Malicious Prosecution and Trigger of Occurrence Based Coverage
In Selective Ins. Co. v. RLI Ins. Co., 2015 U.S. Dist. LEXIS 90572 (N.D. Ohio July 13, 2015), a coverage dispute arose after an individual who, following his exoneration from a criminal conviction for rape and murder, sued the municipality who had pursued the criminal case against him. During the relevant time period, the municipality held successive one year policies with two primary insurers and two excess insurers. The first excess policy ran from policy 1997 -1998 and the second ran from 1998-1999.
The two primary insurers contributed $1 million towards the $5.25 million settlement, however, only the second excess policy contributed to the remainder of the settlement. The first argued that no occurrence took place during their policy period and therefore there was no event which triggered their policy. In making this argument, the insurer asserted that the event triggering coverage occurred a couple of days after the arrest when the municipality’s police officers failed to disclose an interdepartmental memo containing a description of a statement given by another individual who had been arrested for the offence.
The court disagreed with this reasoning, holding that because the underlying complaint alleged misconduct on the part of the municipality officers before the start of the policy period, coverage was triggered prior to the failure to disclose the memo. The court found that there was no reason to believe that if the underlying claim had not settled and had gone to trial, the allegations of earlier misconduct would not have been part of the case. Therefore, the initial triggering event was the arrest. The occurrence then continued during and throughout the prosecution, therefore triggering both excess insurance policies.
In coming to this decision, the court gave greater clarification to the often complicated issues surrounding the determination of the date of an occurrence for insurance purposes when the damage occurred over a long period of time. In this instance, the malicious prosecution “occurrence” was the entire pattern of misconduct which took place from the time of arrest and throughout the prosecution. The second excess insurer’s motion for partial summary judgment against the first excess insurer was therefore granted by the court.