Insurer has to pay for Wrongful Conviction
September 4, 2017
Last week, the Court of Appeals for the Sixth Circuit overturned the decision of a lower court in an insurer dispute. The court decided that Selective Insurance Group is liable to pay $3.25 million of excess coverage in a settlement relating to the wrongful arrest and conviction of an Ohio man for rape and murder. The case is Selective Ins. Co. v. RLI Ins. Co., No. 16-4199, 2017 U.S., App. LEXIS 16327 (6th Cir. Aug. 24, 2017).
On an early June morning in 1998 an intruder raped and murdered a 58 year old woman, Judith Johnson, in her own home, and continued on to rape and beat Judith's granddaughter, Brooke Sutton, into unconsciousness. Hours later Brooke regained consciousness and wandered to a neighbor's house to ask for help. Brooke told the neighbor that somebody had killed her grandma and that the intruder “looked like my Uncle Clarence”. The neighbor drove Brooke to her mother's house, where Brook's mother called the police. At some point, Brook's memory of the intruder looking like her Uncle Clarence turned into a belief that the intruder was actually her Uncle Clarence. On the basis of Brooke's identification, the Barberton police arrested Brooke's Uncle and Judith Johnson's son-in-law, Clarence Elkin, and soon after he was indicted on charges of aggravated murder, attempted aggravated murder, rape, and felonious assault.
In the investigation the month after the murder, police failed to follow up on several leads that would have exculpated Elkin, including DNA evidence, bloody fingerprints, a solid alibi, and evidence in the home that had been overlooked by police.
Eighteen days after Elkin was indicted the City of Barberton switched primary insurance from National Casualty Company to CNA, and secondary insurance carriers from RLI Insurance Company to Selective Insurance Company. Both primary carriers had a duty to defend the City and individual officers in the event of a lawsuit. The primary carriers were also responsible for covering up to $1 million in damages. Both excess carriers were responsible for covering the liability beyond the initial $1 million in damages, up to the policy limit. The excess carriers had no duty to defend.
Six months later the Barberton police officers arrested a man named Earl Mann for two aggravated robberies. During the arrest Mann allegedly asked, “Why aren't you charging me with the Judy Johnson murder too?” Mann also had been living in the house next to Johnson at the time of her murder. This information was collected in a memorandum that was never given to Elkin's lawyers, and Elkin was convicted of murder in June 1999.
Soon after the conviction the evidence against Elkin began to erode. Elkin, who was a prisoner of the same prison as Mann, managed to smuggle out one of Mann's cigarette butts, the DNA of which matched the DNA found on Johnson's body. Based on this evidence, Elkin was exonerated and released in 2005. Elkin and his family sued against the city and several police officers for malicious prosecution and depravation of due process. These suits eventually resulted in a $5.25 million settlement.
National Casualty and CNA each paid their $1 million policy limit and Selective paid $3.25 million in excess coverage, then Selective filed suit at a District Court in Youngstown, Ohio against RLI, seeking a declaratory judgment and monetary relief for the amount they had paid out, the $3.25 million.
RLI argued that insurance liability for malicious prosecution claims for that coverage is triggered when the underlying criminal charges are filed. The district court disagreed with RLI.
A three-judge panel overturned the initial ruling and pointed to the Mann memorandum as the reason that Elkin was exculpated, which was written six months after RLI's occurrence based policy had expired. The court said that there was valid reason to prosecute and detain Elkins until the Mann memorandum was written, which was not written until after the expiration of RLI's coverage.
Editor's Note: The three judge panel decided that the prosecution withholding the Mann memorandum was indeed a Brady violation. The term Brady violation comes from the U.S. Supreme Court case Brady v. Maryland, in which the Supreme Court ruled that suppression of evidence favorable to a defendant, by the prosecution who has requested it, violates due process. Because the prosecution in the case at hand withheld the Mann memorandum from Elkin's attorneys, despite it being very favorable to Elkin's case, they violated Elkin's due process rights. The district court erred in assigning liability to RLI because the claim was not triggered until several months after its coverage period ended, at the time the Mann memorandum was written.