Malicious Prosecution Coverage Triggers From the Start

By Don R. Sampen, published, Chicago Daily Law Bulletin 

May 29, 2018

The 1st District Appellate Court recently held that the coverage trigger date for the “offense” of malicious prosecution is the commencement of the prosecution against the claimant, rather than the claimant’s exoneration.

The insurer in First Mercury Insurance Co. v. Ciolino, 2018 IL App (1st) 171532 (May 11, 2018), was represented by Hinshaw & Culbertson LLP. Thomas J. Fleischmann & Associates in St. Charles and the Law Office of Terence E. Flynn represented the insureds, Paul J. Ciolino and his related entities.

Alstory Simon brought suit against Ciolino, Northwestern University and others in 2015. He claimed that the defendants, as part of an investigative journalism course at Northwestern, participated in a conspiracy to develop evidence of the innocence of a convicted murderer, Anthony Porter, and to obtain false witness statements against Simon relating to the murders for which Porter was convicted.

Ciolino acted as a private investigator for Northwestern. He was alleged to have, among other things, illegally impersonated a police officer and extracted a false confession from Simon. Simon claimed that, based on the false evidence, he pleaded guilty to the crimes in 1999. He eventually was exonerated in 2014.

First Mercury was not Ciolino’s insurer when Simon was allegedly framed or at the time of his guilty plea and conviction in 1999. Beginning in 2006, however, First Mercury issued a number of policies to Ciolino, each of which included coverage for “personal injury.” The policies included the 2014-15 policy that was in effect when Simon was exonerated and brought his malicious prosecution action.

The term “personal injury” was defined in the policy to include malicious prosecution. Under the terms of the policy, such “personal injury” was covered “only if the offense was committed during the policy period.” The term “offense” was not defined in the policy.

Ciolino tendered his defense of the Simon lawsuit to First Mercury. It, in turn, filed this declaratory action seeking a determination of noncoverage. Ciolino counterclaimed for breach of contract and his action included counts against First Mercury for reformation of the policy, promissory estoppel, equitable estoppel, fraud and negligent misrepresentation.

First Mercury moved to dismiss the counterclaim, and the trial court granted its motion for all but the breach of contract count. The parties subsequently crossmoved for summary judgment on the coverage issues as raised by First Mercury’s declaratory complaint and the breach-of-contract count of the counterclaim. The trial court granted summary judgment for First Mercury and against Ciolino. He took this appeal.

Analysis

In an opinion by Justice Joy V. Cunningham, the 1st District affirmed. She initially addressed the coverage issue. Ciolino argued that the “offense” of malicious prosecution was not completed until Simon’s exoneration in 2014.

He took such a position because the termination of the prosecution in the underlying plaintiff’s favor is one of the elements of the tort of malicious prosecution. Thus, in Ciolino’s view, all legal elements of the “offense” had to be completed within the policy period for the coverage to apply.

Cunningham, however, pointed to several Illinois Appellate Court decisions holding that the trigger date for coverage is the commencement date of the alleged malicious prosecution. Among other cases, she cited Indian Harbor Insurance Co. v. City of Waukegan, 2015 IL App (2d) 140293.

That case rejected Ciolino’s argument that coverage for malicious prosecution turned on the termination of the claimant’s prosecution.

Ciolino tried to distinguish Indian Harbor and the other cases on the ground that the policies in those cases did not use the term “offense.” Cunningham observed, however, that the First Mercury policy’s use of the term “offense” did not indicate that coverage would be triggered only upon fulfillment of all elements of a tort claim. Rather, she wrote, the more straightforward reading of that term suggested that coverage depended on whether the insured’s offensive conduct was committed during the policy period.

Thus, the time of the offense for insurance law purposes is different from the time of accrual of the malicious prosecution tort in tort law. The exoneration, moreover, was not part of any “offense” allegedly committed by Ciolino. In addition, since the offense here did not occur during the 2014-15 policy, First Mercury owed no coverage.

As for the other claims pleaded in Ciolino’s counterclaim, Cunningham found that he had not pleaded fraud with the requisite particularity. She wrote that the facts pleaded relating to his claimed justifiable reliance on First Mercury’s representations were especially deficient.

The same reliance requirement defeated Ciolino’s negligent misrepresentation claim as well as his promissory estoppel and equitable estoppel claims. She also said the reformation count failed to allege the requisite mutual mistake of the parties.

The 1st District, therefore, affirmed judgment in favor of First Mercury.

Key point

• The coverage trigger for a policy covering malicious prosecution as a “personal injury,” where the “offense” must be committed during the policy period, is the commencement of the alleged malicious prosecution.