Malicious Prosecution Trigger is Date of Exoneration Not Filing of Charges

An Illinois appellate court, in an opinion written by Justice Pucinski, applied Illinois law and reversed the trial court’s dismissal of the insured’s complaint seeking a declaration of coverage for an underlying suit which alleged malicious prosecution.  According to the appellate court, coverage for the “offense” of malicious prosecution was not triggered until the tort was completed – i.e., when the defendant was exonerated.  Therefore, dismissal was improper because the insurance policies at issue were in effect when the defendant was exonerated. 

Rodell Sanders field suit against the City of Chicago Heights (the “City”) alleging malicious prosecution (the “Sanders Suit”).  Sanders alleged that the City’s police manipulated and coerced false witness identifications of Sanders as being involved in a December 1993 shooting, made false statements to prosecutors to encourage his prosecution, fabricated evidence, and withheld exculpatory information in connection with his 1994 prosecution for the shooting.  Sanders was ultimately exonerated in 2014.

The Sanders Suit settled for $15 million.  Under the terms of the settlement, the City agreed to pay $2 million of the settlement and United National Insurance Company, the City’s insurer at the time Sanders was initially charged with the crimes, agreed to pay $3 million.  The City assigned to Sanders its rights to pursue recovery from the City’s other insurers, Illinois Union Insurance Company (“Illinois Union”) and Starr Indemnity & Liability Company (“Starr”).

Illinois Union and Starr denied coverage for the Sanders Suit and refused to contribute to the settlement.  Sanders and the City filed a coverage action seeking a declaratory judgment that Illinois Union and Starr owed coverage for the Sanders Suit.  Illinois Union issued primary insurance policies to the City for the period of November 1, 2010 through November 1, 2014.  Starr issued excess insurance policies to the City for the period of November 1, 2011 through November 1, 2014. 

According to the insurers, the second amended complaint should have been dismissed because the trigger of coverage for the Sanders Suit was the filing of the criminal charges against Sanders, an act that took place before the insurers’ policies went into effect.  The insurers argued that the retrials of Sanders did not qualify as triggers because they were continuations of the original 1994 prosecution.  Sanders and the City argued that because the policies provided coverage for the “offense” of malicious prosecution, the coverage was not trigged until the completed tort of malicious prosecution – upon his exoneration in 2014.  The trial court granted the insurers’ motion to dismiss, finding that Illinois Union and Starr did not provide coverage for the Sanders Suit. 

On appeal, Sanders and the City argued that the trial court erred in dismissing the second amended complaint.  The relevant policies required the “offense” of malicious prosecution to occur during the policy period.  According to the appellate court, the term “offense” refers to the legal cause of action that arises out of wrongful conduct, not just the wrongful conduct itself.  To support its interpretation, the appellate court noted that “[t]he policies’ reference to the offenses [including malicious prosecution] by their proper, legal names instead of by their underlying wrongful conduct makes clear that coverage is triggered by the occurrence of the completed cause of action (in this case, upon Sanders’s exoneration) and not by merely the underlying wrongful conduct.”  Because Sanders’ exoneration occurred while the Illinois Union and Starr policies were in effect, the appellate court held that the policies were triggered and reversed the trial court’s ruling.  Justice Mason dissented and argued that the trial court’s decision should be affirmed because the offense of malicious prosecution is not committed when the defendant in the underlying case is exonerated, but rather when the defendant was wrongfully charged.  Sanders v. Illinois Union Ins. Co., 2019 IL App (1st) 180158 (Jan. 15, 2019).