Illinois Court Holds Exoneration During Policy Period Does Not Trigger Malicious Prosecution Coverage

In First Mercury Insurance Company v. Ciolino, 2018 IL App (1st) 171532, the First District of the Illinois Appellate Court held that the exoneration of an underlying claimant during a policy period does not trigger personal injury coverage for malicious prosecution. The decision affirmed the judgment of the Circuit Court of Cook County, which held that the insurer did not have a duty to defend its insured for a malicious prosecution claim based on offensive conduct that took place more than a dozen years before the relevant policy period.

The plaintiff in the underlying lawsuit, Alstory Simon, alleged that the insured, a private investigator, conspired in 1999 with a professor affiliated with Northwestern University’s Innocence Project to frame Simon for a 1982 double homicide in order to secure the release of the real killer, who had been previously convicted. Simon specifically alleged that in February 1999, the insured illegally impersonated a police officer to enter Simon’s home and obtained a false confession from Simon through threats, false evidence and “other illegal tactics.” In March 1999, Simon was indicted for murder based on the allegedly false evidence obtained by the insured, and in September 1999 he pleaded guilty to the murder of one of the victims and to the voluntary manslaughter of the other victim. Fourteen years later, the Cook County State’s attorney re-opened its investigation of the underlying homicide, and in October 2014, the State’s Attorney’s office requested Simon’s exoneration. Simon was released the same day. Simon filed suit against Northwestern and the insured in February 2015.

The insured tendered Simon’s complaint to its general liability insurer, First Mercury, under a 2014-2015 policy that was in effect at the time of Simon’s exoneration. The First Mercury policy covered suits seeking damages for “personal injury,” including malicious prosecution, caused by an “offense” committed during the policy period. The policy did not define the term “offense.” First Mercury disclaimed coverage on grounds that the underlying lawsuit did not allege an “offense” during its policy period, as all of the insured’s alleged wrongful conduct occurred in 1999. The insured countered that the “offense” did not occur until Simon was exonerated during the First Mercury policy period because, under Illinois law, a claim for malicious prosecution does not accrue until the plaintiff is exonerated.

The Circuit Court agreed with First Mercury, and the Appellate Court affirmed. The Appellate Court reasoned that the “straightforward reading” of the term “offense” mandated that coverage was dependent on whether the insured’s offensive conduct was committed during the policy period, not whether the underlying cause of action accrued during the policy period.

The insured’s argument had relied on the Seventh Circuit’s 2012 decision in American Safety Insurance Co. v. City of Waukegan, 678 F.3d 475, which held that an underlying claimant’s exoneration was an “occurrence” that triggered coverage. The First District of the Appellate Court held that American Safety conflicted with three subsequent Illinois appellate decisions from other districts—St. Paul Fire & Marine Insurance Co. v. City of Zion, 2014 Il App (2d) 131312, Indian Harbor Insurance Co. v. City of Waukegan, 2015 IL App (2d) 140293, and County of McLean v. States Self-Insurers Risk Retention Group, Inc., 2015 IL App (4th) 140628—all holding that exoneration was not a trigger of coverage under varying policy language. As such, the Appellate Court held that the Seventh Circuit’s decision in American Safety was no longer persuasive authority.