Billings v. Commerce Ins. Co.

• Decision Date: 04 November 2010
• Docket Number: SJC-10656.
• Citation: 936 N.E.2d 408,458 Mass. 194
• Parties: George H. BILLINGS v. COMMERCE INSURANCE COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

936 N.E.2d 408

458 Mass. 194

George H. BILLINGS

v.COMMERCE INSURANCE COMPANY.

SJC-10656.

Supreme Judicial Court of Massachusetts, Barnstable.

Argued Sept. 13, 2010.

Decided Nov. 4, 2010.

Thomas C. Kenny, Falmouth, for the plaintiff.

John F. Hurley, Jr., Worcester, for the defendant.

John Murphy, for American Insurance Association, amicus curiae, submitted a brief.

Present: MARSHALL, C.J., IRELAND, SPINA, COWIN, CORDY, BOTSFORD, & GANTS, JJ.

GANTS, J.

For the period from March 15, 2000, through March 15, 2001, the defendant, Commerce Insurance Company (Commerce), insured the plaintiff, George H. Billings (Billings), under a personal umbrella liability policy (policy). The policyprovided that, if a suit was brought against Billings for damages because of "personal injury" caused by "an 'occurrence' to which this policy applies," Commerce would provide a defense of the suit at its expense. The policy defines "[p]ersonal injury" to include "malicious prosecution [,] [l]ibel, slander or defamation of character." See note 3, infra.

On January 9, 1998, before Commerce insured Billings under the policy, Billings and others filed a civil action in the Superior Court (1998 action) against, among others, the trustees of the Peterson 1990 Real Estate Trust (trust), seeking to annul a decision of the zoning board of appeals of Falmouth regarding the issuance of a building permit on one lot within a thirty-three acre parcel owned by the trust, to enjoin construction on eight other lots within the parcel, and to enjoin the building commissioner from issuing any building permits for thirteen of the lots. On April 7, 2000, while Billings was insured by Commerce under the policy, the 1998 action was dismissed after the parties reported the action settled but failed to filethe settlement agreement within the period prescribed by the court.

On December 14, 2000, Scott M. Peterson and Eric M. Peterson, individually and as trustees of the trust, filed a civil action in the Superior Court against the plaintiffs in the 1998 action, including Billings, alleging, among other claims, malicious prosecution and intentional infliction of emotional distress (2000 action).¹ The malicious prosecution claim was based on the filing of the 1998 action; the intentional infliction of emotional distress claim allegedly arose from the conduct of Billings and his codefendants in filing that action and in "spreading rumors that the [Petersons] would fill the wetlands and build [sixteen] houses in the marsh."

After the 2000 action was filed, Billings forwarded a copy of the complaint to Commerce and asked Commerce to defend him in the action. Commerce declined to provide a defense, contending that "there is no allegation in the [c]omplaint of an offense which was committed during the coverage period " (emphasis in original). At his own expense, Billings retained anattorney to litigate the 2000 action. In December, 2005, a jury returned a verdict in favor of Billings and the other defendants.

On January 26, 2006, Billings filed this declaratory judgment action against Commerce, seeking a declaration that it had a duty to defend him in the 2000 action, as well as actual and punitive damages under G.L. c. 93A for Commerce's alleged unfair insurance practices in violation of G.L. c. 176D, § 3(9). A judge in the Superior Court allowed Commerce's cross motion for summary judgment as to all of Billings's claims, concluding that Commerce did not owe Billings a duty to defend the 2000 action, and denied Billings's motion for summary judgment. Billings appealed, and we transferred the appeal to this court on our own motion.

The appeal poses two issues. First, where, as here, a civil action is filed against a policyholder alleging a claim of malicious prosecution, and coverage under the liability policy is based on the date of the "occurrence" rather than the date of the claim, is the date of the "occurrence" when the underlying, allegedly malicious action is filed or when that action is terminated? We join the majority of courts that have adjudicated this issue in concluding that the "occurrence" is the filing of the malicious action, not its termination.

Second, is the allegation in the complaint that Billings and the other defendants were "spreading rumors that the [Petersons] would fill the wetlands and build [sixteen] houses in the marsh" reasonably susceptible of an interpretation that states or roughly sketches a claim for damages because of "personal injury" arising from "[l]ibel, slander or defamation of character"; and, if so, did the claim occur within the policy period? We conclude that, in the circumstances of this case, the allegation is reasonably susceptible of an interpretation that roughly sketches a claim for libel, slander, or defamation, but it is not reasonably susceptible of an interpretation that any defamatory statement occurred during the policy period.²

1. When is the date of "occurrence" of the tort of malicious prosecution? To prevail on a claim of malicious prosecution, a plaintiff must prove that the defendant instituted a prior civil or criminalproceeding without probable cause and with improperpurpose, and that the prior proceeding terminated in favor of the plaintiff (who was the defendant in the prior proceeding). See Chervin v. Travelers Ins. Co., 448 Mass. 95, 103-113, 858 N.E.2d 746 (2006); Hubbard v. Beatty & Hyde, Inc., 343 Mass. 258, 261, 178 N.E.2d 485 (1961). See generally 2 Massachusetts Superior Court Civil Practice Jury Instructions § 22.1, at 22-1-22-2 (Mass. Continuing Legal Educ.2d ed.2008). Under the policy, Commerce owes Billings a duty to defend against a law suit brought against him for damages arising from malicious prosecution if the alleged damages were caused by an "occurrence," that is, an offense committed within the coverage period.³ Billings contends that the offense of malicious prosecution does not occur under the policy until the termination of the underlying prior proceeding; Commerce contends that it occurs when the malicious action was filed.

The majority of jurisdictions that have considered the issue have concluded that the "occurrence" causing personal injury under an insurance policy is the filing of the underlying malicious suit, not its termination. See Erie v. Guaranty Nat'l Ins. Co., 109 F.3d 156, 163 (3d Cir.1997) (applying Pennsylvania law, "tort of malicious prosecution occurs for insurance purposes at the time the underlying charges are filed"); Selective Ins. Co. v. Paris, 681 F.Supp.2d 975, 983 (C.D.Ill.2010) (applying Illinois law; tort of malicious prosecution occurred for insurance purposes at time criminal charges were filed); North River Ins. Co. v. Broward County Sheriff's Office, 428 F.Supp.2d 1284, 1291 (S.D.Fla.2006) (applying Florida law; "an 'occurrence' in a malicious prosecution case ... is the date the [p]laintiffs in the [u]nderlying [c]omplaints were actually harmed, not the date they were allegedly vindicated");Royal Indem. Co. v. Werner, 784 F.Supp. 690, 692 (E.D.Mo.), aff'd, 979 F.2d 1299, 1300 (8th Cir.1992) (applying Missouri law); Ethicon, Inc. v. Aetna Cas. & Sur. Co., 688 F.Supp. 119, 124, 127 (S.D.N.Y.1988) (applying New Jersey law; in "criminal or civil prosecution that is malicious ... injury begins to flow from the time when the complaint is filed"). See also Zurich Ins. Co. v. Peterson, 188 Cal.App.3d 438, 448, 232 Cal.Rptr. 807 (1986); S. Freedman & Sons v. Hartford Fire Ins. Co., 396 A.2d 195 (D.C.1978); Paterson Tallow Co. v. Royal Globe Ins. Cos., 89 N.J. 24, 31, 444 A.2d 579 (1982); Newfane v. General Star Nat'l Ins. Co., 14 A.D.3d 72, 79, 784 N.Y.S.2d 787 (2004).

The time of the "occurrence" under an indemnity policy "is not the time the wrongful act was committed, but the time when the complaining party was actually damaged." Continental Cas. Co. v. Gilbane Bldg. Co., 391 Mass. 143, 152, 461 N.E.2d 209 (1984), quoting Bartholomew v. Insurance Co. of N. Am., 502 F.Supp. 246, 252 (D.R.I.1980), aff'd sub nom. Bartholomew v. Appalachian Ins. Co., 655 F.2d 27 (1st Cir.1981). See A.W. Chesterton Co. v. Massachusetts Insurers Insolvency Fund, 445 Mass. 502, 520 n. 10, 838 N.E.2d 1237 (2005) (same);Frohberg v. Merrimack Mut. Fire Ins. Co., 34 Mass.App.Ct. 462, 464, 612 N.E.2d 273 (1993) (same). A plaintiff suffers actual damages from a malicious prosecution on the filing of the underlying complaint, which at a minimum triggers the need to invest the time, money, and effort to prepare a defense.⁴ While the termination of the underlying action is a required element and a necessary condition precedent before the malicious prosecution claim accrues for purposes of the statute of limitations, it is not an event that causes harm to the plaintiff and therefore not an "occurrence" within the meaning of the policy.

The minority of courts, of which we find only two, seek to divorce the definition of "occurrence" under the policy from the damage caused by the conduct, concluding that the time of"occurrence" of a malicious prosecution is when the final element of the tort is satisfied. See Security Mut. Cas. Co. v. Harbor Ins. Co., 65 Ill.App.3d 198, 206, 21 Ill.Dec. 707, 382 N.E.2d 1 (1978), rev'd on other grounds, 77 Ill.2d 446, 34 Ill.Dec. 167, 397 N.E.2d 839 (1979); Roess v. St. Paul Fire & Marine Ins. Co., 383 F.Supp. 1231, 1233-1235 (M.D.Fla.1974). Causing personal injury is fundamental to the definition of "occurrence" in an insurance policy. While the termination of the underlying action is the event that ripens a malicious prosecution claim and starts the clock on the statute of limitations, "[s]tatutes of limitation and triggering dates for insurance purposes serve distinct functions and reflect different policy concerns." Erie v. Guaranty Nat'l Ins. Co., supra at 161. "Because of this fundamental difference in purpose, courts have consistently rejected the idea they are bound by the statutes of limitation when seeking to determine when a tort occurs for...