An Illinois Appellate Court recently reversed and remanded in favor of an insured where the trial court had applied too high a burden on proving coverage for a settled claim. United Nat’l Ins. Co. v. Faure Bros. Corp., 2016 IL App (1st) 132419-UB. The insured settled a liability claim related to its shipment of mislabeled chemicals and then sought reimbursement from its commercial general liability insurer. The insurer filed a declaratory judgment action, and at trial the trial court required not only that the insured had the burden of proving coverage for the settlement but that such burden included proving (i) mislabeling actually occurred; (ii) the insured had mislabeled the particular chemical; (iii) who had mislabeled and when; (iv) the mislabeling was the cause of damage alleged in the underlying suit; (v) the allegedly mislabeled products were sent to a customer; and (vi) the inclusion of that chemical shipped by the insured was the reason a customer’s product was defective. On appeal, the appellate court reversed, ruling that when an insured settles an underlying claim prior to verdict, it must show that it settled an otherwise covered loss in reasonable anticipation of liability. But an insured need not establish actual liability to the party with whom it settled so long as a potential liability on the facts known to the insured is shown to exist and the settlement amount is reasonable in light of the size of the possible recovery and the degree of probability of success against the insured. The insured has the burden to demonstrate its anticipation of liability was reasonable based on the quality and quantity of proof that the insured expected would have been offered against it in the underlying case. The insurer then retains the right to rebut a preliminary showing of reasonableness. The appellate court remanded to permit discovery on the reasonableness of the settlement.