It is well known that an insurance policy can be interpreted one way under one state's law, and a different way under a second state's law. That was illustrated recently in a decision by a federal district court in Georgia in a case in which an insured sought coverage for an alleged “malicious prosecution.”
The Case
Dr. James Y. Jones and two other parties sued Massachusetts Mutual Life Insurance (“Mass. Life”) under the Employee Retirement Income Security Act (“ERISA”) in the U.S. District Court for the Eastern District of Kentucky. The district court granted summary judgment in Mass. Life's favor, and it moved for an award of attorneys' fees pursuant to 29 U.S.C. § 1132(g)(1).
The district court granted Mass. Life's motion, and Dr. Jones and his co-plaintiffs were ordered to pay $1,191,799.99 in attorneys' fees.
At the time, Maryland Casualty Company (“MCC”) insured Dr. Jones.
MCC brought an action against Dr. Jones in the U.S. District Court for the Eastern District of Georgia, seeking a ruling that it was not obligated to pay the award that had been entered against him by the Kentucky district court.
The parties moved for partial summary judgment.
Dr. Jones argued that the facts surrounding his lawsuit against Mass. Life were such that the grant of attorneys' fees was equivalent to a malicious prosecution action. MCC urged the opposite conclusion. The parties agreed that Georgia contract interpretation laws applied to the MCC policy and that Kentucky law governed what constituted malicious prosecution.
The Maryland Casualty Policy
The Maryland Casualty policy provided:
We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal and advertising injury” to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or “suit” that may result.
It provided that:
personal and advertising injury
included the offense of:
malicious prosecution.The District Court's Decision
The district court denied the motions.
In its decision, the district court explained that the issue it had to decide was whether the facts from the underlying lawsuit could be said to support an “obligation to pay damages for malicious prosecution” under the MCC policy.
It then observed that an insurance policy that covered “malicious prosecution” indemnified only claims that met the elements of the state law definition of that action.
The district court, citing Atlanta Mut. Ins. Co. v. Atlanta Datacom, Inc., 139 F.3d 1344 (11th Cir. 1998), noted that Georgia law confined “malicious prosecution” to the improper pursuit of criminal actions, not civil ones. That case was quickly resolved on appeal when the Eleventh Circuit, in a brief per curiam decision, rejected the insured's argument that “malicious prosecution” included the allegedly improper commencement of a civil action as well as a criminal prosecution.
The district court in the MCC case, although sitting in Georgia, could not resolve its case as cleanly as the Eleventh Circuit did in Atlanta Datacom. That's because, as the district court pointed out, citing Martin v. O'Daniel, No. 2014-SC-000394-DG (Ky. Sept. 22, 2016), Kentucky law – which governed the MCC policy – provided a cause of action for both criminal and civil malicious prosecution.
The district court explained the five elements of a malicious prosecution claim under Kentucky law, considered each of them in turn, and found a genuine issue of fact as to one of the elements.
Accordingly, it denied both summary judgment motions, and MCC's action continued.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].