                              In the

    United States Court of Appeals
                For the Seventh Circuit
                    ____________________

No. 17-2712
SHANNON HYLAND,
                                                 Plaintiff-Appellee,
                                v.

LIBERTY MUTUAL FIRE INSURANCE COMPANY,
                                    Defendant-Appellant.
                    ____________________

            Appeal from the United States District Court
                  for the Central District of Illinois.
     No. 1:15-cv-01264-JES-JEH — James E. Shadid, Chief Judge.
                    ____________________

   ARGUED FEBRUARY 22, 2018 — DECIDED MARCH 15, 2018
                ____________________

   Before BAUER, EASTERBROOK, and ROVNER, Circuit Judges.
   EASTERBROOK, Circuit Judge. Monteil Hyland was a pas-
senger in a car owned by Kimberly Perkins and driven by
Miquasha Smith—who, at age 16, was not lawfully behind
the wheel when she smashed the car at 12:46 a.m. one Satur-
day into two parked vehicles, seriously injuring Hyland.
Smith has been convicted of aggravated reckless driving.
Neither Smith nor her parents had auto insurance. But Per-
kins had a policy of insurance with Liberty Mutual. It cov-
2                                                         No. 17-2712

ered her family, including her daughter Michiah Risby, plus
anyone else driving the car with the family’s permission.
Smith told Liberty Mutual that Risby gave her the car’s keys
during a party; Risby denied doing that and said that she
had given the keys to “Rob,” who was never identified.
     The police reported that Smith had told many incompat-
ible stories about the events. Liberty Mutual believed its in-
sured, Risby, and when Shannon Hyland (Monteil’s mother,
acting as his next friend) sued Smith it told Shannon’s law-
yer that it would not provide a defense or indemnity. (From
now on, all references to “Hyland” are to Shannon Hyland,
the plaintiff in both the state and federal suits.) Eventually
Smith defaulted, and a state court entered a judgment for
about $4.6 million. Smith assigned to Hyland whatever claim
she had against Liberty Mutual. In this suit under the diver-
sity jurisdiction, the district court concluded that Liberty
Mutual’s failure either to defend Smith or to seek a declara-
tory judgment of non-coverage violated Illinois law, making
it liable for the entire tort judgment, even though the policy
provided only $25,000 per person in coverage. 2017 U.S.
Dist. LEXIS 124374 (C.D. Ill. Aug. 7, 2017). Liberty Mutual
now concedes that it should have defended Smith while re-
serving a right to decline indemnity, but it contends that its
liability cannot exceed the policy’s cap.
   Appellate jurisdiction is the first problem we must ad-
dress. The district court entered this judgment:
    IT IS ORDERED AND ADJUDGED that the Plaintiff, Shannon
    Hyland’s, Motion for Summary Judgment [19] is GRANTED in
    full. The Defendant, Liberty Mutual Fire Insurance Co.’s, Motion
    for Partial Summary Judgment on Damages [20] is DENIED.
    Judgment is entered in favor of the Plaintiff and against the De-
    fendant. Case closed.
No. 17-2712                                                   3

A judgment providing that “[j]udgment is entered” is circu-
lar. Judgments under Fed. R. Civ. P. 58 must provide the re-
lief to which the prevailing party is entitled. See, e.g., Cooke
v. Jackson National Life Insurance Co., 882 F.3d 630 (7th Cir.
2018) (collecting authority). This document does not do so.
Judgments must not recite the pleadings and other papers
that led to the decision. See Fed. R. Civ. P. 54(a). So this
judgment omits what must be included and includes what
must be omitted.
    We dismissed the appeal in Cooke, where a similar docu-
ment had been entered, because the district judge had yet to
decide how much the defendant must pay. In this case the
judge’s     opinion     contains  the    principal    amount
($4,594,933.85) plus a formula (9% per annum) for determin-
ing interest. The judge called this post-judgment interest,
2017 U.S. Dist. LEXIS 124374 at *35, by which he apparently
meant post the state judgment of July 28, 2014. The process of
adding interest should be sufficiently mechanical that the
parties can agree on what Liberty Mutual owes under the
district court’s decision.
    The judge’s opinion and the “Case closed” line in the
judgment show that the district court is done with this litiga-
tion. This makes the decision appealable notwithstanding
the lack of a judgment conforming to Rules 54(a) and 58.
Bankers Trust Co. v. Mallis, 435 U.S. 381 (1978), permits an
appeal when the case is over but the court has failed to enter
a proper judgment. So we have jurisdiction—but once again
we urge district courts to comply with these rules. “Courts
enforce the requirement of procedural regularity on others,
and must follow those requirements themselves.” Hol-
lingsworth v. Perry, 558 U.S. 183, 184 (2010).
4                                                            No. 17-2712

    Having appellate jurisdiction, we now must ask whether
the district court had subject-matter jurisdiction, a question
that the judge and the parties alike ignored. Jurisdiction de-
pends on diversity of citizenship, and until oral argument of
this appeal everyone had assumed that the citizenships of
Monteil Hyland (Illinois) and Liberty Mutual (Massachusetts
and Wisconsin) were all that mattered. (Shannon Hyland’s
citizenship is irrelevant under 28 U.S.C. §1332(c)(2).) But 28
U.S.C. §1332(c)(1) contains a special rule for suits against in-
surers:
    in any direct action against the insurer of a policy or contract of
    liability insurance … to which action the insured is not joined as
    a party-defendant, such insurer shall be deemed a citizen of—
        (A) every State and foreign state of which the insured is a cit-
        izen;
        (B) every State and foreign state by which the insurer has
        been incorporated; and
        (C) the State or foreign state where the insurer has its princi-
        pal place of business[.]

Perkins, Risby, and Smith, all arguably among the insureds,
have not been joined as defendants, and as all three appear
to be citizens of Illinois complete diversity is missing if this
suit is a “direct action against the insurer” within the scope
of paragraph (c)(1).
    Because Liberty Mutual is the only defendant, and Hy-
land seeks money directly from it, it is tempting to call this
suit a “direct action” and order its dismissal. But because the
original state suit named as the defendant Smith, who might
have called on Liberty Mutual for defense and indemnity
(though she never did), things are not so easy. Hyland sues
as Smith’s assignee, and a dispute between Smith and Liber-
No. 17-2712                                                   5

ty Mutual about its obligations to Smith would not be a di-
rect action as insurance law uses that term.
    In 1964, when this part of paragraph (c)(1) was enacted,
two states (Louisiana and Wisconsin) allowed what they
called “direct actions” against insurers. These states permit-
ted people who sought damages to sue the alleged wrong-
doers’ insurers, bypassing the need to get a judgment
against the supposed tortfeasor. The other 48 states insisted
that plaintiffs sue the supposed wrongdoers. See Donald T.
Weckstein, The 1964 Diversity Amendment: Congressional Indi-
rect Action Against State “Direct Action” Laws, 1965 Wis. L.
Rev. 268, 269–70. Some permitted plaintiffs to add insurers
as additional defendants, while other states not only forbade
this but also prohibited juries from learning whether a de-
fendant had insurance. See Steven Plitt, et al., 7A Couch on
Insurance §104:13 (3d ed. 2013).
    Justice Frankfurter was among those who noticed that
the approach taken in Louisiana and Wisconsin allowed suit
against an insurer under the diversity jurisdiction, even
though both the injured party and the asserted injurer were
citizens of the same state. He called for a legislative fix. See
Lumbermen’s Mutual Casualty Co. v. Elbert, 348 U.S. 48, 56
(1954) (concurring opinion). The Wright and Miller treatise
is among many sources understanding the enactment of
paragraph (c)(1) as a response to that suggestion. Charles
Alan Wright, Arthur R. Miller & Edward H. Cooper,
13F Federal Practice & Procedure §3629 (3d ed. 2009).
   As far as we have been able to find, in 1964 no one
knowledgeable about insurance law would have used the
phrase “direct action” to mean anything other than a suit, by
the purported victim of a tort, that omitted the supposed
6                                                  No. 17-2712

tortfeasor as a defendant. It is always possible that legisla-
tors and the President used the phrase “direct action” more
colloquially to include every suit in which an insurance
company is the only defendant, but no contemporaneous ev-
idence supports that reading.
    Since 1964 thousands of suits in which an insurer is the
sole defendant—often suits among insurers seeking to allo-
cate liability between primary and excess layers of cover-
age—have been adjudicated without anyone thinking the
practice incompatible with paragraph (c)(1). Many decisions
hold that suits based on the insurer’s liability for its own
conduct are not “direct actions” that fall under §1332(c)(1).
See, e.g., Velez v. Crown Life Insurance Co., 599 F.2d 471, 473
(1st Cir. 1979); Rosa v. Allstate Insurance Co., 981 F.2d 669,
674–75 (2d Cir. 1992); Beckham v. Safeco Insurance Co., 691
F.2d 898, 902 (9th Cir. 1982).
    Surprisingly, however, only one precedential appellate
decision has addressed the question whether a suit following
assignment of an insured’s claim against the insurer is a
statutory “direct action.” Kong v. Allied Professional Insurance
Co., 750 F.3d 1295, 1299–1301 (11th Cir. 2014), holds that it is
not. We agree with both the reasoning and the conclusion of
that decision. Because Hyland obtained a judgment against
Smith and sues only as her assignee, this suit is unaffected
by paragraph (c)(1). Complete diversity of citizenship exists,
and the amount in controversy comfortably exceeds $75,000.
    Although the controversy exceeds $75,000, the judgment
should not have exceeded $25,000. That’s the maximum Lib-
erty Mutual promised to pay and all Smith lost when the in-
surer declined to defend or indemnify.
No. 17-2712                                                   7

    The district court gave two reasons for awarding Hyland
more than the policy limit. One is that, under Illinois law, an
insurer that fails to defend or seek a declaratory judgment is
estopped to assert any policy defense. 2017 U.S. Dist. LEXIS
124374 at *18–25. Relying principally on Clemmons v. Travel-
ers Insurance Co., 88 Ill. 2d 469 (1981), the district court saw
the maximum indemnity as just another defense that the in-
surer cannot assert. The second theory is that any damages
proximately caused by an insurer’s neglect are recoverable,
without regard to the policy limit. 2017 U.S. Dist. LEXIS
124374 at *25–35. Here the court relied principally on Conway
v. Country Casualty Insurance Co., 92 Ill. 2d 388 (1982), and
Delatorre v. Safeway Insurance Co., 2013 IL App (1st) 120852.
In this court Hyland disclaims the estoppel theory, recogniz-
ing that Clemmons has nothing to say about the circumstanc-
es under which a judgment may exceed the policy’s limit.
But Hyland defends the proximate-cause approach.
    Liberty Mutual insists that Illinois law limits damages to
the policy limit, plus a maximum of $60,000 extra if the
plaintiff shows that the refusal to defend or indemnify arose
from bad faith. See 215 ILCS 5/155. It quotes this passage
from Conway: a “mere failure to defend does not, in the ab-
sence of bad faith, render the insurer liable for [the] amount
of the judgment in excess of the policy limits.” 92 Ill. 2d at
397. As Liberty Mutual sees things, bad faith and injury
proximately caused by the insurer’s conduct are both neces-
sary for a judgment to exceed the policy limit; proof of one
but not the other won’t do. And the insurer adds that Hy-
land has never alleged—and the district judge did not find—
that it acted in bad faith. Smith was neither a named insured
nor a member of Perkins’s family, and Hyland’s state-court
complaint did not allege that Smith had Risby’s permission
8                                                   No. 17-2712

to drive the car. Because an insurer’s responsibilities under
Illinois law depend on whether the complaint as drafted ar-
guably comes within the policy’s coverage, see U.S. Fidelity
& Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 73
(1991), it would not be possible to say that an insurer dis-
plays bad faith by not defending when the complaint omits a
fact (Risby’s consent) essential to the policy’s coverage.
What’s more, Smith never asked Liberty Mutual to defend
her. If Liberty Mutual is right that bad faith (or some equiva-
lent, such as fraud) is essential to any award exceeding a pol-
icy’s limit, then recovery is capped at $25,000.
    Hyland observes that Conway said that “damages for a
breach of the duty to defend are … measured by the conse-
quences proximately caused by the breach.” 92 Ill. 2d at 397–
98. This language does not directly address the insurer’s con-
tention that both bad faith and proximate cause are essential.
Liberty Mutual maintains that Cramer v. Insurance Exchange
Agency, 174 Ill. 2d 513 (1996), reinforces its view that Illinois
requires bad faith plus proximate cause. For her part, Hyland
does not so much as cite Cramer.
   We are reluctant to get into this dispute about the mean-
ing of Illinois insurance law, for we lack the remit to supply
an authoritative answer. It is enough for current purposes to
say that, even if proximate cause by itself suffices, Hyland
has not shown how the insurer’s conduct could have caused
Smith any loss exceeding $25,000—and recall that Hyland is
Smith’s assignee, so only Smith’s injury matters.
   The best situation for Smith would have been Liberty
Mutual’s provision of a defense lawyer plus the tender of the
policy limit toward a settlement or judgment. Then Smith
would have been at least $25,000 to the good. A tender of
No. 17-2712                                                  9

cash would have been unlikely compared with a reservation
of rights to decline indemnity later, but let us make condi-
tions as favorable to Smith as they could be.
    The provision of a lawyer to defend Smith would have
been valuable to her, independent of a policy-limit tender,
only if a vigorous defense might have defeated Hyland’s
claim or at least held damages under $4.6 million. Yet Hy-
land has not argued in this court—and the district judge did
not find—that either outcome was plausible. Smith had a re-
stricted license, see 625 ILCS 5/6-113, yet was behind the
wheel after the 11 p.m. curfew to which Illinois subjects 16-
year-old drivers. 625 ILCS 5/6-110(a-1). Smith had too many
passengers (the limit is one person under 20, 625 ILCS 5/6-
107(g)), crashed into two parked cars at high speed, and was
criminally convicted for her behavior. Smith’s liability was
too clear for argument; counsel could not have hoped to de-
feat Hyland’s suit. There was no difference between what
counsel could have achieved and what actually happened (a
default judgment when Smith did not defend herself).
     As for damages: the state judge awarded Hyland the
amount that she proved after the default was declared. Hy-
land has not argued that she asked for too much and pulled
the wool over the state judge’s eyes. She’s in no position to
contend that Liberty Mutual must pay her $4.6 million pre-
cisely because that sum represents more money than her en-
titlement—and she does not say anything of the sort. Nor
does she offer any alternative. She does not contend, for ex-
ample, that a vigorous defense could have held damages to,
say, $2 million, and that $2.6 million (the $4.6 million award-
ed less $2 million that should have been awarded) thus is the
loss, from Smith’s perspective, proximately caused by the
10                                                  No. 17-2712

lack of a defense. Instead Hyland wants the whole $4.6 mil-
lion, which is proper only if it is the right judgment—and
thus not proximately caused by the absence of a lawyer dis-
patched by Liberty Mutual to defend Smith.
    If Smith had a plausible defense, either to liability or to
the amount of Hyland’s claim, then the insurer’s failure to
send a lawyer to help Smith make those arguments could be
seen as a proximate cause of the state-court judgment. But
some judgment against Smith was inevitable and the
amount of the judgment must be taken as justified. Hyland
has not argued otherwise. The maximum loss caused by the
failure to defend thus is $25,000, and the award in this suit
cannot exceed that sum.
     Liberty Mutual is not satisfied with this conclusion. It al-
so maintains that it does not owe interest on even the
$25,000. That’s wrong. Illinois provides for post-judgment
interest at 9% per annum. 735 ILCS 5/2-1303. The district
judge found that Liberty Mutual should have paid the
judgment against Smith in July 2014, and Liberty Mutual
does not contest that decision to the extent that the principal
obligation is capped at $25,000. Thus Smith’s substantive en-
titlement, as a matter of Illinois law, is $25,000 plus interest
from July 2014. This is what Hyland now holds by assign-
ment. That the insurer later offered to pay $25,000 is irrele-
vant; §5/2-1303 provides that interest stops only with tender
of payment. (Liberty Mutual’s reliance on the policy’s lan-
guage does not help it, because the policy limits interest only
in suits that Liberty Mutual defended.) And Liberty Mutual
does not contend that interest after the date of the federal
judgment should run at the federal post-judgment rate ra-
ther than the state post-judgment rate; we do not decide
No. 17-2712                                             11

whether a change from one rate to the other would be ap-
propriate.
   The judgment is vacated, and the case is remanded for
the entry of a judgment for $25,000 plus interest at 9% per
annum from July 28, 2014, until the date of payment.
