Insurer Cornered in Wrongful Conviction Suit

     (CN) – As two men fight Council Bluffs, Iowa, for 26 years of wrongful imprisonment on a murder they did not commit, an insurer must indemnify the city, the 8th Circuit ruled.
     Curtis McGhee and Terry Harrington were arrested in 1977 for the murder of a retired police officer. While serving life sentences in 2003, the Iowa Supreme Court found that the prosecutors failed to disclose evidence of an alternative suspect to the defense.
     McGhee and Harrington were soon released and sued Pottawattamie County, Iowa, for malicious prosecution. Their case went before the U.S. Supreme Court, where several justices indicated that prosecutors might not have absolute immunity for pre-trial wronging – in this case, framing two innocent men.
     Pottawattamie then reportedly settled the case for $12 million.
     The two men also sued the city of Council Bluffs for wrongful imprisonment, seeking more than $110 million, but the case ended in a jury mistrial in December 2012.
     Chicago Insurance Co. and Columbia Casualty Co. meanwhile filed a federal complaint for declaratory judgment, and a federal judge agreed with them that they should not have to indemnify the city against McGhee and Harrington’s claims.
     A divided three-judge panel of the 8th Circuit sided with one insurer but not the other Tuesday.
     Chicago Insurance is not liable for the city’s damages because the injury did not occur during the coverage period, according to the ruling.
     Columbia, however, had executed a 1977-1978 Special Excess Liability policy, which covers damages from malicious prosecution “caused by an occurrence” during the coverage period, the St. Louis, Mo.-based court found.
     Though the policy defines occurrence as “an accident, including injurious exposure to conditions,” the malicious prosecution of McGhee and Harrington was intentional, according to the ruling.
     “The 1977-78 Columbia special excess liability policy technically excludes expected damages arising from intentional acts; nevertheless, given the policy’s express inclusion of coverage for damages arising from ‘malicious prosecution[,]’ we conclude that an ordinary layperson would have misunderstood the policy’s scope of coverage,” Judge Roger Wollman wrote for the majority.
     “In addition, enforcement of the Columbia policy’s requirement that personal injuries be caused by ‘an accident’ and result in personal injuries ‘neither expected nor intended from the standpoint of the insured’ would effectively ‘eviscerate[] terms explicitly agreed to,’ namely, coverage for damages arising from malicious prosecution – an intentional tort,” Wollman added.
     Judge Kermit Bye dissented in part, finding that Council Bluffs also deserves coverage from Chicago Insurance.
     “McGhee and Harrington clearly sustained damage arising out of the 1978 malicious prosecution during the time the CIC excess policies were in effect,” Bye wrote, abbreviating the insurer’s name. “Nowhere do the CIC/Admiral policies limit coverage only to an injury occurring during the policy period.”

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