State Farm need not contribute to college trustee’s defense costs

The 7th U.S. Circuit Court of Appeals ruled Monday that State Farm Fire and Casualty Co. is not required to pay another insurer a portion of the defense costs an Illinois community college trustee incurred during a wrongful termination lawsuit.

The appellate panel in Great American Insurance Co. v. State Farm Fire and Casualty Co. said a provision in Kathy Hamilton’s State Farm policy relieved the insurer from providing a defense if a loss was already being covered by another insurer.

DuPage County Community College District No. 502 was insured by the Illinois Community College Risk Management Consortium in 2015 when Robert Breuder, the college’s former president, sued the board of trustees and some of its members, including Ms. Hamilton. Mr. Breuder said in his federal lawsuit that he was harmed by defamatory statements by certain board members that implied he acted unprofessionally, court records show.

Ms. Hamilton informed State Farm of the lawsuit and it denied it was obligated to provide a defense, citing the provision regarding other insurance. The Consortium paid for the board member’s defense costs.

Mr. Breuder’s lawsuit later settled for $4 million, and the amount was paid by the Consortium, which later assigned its rights to American Financial Group unit Great American Insurance Co. 

Great American sued State Farm in federal court in Chicago, seeking contribution toward the Consortium’s payment of defense costs and accusing State Farm of breaching its defense obligations. The trial judge dismissed the suit, finding the other insurance provision applied.  

Representatives for the parties did not respond to requests for comment.