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Travelers units must indemnify city in wrongful conviction case

appeals court

A federal appeals court, overturning a lower court ruling, held that Travelers Cos. units must indemnify a Kentucky city in connection with its wrongful conviction of a man for murder.

William Virgil had served 28 years of his 70-year sentence for rape and murder when he was granted a new trial on the strength of new DNA evidence, which led to charges against him being dismissed and his release from prison, according to Monday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in St. Paul Guardian Insurance Co. et al. v. City of Newport, KY, et al; William R. Virgil; Lieutenant Colonel Ken Page.

After his release, Mr. Virgil filed suit against Newport on charges including malicious prosecution and due process violations for fabricating evidence and withholding exculpatory evidence.

Travelers Cos. units including St. Paul Guardian had provided coverage for Newport from July 2007 to July 2010 that included a law-enforcement liability provision, which provided coverage for damages resulting from injury caused by a wrongful act.

After Newport demanded St. Paul defend and indemnify it, the insurer filed suit in U.S. District Court in Covington, Kentucky, seeking a declaration that it had no duty to defend or indemnify the city.

The district court ruled in the insurers’ favor but was overturned by a unanimous three-judge appeals court panel.

The only contested issue was whether Mr. Virgil’s alleged injuries happened while any of the relevant insurance policies were in effect, said the ruling.  While Mr. Virgil said he spent more than 28 years in prison for crimes he did not commit, St. Paul contended he had suffered a “malicious prosecution injury” that occurred before its coverage went into effect. 

“But St. Paul’s argument misreads the complaint and is contrary to the plain terms of the (law enforcement-liability) provision,” the ruling said.

Mr. Virgil “did not allege a malicious prosecution injury; he raised, among others, a malicious prosecution claim.  The injuries alleged in his complaint are the various harms that were caused by or flowed from that wrongful act,” the ruling said. 

In addition, “by the plain terms of (the law-enforcement liability) provision, covered personal injuries include any injuries caused by the wrongful act — malicious prosecution.”

Mr. Virgil’s injuries “were caused by the malicious prosecution and were continuous, that is, they happened repeatedly, during the relevant coverage period.

“We conclude that these injuries are covered by the policy language as that language would be used and understood by the common person … and at a minimum, we cannot say those injures are clearly not covered,” the appeals panel said in reversing the lower court’s ruling and remanding the case for further proceedings.

The city’s attorney, Jason C. Kuhlman, of the Law Offices of Jason C. Kuhlman, PLLC in Fort Mitchell, Kentucky, said in a statement, “This is a unique coverage case” and “my clients and I are pleased with the outcome of this appeal, and believe the Sixth Circuit Court of Appeals reached the correct conclusion, given the policy language involved and Kentucky law.”

Mr. Virgil’s attorney, Elliot Slosar of Loevy & Loevy in Chicago, said in a statement, “We couldn't be more pleased with the ruling. It's unfortunate that policyholders too often need to litigate with insurers to get them to pay out under their policies. This is an especially important ruling for municipalities which are particularly strained right now with COVID-19.  Insurers should be standing behind their insureds at a time like this. We believe this ruling further clarifies that they are obligated to do so.”

Travelers Cos. attorneys did not respond to a request for comment.

Earlier this month, a federal appeals court affirmed a lower court ruling and held an Argo Group unit is obligated to defend a Missouri county in a case in which its police officers had arrested a man who was subsequently exonerated for his wife’s murder.