The city's primary insurer, Illinois Union Insurance Company, and excess carrier, Starr Indemnity & Liability Company, declined to provide coverage, reasoning that no covered events had occurred during the November 2011 to November 2014 policy periods.

Chicago Heights asked the insurers to reconsider, arguing that the date of Mr. Sanders' exoneration and his retrials in August 2013 and July 2014 were discrete dates of loss.

The insurers declined, and Chicago Heights sued.

In September 2016, a consent judgment was entered in Mr. Sanders' favor in his action for $15 million.

Mr. Sanders then was substituted as plaintiff in the city's suit against its insurers, and the insurers moved to dismiss.

The insurers noted that Mr. Sanders had been "maliciously prosecuted in 1994 resulting in his conviction and incarceration for a crime he did not commit." In their view, his injury predated the effective dates of their policies.

The trial court granted the insurers' motion, a divided appellate court reversed, and the dispute reached the Illinois Supreme Court.

The Illinois Supreme Court's Decision

The court reversed, concluding that coverage was triggered when Mr. Sanders was prosecuted in 1994.

In its decision, the court explained that the policies provided that Illinois Union and Starr would indemnify Chicago Heights for damages for which Chicago Heights became legally obligated to pay because of a claim arising out of the "offense of malicious prosecution," happening during the policy period and taking place during the policy period.

Therefore, the court continued, to resolve when the malicious prosecution occurred, it had to interpret the word "offense."

The court then held that the most "straightforward reading" of the term indicated that coverage depended on whether the insured's offensive conduct "was committed during the policy period."

In the court's view, a malicious prosecution neither happened nor took place upon exoneration. It added that the "gist of the action for malicious prosecution" was that "the prosecutor acted without probable cause."

The court rejected Mr. Sanders' contention that his retrials in 2013 and 2014 constituted separate triggers for coverage, finding that claim "foreclosed by the language of the policy," which provided that, "[a]ll damages arising out of substantially the same Personal Injury regardless of frequency, repetition, the number or kind of offenses, or number of claimants, will be considered as arising out of one Occurrence."

Accordingly, the court held that insurance coverage for the underlying malicious prosecution claim was triggered when Mr. Sanders was maliciously prosecuted in 1994. Because the triggering event occurred more than a decade before Illinois Union and Starr issued their policies to Chicago Heights, the insurers did not have to indemnify the city for damages under the policies, the court concluded.

The case is Sanders v. Illinois Union Ins. Co., No. 124565 (Ill. Nov. 21, 2019).