL 115601, ¶ 9
(2013) (“A contractual provision will not be invalidated on
public policy grounds unless it is clearly contrary to what the
constitution, the statutes, or the decisions of the courts have
declared to be the public policy or unless it is manifestly inju-
rious to the public welfare.”); see also Hartford Accident & In-
dem. Co. v. Lin, 97 F.4th 500, 512 (7th Cir. 2024) (applying Illi-
nois law) (“The clear and unambiguous terms of insurance
policies must be enforced as written.”). We look primarily to
decisions of the Supreme Court of Illinois to determine such
law or policy, although “a state appellate court’s decision can
provide controlling guidance as well.” Smith v. RecordQuest,
8 Nos. 25-1067, 25-1134, 25-1285, 25-1336
LLC, 989 F.3d 513, 517–18 (7th Cir. 2021). Absent a Supreme
Court of Illinois decision that squarely controls, we predict
how that Court would rule, and “we consult and follow the
decisions of intermediate appellate courts unless there is a
convincing reason to predict the state’s highest court would
disagree.” Id. at 517 (citation omitted).
Ultimately, we cannot agree with Consolidated that Illi-
nois law trumps the terms of the policy here. Illinois law rec-
ognizes a narrow exception to the insurer’s right to control its
insured’s defense where there exist serious, actual conflicts of
interest between the insurer and its insured. But no such con-
flict existed between Northland and Consolidated. Consoli-
dated argues that its adversity with Midvest and Lambert,
alone, can trigger the right to independent counsel, but Illi-
nois law does not support that proposition—especially not to
the degree of certainty required to discard the contract’s
terms. Even if the right to independent counsel in Illinois does
extend to conflicts solely based on adverse interests between
insured codefendants, it applies only where their interests are
diametrically opposed, which was not the case here.
A.
As noted above, an insurer’s duty to defend its insured in
a potentially covered lawsuit is “broad.” Outboard Marine
Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90, 127 (1992). And
“[a]long with an insurer’s obligation to defend its insured
comes its right to control and direct the defense.” Forge Indus.,
567 F.3d at 874. That right to control the defense enables an
insurer to “protect its financial interest in the litigation’s out-
come and minimize unwarranted liability claims.” Id. (quot-
ing Stoneridge Dev. Co. v. Essex Ins. Co., 382 Ill. App. 3d 731,
742 (2008)).
Nos. 25-1067, 25-1134, 25-1285, 25-1336 9
But there is “an exception to th[is] general rule”: An in-
surer has no duty to defend—and in fact “must decline to de-
fend”—where “there is a conflict of interest between it and the
insured.” Murphy, 88 Ill. 2d at 451. The conflict must be “seri-
ous,” Ehlco, 186 Ill. 2d at 156, and “actual, not merely poten-
tial,” Forge Indus., 567 F.3d at 874 (citing Murphy, 88 Ill. 2d at
453–54). In such cases, the insured, rather than the insurer, has
“the right to control the conduct of the case.” Md. Cas. Co. v.
Peppers, 64 Ill. 2d 187, 199 (1976). And “[i]nstead of participat-
ing in the defense itself, the insurer must pay the costs of in-
dependent counsel for the insured.” Murphy, 88 Ill. 2d at 452;
see also Peppers, 64 Ill. 2d at 199.
Such a conflict of interest can arise when the insurer’s own
“interests would be furthered by providing a less than vigor-
ous defense” to its insured in the underlying suit. Forge Indus.,
567 F.3d at 875 (quoting Ill. Masonic Med. Ctr. v. Turegum Ins.
Co., 168 Ill. App. 3d 158, 163 (1988)). That typically occurs
where, “after comparing the complaint against the insured to
the insurance policy, ‘it appears that factual issues will be re-
solved in the underlying suit that would allow insurer-re-
tained counsel to “lay the groundwork” for a later denial of
coverage.’” Id. (quoting Am. Fam. Mut. Ins. Co. v. W.H.
McNaughton Builders, Inc., 363 Ill. App. 3d 505, 511 (2006)). Im-
agine, for example, that the “underlying complaint contains
two mutually exclusive theories of liability, one which the
policy covers and one which the policy excludes”—like neg-
ligence (covered) and intentional conduct (excluded). Id. In
this circumstance, the insurer might be happy for a jury to
find that its insured had acted intentionally, leaving the in-
sured liable but the insurer off the hook. That type of scenario
creates a very real conflict between the interests of the insurer
10 Nos. 25-1067, 25-1134, 25-1285, 25-1336
and insured in defending the underlying case. See Peppers, 64
Ill. 2d at 198.
The Supreme Court of Illinois’s decision in Murphy v. Urso
illustrates the type of conflict that warrants an exception to
the insurer’s duty to defend. In that case, Joyce Murphy was
injured when she was a passenger in a van that crashed. 88 Ill.
2d at 448. Murphy sued the driver of the van, as well as the
van’s owners (a school and its operator). Id. Although all de-
fendants were at least putatively insured by Travelers Insur-
ance Company, the insurance policy covered the driver only
if he “had permission to use the van.” Id. at 453. And whether
the driver had permission “was the principal contested issue”
in Murphy’s suit. Id. If the driver lacked permission, then the
school would be off the hook, as would Travelers—but the
driver would remain liable. Id. In these circumstances, Mur-
phy held, the “permission issue presented a fundamental con-
flict between the insurer and the putative insured,” such that
Travelers was “not obligated or permitted to participate in the
[driver’s] defense.” Id. at 454.
That aspect of Murphy—the significance of a conflict be-
tween an insurer and its insured—is undisputed here. But
other language in Murphy is at the heart of the parties’ disa-
greement in this case. In addition to the “fundamental prob-
lem” of an insurer-insured conflict, the Murphy court also ob-
served that the interests of the insureds themselves (the
school and driver) were “diametrically opposed” in the un-
derlying suit. Id. at 453. The school’s best defense would re-
quire showing that the driver lacked permission to use the
van. Id. The driver, by contrast, “had to try to show that he
did have permission,” which “would spread the liability” to
the school. Id.
Nos. 25-1067, 25-1134, 25-1285, 25-1336 11
Both Consolidated and the district court interpret this pas-
sage in Murphy as extending the conflict-of-interest exception
to reach conflicts between insured codefendants, regardless of
whether any real conflict exists between the interests of the
insurer and insured. Northland disagrees, and so do we. The
language in Murphy that reads like a holding—rather than a
description of the case—focuses on the conflict between the
interests of the insurer and insured. See, e.g., id. at 451 (stating
that “this case turns on” the “exception” that an “insurer must
decline to defend where there is a conflict of interest between
it and the insured”); id. at 453 (after describing diametric op-
position between school and driver, turning to the “even more
fundamental problem” of “the conflict between [the insurer’s]
own interests and [the driver’s]”).
Murphy also relied on the Supreme Court of Illinois’s de-
cisions in Peppers, 64 Ill. 2d 187, and Thornton v. Paul, 74 Ill. 2d
132 (1978), both of which similarly described the exception as
arising from conflicts between interests of the insurer and the
insured. See, e.g., Murphy, 88 Ill. 2d at 458 (summarizing con-
clusion: “For the reasons stated, this case falls within the ex-
ception enunciated in Thornton. Conflicts of interest with the
putative insured relieve the insurer from his defense.”). And
on the same day Murphy was issued, the Supreme Court of
Illinois also decided Clemmons v. Travelers Insurance Co., which
discussed Murphy and framed the exception in the same way.
88 Ill. 2d 469, 478 (1981) (the “limited exception” applies
where “there is a conflict of interest between the insurer and
the putative insured”). In distinguishing Murphy, Clemmons
highlighted the coverage dispute—regarding permission to
drive the van—that was at the root of the conflict between the
Murphy insurer and insured (the driver). Id. at 478 (noting that
in Murphy, the insurer’s “loyalty” was “torn” “when
12 Nos. 25-1067, 25-1134, 25-1285, 25-1336
permission [wa]s at issue” in the underlying suit); see also id.
at 479 (no conflict where the insurer “could not manipulate
the proceedings in the [underlying] suit to lay the ground-
work” to later deny coverage to insured).
Other Illinois cases similarly recognize an exception to the
duty to defend when issues determining policy coverage are
contested in the underlying suit, producing a direct conflict
between the interests of the insurer and insured in defending
that suit. See, e.g., Xtreme Prot. Servs., LLC v. Steadfast Ins. Co.,
2019 IL App (1st) 181501, ¶ 24 (insurer disclaimed liability for
punitive damages); W.H. McNaughton Builders, Inc., 363 Ill.
App. 3d at 510–15 (incidents at issue may have occurred be-
fore policy took effect); Ill. Masonic Med. Ctr. v. Turegum Ins.
Co., 168 Ill. App. 3d at 167–68 (incidents at issue may have oc-
curred after policy coverage lapsed); Peppers, 64 Ill. 2d at 197–
99 (policy covered negligent but not intentional conduct).
These cases all emphasize one common feature: an actual
conflict, based on the allegations in the underlying complaint,
between the interests of the insurer and its insured. Consoli-
dated identifies no Illinois case, nor have we found one, that
finds an exception to the duty to defend based on adverse in-
terests between insureds alone, without any concurrent con-
flict directly between the insurer and the insured. We do not
see that as a mere coincidence.
To be fair, some Illinois appellate court decisions, follow-
ing Murphy, have emphasized “diametrically opposed” inter-
ests between insured codefendants in finding a conflict that
triggers the independent-counsel exception. See Williams v.
Am. Country Ins. Co., 359 Ill. App. 3d 128, 138 (2005); County
Mut. Ins. Co. v. Olsak, 391 Ill. App. 3d 295, 304 (2009). But—
like Murphy—each of those cases also involved a conflict
Nos. 25-1067, 25-1134, 25-1285, 25-1336 13
directly between the interests of the insurer and insured,
where the insurer had an incentive to favor one insured party
in diametric opposition to the other. Williams, 359 Ill. App. 3d
at 138–39 (policy coverage turned on whether insured party
was acting as agent of coinsured, which was the same issue as
to which insureds were diametrically opposed); Olsak, 391 Ill.
App. 3d at 299, 304 (policy excluded intentional conduct,
which was the same issue as to which insureds were diamet-
rically opposed). As in Murphy, we understand the “diametric
opposition” in those cases to have underscored, and exacer-
bated, the conflicts that the insurers faced directly with their
insureds. See Clemmons, 88 Ill. 2d at 478. The conflict between
the insureds thus did not stand alone.
We have found (and the parties have cited) only one Illi-
nois case considering a conflict between two insureds where
the insurer itself lacked a dog in the fight, and that case sup-
ports our conclusion. See Findlay v. Chi. Title Ins. Co., 2022 IL
App (1st) 210889, appeal denied, 460 Ill. Dec. 568 (2023). In
Findlay, the court concluded that an insured was not entitled
to its choice of counsel where, in the underlying suit, it was
directly adverse to another party covered by the same insurer.
Id. ¶¶ 48–52. As in this case, the insurer had appointed sepa-
rate counsel to represent each of its insureds. Id. ¶ 51. But be-
cause the insurer “had no incentive to favor one insured over
another,” there was no conflict between the interests of the
insurer and insured, and the insured was not entitled to
choose their own counsel at the insurer’s expense. Id. ¶ 52.
For these reasons, we interpret Illinois law as requiring an
actual, serious conflict between the interests of an insurer and
an insured to trigger the right to independent counsel. Dia-
metric opposition between insureds may be part of that
14 Nos. 25-1067, 25-1134, 25-1285, 25-1336
calculus, underscoring the severity of an insurer-insured con-
flict, but adversity between insured codefendants alone does
not trigger this “narrow” exception. See Ehlco, 186 Ill. 2d at
156.
B.
No actual, serious conflict between Northland and Con-
solidated existed here. Gilliam-Nault’s complaint exclusively
alleged claims of negligence against Consolidated, Midvest,
and Lambert. And Northland’s policy covered damages, up
to the $1 million policy limit, arising from an accident involv-
ing its insured. There were no concerns about intentional con-
duct, see Peppers, 64 Ill. 2d at 197–98, or agency or permission,
see Murphy, 88 Ill. 2d at 453–54, that may have brought Con-
solidated outside the scope of Northland’s policy. Indeed,
Northland expressly withdrew any reservation of its rights to
deny coverage in undertaking Consolidated’s defense. See
Peppers, 64 Ill. 2d at 198 (if an insurer “waives its defense of
noncoverage” and “defends without asserting a reservation
of rights … the conflict of interests will be removed”); Doe v.
Ill. State Med. Inter-Ins. Exch., 234 Ill. App. 3d 129, 134–35
(1992) (“Assumption and control of the insured’s defense, ab-
sent a reservation of rights, estops the insurer from question-
ing policy coverage.”) (citing Gibraltar Ins. Co. v. Varkalis, 46
Ill. 2d 481 (1970)).
It is true that, for about a ten-week period after SRC ten-
dered Gilliam-Nault’s complaint to Northland, Northland re-
served its rights to confirm whether Consolidated was an “ad-
ditional insured” under the policy—a common practice in this
industry. But Northland immediately withdrew that reserva-
tion after SRC asserted that it created a conflict between
Northland and Consolidated. That temporary reservation did
Nos. 25-1067, 25-1134, 25-1285, 25-1336 15
not give rise to an actual, serious conflict in defending the
Gilliam-Nault suit. We can find no Illinois case holding that
every reservation of rights, even a temporary one, automati-
cally results in a conflict of interest. Instead, the ultimate ques-
tion is whether, given the nature of the underlying suit, the
reservation could be leveraged to later disclaim coverage or
otherwise further the interest of an insurer at the expense of
its insured’s defense. Cf. Shelter Mut. Ins. Co. v. Bailey, 160 Ill.
App. 3d 146, 155 (1987) (“A conflict cannot be inferred merely
because an insurance company is asserting noncoverage in a
separate suit. The test is whether or not there are conflicting
interests based upon the allegations found in the com-
plaint.”). There is no such indication here. Because there was
no risk that Northland would “manipulate the proceedings”
in the Gilliam-Nault suit to “lay the groundwork” to later dis-
claim coverage, no conflict arose between Northland and
Consolidated. See Clemmons, 88 Ill. 2d at 479.
In lieu of a real conflict with its insurer, Consolidated em-
phasizes its adversity with Midvest and Lambert, against
whom it filed crossclaims in the Gilliam-Nault suit. As dis-
cussed above, the tension between Consolidated and its code-
fendants, alone, does not trigger Consolidated’s right to coun-
sel of its own choosing. Unlike Murphy or the other Illinois
cases discussing conflicts between insured parties, Northland
had no stake in the dispute between its insureds here. North-
land’s policy coverage was unaffected by the conditional
crossclaims; it was on the hook no matter how they were re-
solved. This case therefore lacks the insurer-insured con-
flict that has triggered the right to independent counsel in Il-
linois case law. In the absence of clear Illinois law telling us
otherwise, then, we must hold the parties to their contract,
16 Nos. 25-1067, 25-1134, 25-1285, 25-1336
which granted Northland the right to control its insureds’ de-
fense.
C.
Even if we were to read Murphy as recognizing a
standalone conflict based on adverse interests between coin-
sureds, it would establish that the right to independent coun-
sel is triggered only where those interests are “diametrically
opposed.” Murphy, 88 Ill. 2d at 453. That standard is not met
here, either.
Murphy did not expressly define diametric opposition, but
the facts of Murphy provide a helpful guidepost. In the under-
lying Murphy suit, the driver’s negligence “could not be real-
istically contested,” and the “principal contested issue” was
therefore his “permission to use the van.” Id. at 451–53. The
codefendants were “diametrically opposed” as to that princi-
pal issue, as their “best defen[ses]” were mutually exclusive
with each other. Id. at 453. Consolidated cites Williams v.
American Country Insurance, as another example. But that case
similarly involved insured codefendants whose “best” strat-
egy was to blame each other. 359 Ill. App. 3d at 139.
The conflict between the insureds’ interests in this case is
different in kind than the ones at issue in Murphy or Williams.
Here, the allegations in the complaint and in the insureds’ an-
swers and crossclaims demonstrate that the best strategy was
for Consolidated, Midvest, and Lambert to each deny their
own negligence and argue Gilliam-Nault’s comparative neg-
ligence. It is true that Consolidated filed crossclaims against
Midvest and Lambert under the Joint Tortfeasor Contribution
Act, 740 ILCS 100/1, et seq., which allows a joint tortfeasor to
recover from another if they are found liable to the plaintiff
Nos. 25-1067, 25-1134, 25-1285, 25-1336 17
and pay more than their pro rata share of liability. See id. Such
crossclaims are routine and, in Illinois, waived if not filed in
the underlying litigation. See Laue v. Leifheit, 105 Ill. 2d 191,
196 (1984). But nothing in the pleadings indicates, nor does
Consolidated argue, that its best or primary defense was to
blame Midvest and Lambert for the accident. And even if
Consolidated’s best defense had been to argue Midvest’s and
Lambert’s negligence, there is no indication that Midvest’s
and Lambert’s best defense was to argue Consolidated’s neg-
ligence. The Gilliam-Nault codefendants were not, as a result,
“diametrically opposed,” as the Supreme Court of Illinois has
used that phrase. See Murphy, 88 Ill. 2d at 453.
Consolidated also argues that its interests were diametri-
cally opposed to Midvest and Lambert given the risk of a ver-
dict in excess of Northland’s $1 million policy limit, citing dis-
covery that revealed expensive medical bills and Gilliam-
Nault’s settlement demand of $2.5 million. Given that risk,
Consolidated argues, it had an interest in shifting as much
blame as possible to Midvest or Lambert to avoid being sad-
dled with an excess judgment. Consolidated relies on this
court’s decision in R.C. Wegman Construction Co. v. Admiral In-
surance Co., 629 F.3d 724 (7th Cir. 2011), for the proposition
that a conflict of interest arises from a “nontrivial probability”
of an excess judgment in an underlying suit. See id. at 730.
But Consolidated misreads Wegman. That case concerned
an insurer who had “gambl[ed]” with its insured’s case by go-
ing to trial on a claim that it knew likely and significantly ex-
ceeded the policy limit without informing its insured of that
strategy or attempting to settle the case for a covered amount.
Id. at 728–29; see also R.C. Wegman Constr. Co. v. Admiral Ins.
Co., 634 F.3d 371, 372 (7th Cir. 2011) (mem.) (clarifying
18 Nos. 25-1067, 25-1134, 25-1285, 25-1336
opinion on denial of rehearing). No evidence remotely of that
nature exists here. To the contrary, Northland settled this case
within policy limits and footed the bill for all its insureds be-
fore any trial. Nor does the risk of an excess judgment gener-
ally give rise to diametrically opposed defense strategies be-
tween insureds, or to a serious and actual conflict with the in-
surer. See Joseph T. Ryerson & Son v. Travelers Indem. Co., 2020
IL App (1st) 182491, ¶ 57 (expressly rejecting “proposition
that ‘a conflict exists when there is “a nontrivial probability”
of an excess judgment in the underlying suit,’ thereby enti-
tling an insured to retain independent defense counsel at the
insurer’s expense”). If it did, then Illinois’s “narrow” excep-
tion to the duty to defend would risk swallowing the rule, as
many cases pose some risk of recovery in excess of policy lim-
its. Ehlco, 186 Ill. 2d at 156; see Murphy, 88 Ill. 2d at 458 (em-
phasizing that the “exception is not meant to swallow the gen-
eral rule requiring the insurer to provide its insured with a
defense”); Ryerson, 2020 IL App (1st) 182491, ¶ 57 (“[M]any
cases involve a ‘nontrivial probability’ of a judgment in excess
of the applicable policy limits that the insured could be per-
sonally responsible to pay.”).
It is true that Consolidated’s interests in the Gilliam-Nault
suit were in some tension with Midvest’s and Lambert’s.
Northland handled that situation by appointing separate
counsel for Consolidated and for Midvest and Lambert—
counsel that were independent of each other, if not of North-
land. The Illinois Rules of Professional Conduct likely re-
quired as much. See Ill. R. Prof’l Conduct R. 1.7 (2010) (pro-
hibiting an attorney from representing two clients with ad-
verse interests unless certain conditions met); cf. Findlay, 2022
IL App (1st) 210889, ¶¶ 51–52 (finding insurer’s appointment
of separate and independent counsel for its insureds
Nos. 25-1067, 25-1134, 25-1285, 25-1336 19
eliminated conflict of interest). While Consolidated preferred
counsel of its own choosing, Illinois law did not require that
result—at the very least, not clearly enough to supersede the
parties’ contract and establish an exception to the broad duty
to defend.
The district court therefore erred in granting judgment in
favor of Consolidated on its claims for declaratory relief and
breach of contract, and we reverse as to those claims.
D.
Finally, we turn to Consolidated’s cross-appeal of the dis-
trict court’s judgment in favor of Northland on the claim for
attorneys’ fees and penalties under § 155 of the Illinois Insur-
ance Code.
Section 155 permits a court to award attorneys’ fees, costs,
and statutory damages if an insurer “unreasonabl[y] delay[s]
in settling a claim, and it appears to the court that such … de-
lay is vexatious and unreasonable.” 215 ILL. COMP. STAT.
5/155(1). Section 155 “provides a remedy in a specified type of
‘action’ (case); it does not create a cause of action; it presup-
poses rather than authorizes a suit.” Hennessy Indus., Inc. v.
Nat'l Union Fire Ins. Co. of Pittsburgh, 770 F.3d 676, 679 (7th Cir.
2014). In other words, where there is no underlying legal
wrong by the insurer, there is no violation of § 155. See Wolf v.
Riverport Ins. Co., 132 F.4th 515, 519–20 (7th Cir. 2025).
Northland did not breach its duty to defend or its contract
with Consolidated. As a result, Consolidated’s § 155 claim
necessarily fails, and the district court’s judgment as to that
claim is affirmed.
***
20 Nos. 25-1067, 25-1134, 25-1285, 25-1336
The district court’s judgment is REVERSED in part and
AFFIRMED in part.
Nos. 25-1067, 25-1134, 25-1285, 25-1336 21
BRENNAN, Chief Judge, concurring in the judgment. My
reading of Illinois insurance law differs somewhat from my
colleagues. To me, Murphy v. Urso, 88 Ill. 2d 444, 452–53
(1981), and subsequent caselaw recognize more than one cir-
cumstance in which a conflict of interest entitles the insured
to independent counsel of its own choosing at the insurer’s
expense. One of these is when the interests of multiple in-
sureds are “diametrically opposed.” Id.; see Illinois Mun.
League Risk Mgt. v. Seibert, 223 Ill. App. 3d 864, 872–73 (1992);
Williams v. Am. Country Ins. Co., 359 Ill. App. 3d 128, 138–39
(2005); Joseph T. Ryerson & Son, Inc. v. Travelers Indem. Co. of
Am., 2020 IL App (1st) 182491, ¶ 54.
Illinois courts recognize this kind of conflict because it is
impossible for an insurer to provide a “full and vigorous de-
fense” to each of the represented parties. Murphy, 88 Ill. 2d at
453. That rationale can apply even when other conflict-creat-
ing circumstances are not present. And Findlay v. Chi. Title Ins.
Co., 2022 IL App (1st) 210889, does not persuade me other-
wise. Title insurance policies, unlike general liability policies,
do not entitle their insureds to a full and vigorous defense. Id.
at ¶¶ 53–64.
Still, I concur in the judgment because the interests of the
insureds in this case though adverse are not necessarily “dia-
metrically opposed.” On the question of whether Midvest and
Lambert were negligent, Consolidated’s interests are cer-
tainly opposed to their interests. Consolidated submits that
Midvest and Lambert are wholly or primarily liable; they con-
tend they are not. But Midvest and Lambert do not try to shift
the blame back onto their co-insured, Consolidated. They did
not file a crossclaim against Consolidated, nor do their other
pleadings contain any such argument. So, even if
22 Nos. 25-1067, 25-1134, 25-1285, 25-1336
Consolidated’s best defense was to blame its co-insureds, I
agree with the majority’s conclusion. Unlike in Murphy and
Williams, the best defenses of the co-insureds here were not
diametrically opposed. Absent a conflict of interest, Consoli-
dated was not entitled to independent counsel at Northland’s
expense.