What you need to know

The Massachusetts Supreme Judicial Court has ruled that the tort of malicious prosecution occurs, for insurance coverage purposes, at the time the underlying malicious suit is filed, not the time it is terminated.

What you need to do

Insurers should consider the impact of the SJC’s decision in approaching demands by policyholders for defense of malicious prosecution actions.

Background

In 1998, George Billings filed a suit seeking to block real estate development adjacent to a wetland. The suit was dismissed on April 7, 2000. On December 14, 2000, the defendants in the 1998 action sued Billings, alleging malicious prosecution and infliction of emotional distress based on the earlier case and Billing’s alleged spreading of rumors that the defendants intended to despoil the wetland. Commerce Insurance Co. insured Billings under a personal umbrella policy from March 15, 2000 to March 15, 2001. The policy required Commerce to defend Billings against suits for damages because of “personal injury” caused by an “occurrence.” Commerce refused to defend, contending that the date of the occurrence was the filing of the 1998 suit – before the policy period began – rather than its dismissal during the policy period. The SJC agreed, affirming summary judgment for the insurer. See Billings v. Commerce Insurance Co., No. SJC-10656, __ N.E.2d __, 2010 WL 4331230 (Mass. Nov. 4, 2010).

The Court’s Ruling

The Court held that:

  • The date of occurrence of the tort of malicious prosecution is the date the malicious prosecution action is filed, not when it is terminated. The Court recognized that a required element of malicious prosecution is the termination of the underlying action, and that termination of the suit triggers the statute of limitations. However, the Court concluded that a plaintiff suffers damages at the time a malicious prosecution action is filed, because that is when a litigant must invest the time, money, and effort to prepare a defense. The Court also noted that limitations periods do not determine when a tort occurs for insurance coverage purposes. The Court accordingly joined the majority of jurisdictions that have addressed the issue, and concluded that the occurrence causing injury under an insurance policy is the filing of the underlying malicious suit, not its termination.
  • The Court further held that malicious prosecution is not a continuing tort such that an occurrence lasts from the time of filing of the underlying suit until its termination. The Court concluded that the injurious effects of malicious prosecution manifest themselves upon filing, and that “[i]t is clearer, simpler and fairer to define the time of the ‘occurrence’ as the time the injurious effects ‘first became apparent,’ i.e., the date of filing.” The Court thus concluded that the insurer had no duty to defend the malicious prosecution suit because the occurrence was the filing of the 1998 action, before the policy period began in 2000.
  • The Court also held that Commerce had no duty to defend the infliction of emotional distress claim. The Court held that the 2000 action reasonably stated a claim for damages because of “personal injury” arising from “libel, slander, or defamation of character” as required under the policy. However, the allegations were not reasonably susceptible of an interpretation that such statements were made during the policy period. According to the Court, the reasonable implication was that the statements at issue were made in 1998 when the 1998 action was filed, and that the action was settled before the policy period began. The Court therefore held that the insurer had no duty to defend because the allegations of the complaint in the 2000 action did not reasonably state a claim within the coverage period of the policy.

Conclusion

The Massachusetts Supreme Judicial Court ruled that the tort of malicious prosecution occurs, for insurance coverage purposes, at the time the underlying malicious suit is filed, not the time it is terminated.