An Illinois Appellate Court established a new rule for when malicious prosecution occurs and triggers coverage under a liability policy. In Sanders v. Illinois Union Insurance Company, the court determined that the triggering event for malicious prosecution coverage is the claimant’s exoneration, rather than the initiation of the alleged malicious prosecution. The rule established in Sanders is in direct contrast with a number of Illinois decisions, including several in the past few years that had held that the commencement of the malicious prosecution was the proper trigger of coverage.
The coverage dispute arose from Rodell Sanders’ malicious prosecution claim against the City of Chicago Heights, which alleged that members of Chicago Heights’ police department manipulated and coerced false witness identifications, withheld exculpatory evidence and made false statements to prosecutors in connection with a December 1993 shooting. Sanders alleged that he was wrongly convicted of murder, attempted murder, and armed robbery. Sanders’ convictions ultimately were vacated and he was acquitted of the crimes after a retrial in 2014.
Chicago Heights sought coverage for Sanders’ claim under its policies in effect during 2014. However, the insurers denied coverage. After a $15 million settlement was reached and Chicago Heights’ claim for indemnity coverage under the 2014 policies was assigned to Sanders, Sanders and Chicago Heights brought a declaratory judgment action against the insurers. The insurers moved to dismiss, arguing that the policies did not provide coverage because the trigger of coverage for the malicious prosecution claim was the allegedly wrongful filing of criminal charges against Sanders, which took place before the insurers’ policies went into effect. Sanders and Chicago Heights responded that the proper trigger was not the filing of the charges, but the completed tort of malicious prosecution, which occurred when Sanders was exonerated in 2014. The trial court sided with the insurers and dismissed Sanders and Chicago Heights’ claims.
The appellate court reversed after concluding that the policies were triggered upon the completion of the tort of malicious prosecution. The appellate court held that the term “offense,” as it related to malicious prosecution, referred to the completed legal cause of action of malicious prosecution. Importantly, the offense of malicious prosecution includes five elements, one of which requires the termination of the original proceeding in favor of the plaintiff. The appellate court rejected calls by the insurers to follow a line of Illinois precedent stating that the triggering event for a claim of malicious prosecution is when the alleged malicious prosecution was initiated. The appellate court refused to follow the prior decisions, some of which involved different policy wording, by flatly rejecting their reasoning.
Because this decision runs counter to several recent Illinois decisions as well as the majority of case law from other jurisdictions, the decision is an outlier. However, further developments in this area should be monitored to see if the appellate court’s decision signals a trend towards embracing the new approach to trigger of coverage for malicious prosecution claim in Illinois.