Insurance Coverage for Wrongful Incarceration Claims in Ohio

Over the past 18 months, we have examined numerous states’ approaches to insurance coverage for underlying claims of wrongful incarceration and malicious prosecution. See here, here, here and here.

Last summer, the Sixth Circuit Court of Appeals, interpreting Ohio law, weighed in on this issue. Selective Ins. Co. v. RLI Ins. Co., 2017 U.S. App. LEXIS 16327 (6th Cir. Aug. 24, 2017). The Sixth Circuit ruled that the district court erred in finding an excess insurer liable for a settlement of an underlying malicious prosecution claim arising out of a claimant’s wrongful conviction. The court concluded that coverage was not triggered because the claim did not occur until several months after the policy period expired, when police withheld new exculpatory evidence from the wrongfully convicted claimant and there was no longer probable cause for the claimant’s arrest and prosecution.

In Selective, “Insurer A” issued an excess policy to the City of Barberton (“City”) from June 29, 1997 to June 29, 1998, and “Insurer B” issued an excess policy to the City from June 29, 1998 to June 29, 1999. The underlying claimant, who was exonerated of rape and murder based on DNA evidence after spending several years in jail, sued the City and its police officers, alleging violations of state law and his federal constitutional rights. All claims against the City were dismissed. The surviving claims against the individual officers included a § 1983 claim for a violation of due process based on the officers’ failure to disclose exculpatory evidence, and state law claims of malicious prosecution and loss of consortium. Specifically, the failure to disclose exculpatory evidence, i.e., the Brady violation, involved an inter-departmental memorandum that a police officer drafted identifying a suspect in two other aggravated robberies as the likely suspect in the claimant’s rape and murder case. The civil case settled for $5.25 million, to which Insurer B contributed $3.25 million. Insurer A denied coverage, claiming that the malicious prosecution of the claimant did not “occur” during its policy period.

As part of the settlement, Insurer B took an assignment of rights from the insured and filed suit against Insurer A for a declaration of coverage under Insurer A’s policy. Insurer B argued on summary judgment that the malicious prosecution of the claimant “occurred” when the charges were filed against the claimant on June 11, 1998. As a result, coverage was triggered under Insurer A’s policy, whose policy period ended on June 29, 1998. Insurer A also moved for summary judgment, arguing that the tort of malicious prosecution occurred at the time of the Brady violation, which occurred in January 1999, six months after its policy expired.

The district court disagreed with Insurer A, stating that although the January 1999 concealment of exculpatory evidence was enough on its own for the claimant’s malicious prosecution claim, there was also evidence of wrongdoing by the police officers during the earlier policy period, such as the dismissal of alibi witnesses and a DNA mismatch. Therefore, the claimant may have had a viable malicious prosecution claim even prior to the alleged Brady violation, during the first policy period. The district court then relied on what it called the “majority rule” from other jurisdictions as to trigger of coverage for malicious prosecution claims, holding that coverage for such claims is triggered at the time that the underlying charges are filed. Because the claimant was first arrested during the first policy period, the court ruled that Insurer A owed coverage and had to reimburse Insurer B.

On appeal to the Sixth Circuit, Insurer A again argued that it was not liable for the excess liability claim because no tort occurred during the policy. The Sixth Circuit agreed, concluding that the district court erred in finding Insurer A liable for the settlement. According to the court, because there was probable cause to prosecute and detain the claimant until exculpatory evidence came into existence, the officers’ actions before the exculpatory evidence came into existence could not have caused a covered loss under the RLI policy. The court explained that under Ohio law, malicious prosecution requires the instituting or continuing of prosecution without probable cause. In Ohio, a claimant can recover for a prosecution that was not malicious at its inception, but became malicious later, when it continued without probable cause. The key issue is whether there was probable cause and when such probable cause disappeared. The court determined that in the underlying matter, the City and police officers had probable cause until the alleged Brady violation, such that the malicious prosecution and the deprivation of due process could only have occurred in January 1999, after expiration of Insurer A’s policy period. Therefore, the court concluded that under the plain language of the policy, the police officers’ liability to claimant was not covered under Insurer A’s policy.

The Sixth Circuit distinguished the district court’s “majority rule” based upon the policy language at issue in Insurer A’s policy and because none of the cases relied upon dealt with a situation like claimant’s case, “where the injury—i.e., the filing of charges—occurred before any tortious activity, and therefore could not have been caused by the tortious activity.”

This case demonstrates the importance of carefully analyzing the specific elements of a malicious prosecution claim in a particular jurisdiction, as well as the specific policy language at issue. Such careful analysis translates to a predictable conclusion in trigger of coverage for wrongful incarceration cases.

The next installment will review the law in Mississippi. In the meantime, if there are any questions about other jurisdictions or jurisdictions already discussed, please contact us ( or and we can address your questions directly.

Insurance Coverage for Malicious Prosecution Claims in Georgia

Until recently, Georgia has had no case law addressing insurance coverage trigger for a malicious prosecution claim. But in 2016, the Georgia Court of Appeals finally rendered an opinion addressing this specific issue, with a twist in that the claimant was arrested during the policy period but was charged and prosecuted after the policy expired.

In Zook v. Arch Specialty Ins. Co., 784 S.E.2d 119 (2016), the claimant was arrested on May 21, 2009 after an incident at the insured’s nightclub. The claimant was charged with simple battery on March 1, 2010 and was prosecuted thereafter. After the jury found the claimant not guilty of simple battery, he commenced a lawsuit against the nightclub and its employees for false imprisonment, battery, negligence, malicious prosecution and malicious arrest. While that action was pending, the claimant filed a declaratory judgment action against the same defendants and Arch Specialty Insurance Company (“Arch”), which issued a CGL policy (“Policy”) to the nightclub from June 27, 2008 to June 27, 2009. The policy provided coverage for injury arising out of malicious prosecution if the offense was committed during the policy period. Arch took the position that the “offense” took place on March 1, 2010, when the claimant was charged with the crime for which he was prosecuted (simple battery). Because the Policy expired on June 27, 2009, Arch argued that no offense took place during the policy period.  The trial court agreed and granted summary judgment to Arch.

The Georgia Court of Appeals, however, disagreed. The Court noted that Georgia appellate courts had not yet addressed the issue of when a malicious prosecution claim arises for purposes of triggering insurance coverage. The Court of Appeals acknowledged that the majority of other jurisdictions have held that “coverage is triggered when the insured sets in motion the legal machinery of the state.” Id. at 674. However, the Court disagreed with Arch’s interpretation of the majority holding because Arch focused on when the claimant was charged and relied on case law that dealt with a scenario in which the claimant was arrested and charged on the same date.

The Georgia Court of Appeals held that in this case, the arrest is the “bad act” of the insured that set the legal machinery of the state in action.  Id. at 675. In other words, the arrest was the “offense” that invoked the judicial process against the claimant, and the arrest took place during the Arch policy period. The Court held,

From the standpoint of a reasonable person in the position of the insured, policy coverage for injury arising from a malicious prosecution occurring during the policy period exists if the insured’s conduct in instituting such a prosecution took place during the covered period. For the foregoing reasons, we adopt the majority rule that when the contract does not specify, insurance coverage is triggered on a potential claim for malicious prosecution when the insured sets in motion the legal machinery of the state.

Id. at 675-6.

The analysis pertaining to the trigger of coverage for wrongful incarceration and malicious prosecution cases are becoming more intricate and detail-oriented as the courts throughout the country are exposed to different fact patterns. To the extent that the claimant is arrested and charged during different policy periods, it appears that the first event of the arrest will be considered as the event that triggers coverage.

The next installment will review the law in Ohio. In the meantime, if there are any questions about other jurisdictions or jurisdictions already discussed, please contact us ( or and we can address your questions directly.

The Scope of Continuous Trigger in Pennsylvania

The continuous trigger rule is well-known to those in the insurance industry. However, the scope of its application continues to evolve as new risks emerge. While the concept of continuous trigger generally came about to address long-tail environmental pollution and asbestos bodily injury claims, the courts that first implemented and adopted the rule were not facing claims based on sexual molestation, sports-related concussions, wrongful incarceration, large-scale construction defects, complex food recalls, etc.

Pennsylvania has long been a first manifestation state, meaning that only the policy on the risk when underlying bodily injury or property damage is first known or reasonably ascertainable must respond to a loss. The Pennsylvania Supreme Court adopted the continuous trigger rule in J.H. France, which involved coverage for asbestos bodily injury claims. J.H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d 502 (Pa. 1993). The continuous trigger rule, over time, has also been applied to pollution cases.

For that reason, the industry took great interest in the St. John case, decided at the end of 2014, in which the Pennsylvania Supreme Court rejected efforts by an insured to trigger four years of consecutive policies in connection with an underlying lawsuit alleging that the insured’s defective installation of a new plumbing system caused damage to a dairy farm. Pennsylvania Nat. Mut. Cas. Ins. Co. v. St. John, 106 A.3d 1 (Pa. 2014). Specifically, the insured installed the new plumbing system in 2003, the dairy farm’s cows suffered health problems and produced less milk starting in 2004, and the dairy farm owners discovered the cause – contaminated drinking water due to defects in the plumbing system – in 2006. The court ruled that the 2004 policy was the only triggered policy, but it made a few comments that raised eyebrows. The court noted that Pennsylvania follows the first manifestation rule, “with the lone exception of asbestos injury claims” and that “[o]ur holding in J.H. France remains an exception to the general rule under Pennsylvania jurisprudence that the first manifestation rule governs a trigger of coverage analysis for policies containing standard CGL language.”

The Pennsylvania Supreme Court’s strict application of the manifestation trigger, and its characterization of the exception being limited to asbestos claims, caused a ripple effect in non-asbestos related coverage actions such as pollution cases involving damage that occurs across multiple policy periods. While experience thus far has shown that trial courts are hesitant to apply St. John to limit coverage for pollution claims to a single policy year, the issue is still lingering in many cases. St. John most recently surfaced in the Penn State coverage action related to underlying claims brought against the school by victims of convicted child molester Jerry Sandusky. There, a Philadelphia trial court judge ruled that a victim’s continued sexual abuse over time does not justify application of the continuous trigger rule, and that Penn State could only access the policy during which the bodily injury to a particular victim first manifested. Pa. State Univ. v. Pa. Manufacturers’ Ass’n Ins. Co., 2016 Phila. Ct. Com. Pl. LEXIS 158 (May 4, 2016). Interestingly, the court stated that sexual abuse was different from “environmental pollution or asbestos coverage,” meaning that perhaps the court did not read St. John so literally.

Whether the court intended it or not, the sound bites in the St. John decision still have insurers and insureds paying close attention to the scope of the continuous trigger rule.

Insurance Coverage for Wrongful Incarceration Cases in New Jersey

The third jurisdiction we address pertaining to wrongful incarceration coverage issues is New Jersey, which has three relevant cases. New Jersey courts have held that for purposes of determining the existence of insurance coverage under a general liability policy, in the absence of any applicable exclusion, the triggering event occurs on the date when the underlying criminal complaint is filed against the claimant. However, when determining coverage for a municipal insured’s obligation to indemnify its employee for fees incurred in defending against criminal charges, as required by specific statutes, the triggering event is not the filing of criminal charges against the employee, but rather the acquittal or dismissal of those charges against the employee.

The first of the malicious prosecution cases is Muller Fuel Oil Co. v. Ins. Co. of North America, 232 A.2d 168 (N.J. Super. Ct. App. Div. 1967), in which the insured, Muller Fuel Oil Company (“Muller”), unsuccessfully filed a criminal complaint against Thomas Policastro (“Policastro”) for issuing a worthless check. Policastro was arrested in November 1961 and indicted in May 1962.  In December 1962, Muller purchased a CGL policy from Insurance Company of North America (“INA”). Thereafter, in March 1963, Policastro was acquitted of the criminal charges and quickly filed a malicious prosecution and false arrest suit against Muller.

Muller sought coverage from INA, claiming that Policastro’s lawsuit against it did not fully ripen until his acquittal in March 1963, and thus constituted an “occurrence” during INA’s policy period of December 1, 1962 to December 1, 1965. INA, on the other hand, denied coverage for Muller’s claim, contending that the criminal complaint that was the basis for Policastro’s malicious prosecution suit was filed by Muller prior to inception of the INA policy. Muller then sought a declaratory judgment that coverage existed under the policy.

On appeal from a New Jersey Superior Court ruling dismissing Muller’s complaint against INA, the Appellate Division affirmed the decision, finding that “[i]n a claim based on malicious prosecution the damage begins to flow from the very commencement of the tortious conduct – the making of the criminal complaint.” According to the Appellate Division, the allegedly tortious conduct and injury to the accused as a result of the malicious prosecution (arrest on November 1961) antedated the issuance of the policy (December 1, 1962) by more than year. As a result, there was no coverage under the INA policy.

The second malicious prosecution case is Paterson Tallow Co. v. Royal Globe Ins. Co. 89 N.J. 24, 444 A.2d 579 (1981). In Paterson, the New Jersey Supreme Court affirmed the judgment of the lower court that insurer Royal Globe Insurance Company (“Royal Globe”) was not obligated to defend the insured, Paterson Tallow Company (“Paterson”), because the complaint that resulted in the malicious prosecution action against Paterson was filed before the effective date of Royal Globe’s policy.

In Paterson, Paterson filed criminal charges in June 1969 against a former employee, James Brown (“Brown”), for theft. In October 1970, while the criminal charges were pending, Paterson purchased a CGL policy that provided coverage for bodily injury, property damage, and personal injury, including coverage for malicious prosecution. In March 1971, Brown was acquitted of all charges against him. Brown filed suit against Paterson in January 1977 alleging malicious prosecution, and Paterson tendered the claim to Royal Globe seeking coverage. Royal Globe denied coverage for the claim, in part, because “all the acts that were alleged to constitute malicious prosecution took place before the policy was issued in 1970.” In a subsequent declaratory judgment action, Paterson and Royal filed cross motions for summary judgment and Paterson asserted that it was entitled to coverage for the action because a crucial component of the malicious prosecution offense, specifically, termination of the criminal charges against Brown, occurred during Royal Globe’s policy period.

The trial court found the appellate court’s ruling in Muller (discussed above) dispositive and granted summary judgment in favor of Royal Globe. On appeal, the New Jersey Supreme Court held that “for the purpose of determining the existence of coverage under this type of policy, in the absence of any qualifying exclusion or exception the offense of malicious prosecution occurs on the date when the underlying [criminal] complaint is filed. Inasmuch as the [criminal complaint] in this case was filed before the effective date of the policy, we affirm the judgment of the Appellate Division denying coverage.”

The third case is slightly different in that it addressed coverage for an insured’s obligation to indemnify its employee for fees and costs the employee incurred defending against criminal charges against him that were ultimately found to be meritless. In Board of Education v. Utica Mut. Ins. Co., 798 A.2d 605 (N.J. 2002), the New Jersey Supreme Court was tasked with deciding whether it was the filing of criminal charges against an employee of a board of education, or the acquittal of dismissal of those charges, that triggered coverage under an insurance policy issued to satisfy the board’s statutory obligation to indemnify such employee. The trial court found that the triggering event was the acquittal or dismissal while the appellate court reversed and decided that the triggering event was the filing of criminal charges. On appeal, the New Jersey Supreme Court held that the triggering event is the acquittal or other disposition of the criminal charges in favor of the employee of the board of education.

This case involved a teacher, David Ford (“Ford”), employed by the Borough of Florham Park Board of Education (“Board”), who was arrested and charged with sexual assault and reckless endangerment of four of his students in June 1996. In March 1999, a jury acquitted Ford of all charges. Soon after, he demanded that the Board reimburse him nearly $500,000 in legal fees and expenses for successfully defending the criminal action pursuant to various New Jersey statutes that “…obligate a board of education to defray all costs incurred by an … employee of the board in defending criminal charges filed against the person whose charges: … (2) resulted in a final disposition in favor of such person.” The statute also authorized a board to purchase insurance to cover all such damages, losses and expenses the board may be obligated to pay.

The Board sought coverage from Selective Insurance Company (“Selective”) and Utica Mutual Insurance Company (“Utica”) for its indemnity obligation to Ford. At the time of Ford’s arrest, the Board was insured by Selective under a policy that provided coverage from July 1, 1993 to July 1, 1996. By endorsement, the Selective policy provided that “this Coverage Part shall conform to the terms of the New Jersey compiled statutes” discussed above. Utica insured the Board from July 1, 1996 to July 1, 1999, and contained a nearly identical endorsement provision as the Selective policy, incorporating the pertinent New Jersey statutes. Utica denied coverage to the Board because its policy was not in effect when Ford was criminally charged in June 1996. Selective denied coverage for any legal expenses that were incurred after its policy expired on July 1, 1996, and reserved the right to deny all coverage. The Board filed a declaratory judgment action against Selective and Utica.

The trigger issue was appealed to the New Jersey Supreme Court. The Court noted that both the Selective and Utica policies incorporated by reference the statutory language, which specified that an employee’s right to reimbursement accrues when “the criminal charges result in an acquittal or otherwise are dismissed.” The Court also noted that indemnification obligations generally accrue “only on an event fixing liability, rather than on preliminary events that eventually may lead to liability but have not yet occurred.” The Court held that the triggering event for coverage was the favorable disposition of all criminal charges against Ford. As a result, Utica’s policy was triggered since Ford incurred no reimbursable expenses prior to his acquittal. On the other hand, Selective had no coverage obligation as the Selective policy had expired by the time of Ford’s acquittal.

The Court distinguished its holding in Paterson and explained that when an insured seeks coverage related to its own conduct of initiating criminal charges against its employee, it is reasonable to use the conduct of the insured in filing the criminal charges as the “triggering event” to assess coverage for malicious prosecution. But in a statutory indemnification case, the “essence” of the claim is not the filing of the criminal charges.” Rather, the Board’s liability “is triggered by the event specified in the statutes, namely a final disposition of those charges in favor of the Board’s employee.”

In light of the cases discussed above, the New Jersey courts are fairly clear that the trigger of coverage in malicious prosecution and wrongful arrest cases is the filing of charges against the claimant. However, in cases involving coverage for statutory indemnification of fees and costs incurred in defending against a criminal prosecution case, the trigger of coverage is not filing of charges, but rather, acquittal of such charges. As is always the case, it is important to carefully review the applicable policy and understand the scope of coverage provided.

The next installment will review the law in Georgia. In the meantime, if there are any questions about another jurisdiction, please contact us ( or and we can address your questions directly.

Insurance Coverage for Wrongful Incarceration Cases in California

The second jurisdiction we will discuss pertaining to coverage issues arising out of claims for wrongful incarceration is California, which, like New York, has two pertinent decisions involving coverage for malicious prosecution cases. Unlike New York, however, the case law in California stems from civil cases, not criminal cases. Nonetheless, the Court of Appeal in California held that it makes no difference whether the case is civil or criminal in determining whether a claim for malicious prosecution implicates insurance coverage.

The first case is Harbor Insurance Company v. Central National Insurance Company, 165 Cal. App.3d 1029, 211 Cal. Rptr. 902 (1985), in which the insured, A.J. Industries, Inc. (“A.J.”) unsuccessfully prosecuted an action between 1971 and 1978 against its former president and chairman. When A.J. filed the action, it was insured by Zurich Insurance Company (“Zurich”) for a limit of $300,000 and by Harbor Insurance Company (“Harbor”) for $5,000,000. While the malicious action was pending (and until April 1, 1975), A.J. switched insurers and had primary insurance with Argonaut Insurance Company (“Argonaut”) and excess insurance with Midland Insurance Company (“Midland”).

On April 16, 1976, the former president and chairman filed an action against A.J. for malicious prosecution. By that point in time, A.J. was insured by Central National Insurance Company (“Central National”). A.J. nonetheless tendered its defense to Zurich.  Zurich accepted the tender and turned the matter for handling to Harbor, the concurrent excess carrier. Harbor defended the malicious prosecution action under reservation of rights, and also tendered the claim to Central National, Midland and Argonaut. After those insurers denied coverage, Harbor filed suit.

The issue addressed by the California Court of Appeal, Second Appellate District, was whether Argonaut’s or Midland’s policies provided coverage for the malicious prosecution lawsuit against A.J.

Argonaut’s policy provided coverage for damages because of “personal injury” sustained by any person arising out of an offense committed in the conduct of the named insured’s business.  The term “offense” included false arrest, detention or imprisonment, or malicious prosecution, if such offense is committed during the policy period. The Court of Appeal ruled that the “offense” of malicious prosecution is “committed” upon institution of the malicious action against the defendant. The court noted that the “gist of the tort is committed when the malicious action is commenced and the defendant is subjected to process or other injurious impact by the action.” In other words, “from both the tortfeasor’s and the victim’s standpoint the ‘offense’ is ‘committed’ upon initial prosecution of that action. At that point the tortfeasor has invoked the judicial process against the victim maliciously and without probable cause, and the victim has thereby suffered damage.” Because the malicious action was commenced before the Argonaut policy came into effect, the court held that there was no coverage under the policy.

The court rejected Harbor’s argument that the offense of malicious prosecution is a “continuing occurrence,” which is “committed” throughout the prosecution of the malicious action because it continues to cause damage until the action is terminated. The Court of Appeal noted that such an argument was a theoretical misunderstanding of the elements of the tort in that “[a]lthough continued proceedings after commencement of the action will increase and aggravate the defendant’s damages, the initial wrong and consequent harm have been committed upon commencement of the action and the initial impact thereof on the defendant.”

The Court then addressed the two Midland policies, one of which agreed to indemnify A.J. against such ultimate net loss in excess of the primary limits by reason of liability for damages because of personal injury caused by an occurrence. This excess policy defined “personal injury” as “injury arising out of false arrest, false imprisonment, wrongful eviction, detention, malicious prosecution, … which occurs during the policy period.” The Court of Appeal held that the definition of “personal injury” required the malicious prosecution to “occur” during the policy period. For the reasons discussed pertaining to the Argonaut policy, the Court of Appeal held that malicious prosecution did not “occur” during this Midland policy, so Midland had no obligations under the policy.

The second Midland policy agreed to indemnify A.J. for all sums that it became obligated to pay by reason of liability for damages on account of “personal injuries” caused by an “occurrence.” The term “personal injuries” was defined, in part, as malicious prosecution, and the term “occurrence” was defined as “an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the Insured.” In order to avoid a self-defeating construction of the policy that would render “personal injuries” being excluded from coverage, the court deemed as an oversight the use of the term “bodily injury” in the definition of “occurrence” and inserted “personal injuries” in the place of “bodily injury” in the definition.

So construed, however, the policy yet remains limited in coverage to “occurrences” which result in personal injury (here, i.e., malicious prosecution), or property damage, within the policy period. The upshot of this “occurrence” limitation is that the instant incident of malicious prosecution was not subject to this policy. As discussed above, A.J.’s malicious prosecution “occurred” before the policy term began, when the malicious action was commenced against [the former president and chairman] in 1971. The gist of the wrong then was inflicted and complete.

The Court found no coverage under this Midland policy.

The second California case is Zurich Ins. Co. v. Peterson, 188 Cal. App.3d 438, 232 Cal. Rptr. 807 (1986), which involved a lawsuit filed by Tri-Tool against its president to rescind an employment contract. When the complaint was filed, Tri-Tool was insured by Home Insurance Company (“Home”). The Home policy agreed to indemnify Tri-Tool for damages because of injury arising out of the offenses of false arrest, detention, or imprisonment, or malicious prosecution, if such offense is committed during the policy period.

In February of 1980, the Home policy was replaced by a primary policy issued by American Guarantee and Liability Insurance Company (“AGLIC”) and an excess policy issued by Zurich Insurance Company (“Zurich”). The AGLIC policy agreed to pay all sums that the insured becomes legally obligated to pay as damages because of “personal injury,” which, in turn, was defined as an “injury arising out of one or more of the following offenses committed during the policy period” and listed false arrest, detention, imprisonment or malicious prosecution as the offenses. The Zurich policy also provided coverage for personal injury, including “injury resulting from false arrest, detention or imprisonment, … malicious prosecution ….” The policy defined an “occurrence” of malicious prosecution as “an act or series of acts of the same or similar nature, committed during this policy period which causes such personal injury.”

The Court of Appeal, Third Appellate District, noted that a favorable termination of the malicious action might be a prerequisite to the filing a malicious prosecution action, but it was not determinative of coverage because the policies at issue did not contain any reference to a particular date. Rather, to implicate coverage, the policies required the act or offense of malicious prosecution to have been committed during the policy period. The court then reviewed the Harbor Insurance Company case and noted that the Harbor court rejected the continuing occurrence concept and determined that the critical date was the filing of the complaint. The Court ruled,

It makes little difference whether the state or an individual controls the maliciously prosecuted action: an individual is first injured upon the filing of a complaint with malice and without probable cause. While some of the adverse consequences to the injured party will depend on whether a criminal prosecution is begun or a civil suit prosecuted, in each case a party’s reputation is injured and legal expenses are incurred at the initiation of the malicious complaint. The fact that damages increase as the prosecution continues does not transform malicious prosecution into a continuing occurrence. We join the reasoned decisions of the majority in holding that for purposes of an insurance policy which measures coverage by the period within which the “offense is committed,” the tort of malicious prosecution occurs upon the filing of the complaint.

Because the policies issued by Zurich and American came into effect after the date Tri-Tool filed its complaint against the president, neither insurer had an obligation to defend or indemnify Tri-Tool.

The interesting thing about California is the interplay between wrongful incarceration cases and California Insurance Code Section 533 (“Section 533”), which states, in part, that an “insurer is not liable for a loss caused by the willful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured’s agents or others.” In short, Section 533 precludes insurance coverage, or indemnity, for a “willful act,” but Section 533 does not apply to the duty to defend or to vicarious liability.

In Downey Venture, et al. v. LMI Ins. Co., 66 Cal. App. 4th 478, 78 Cal. Rptr.2d 143 (1998), the California Court of Appeal, Second Appellate District, held that Section 533 precluded coverage for malicious prosecution, even though such coverage was expressly provided in the policy, because malice is an element for establishing a claim for malicious prosecution. The Court of Appeal noted that in California, “the commission of the tort of malicious prosecution requires a showing of an unsuccessful prosecution of a criminal or civil action, which any reasonable attorney would regard as totally and completely without merit, for the intentionally wrongful purpose of injuring another person.” Id. at 154. The Court of Appeal ultimately held that because the commission of the tort of malicious prosecution constitutes a willful act within the meaning of Section 533, LMI was not obligated to indemnify the insured for such claim.

Ultimately, under California law, an insurer may have a defense obligation in wrongful incarceration cases, but there is a good chance that the insurer will not have an indemnity obligation to the extent that the liability of the insured(s) is based on “willful acts” of malicious prosecution.

The next installment will review the law in New Jersey, a jurisdiction that may have the oldest case law pertaining to insurance coverage for malicious prosecution cases. Again, if there are any questions about another jurisdiction, please contact us ( or and we can address your questions directly.

Indiana Supreme Court Refuses to Hear Insured’s Challenge to Pro Rata Allocation Ruling

Indiana has traditionally been thought of as an “all sums” jurisdiction. Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049, 1060 (Ind. 2001) (“whether or not the damaging effects of an occurrence continue beyond the end of the policy period, if coverage is triggered by an occurrence, it is triggered for ‘all sums’ related to that occurrence.”) However, the Indiana Supreme Court – over the strident dissent of its Chief Justice and one other Justice of the five Justice court – recently refused to hear an appeal from an intermediate appellate court decision which applied pro rata allocation in an insurance coverage action involving long-tail toxic exposure claims asserted by former employees against the insured. Thomson Inc. v. Ins. Co. of N. Am., 2015 Ind. LEXIS 397 (Ind. May 15, 2015).

In Thomson, the insured was sued by former Taiwanese employees who were allegedly exposed to industrial solvents from 1970 through 1992. These employees claimed that this exposure caused cancer, or increased their risk of developing cancer in the future.  The insured sought defense and indemnity under commercial general liability policies issued to it between 1991 and 2007. The insured contended that an all sums allocation method applied under the Indiana Supreme Court’s holding in Dana. The trial court agreed and issued an “all sums” ruling.

The appellate court reversed the trial court’s allocation holding. The appellate court distinguished Dana based on differences in the applicable policy language. Specifically, the insuring agreements at issue in Dana required the insured to “indemnify the insured for all sums. . .” the insured became obligated to pay because of an occurrence. Id. at n. 3-4. In contrast, the insuring agreements in the Thomson policies required the insured to “pay those sums. . .” the insured became obligated to pay “during the policy period.” Id. at 1003. The Thomson court held that this different, “limiting” policy language merited a departure from Dana: “the plain meaning of the limiting phrases ‘those sums’ and ‘during the policy period’ and does not render any of the remaining language meaningless.” Id. at 1020. In other words, the Thomson insurers only were required to cover damages occurring during the policy period and not all damages resulting from any occurrence during the policy period.

However, the Thomson court did not provide any guidance to the trial court as to the proper pro rata allocation method: it did not indicate whether “time on the risk,” “years and limits,” or some other method was advisable. Rather, the court remanded the allocation issue to the trial court:

The trial court will be best situated to select (and customize, if necessary) the fairest method of apportioning liability among the insurers in light of the factual complexities of the case at the appropriate time. And for that reason, we believe that the trial court should be afforded broad discretion in selecting and applying an apportionment method.

Id. at 1022-23.

There is no “one-size-fits-all” approach to allocation in Indiana in light of Thomson. Rather, as the Supreme Court dissenters recognized, courts applying Indiana law must engage in careful scrutiny of policy language to determine proper allocation in long-tail exposure cases. See Thomson Inc. v. Ins. Co. of N. Am., 2015 Ind. LEXIS 397, *2 (Ind. May 15, 2015) (Rush, C.J., dissenting) (“We should not burden trial courts with that task [of determining allocation] based on policy language that is ambiguous at best.”)

Seventh Circuit Court Applies “Continuous” Trigger Theory To A First Party Property Claim

In Strauss v. Chubb Indem. Ins. Co., the Seventh Circuit U.S. Court of Appeals (applying Wisconsin law) declined to adopt the “manifestation” trigger theory in all first-party property insurance claims, and instead found that the policy terms unambiguously required application of a “continuous” trigger theory.

The insureds constructed a home in 1994.  They purchased insurance for the residence from a number of insurers from October 1994 to October 2005 (collectively, “the Chubb Defendants”).  Water infiltrated and damaged the home as the result of construction defects, but the damage was not discovered until 2010.  The Chubb Defendants denied the insureds’ request for coverage because the damage first manifested in 2010, well after the last of the Chubb Defendants’ one-year policies expired.  The Chubb Defendants’ maintained that a “manifestation trigger” applied to first-party property insurance, meaning that the insureds should seek coverage under the policy it had in place at the time it discovered the damage.  The Chubb Defendants also asserted that the claim was time barred under Wisconsin statutory law and a suit limitation clause.

The insureds filed suit within one year of their discovery of the damage caused by the water intrusion.  In cross-motions for summary judgment, the Chubb Defendants argued that public policy and case law from across the country supported application of a “manifestation” trigger.  The insurers also argued that the insureds filed suit too late, past either a statutory deadline or a time limit imposed by the policies.  The district court disagreed and concluded that the “continuous” trigger theory applied to the “occurrence-based” policies at issue.  Since the “continuous” trigger theory applied, the district court also found that the insureds’ claim was not time-barred.

The Seventh Circuit affirmed.   While acknowledging that jurisdictions across the country utilize the manifestation trigger in first-party claims, the court explained that no Wisconsin court had so held.  Rather, the court noted that in Miller v. Safeco Ins. Co of Am., 683 F.3d 805, 810-11 (7th Cir. 2012), the court had declined to adopt a bright-line rule requiring use of the manifestation trigger theory in all first-party property insurance coverage disputes.  Instead, the court looked to the policy language and its definition of “occurrence,” as “a loss or accident to which this insurance applies occurring within the policy period. Continuous or repeated exposure to substantially the same general conditions unless excluded is considered to be one occurrence.”  This language unambiguously contemplated a long-lasting occurrence that could give rise to a loss over an extended period of time.  The court dismissed public policy concerns raised by the Chubb Defendants that by not adopting a bright-line manifestation trigger, it created uncertainty for insurers because it allowed liability arising on stale policies.  Finally, because the loss was ongoing and occurred with each rainfall, the loss was continuous from the date of faulty construction until the damage manifested in October 2010 for purposes of the statute of limitations.

Arguably, the occurrence definition was designed to apply to the liability coverage part of the policy.  However, the first-party portion of the policy also referenced the word “occurrence,” so the court found it applicable in the first party context as well.

Asbestos Suits Against Employers Present New Risk for Employer’s Liability Insurers

Two asbestos hotbed jurisdictions, Pennsylvania and Illinois, have recently opened the door to long-tail occupational disease claims against employers in the tort system.  These decisions held that the exclusivity provisions of the applicable state workers’ compensation acts do not prohibit employees diagnosed with occupational diseases long after their retirement from suing their former employers in the tort system alongside the traditional panoply of asbestos defendants.  Employers and their employer’s liability insurers should be aware of this new risk and the issues it may present going forward.

In Pennsylvania – as in almost any other state – the Workers’ Compensation Act is and has been the exclusive means for an employee to recover from his or her employer for workplace-related injuries.  Certain enumerated “occupational diseases,” such as asbestosis, are included within the act’s ambit provided that they occur “within three hundred weeks after the last date of employment . . .” 77 P.S. § 411(2).  This 300-week provision had been interpreted as a statute of limitations and/or repose, closing the door on claimants’ recovery from employers when a latent disease manifests after 300 weeks.  Therefore, employees could not sue their employers in the tort system because of the workers’ compensation exclusivity provision, nor could they pursue workers’ compensation benefits because of the statute of repose.

say Images: Robert Biedermann/

Images: Robert Biedermann/

The Supreme Court of Pennsylvania abrogated this long-standing interpretation in Tooey v. AK Steel Corp., 81 A.3d 85 (Pa. 2013).  The court held that because the occupational disease claims manifesting outside the 300-week period are not covered by the act, the act’s exclusivity provision does not apply, and employees are free to sue their former employers in tort.  Similarly, in Illinois, the Workers’ Compensation Act and Workers’ Occupational Diseases Act contain exclusivity provisions that bar employees’ direct tort actions against employers for workplace injuries.  Under those statutes, an employee must file claims within three and 25 years, respectively.

In Folta v. Ferro Engineering, (Ill. App. Ct. 1st Dist. June 27, 2014), an Illinois intermediate appellate court held that the Foltas could maintain a tort claim against James Folta’s former employer because he first discovered his asbestos-related injury outside of the acts’ statutes of repose.  Unlike Pennsylvania, where a legislative amendment to the workers’ compensation statute appears to be the only “fix,” there remains a possibility that Folta is reversed on appeal or that the Illinois Supreme Court overrules Folta in another case.  The defendant in Folta filed a petition for leave to appeal, which remains pending.

While the traditional asbestos products and premises defendants seek coverage from their historical general liability insurers, commercial general liability policies are unlikely to provide coverage to employer defendants because of the policies’ employer’s liability exclusions.  Instead, employers may look to their workers’ compensation/employer’s liability policies.  Employer’s liability coverage exists “to ‘fill the gaps’ between workers’ compensation coverage and an employers’ general liability policy… to protect the insure[d] from tort liability for injuries to employees who do not come under the exclusive remedy provisions of workers’ compensation.”  See Erie Ins. Prop. & Cas. Co. v. Stage Show Pizza, JTS, Inc., 210 W. Va. 63, 68, 553 S.E.2d 257, 262 (2001).  Tooey and Folta have created a new “gap,” and that gap may widen into a chasm, as Philadelphia’s The Legal Intelligencer reported on June 3 that courts are “universally” accepting plaintiffs’ attempts to join employers in pending mesothelioma cases, and that virtually every new filing names employers as defendants.

Images: Robert Biedermann/

Images: Robert Biedermann/

Employer’s liability coverage is fundamentally different and much more limited than general liability coverage.  Because this coverage was offered to fill the narrow “gap” between general liability and workers’ compensation coverage, it was offered inexpensively.  As a result, employer’s liability coverage often includes high deductibles (or loss reimbursement provisions) and low aggregate limits.  Some employer’s liability coverage forms include time limitations, limiting coverage to claims filed against the employer within three or five years of the policy’s expiration date.  Further, most employer’s liability coverage contains specific trigger language, limiting coverage to those policies in effect only on the last date of the worker’s exposure to hazardous conditions at the workplace.  Therefore, the “continuous trigger” applicable to general liability policies is unlikely to apply to employer’s liability insurers.  Employers risk only being able to access a single policy year that is subject to a high deductible and low aggregate limit (with no excess coverage available).

It remains to be seen whether the decisions in Pennsylvania and Illinois represent an emerging risk that may spread to other jurisdictions, or if the legislatures of both states will react swiftly to amend their respective states’ laws.  For now, however, employers and their employer’s liability insurers should be prepared to address these potential newfound liabilities.