BatesCarey partners Agelo L. Reppas and Adam H. Fleischer achieved fantastic legal precedent for the insurance industry and their client, Starr Indemnity & Liability Company, with the Illinois Supreme Court’s ruling that insurance coverage for malicious prosecution claims is triggered only at the time of the wrongful charging, and not in subsequent years of retrials or exoneration. 

On November 21, 2019, in Sanders v. Illinois Union Insurance Company and Starr Indemnity & Liability Company, the Illinois Supreme Court reversed a 2-1 appellate court decision and found that, for malicious prosecution claims, insurance coverage under occurrence-based policies is triggered only at the time of the wrongful charging, and not during later periods of retrials or exoneration. 

The case stemmed from a 1993 murder in Chicago Heights, after which Rodell Sanders was arrested.  Although he did not match the victim’s description and had a confirmed alibi, officers manipulated evidence that resulted in him being charged with murder in 1994.   In January 1995, Sanders was convicted and sentenced to 80 years’ imprisonment.  In 2011, the Cook County, Illinois circuit court overturned the original conviction, and Sanders went back for another retrial in 2013, which ended in a mistrial.  In July 2014, he was tried again and acquitted. 

Sanders sued Chicago Heights for malicious prosecution.  In September 2016, a consent judgment was entered in his favor for $15 million.  Chicago Heights agreed to pay part of the judgment, with another part of the judgment being paid by the insurer in 1994—the year in which Sanders was wrongfully charged.  This left $10 million in unpaid judgment, the right to which was assigned to Sanders to pursue against the City’s primary insurer from 2001 to 2014, Illinois Union, as well as against the excess insurer, Starr.

The City and Sanders argued in a declaratory judgment action that Illinois Union and Starr were liable to insure all damages arising out of “an Occurrence happening during the Policy Period” for “Personal Injury . . . taking place during the policy period.”  The term “Occurrence” and the term “Personal Injury” were both commonly defined as “the offense of malicious prosecution.” Therefore, the City and Sanders argued that the “offense” can take place only once all legal elements of the tort of malicious prosecution are completed.  Because the final element of the tort is “exoneration,” which happened in 2014, the City and Sanders argued that the “offense” took place in the 2014 policy period, thereby requiring Illinois Union and Starr to pay the remaining $10 million of the judgment. The appellate court agreed with the City and Sanders, finding that the insuring agreement was unique in requiring only the “offense” during the policy period, and that this could trigger coverage in the year of exoneration. 

In reversing the appellate court, the Illinois Supreme Court became one of the first state high courts to rule that the term “offense” in the context of an occurrence-based policy indicates that coverage is triggered during the period in which the offensive conduct was committed.  The court explained that, if “exoneration” were to trigger coverage, then insurance could exist in the 2014 year during which none of the acts or omissions that gave rise to the claim occurred.  Such a result would violate the intent of occurrence-based policies, the court explained.  The Illinois Supreme Court also clarified that the personal injury at issue in the case took place only at the time of the initiation of a suit based on manufactured evidence, and therefore Sanders’ retrials did not present new personal injury that triggered new insurance coverage.