Wrongful Prosecution Does Not Trigger Coverage
June 02, 2010
The 7th U.S. Circuit Court of Appeals recently held that a law enforcement liability policy and three commercial general liability policies provided no coverage for a county and its former state's attorney in connection with a claim for wrongful prosecution brought by a man whose conviction for murder had been overturned by federal court. National Casualty Co. v. McFatridge, 2010 WL 1688513 (7th Cir. Apr. 28, 2010).
The insurers, National and Scottsdale, were represented by James Craney of Brown & James, St. Louis. Michael E. Raub of Heyl, Royster, Voelker & Allen P.C., Urbana, represented the former state's attorney, Michael McFatridge, and Edgar County, Ill.
Gordon Steidl had been convicted for murder in 1987 in state court during McFatridge's tenure as the Edgar County state's attorney. In 2003 he was granted a writ of habeas corpus by a federal district court and released, based on ineffectual counsel at trial and sentencing.
Following Steidl's release, and well after McFatridge left office in 1991, Steidl brought suit against him and Edgar County, claiming that McFatridge falsely prosecuted him, induced witnesses to testify falsely, and concealed exculpatory evidence. Steidl further claimed that throughout the trial and even after McFatridge left office, McFatridge made false public statements about Steidl's guilt and prevented witnesses from recanting false testimony.
Steidl sought damages for false arrest, false imprisonment, malicious prosecution, conspiracy and intentional infliction of emotional distress. The county tendered the defense of the case to its insurers.
Scottsdale issued a law enforcement liability policy to the county during the period 1989 to 1990, and Scottsdale and National issued three CGL policies to the County from 1997 to 2000. Upon tender of the Steidl lawsuit, the insurers filed a declaratory judgment action asking the court to determine that they had no duty to defend or indemnify McFatridge or the County. The district court granted summary judgment for the insurers, and McFatridge and the County brought this appeal.
In an opinion by Judge William J. Bauer, the 7th Circuit affirmed. He first addressed Scottsdale's 1989-90 law enforcement policy, noting that the named insured on the policy was "County of Edgar S.D.," and that the policy extended coverage to the named insured and all its law enforcement officers.
The county argued that the "S.D." was ambiguous and did not necessarily refer to the "Sheriff's Department," so that the named insured should be regarded as the county as a whole. Bauer observed, however, that an endorsement to the policy identified the county as an additional insured, and the same endorsement limited coverage for additional insureds to liability arising out of the activities of the named insured.
Bauer reasoned that if the county were the named insured, then it would have made no sense for the county to be added as an additional insured. He further noted that the address for the named insured was the address for the sheriff's department, which was different from the main county address. He therefore concluded that the named insured for the policy was the sheriff's department.
Even though coverage was extended to the county for liabilities arising out of the sheriff department's conduct, Bauer opined further that McFatdridge's prosecution of Steidl did not so arise. For one thing, the Edgar County Sheriff's Department was not involved in the prosecution of Steidl. For another, McFatdridge, as state's attorney, was the state's chief prosecuting official, not the sheriff's department.
Thus, by state law McFatdridge was not an employee of the county, and the county did not oversee or control his prosecution of Steidl. Although McFatdridge was elected in the county, he could serve as an agent in civil matters for the county, and a portion of his salary came from the county, still, when prosecuting criminal matters, he served as a representative of the state. Accordingly, the county could not be considered an insured in regard to McFatdridge's prosecutorial duties.
The county nevertheless argued that the "conditions" section of the Scottsdale policy based the premium for the policy in part on the number of "Class C" employees, which was defined as those employees with administrative duties. It further argued that part of the state's attorneys duties were administrative, and that McFatdridge therefore fell under this definition.
Bauer rejected the argument, noting that as a prosecutor for the state McFatridge did not qualify as a county Class C employee and that, moreover, the "conditions" section of the policy likely could not be construed as giving rise to a duty to defend in any event.
He then went on to consider the three CGL policies in effect during the 1997-2000 time period. These were all occurrence policies that required the alleged "offense" giving rise to liability to have been committed during the policy period. Steidl's complaint alleged certain conduct during this time that arguably qualified as an "offense," including alleged false testimony given by McFatridge while Steidl's post-conviction petition was pending, and a perpetuation of publicity to defeat the petition.
Bauer nevertheless found that the CGL policies covered only "insureds" defined in these policies as "employees" and "elected officials." Because McFatridge was not an employee or elected official at this time, the policies provided no coverage for his conduct.
The county argued that McFatridge's misconduct was alleged to have been an ongoing tort that continued from 1987 to his release in 2003. Still, said Bauer, the wrongful conduct must have occurred during the policy periods. He proceeded to analyze the various torts alleged by Steidl, including a false imprisonment, deprivation of a fair trial and denial of due process – which either occurred in 1987 or before, or, alternatively, did not accrue until 2003, when the district court issued the writ of habeas corpus.
Finally, the county argued that it was required by statute to indemnify the state's attorney's office for any damages it pays to Steidl on his claims, meaning that it, the county, could become legally obligated to pay damages because of "personal injury" as alleged by Steidl. Bauer found, however, that the county's obligation to pay the judgment did not mean that the county itself was liable to the plaintiff. Rather, its obligation arose by operation of law and was not an occurrence.
The court therefore affirmed the district court's summary judgment in favor of the insurers.
