Court Finds Malicious Prosecution Coverage Upon Exoneration

Creating a conflict with earlier Illinois appellate case law, the 1st District Appellate Court recently held that a municipality’s liability coverage for malicious prosecution was triggered upon exoneration of the claimant, not at the time the claimant was wrongfully prosecuted.

The claimant, Rodell Sanders, and the municipality that assigned its rights to Sanders, were represented by Loevy & Loevy. Walker Wilcox Matousek LLP represented the insurers, Illinois Union, the primary insurer, and Starr Indemnity & Liability Co., the excess insurer. The case is Sanders v. Illinois Union Insurance Co., 2019 IL App (1st) 180158 (Jan. 15, 2019).

Sanders brought suit against the city of Chicago Heights and others claiming that members of the city’s police department coerced false witness identifications and withheld exculpatory information, resulting in his murder conviction in 1993.

Sanders’ convictions were vacated in 2011. Following a second retrial in 2014, he was acquitted. These events occurred during the time period of primary liability insurance coverage issued by Illinois Union to Chicago Heights. The acquittal also occurred while Starr’s excess coverage was in place.

Sanders ultimately settled his suit for $15 million. Under the terms of the settlement, the city paid $2 million and one of the city’s insurers at the time of his prosecution paid $3 million. The city also assigned to Sanders its rights to pursue recovery from Illinois Union and Starr.

Sanders then brought this coverage action. The trial court dismissed the action, holding that coverage for malicious prosecution under the policies was triggered by the initiation of Sanders’ prosecution, not his subsequent exoneration. It also rejected the argument that the retrials of Sanders were additional triggers of coverage.

Sanders, along with Chicago Heights, which joined him as a plaintiff, brought this appeal.

Policy language

In an opinion by Justice Aurelia Pucinski, the 1st District reversed. She observed at the outset that the issue was whether the coverage for malicious prosecution under the policies was triggered by the actual prosecution of Sanders, which took place in the 1990s, or by his exoneration, which effectively took place upon the vacating of his conviction and subsequent acquittal.

Turning to the language in the Illinois Union policies, Pucinski observed that the tort of malicious prosecution was one of several “offenses” within the definition of “personal injury” that the policy covered. The policies, moreover, required that the “offense” take place within the applicable policy period. The Starr excess policies followed form to the Illinois Union policies.

Based on the policy language, Sanders argued that the “offense” of malicious prosecution did not happen until all the elements of the tort were satisfied, which included exoneration. Under his view, the two policies would be triggered.

The insurers contended, however, that the “offense” of malicious prosecution was not the completed tort but the offensive act of maliciously prosecuting someone. In their view, coverage would be provided by the policies in effect at the time of prosecution, not the defendants’ policies.

Relying on a dictionary definition, Pucinski concluded that “offense” in the policies referred to the legal cause of action, not just the wrongful conduct. This interpretation, she said, is what the average person would understand the policies to cover. She believed her view to be bolstered by the fact that the policies coupled the term “offense” with the titles of legal causes of action and not specifically be based wrongful acts alone.

Rejection of precedent

Pucinski then addressed a series of Illinois appellate decisions that reached a contrary result. She distinguished several of the cases based on differing policy language. She concluded that another case, County of McLean v. States Self-Insurers Risk Retention Group Inc., 2015 IL App (4th) 140628, although having similar language, was not properly reasoned.

She devoted extra attention to First Mercury Insurance Co. v. Ciolino, 2018 IL App (1st) 171532, a 1st District decision construing policy language similar to that found in the Illinois Union policies. While disagreeing with the First Mercuryresult, Pucinski also found a technical ground for distinction.

The policy in First Mercury required the offense to have been “committed” during the policy period, while the Illinois Union policies required the offense to “happen” during the period. According to Pucinski, “happen,” unlike “commit,” suggests the completion of the tort during the policy period, not just the initiation of the prosecution.

She also rejected the insurers’ argument that exoneration should not be the trigger of coverage since there is nothing offensive about exoneration. Rather, according to the insurers, exoneration is a step in rectifying the wrong done to the claimant.

Pucinski found this contention without merit because, in her view, the trigger of coverage is not the exoneration alone but the satisfaction of all the elements of the tort.

The court therefore reversed in favor of coverage for Sanders.

Justice Mary Anne Mason dissented, arguing that the outcome should be controlled by First Mercury and other cases distinguished by Pucinski.

“The overwhelming weight of authority in Illinois,” Mason said, “supports the conclusion that it is the commencement of prosecution, and not exoneration, that triggers coverage for malicious prosecution.”

Key point

A split of authority now exists at the appellate level in Illinois concerning whether malicious prosecution coverage is triggered by the prosecution itself or by the exoneration of the claimant.