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
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
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.