Court Justifies Coverage For Intentional Act
October 05, 2011
The 3rd District Appellate Court recently held that a homeowner's "personal-injury" coverage for malicious prosecution was valid and enforceable notwithstanding a policy exclusion for intentional conduct and a general public policy against insurance for intentional misconduct. Illinois Farmers Insurance Co. v. Keyser, No. 3-09-0484, 2011 WL 3765412 (3d Dist. Aug. 22, 2011).
The insurer, Farmers, was represented by Zacarias R. Chacon and Danny L. Worker of Lewis, Brisbois, Bisgaard & Smith LLP. Thomas P. Naughton of the Law Office of Thomas P. Naughton in Joliet represented the underlying claimant, Charles Keyser Jr. Zachary B. Pollack of Sabuco, Beck, Hansen & Schrock P.C. in Joliet represented the insured, Cindy Stukel.
In 2007, Stukel caused criminal trespass charges against Keyser to be filed after she informed Joliet police that Keyser entered her property although Keyser was warned that such entry was forbidden. Keyser was arrested, but the criminal proceedings against him subsequently were dismissed.
Keyser then filed a civil complaint for malicious prosecution against Stukel, in which he alleged that Stukel's verbal and written statements to the police were false and that Stukel knew they were false when she made them.
Trial Court Proceedings
Stukel tendered defense of the malicious prosecution claim to Farmers, her homeowner's insurer. The Farmers policy provided her coverage against damages caused by, among other things, "personal injury" resulting from an "occurrence." The "personal injury" coverage included injury arising from malicious prosecution. The policy defined "occurrence" as an accident. The policy also contained an exclusion that excluded coverage for personal injury "caused intentionally by or at the direction of an insured."
Farmers filed a declaratory judgment action seeking a judgment declaring that Stukel's policy did not afford her coverage for the claimed malicious prosecution because her acts were intentional and, therefore, excluded. It moved for summary judgment and Stukel and Keyser filed a cross-motion for summary judgment arguing that the tort of malicious prosecution was specifically covered by the policy.
The trial court found in favor of coverage and Farmers took this appeal.
Potential Illusory Coverage
In an opinion by Justice Tom M. Lytton, the 3rd District affirmed. He began by reviewing the general rules for deciding the duty to defend and then observed that the policy covered personal injury from both accidental conduct and certain enumerated intentional acts, including malicious prosecution.
He further said if Farmers' position of noncoverage were accepted, then coverage for certain named intentional torts would be included under the definition of "personal injury," but removed under the meaning of "occurrence." This would render the provision defining "personal injury" superfluous and ambiguous for the policy would be providing coverage in one sentence and then taking it away, leading to "illusory coverage."
Public Policy
Farmers further contended that if the underlying claim were covered, such coverage would violate public policy because the policy would then insure against intentional misconduct. Lytton agreed that, as a general proposition, where an insurance contract indemnifies a person for damages resulting from his own intentional misconduct, it is void as against public policy and will not be enforced.
He further said, however, that whether a particular contract violates public policy depends on the nature of the risk against which insurance is sought. Thus, Illinois courts have approved personal-injury coverage for certain intentional torts such as retaliatory discharge and defamation. At the same time, they have excluded coverage for intentional torts that are also serious crimes.
According to Lytton, the distinction was "apparent" and depended on the insured's reasonable expectations. Here, while the policy generally excluded coverage for intentional conduct, it explicitly provided coverage for damages caused by malicious prosecution and the insured could reasonably anticipate that the policy protections would apply.
He further noted that there is nothing inconsistent with public policy in allowing an individual to insure himself against damages caused by certain intentional acts where the insured wrongdoer is not the person who recovers the policy proceeds.
Here, any benefits under the policy will be paid to Keyser and would not compensate Stukel for her wrongdoing. The coverage for malicious prosecution, therefore, should not violate Illinois public policy.
The 3rd District therefore affirmed in favor of coverage.
Key point
Coverage for the intentional tort of malicious prosecution does not violate Illinois public policy against coverage for intentional wrongdoing where the insurance contract specifically covers the tort, the insured reasonably expects the coverage and any payment under the policy does not compensate the insured for his or her wrongdoing.
