The Massachusetts Appeals Court recently held, in an unpublished decision, that an insurer breached its duty to defend a town against a suit filed by the sister of a man wrongly convicted for murder, in Waters v. Western World Insurance Company
, No. 11-P-2124. A copy of the decision from the official Massachusetts reports website is available here
Kenneth Waters was convicted of murder in 1983 and served 18 years in prison, until he was exonerated and released in 2001. (His story was the basis for the 2010 Hollywood movie, Conviction.) He died the following year in an accident, but his estate sued the town of Ayer for “unconstitutional and tortious conduct” resulting in Waters’ wrongful conviction and incarceration. The town was insured by Western World, which denied coverage. The trial court upheld Western World’s denial of coverage and the town appealed.
The appellate court first found that the complaint against the town alleged “negligent acts, errors, or omissions” under the policy’s insuring agreement. The court noted that the complaint alleged that the town failed to adequately train its employees and failed to undertake proper investigations into the existence of exculpatory evidence. It held that these allegations, among others, “leave open the potential for liability to be predicated on negligence.” The court also found that an exclusion for any “willful violation of a penal statute or ordinance” did not preclude a duty to defend, as the underlying complaint did not mention any penal statute.
But the most interesting and surprising holding in the decision is contained in a footnote. Western World’s policies covered the period of 1985-1991. Thus, Waters was wrongly convicted two years prior to the inception of its coverage. The policies’ coverage, meanwhile, applied “only to acts committed or alleged to have been committed … during the policy period.” The appellate court found that the town’s alleged ongoing failure to conduct any “reinvestigation” into the existence of exculpatory evidence and its alleged “affirmative obligation to come forward every year” during Waters’ incarceration triggered coverage. The court distinguished another Massachusetts coverage case involving wrongful prosecution – Billings v. Commerce Ins. Co.
, 458 Mass. 194, 196-97 (2010) – on the basis that Billings involved a policy requiring that the injury
occur during the policy period.
In 2011, we wrote
about a case involving very similar facts, but which reached a contrary result. That case (Gulf Underwriters Ins. Co. v. City of Council Bluffs
, No. 4:07-cv-00135 (etc.) (S.D. Iowa Dec. 20, 2010)) also involved a policy issued after a wrongful conviction, and the policy covered “wrongful acts” occurring during the policy period. The court in Gulf Underwriters
, however, held that there was no coverage, finding that the city’s ongoing failure to discover the exculpatory evidence and correct the wrongful conviction was not a new “wrongful act” sufficient to trigger coverage in a new policy year. The court reasoned that there was no “new, separate wrongful act” during the policy period. It reached the same conclusion regarding other policies that required “personal injury” during the policy period, but based on the same logic, and citing the Billings
case. That logic is that the injury manifested itself and was complete when the claimant was wrongfully prosecuted; the ongoing incarceration or failure to correct that injury does not trigger subsequent coverage.
Indeed, the Gulf Underwriters
opinion seems more persuasive than Waters
. It is difficult to understand how the Waters court distinguished Billings
. The fact that the trigger in Billings
was “injury” rather than “act” would not seem to be a meaningful difference. The “injury” in Billings also continued through the period of the policies in question, as the claimant remained incarcerated. But the court held that since the injury was already complete and manifest prior to that time, its continued existence did not trigger coverage. The same is true with regard to the “acts” committed by the town of Ayer. According to the complaint, Ayer officials wrongfully withheld exculpatory evidence and convicted Waters in 1983. At that time, the alleged evil acts were complete; they merely continued to stand uncorrected in 1985-1991.
The lesson for insurers in Massachusetts is that before denying a defense, a comprehensive analysis of the allegations of the complaint must be completed, especially when policies contain broad coverage for “acts, errors, or omissions.”