For years, courts have generally viewed the appropriate trigger of coverage for malicious prosecution claims as a binary choice: either the coverage trigger date for the malicious prosecution claim is the date when the wrongful prosecution against the claimant began, or it’s the date when the accused’s innocence is vindicated in a court of law.
Unsatisfied with this dichotomy, policyholders have sometimes argued that all policies in effect from the time the claimant was wrongfully arrested until the date of exoneration are obligated to provide coverage. Until recently, courts had consistently rejected this approach, finding that the claim takes place at a distinct point in time.
However, in the past year, decisions by the 6th Circuit Court of Appeals, applying Kentucky law [St. Paul Guardian Ins. Co. v. City of Newport, KY, 19-5948, 2020 WL 1514837 (6th Cir. Mar. 30, 2020], and the Missouri Court of Appeals [Ferguson v. St. Paul Fire & Marine Ins. Co., WD 82090, 2019 WL 6703892 (Mo. Ct. App. Dec. 10, 2019)] have revived what looked to be a dead argument. Although these two appellate decisions are unpublished, they could mark the beginning of a new trend in this area of coverage law.
Continuous Trigger for Claims
Historically, courts have offered several justifications for rejecting continuous trigger for malicious prosecution claims. Some have said a continuous trigger should be limited to a narrow set of circumstances, such as latent injury cases in which the injuries caused by toxic exposure do not manifest themselves until long after the exposure causing the injury.
As another example, asbestos cases presented a unique issue in the insurance market that was thought to justify continuous trigger. As it became known that inhalation of asbestos caused adverse health consequences, insurers ceased providing coverage for these injuries. Courts expressed concern that if coverage was triggered only when it manifested, insurers would only be responsible for a fraction of the policyholder’s asbestos-related liability. To avoid this result, courts have sometimes applied a continuous trigger in asbestos cases.
Most courts have held that malicious prosecutions do not present the same types of issues as latent injury cases. In malicious prosecution cases, there is no time lag between the arrest and injury—it is generally accepted that the injury from incarceration, humiliation, and damage to reputation starts as soon as charges are filed. Because the injuries are evident from the outset, courts were not concerned about a time lag in which insurers could terminate or decide not to provide coverage.
Some courts have pointed to the differences between personal injury coverage (under which malicious prosecution claims usually fall) and other forms of coverage. Courts, such as in Travelers Indem. Co. v. Mitchell, 925 F.3d 236, 241 (5th Cir. 2019), have noted that, unlike bodily injury coverage, personal injury coverage is typically tied to a specified list of torts. Bodily injury coverage is often focused on the resulting harm, not its cause.
Some courts have also said that applying a continuous trigger to malicious prosecution claims would contravene the reasonable expectations of the parties. It would be unreasonable, the courts have observed, for a municipality to expect to provide coverage for tortious acts years before the inception of its policies.
Majority and Minority Views
In rejecting a continuous trigger, courts have held that the trigger of coverage must be a single point in time: either when the prosecution begins or when the accused is exonerated. The vast majority has held that the trigger date of coverage is the date of the prosecution [see, for example, Sanders v. Illinois Union Ins. Co., __ N.E.3d __, 2019 IL 124565, 2019 WL 6199651 (Ill. Nov. 21, 2019)]. Standard commercial general liability policies require that the claimant’s injury or the insured’s wrongful act must take place during the policy period. These courts note that a claimant’s exoneration from wrongfully filed criminal charges is not an “injury”—to the contrary, the exoneration is considered the first step in the legal system to rectify the wrong done to the claimant.
The majority view contends that the “injury” in a malicious prosecution claim occurs when the prosecutorial machinery of the state is set in motion against a claimant. These courts have held that the injury to the claimant occurs the day he is accused of the crime by authorities. At that point, the claimant’s reputation is damaged and his legal expenses begin to incur. Thus, the majority view reasons that the policy in effect when the prosecution first commences responds, assuming the other elements for coverage are satisfied.
A small minority of courts have held that only policies in effect on the date the claimant is exonerated are triggered. These decisions emphasized that a cause of action for such a claim did not ripen substantively, or accrue for purposes of the statute of limitations, until the ultimate termination of the criminal action. This reasoning has been widely criticized. The majority view points out that when a cause of action accrues for statute-of-limitations purposes and when a policy is triggered for insurance purposes are distinct conceptual issues.
But, until last year, it appears no court had adopted a continuous trigger of coverage.
Rejecting the Binary Choice Paradigm
The courts in the previously mentioned Ferguson and St. Paul Guardian cases, though, go in a different direction. In Ferguson, the city of Columbia, Missouri, and its officers were insured by law enforcement liability (LEL) policies through St. Paul from Oct. 1, 2006 through Oct. 1, 2010, and insured by a similar LEL policy through Travelers from Oct. 1, 2010 through Oct. 1, 2011. The relevant policy provision “covered injury or damage that…happens while this agreement is in effect.”
The court found that the malicious prosecution claim did not accrue until the underlying conviction was vacated and the state elected not to retry the accused, holding that any policies in effect before the exoneration could be triggered—in effect, applying a continuous trigger of coverage. The court emphasized that the policy was an “injury-based policy” as opposed to an “act-based” or “occurrence-based” policy; and concluded that a plaintiff suffers a continuous and ongoing injury every day he is imprisoned, and that a lay person purchasing an insurance policy would understand that incarceration is a continuing injury.
Similarly, in St. Paul Guardian, the 6th Circuit, applying Kentucky law, adopted a continuous trigger of coverage for malicious prosecution claims. In that case, the City of Newport, Kentucky, was insured via three consecutive one-year insurance policies with identical LEL provisions. The LEL provision provided coverage for “amounts any protected person is legally required to pay as damages for covered injury or damage that results from law enforcement activities or operations by or for you; happens while this agreement is in effect; and is caused by a wrongful act that is committed while conducting law enforcement operations.”
The policies defined “injury or damage” as “bodily injury, personal injury, or property damage.” The policies defined “personal injury” as any “injury, other than bodily injury, caused by any of the following wrongful acts [including]…[m]alicious prosecution.”
The 6th Circuit held that the insurer was obligated to defend any claim in which covered injuries occurred while the policies were in effect, regardless of when the wrongful causal act occurred. Like the Ferguson court, the 6th Circuit emphasized that the policies at issue applied an injury-based trigger of coverage, not an act-based trigger. The 6th Circuit pointed to the fact that the temporal requirement in the policy—that the injury or damage happen while the agreement is in effect—only applied to injury, not the LEL provisions’ other requirements.
The 6th Circuit disagreed with other decisions’ presentation of a malicious injury as “dichotomy: either the injury occurs at the time of the commencement of the prosecution or upon exoneration.” The 6th Circuit held that the claimant’s injuries were continuous—that is, they happened repeatedly during the relevant coverage period. The court reasoned that to hold that the injuries caused by the malicious prosecution happened only when the malicious prosecution begins came close to rewriting the policies as containing an act-based trigger.
Reconciling With Other Decisions
Ferguson and St. Paul Guardian attempt to distinguish their holdings from other decisions based on policy language. Many decisions holding that a malicious prosecution claim occurred only at the time of the prosecution involved occurrence-based, rather than, injury-based, policies. For example, last year, in Sanders v. Illinois Union Ins. Co., the Illinois Supreme Court, in holding that a malicious prosecution claim occurred at the time of the prosecution, explicitly stated that the policy’s classification as an occurrence-based policy “weighs heavily into our decision.” By contrast, Ferguson and St. Paul Guardian focused heavily on their conclusion that the policies at issue were injury-based policies.
In addition, the presence or absence of a “deemer clause” played a role in Ferguson and St. Paul Guardian. Deemer clauses typically state that all forms of specified damage rising out of the same wrongful act are deemed to occur at the time of the wrongful act. St. Paul Guardian reasoned that inclusion of such a provision in the policy with respect to property damage, but not personal injury damage, provided further justification for a continuous trigger. Ferguson held that the absence of a deemer clause distinguished that case with another Missouri case.
However, it is not easy to distinguish the cases based on policy wording alone. Policies do not always fit easily into “injury-based” or “occurrence-based” classifications, and sometimes courts make no distinction between the two. Nor are deemer clauses always considered dispositive.
It is unclear if Ferguson and St. Paul Guardian represent the beginning of a new trend. It is difficult to explain the different results based on policy language alone. What is clear, however, is that malicious prosecution is not settled, and this area will continue to develop, especially if DNA evidence and other scientific advances lead to increased malicious prosecution claims.