MALICIOUS PROSECUTION CLAIMS: RECENT DEVELOPMENTS AS TO WHEN COVERAGE IS TRIGGERED Presented and Prepared by: John P. Heil, Jr. jheil@heylroyster.com Peoria, Illinois 309.676.0400 Heyl, Royster, Voelker & Allen PEORIA CHICAGO EDWARDSVILLE ROCKFORD SPRINGFIELD URBANA 2015 Heyl, Royster, Voelker & Allen D-1
MALICIOUS PROSECUTION CLAIMS: RECENT DEVELOPMENTS AS TO WHEN COVERAGE IS TRIGGERED I. BACKGROUND... D-3 II. ST. PAUL FIRE & MARINE INS. CO. V. CITY OF ZION... D-3 III. INDIANA HARBOR INS. CO. V. CITY OF WAUKEGAN... D-5 IV. CONCLUSION... D-6 The cases and materials presented here are in summary and outline form. To be certain of their applicability and use for specific claims, we recommend the entire opinions and statutes be read and counsel consulted. D-2
MALICIOUS PROSECUTION CLAIMS: RECENT DEVELOPMENTS AS TO WHEN COVERAGE IS TRIGGERED Two recent decisions by the Illinois Appellate Court, St. Paul Fire & Marine Ins. Co. v. City of Zion, 2014 IL App (2d) 131312 and Indian Harbor Ins. Co. v. City of Waukegan, 2015 IL App (2d) 140293, may have a profound effect upon how local units of government and their employees are insured against claims relating to law enforcement activities. The central question addressed by both decisions was whether malicious prosecution claims accrue for insurance coverage purposes at the time the alleged malicious prosecution was commenced or at the time it was terminated in favor of the accused. As written, the insurance policies at issue dictated that the action accrued when the alleged malicious prosecutions were commenced. From a practical perspective, this means that certain law enforcement liability policies may be found to provide coverage in lawsuits commenced many years even decades after their expiration. I. BACKGROUND The tort of malicious prosecution in Illinois is routinely alleged in both state and federal court. 1 The elements of a malicious prosecution are: 1) the commencement or continuation of an original criminal or civil judicial proceeding by the defendant; 2) the termination of the proceeding in favor of the plaintiff; 3) the absence of probable cause for the proceeding; 4) the presence of malice; and 5) damages. Swick v. Liautaud, 169 Ill. 2d 504, 512 (1996). The failure to establish any one of these elements precludes recovery. Gauger v. Hendle, 2011 IL App (2d) 100316, 99. With respect to the second element, a malicious prosecution claim cannot be predicated on underlying criminal proceedings that were terminated in any manner not indicative of the innocence of the accused. Swick, 169 Ill. 2d at 512 (citing Joiner v. Benton Comm. Bank, 82 Ill. 2d 40, 45 (1980)). The mere abandonment of a prosecution without some showing of actual innocence does not satisfy this requirement. Swick, 169 Ill. 2d at 513. II. ST. PAUL FIRE & MARINE INS. CO. V. CITY OF ZION The prosecution and subsequent release of an individual named Jerry Hobbs III formed the underlying basis of the St. Paul Fire case. St. Paul Fire & Marine, 2014 IL App (2d) 131312, 3. Hobbs was arrested and charged with murdering his daughter and her friend in 2005. Id. 3-4. 1 State law malicious prosecution claims are frequently added to federal Section 1983 suits because, pursuant to Newsome v. McCabe, 256 F.3d 747 (7th Cir. 2001), plaintiffs may not bring malicious prosecution claims predicated upon the due process clause of the Fourteenth Amendment. See also Llovet v. City of Chicago, 761 F.3d 759, 762 (7th Cir. 2014) (Illinois malicious prosecution remedy was adequate to provide the plaintiff with all the due process to which he was entitled ). D-3
He spent five years in jail awaiting trial but, after DNA evidence exonerated him, the charges were dropped in 2010. Id. Following his release from custody, Hobbs filed a federal civil rights action against the City of Zion, the arresting police officer and a number of other defendants. St. Paul Fire & Marine, 2014 IL App (2d) 131312, 3. (citing Hobbs v. Cappelluti, 899 F. Supp. 2d 738, 752 (N.D. Ill. 2012)). In addition to counts alleging constitutional deprivations, Hobbs complaint contained a state law claim for malicious prosecution. St. Paul Fire & Marine, 2014 IL App (2d) 131312, 3. After Hobbs filed his federal lawsuit, St. Paul filed a declaratory judgment action in the Circuit Court of Lake County against Hobbs, Zion, the arresting officer and others. Id. 4. St. Paul s complaint stated that it issued a series of insurance policies to Zion encompassing the period of December 1, 2006 to December 5, 2010. Those policies included coverage for law enforcement liability. Id. St. Paul alleged that, although the dismissal of the murder charges against Hobbs occurred during the coverage period, those charges were initiated before the coverage period. Id. It thus sought a declaration that Hobbs malicious prosecution claim did not trigger coverage because the occurrence triggering coverage of a malicious-prosecution claim is the commencement of the wrongful prosecution, not its termination in favor of the accused. Id. The Illinois County Risk Management Trust (ICRMT), which insured Zion at the time the charges were filed, intervened in the suit and argued that the occurrence triggering coverage was the termination of the prosecution in Hobbs favor. Id. 5. The trial court disagreed, ruling at summary judgment that insurance coverage was triggered by the initiation of the prosecution not its termination. Id. 6. On appeal, Hobbs and ICMRT argued that, because termination of a prosecution in favor of the accused is the final element necessary to complete the tort of malicious prosecution, there can be no claim for which an insurance policy can provide coverage until that element is satisfied. Id. 8. In other words, they argued, there was no malicious prosecution until such time as the prosecution elected to drop the murder charges against Hobbs. Id. A court s primary task in construing an insurance policy is to ascertain the intent of the parties as expressed in their agreement. Id. 10 (citing Pekin Ins. Co. v. Wilson, 237 Ill. 2d 446, 455 (2010)). Consistent with this principle, the appellate court examined the law enforcement liability section of the St. Paul policy in detail. St. Paul Fire & Marine, 2014 IL App (2d) 131312, 12-14. The policy language stated, in pertinent part, that St. Paul agreed to do the following: pay amounts any protected person is legally required to pay as damages for covered injury or damage that (1) results from law enforcement activities or operations by or for you, (2) happens while this agreement is in effect, and (3) is caused by a wrongful act that is committed while conducting law enforcement activities or operations. Id. 12. The policy defined an [i]njury or damage as bodily injury, personal injury, or property damage; defined a [p]ersonal injury, in pertinent part, as injury... caused by... [m]alicious prosecution; and defined a [w]rongful act as any act, error, or omission. Id. D-4
Pointing to the use of the words malicious prosecution within the policy, Hobbs and ICMRT argued that coverage can only be triggered once all the elements of malicious prosecution including the favorable termination of that prosecution are in place. Id. 13. Since Illinois precedent was scarce on this point, the appellate court examined case law from around the country. It determined that the majority of courts addressing the issue concluded that the commencement of a malicious prosecution is the event which triggers insurance coverage. Id. 19-22 (citing City of Erie v. Guaranty Nat. Ins. Co., 109 F.3d 156, 160 (3d Cir. 1997) ( [T]he clear majority of courts have held the tort occurs when the underlying criminal charges are filed ); Muller Fuel Oil Co. v. Insurance Co. of North America, 95 N.J. Super. 564, 232 A.2d 168 (N.J. Super. Ct. App. Div. 1967) (damage flows immediately from the tortious act of filing a criminal complaint with malice and without probable cause). Consistent with the majority view, the appellate court found that the Hobbs/ICMRT argument misconstrued the plain language of the policy. St. Paul Fire & Marine, 2014 IL App (2d) 131312, 14. According to the court, the language of the law enforcement liability section dictates that coverage only exists if the injury caused by malicious prosecution happens while the policy is in effect. Id. In other words, the triggering moment is not when all of the common law elements of malicious prosecution are established; rather, it is when the injury happens. Id. The injury is sustained when the prosecution files a criminal complaint with malice and without probable cause. Id. 23. On the other hand, the favorable termination of the prosecution, far from causing injury itself, marks the beginning of the judicial system s remediation of the wrong committed. Id. 23, 25 (internal quotations omitted). As had other jurisdictions, the court found it difficult to see how a criminal defendant s release from prison can be described as an injury in any sense of the word. Id. 23. (internal bracketing omitted). In light of its ruling, the court warned that injury resulting from malicious prosecution often precedes accrual of the cause of action by a number of years, or even decades in some cases. Id. 27. It further cautioned, though, that it was the specific language of the St. Paul policy that warranted this result. It express[ed] no opinion regarding which occurrence would trigger coverage if a policy were to require the offense of malicious prosecution to be committed during the policy period, rather than, as here, requiring the injury caused by the prosecution to happen during the policy period. Id. 34. III. INDIANA HARBOR INS. CO. V. CITY OF WAUKEGAN In Indiana Harbor Ins. Co. v. City of Waukegan, 2015 IL App (2d) 140293, decided on March 6, 2015, the Second District Appellate Court again considered a nearly identical issue. In this case, Juan A. Rivera, Jr. was wrongfully convicted of rape and murder and imprisoned for 20 years before DNA evidence resulted in his 2011 exoneration. Indiana Harbor, 2015 IL App (2d) 140293, 3. Rivera subsequently filed a federal civil rights action against the City of Waukegan and six former police officers, including a state law claim of malicious prosecution. Id. D-5
Indiana Harbor was the insurer for the city and the officers at the time of Rivera s exoneration. The relevant law enforcement liability policies contained language stating that Indiana Harbor would pay on behalf of the insured(s) all damages resulting from a wrongful act(s), which arise out of... law enforcement activities. The wrongful act(s) must occur during the policy period and within the policy territory. Id. 4. A wrongful act was defined by the policies, in part, as a personal injury, and a personal injury was defined, in part, as a malicious prosecution. Id. As in the St. Paul Fire case, a declaratory judgment action ensued. Id. 5. Indiana Harbor asserted that none of Rivera s claims were covered by its policies because all of the alleged wrongful acts occurred 20 years prior to the policy periods, at the time Rivera was arrested and charged. Id. The city and the officers, on the other hand, argued that coverage for the malicious prosecution claim was triggered by termination of the prosecution in Rivera s favor. Id. 6. The trial court granted Indiana Harbor s motion for judgment on the pleadings. Id. 8. The declaratory judgment defendants (Rivera, the city and the police officers) timely appealed. Id. 9. Before the appellate court, the defendants arguments were the same as those raised in St. Paul Fire: that coverage is triggered at the time of termination [of the prosecution], because that is the final element for the accrual of the tort. Id. 14. The defendants were not aware of the failure of that line of reasoning in St. Paul Fire because the St. Paul Fire opinion was issued after briefing was completed in this case. Id. 17. The Indiana Harbor court reviewed in detail the principals set forth in St. Paul Fire. Id. 17-26. It then turned its attention to the task of construing the two insurance policies at issue. Id. 29-30. The court found that, as in St. Paul Fire, the policies focused on wrongful acts resulting in injury, rather than the satisfaction of the elements of the common law tort. Stated another way, the policies do not equate a wrongful act with a completed cause of action. Id. 32. The court also noted that the policies were occurrence-based, meaning that coverage was triggered by an act or injury occurring during the policy period. Id. If favorable termination of the prosecution were regarded as the triggering event, the court reasoned, [t]his would change an occurrencebased policy into something similar to a claims-made policy; the policy would cover prior acts or omissions that merely happen to accrue as a cause of action while the policy is in effect. Id. 33. The court thus found that insurance coverage under the Indiana Harbor policies was not triggered by Rivera s malicious prosecution claim. Id. 50. IV. CONCLUSION These cases set up a paradox for the insurance industry. On the one hand, a criminal defendant may not bring a malicious prosecution action in Illinois until such time as the prosecution is terminated in his or her favor. Such a termination can occur at any time 24 hours or 24 years after its initiation. On the other hand, the courts now view the triggering event for enforcement liability coverage as the conduct involved in initiating the alleged malicious prosecution, since D-6
that conduct is what causes the injury. In light of these two opposing forces, insurers may very well be surprised by claims arising years, or even decades, after the end of the policy period. The aforementioned rulings resulted from the language of the law enforcement liability policies themselves. The policies focused on wrongful acts, not the fulfillment of the elements of the tort. As alluded to in St. Paul Fire, it is conceivable that policy language requiring the offense of malicious prosecution to be committed during the policy period would warrant a different result. In the absence of such explicit language, it is advisable for insurers and their customers to retain their old policies for a very long time. D-7
John P. Heil, Jr. - Partner John focuses his practice on complex civil rights litigation, commercial litigation and the defense of catastrophic tort actions. John also defends professional liability actions directed at attorneys, federal "whistle-blower" suits brought against publicly funded medical institutions, and personal injury claims brought against individuals and their employers. John is a Vice-Chair of the firm's Business and Commercial Litigation Practice, Chair of the firm's Drone Law Practice, and the head of the firm's Mentoring Program. John's civil rights practice involves the defense of federal Section 1983 actions and associated state law claims leveled against members of the law enforcement community and other public officials. In this context John routinely defends allegations of false arrest, excessive force, deliberate indifference and denial of due process of law. John is also heavily involved in commercial litigation, including allegations of breach of contract, fraud and deceptive business practices, on behalf of large and small businesses and their employees throughout the state. John joined Heyl Royster in 2007 after serving for eleven years as a trial attorney with the Cook County State's Attorney's Office. During his years as a prosecutor, he prepared and argued hundreds of motions, over one hundred bench trials and eighteen felony jury trials. As a member of the Civil Actions Bureau, John defended Cook County, Illinois, its elected officials and employees in state and federal court. John was part of the team charged with defending the elected State's Attorney and his Assistants in several high profile federal civil rights actions in the Northern District of Illinois. He received his J.D., with Honors, from Chicago-Kent College of Law and a B.S., magna cum laude, from Bradley University. Publications "Civil Rights Update: The Seventh Circuit's Footnotes Question the Failure to Raise Available Immunities," Illinois Defense Counsel Quarterly (2014) "Accrual of Deliberate Indifference Claims Premised on Medical Treatment Errors," Illinois Defense Counsel Quarterly (2013) "To Be or Not To Be: A State Entity Intergovernmental Police Task Force Is Entitled to Eleventh Amendment Immunity," Illinois Defense Counsel Quarterly (2012) "Mental Illness, Extreme Danger Creation, and the Denial of Qualified Immunity," Illinois Defense Counsel Quarterly (2012) "Prosecutor's Office Not Subject to Section 1983 'Failure to Train' Liability in the Absence of a Demonstrated Pattern of Similar Brady Violations," Illinois Defense Counsel Quarterly (2012) "No Matter How Egregious, Bad Acts Do Not Spawn Section 1983 Liability Unless Performed Under Color of State Law," Illinois Defense Counsel Quarterly (2011) "Your Qualified Immunity Defense Was Denied at Summary Judgment. Will the Court of Appeals Have Jurisdiction Over Your Interlocutory Appeal?" Illinois Defense Counsel Quarterly (2010) "The Supreme Court Abandons an Inflexible Application of the Saucier Two-Step," Illinois Defense Counsel Quarterly (2009) "Defending Governmental Entities in Section 1983 Claims," IDC Fall Conference (2009) "Do Not Forget About the Law Enforcement Investigatory Privilege," Illinois Defense Counsel Quarterly (2008) "Rule 41(a) Voluntary Dismissal in Federal Court Takes Effect Immediately Upon Filing, Not When Docketed," Illinois Defense Counsel Quarterly (2008) Public Speaking Medical Cannabis: A Primer For Employers and Governmental Entities Heyl Royster Lunch & Learn Seminar/Webinar (2014) The Americans with Disabilities Act (ADA) and Accommodations Basics Heyl Royster Quarterly Business & Commercial Litigation Seminar (2013) D-8 Learn more about our speakers at www.heylroyster.com
Governmental Liability and Immunities ILSAAP Conference for Newly Elected State s Attorneys (2013) The Personnel Records Review Act: Your Obligations Under Illinois Law Heyl Royster Quarterly Business & Commercial Litigation Seminar (2011) Liquor Liability: Social Hosts & Other Issues Heyl Royster's 26th Annual Claims Handling Seminar (2011) Employer Provided Technology: Potential Liability Heyl Royster Quarterly Business & Commercial Litigation Seminar (2011) Court Admissions State Courts of Illinois United States District Court, Central, Southern and Northern (Trial Counsel) Districts of Illinois United States Supreme Court Education Juris Doctor (with honors), Chicago-Kent College of Law, 1996 Bachelor of Science-Political Science and History (magna cum laude), Bradley University, 1993 Professional Recognition Martindale-Hubbell AV Preeminent Professional Associations Illinois State Bar Association Peoria County Bar Association, Board of Directors; Chair, Public Relations Committee Federal Bar Association Illinois Association of Defense Trial Counsel Abraham Lincoln American Inn of Court D-9 Learn more about our speakers at www.heylroyster.com