In this era of sophisticated DNA testing, exonerations of incarcerated individuals have become increasingly commonplace. The ensuing malicious prosecution lawsuits have justifiably resulted in high verdicts and settlements. The key issue for many municipalities is whether coverage is triggered for these malicious prosecution claims, and under which policies of insurance. On November 21, 2019, the Supreme Court of Illinois, in Sanders v. Illinois Union Insurance Company, 2019 IL 124565, definitively determined that claims of malicious prosecution trigger coverage only under policies of insurance in effect on the date of which the prosecution was instituted, not on the date of exoneration, joining the majority of jurisdictions to so hold.
The facts underlying Sanders v. Illinois Union Insurance Company have become all too common. In 1993, a group of men attacked and robbed a couple, resulting in one death. In January 1994, police detectives arrested Rodell Sanders. Although Mr. Sanders did not match the physical description provided by the survivor of the attack and had an alibi, he was indicted, tried, and convicted based on evidence that was manipulated and fabricated by the detectives. Mr. Sanders was sentenced to 80 years’ imprisonment.
In 2011, Mr. Sanders’ conviction was overturned and his sentence vacated. Mr. Sanders was retried twice—once in 2013, resulting in a hung jury, and the second time in 2014, when Mr. Sanders was acquitted. Mr. Sanders filed a lawsuit against the police department, asserting claims of malicious prosecution, among other claims. Mr. Sanders’ lawsuit was settled for $15 million. The city paid $2 million and the city’s carrier from 1994 paid $3 million. The city and Mr. Sanders sought additional coverage from a primary and excess carrier that provided coverage during the retrials and ultimate exoneration.
Illinois Union Insurance Company, the city’s primary carrier in 2013 and 2014, issued an occurrence-based commercial general liability policy that provided coverage for claims arising out of the offense of malicious prosecution. To determine when the claim of malicious prosecution occurred, and thus whether the later policies were triggered by Mr. Sanders’ claim, the supreme court focused on the meaning of the term, “offense.” Mr. Sanders and the city argued that “offense” in the policy meant a legal cause of action. Therefore, the legal claim of malicious prosecution could not have accrued until Mr. Sanders was exonerated, triggering the policy in effect in 2014. The carrier argued that both the wrongful conduct resulting in the malicious prosecution claim and the resulting injuries suffered by Mr. Sanders occurred earlier, in 1994, when Mr. Sanders was arrested.
The supreme court concluded that a straightforward interpretation of the term, “offense,” required that the insured’s offensive conduct occur during the policy period. The court found that such an interpretation was consistent with policy language that indicated that the offense must both happen and take place during the policy period. The court reasoned, “a malicious prosecution neither happens nor takes place upon exoneration.” This construction also conformed with the purpose of occurrence-based (as opposed to claims-made) policies. If exoneration triggered coverage, then liability could be shifted to a policy period in which none of the acts giving rise to the malicious prosecution claim occurred.
Lastly, the supreme court considered and ultimately rejected the argument that the retrials of Mr. Sanders were separate offenses that triggered coverage under the 2013 and 2014 policies. Construing policy language that “all damages arising out of the substantially the same personal injury regardless of…the number or kind of offenses…will be considered one occurrence,” the court held that the source of the malicious prosecution, specifically the evidence fabricated by the city’s employees, remained the same and was the cause of all three trials. Therefore, there was but one occurrence that occurred, for insurance purposes, at the time of Mr. Sanders’ initial arrest.
With this decision, Illinois joins the majority of jurisdictions finding that malicious prosecution claims only trigger coverage under policies of insurance in effect at the time that the prosecution was instituted. This decision also further erodes the minority position, which holds that malicious prosecution claims trigger coverage under policies in effect on the date of exoneration, a position first promulgated by the Seventh Circuit Court of Appeals, in National Casualty Company v. McFatridge, in its attempt, interestingly, at predicting Illinois law.