Traub Lieberman Partner Brandt W. Allen Obtains Dismissal of Case Seeking Coverage for a Malicious Prosecution Claim

Traub Lieberman Straus & Shrewsberry LLP partner Brandt W. Allen recently obtained dismissal of a claim for excess liability coverage in Illinois state court. The case involved the availability of coverage for an underlying malicious prosecution claim filed against the insured. Plaintiff in the underlying case was tried for a 1993 shooting, which resulted in his 1994 conviction for murder, attempted murder, and robbery. After nearly two decades of incarceration, the conviction was vacated based on ineffective assistance of counsel. The individual was re-tried in August 2013, resulting in a hung jury, and again in July 2014, which resulted in an acquittal. The individual subsequently brought suit against the City and various police officers involved with the 1994 trial and conviction. The City sought insurance coverage for the malicious prosecution claim from its 1994 liability insurer, as well as its general and excess liability insurers from 2010 to 2014 (the years encompassing the individual’s re-trials and eventual exoneration).  After the general and excess liability insurers denied coverage for the claim under the 2010-2014 policies, the City brought suit against those insurers seeking a declaration of coverage.

While the coverage litigation was pending, the City and the underlying plaintiff agreed to a consent judgment, pursuant to which the City and its 1994 insurer agreed to pay a part of the consent judgment and assigned the City’s rights to collect the balance from the 2010-2014 general and excess liability insurers. Said insurers moved to dismiss the coverage case arguing, in part, that the allegation of malicious prosecution against the City did not trigger coverage under the 2010-2014 policies because such occurs only when the initial prosecution is initiated and not when the individual is eventually exonerated. Thus, the insurers argued that the City was entitled to coverage only from its 1994 insurer. The City opposed the motion, arguing that the offense of malicious prosecution accrues upon exoneration and thus, the policies in effect at that time are triggered.

The Court disagreed with the opposition, holding that the argument was not supported by Illinois law or the unambiguous terms of the insurers’ policies. Following Illinois precedent and the majority rule nationwide, the Court concluded that the coverage trigger for a malicious prosecution claim is the initial filing of the malicious action against the accused and not the underlying action’s eventual termination in his favor. The Court observed that while exoneration is a required element and a necessary condition precedent before the malicious prosecution claim accrues, it is not an offense that causes injury or harm within the meaning of the policy. According to the Court, to hold otherwise would impermissibly convert the insurers’ occurrence-based policies into claims-made policies.