Defining Trigger For Malicious Prosecution

The 4th District Appellate Court recently agreed with the 2nd District—and rejected with two federal decisions—in holding that the insurer on the risk at the time of arrest and prosecution, rather than at the time of exoneration, is the insurer that provides coverage for the tort of malicious prosecution.

The insured in County of McLean v. States Self-Insurers Risk Retention Group Inc., 2015 IL App (4th) 140628 (June 2), was represented by Heyl, Royster, Voelker & Allen of Urbana. Hinshaw & Culbertson LLP represented the insurer.

In 1994, McLean County officials arrested Alan Beaman on a murder charge. He subsequently was convicted and sentenced to 50 years in prison. In May 2008, however, the Illinois Supreme Court concluded that the county unlawfully withheld exculpatory evidence, and in 2009, the state dismissed all charges against Beaman.

In 2012, Beaman filed suit in federal court against the county and county officials for malicious prosecution and violation of his civil rights. The following year, the county brought the instant action against the States Self-Insurers Risk Retention Group Inc., seeking a declaration that the group was obligated to pay the defense costs for Beaman’s federal action. The group’s policy on which suit was brought was in place from March 2008 until March 2009, which included the time when Beaman was exonerated.

The policy covered “personal injury,” which was defined to include the “injury … caused by … malicious prosecution.” The coverage applied only if the personal injury “is the result of an occurrence during the policy period.” According to the policy, the date of an occurrence involving a personal injury “is the date that the first offense took place.”

The county moved for summary judgment, arguing that the definition of “occurrence” was ambiguous. The trial court granted the motion, finding that Beaman’s personal-injury claims were not actionable until the state dismissed the criminal charges against him in early 2009. Because the dismissal occurred during the policy period, the court ordered the group to pay defense costs. The group filed this appeal.

Analysis

In an opinion by Justice Robert J. Steigmann, the 4th District reversed. He observed that the county’s main argument was that, because Beaman’s malicious-prosecution claim was not fully ripe for adjudication until the criminal proceedings against him were terminated, the malicious prosecution “took place” when the state dismissed the charges against Beaman. Steigmann disagreed.

He said the personal injury of malicious prosecution as used in the policy could not be equated with the common-law elements of the tort of malicious prosecution. This was because the policy defined “personal injury” as the “injury … caused by … malicious prosecution.” He also construed the timing of the occurrence as requiring that the injury caused by the malicious prosecution take place within the policy period.

In this case, Steigmann said, Beaman’s injury did not occur when he was exonerated – during the March 2008 to March 2009 policy period. Rather, as the 2nd District held in St. Paul Fire & Marine Insurance Co. v. City of Zion, 201 IL App (2d) 131312, and Indian Harbor Insurance Co. v. City of Waukegan, 2015 Il App (2d) 140293, the malicious-prosecution injury happened when Beaman was arrested and prosecuted, because the favorable termination of a malicious prosecution marks the beginning of the remediation process, not the commencement of the injury.

Ultimately, Steigmann found that City of Zion and City of Waukegan were well-reasoned and applicable to the policy provisions at issue here. Moreover, since Beaman’s alleged personal injury occurred outside the March 2008 to March 2009 policy the group issued, the trial court erred in granting summary judgment for the county.

In so holding, the court effectively rejected two 7th U.S. Circuit Court of Appeals cases finding that the insurer on the risk at the time of exoneration must bear the loss. American Safety Casualty Insurance Co. v. City of Waukegan, 678 F.3d 475 (7th Cir. 2012); National Casualty Co. v. McFatridge, 604 F.3d 335 (7th Cir. 2010).

The 4th District therefore reversed in favor of the group.

Key Point

According to this court, the policy on the risk at the time of arrest and prosecution must bear the loss for a claimant’s malicious prosecution claim against an insured.