Court Opinion

ID: 9762345
Source: CourtListenerOpinion
Date Created: 2023-08-29 02:20:39.044878+00
Date Added: 2024-06-11T07:29:33.569658
License: Public Domain

SCHREIBER, J.,
dissenting.
Coverage under an insurance policy depends in the first instance upon the agreement expressed in the contract of insurance. When tested by that simple principle, I find that this policy required the Royal Globe Insurance Company to defend its insured in a malicious prosecution suit, when the tort of malicious prosecution had been committed during the policy period.
The policy issued to the plaintiff Paterson Tallow Co., Inc. provided for various types of protection. One such protection, which is not at issue in this case, was to pay on behalf of the insured all sums that the insured should become legally obligated to pay as damages because of bodily injury or property damage caused by an “occurrence.” The policy defined an occurrence as an accident “which results during the policy period in bodily injury or property damage.”
A second type of protection required the insurance company to pay all sums that the insured should become legally obligated to pay as damages because of certain “offenses committed” by the insured during the policy period. The policy listed various offenses including malicious prosecution. The policy did not define the words “offenses committed.”
Certain tenets should be applied when interpreting insurance contracts. Justice Francis commented in Bowler v. Fidelity & Casualty Co. of N. Y., 53 N.J. 313 (1968) that:
Insurance policies are unipartite in nature. They are prepared by the company’s experts, men learned in the law of insurance who serve its interests in exercising their art of draftsmanship. The resulting document with its many clauses is given to the insured in printed form upon the payment of the premium. There is no arm’s length bargaining such as characterizes negotiations between equals *38in the marketplace. Consequently courts in their quest for justice for the insured, universally give him the benefit of any construction of the language which can be said fairly to represent the protection extended to him. [Id. at 326; emphasis supplied.]
Justice Hall in Butler v. Bonner & Barnewall, Inc., 56 N.J. 567 (1970) wrote that
if the controlling language of a policy will support two meanings, one favorable to the insurer and the other to the insured, the interpretation favoring coverage should be applied .... [Id. at 576]
Chief Justice Vanderbilt in Herbert L. Farkas Co. v. N. Y. Fire Ins. Co., 5 N.J. 604 (1950) stated:
When policies of insurance were prepared by the insurer without any legislative restrictions, any ambiguities were resolved, under general principles of contract law, against the insurer, as the party who prepared the contract. [Id. at 610-11]
It is with these interpretive principles in mind that we must examine the policy. The central question is whether the policy may reasonably be construed to mean that a malicious prosecution was “committed” when the tort came into existence. I submit that such an interpretation is reasonable.
The essential elements of the tort of malicious prosecution are: (1) that the criminal action was instituted by the defendant against the plaintiff, (2) that it was activated by malice, (3) that there was an absence of probable cause for the proceeding, and (4) that it was terminated favorably to the plaintiff. Lind v. Schmid, 67 N.J. 255, 262 (1975). In Lind we stated that “[t]he plaintiff must establish each element. Upon failure to prove any one, the cause must fail.” Termination of the prosecution in favor of the plaintiff is a sine qua non of the tort of malicious prosecution. Penwag v. Landau, 76 N.J. 595, 598 (1978); Earl v. Winne, 14 N.J. 119, 134 (1953); Prosser, Law of Torts, § 119 at 835 (4th ed. 1971); Dooley, 3 Modern Tort Law, §§ 41.03, 41.06 (1977).
Despite the universal view that without favorable termination there can be no liability for malicious prosecution, the majority has created “the offense of malicious prosecution ... for insurance coverage purposes,” which is committed at the time the *39criminal complaint is filed. [Ante, at 35; emphasis in original.] No rationale or explanation has been advanced why this limited view should be adopted to deny coverage.
The majority relies substantially on an Appellate Division decision in Muller Fuel Co. v. Insurance Co. of North America, 95 N.J.Super. 564 (App.Div.1967), decided eight years before Lind. Muller was posited on the proposition, contrary to Lind, that favorable termination of the underlying criminal proceeding is merely a condition precedent to institution of a malicious prosecution action. I discern no reason to retreat from the Lind analysis, which accords with prominent authorities in the field, Prosser, Law of Torts, supra; Dooley, Modern Tort Law, supra; Harper and James, 1 Law of Torts, § 4.4 (1956), and with The Restatement of the Law, Torts, 2d, §§ 653 and 658.
The reasoning of Muller is not persuasive. The Appellate Division offered no authority for the contention that, although an “essential ingredient,” termination in favor of the plaintiff is not required to create the tort of malicious prosecution. In fact, without such favorable termination, the legal obligation to pay damages does not arise; there can be no legal injury until all essential elements of the tort have occurred. The view I have espoused has been followed in other jurisdictions when insurance policy coverage for malicious prosecution has been at issue. Roess v. St. Paul Fire and Marine Insurance Company, 383 F.Supp. 1231 (M.D.Fla.1974) and Security Mut. Cas. Co. v. Harbor Ins. Co., 65 Ill.App.3d 198, 21 Ill.Dec. 707, 382 N.E.2d 1 (App.Ct.Ill.1978), rev’d on other grounds, 77 Ill.2d 446, 34 Ill.Dec. 167, 397 N.E.2d 839 (Sup.Ct.1979).
The Appellate Division in Muller ignored the interpretive guidelines applicable to insurance policies. Instead it viewed the policy from what “the insurance company intended to insure against” and stated that it would be unfair to “shift the burden of damages to an unwary insurance company.” [Id. 95 N.J.Su*40per. at 578]. It might be urged that the carrier did not intend coverage if some elements of malicious prosecution existed when the policy was issued. However, that could be the precise exposure for which the insured was seeking protection. If the insurance company did not want to accept the risk, it could have requested any pertinent information about criminal proceedings which the prospective insured had instituted. Then the company could have refused to issue the policy or inserted an appropriate exclusion.
The majority asserts that “the average reader would understand the policy language as fixing the point of coverage for malicious prosecutions at ... the date on which the acts are committed that result in ultimate liability.” [Ante, at 35 n.5]. This approach permits a carrier to rely on the public’s ignorance of the legal elements of the offense. The fairer methodology is to assume that the insured has been made aware of the legal elements of malicious prosecution. Thus 1 Couch on Insurance 2d § 15:20 states that “[w]hile words should be given their ordinary meaning, they must be construed in accordance with established rules of law, even though the insured may not be familiar with their legal meaning.” Once the malicious prosecution elements are known, the average reader would contemplate that he had coverage if the criminal action had been terminated adversely to his position during the policy period.
I would reverse the summary judgment in favor of defendant and remand the cause for trial.
Justice HANDLER joins in this dissent.
■ • For affirmance—Chief Justice WILENTZ and Justices PASHMAN, CLIFFORD, POLLOCK and O’HERN—5.
For reversa1 and remandment—Justices SCHREIBER and HANDLER—2.