Royal Indemnity Company v. E. Louis Werner, Jr.

MORRIS SHEPPARD ARNOLD, Circuit Judge.

When two limited partnerships in which appellant had invested became unprofitable, he and other investors sued Irving Cohen, their general partner, for securities fraud. After summary judgment was entered in favor of Cohen, he filed a suit for malicious prosecution against appellant and the other plaintiffs in the fraud suit. Appellant had purchased a homeowner’s insurance policy (“Homeowner’s Policy”) and a personal liability policy (“VIP Policy”) from appellee, both of which covered claims brought against him for damages due to “personal injury ... caused by an occurrence” that happened “during the policy period.” Both policies included “malicious prosecution” in the definition of “personal injury.” Appellant demanded that Royal Indemnity defend and indemnify him in the malicious prosecution suit, and appel-lee refused on the ground that the relevant “occurrence” happened outside the policy period. Appellee then sought a declaratory judgment that it had no duty to defend or indemnify. The district court agreed, 784 F.Supp. 690, with appellee and this appeal followed.

Appellant purchased his policies after he brought the fraud suit but before it was decided. The insurer argues that the “oc*1300currence” causing the “personal injury,” if any, was the filing of that suit and that no coverage is provided since the occurrence arose outside the policy period. Appellant, on the other hand, posits that the relevant occurrence was the termination of the fraud suit, since under Missouri law no “personal injury" arises until that time. Appellant relies here on the familiar rule that a malicious prosecution action could not accrue until the relevant suit terminated in his opponent’s favor. See Euge v. LeMay Bank & Trust Co., 386 S.W.2d 398, 399 (Mo.1965); Walkenhorst v. Lowell H. Liston & Co., 752 S.W.2d 825, 827 (Mo.App.1988). (There was a suggestion that Arizona law might be applicable here, but, if so, there is only a false conflict of laws, since Arizona law is the same as Missouri’s. See Bradshaw v. State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 417, 758 P.2d 1313, 1319 (1988)).

The cases on this question were analyzed by the district court in a lucid and well-reasoned opinion. As the district judge noted, almost all of the courts that have considered the matter have accepted the insurer’s argument, even in the face of policy language that offered stronger support for appellant’s position than does that contained in the policy relevant here. Many of these cases emphasize that a contrary rule .might well enable plaintiffs to lull an unwary insurer into extending coverage after they perceive an impending difficulty from a suit in which' they are already engaged. See, e.g., Southern Md. Agric. Ass’n, Inc. v. Bituminous Casualty Corp., 539 F.Supp. 1295, 1302 (D.Md.1982); Zurich Ins. Co. v. Peterson, 188 Cal.App.3d 438, 232 Cal.Rptr. 807, 812 (1986); S. Freedman & Sons, Inc. v. Hartford Fire Ins. Co., 396 A.2d 195, 199 (D.C.1978); Paterson Tallow Co. v. Royal Globe Ins. Companies, 89 N.J. 24, 444 A.2d 579, 585 (1982). We believe that the Supreme Court of Missouri would be -persuaded by the reasoning of these cases. We note, too, that we think it improbable that the term “personal injury” is used in a technical sense to speak of a time when a cause of action has fully matured. It is more likely intended to describe the time when harm begins to ensue, when injury occurs to the person, that is, in this case, when the relevant law suit is filed.

For the reasons indicated, we affirm the judgment of the district court.