Malicious Prosecution “Occurrence” When Wrongful Conduct Happened, Not Exoneration (Reversal)

The Illinois Supreme Court, in a unanimous opinion, found that coverage for malicious prosecution is not triggered by exoneration. Thus, the insurers at the time of the exoneration had no obligation to fund the remaining $10 million of a settlement for a malicious prosecution suit brought by a man who was framed by the City of Chicago Heights (the “City”) police and served more than 20 years in prison for murder. A previous Bytes on the overturned appellate decision can be found here.

Rodell Sanders filed suit against the City alleging malicious prosecution.  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 re-tried in 2013, and after a mistrial, he was ultimately exonerated in 2014.

Sanders’ malicious prosecution suit settled for $15 million, of which the City and the City’s insurer at the time of the 1994 conviction contributed $5 million. As part of the settlement, the City assigned to Sanders its rights to recover the remaining $10 million from its insurers at the time of the 2014 exoneration.

The 2014 insurers, Illinois Union Insurance Co. and Starr Indemnity & Liability Co., refused to pay, arguing that the 2014 retrial was a continuation of an existing malicious prosecution, not a new trigger for coverage, and that the “offense” that triggers coverage was the framing of Sanders that occurred in 1994. The trial court ruled in favor of the insurers. But in a split decision, the Illinois Appellate Court reversed and held that a falsely convicted person cannot sue for malicious prosecution until exonerated, and that because Sanders’ exoneration occurred while the Illinois Union and Starr policies were in effect, the policies were triggered.

The Illinois Supreme Court reversed, holding that “the word offense in the insurance policy refers to the wrongful conduct underlying the malicious prosecution,” and that “a malicious prosecution neither happens nor takes place upon exoneration.” The court also found significance in the fact that the policies were “occurrence-based,” meaning that coverage was appropriate only for injuries that occurred during the policy period. Sanders v. Illinois Union Ins. Co., 2019 IL 124565 (Nov. 21, 2019).