Starstone Insurance SE v. City of Chicago

In an insurance coverage case arising out of a civil rights lawsuit in which there was a significant jury verdict against the defendant, the Seventh Circuit considered both questions of coverage and of the federal court’s jurisdiction. With regard to jurisdiction, the Seventh Circuit considered whether it had subject-matter jurisdiction based on plaintiff’s assertion that the lawsuit involved citizens of a state and citizens of a foreign state. The appellate court noted that its resolution of the jurisdictional question hinged on whether the plaintiff was a “corporation.” The court ultimately concluded that the plaintiff was a corporation for the purposes of subject-matter jurisdiction because it met the essential elements of a corporation. The court then considered whether the plaintiff was obligated to pay the defendant’s legal fees in the underlying lawsuit. The district court had concluded that attorney fees were covered under the policy because it constituted an “ultimate net loss,” which was covered by the explicit language of the policy. The Seventh Circuit affirmed, explaining that while there was an absence of Illinois cases to provide guidance on this question, its independent reading of the language of the policy accorded with that of the district court. (KIRSCH and KOLAR, concurring)