No Coverage For Criminal Acts by Insured

Criminally Tampering With Evidence is Not Malicious Prosecution

Police officers are expected to be honest and present true and accurate evidence. Presenting false evidence to a court to support a criminal prosecution is a criminal act. No insurer intends to, nor should it ever, insure against criminal acts by an insured.

In Nicholas Sampson v. Investigator William Lambert, et al, St. Paul Fire and Marine Insurance Company et al, No. 17-1104, No. 17-1106, No. 17-1114, No. 17-1117, United States Court of Appeals For the Eighth Circuit (September 11, 2018) St. Paul Fire and Marine Insurance Co. (“St. Paul Insurance”) appealed the district court’s grant of summary judgment to Matthew Livers and Nicholas Sampson. The trial court concluded that St. Paul Insurance had a duty under its coverage policy to indemnify David Kofoed for intentional acts Kofoed committed against Livers and Sampson during his employment as a law enforcement officer for Douglas County, Nebraska. St. Paul Insurance contends that its own policy — with some narrow exceptions, including for malicious prosecution — bars indemnification of intentional criminal acts.

BACKGROUND

Commander David Kofoed of the Douglas County Crime Scene Investigation Unit tampered with evidence while investigating the April 17, 2006 murders of Sharmon and Wayne Stock. Murder charges — driven in part by the tampered evidence — were filed against cousins Matthew Livers and Nicholas Sampson, which charges eventually were dropped.

Livers and Sampson sued, among others, Kofoed, the Cass County Sheriff’s Office, the Nebraska State Patrol, and the Douglas County Sheriff’s Office. They alleged numerous constitutional violations, including: conspiring to coerce Livers’ confession; planting false evidence; concealing exculpatory evidence; making arrests without probable cause; failing to intervene; failing to train; and violating their due process rights under the Fifth and Fourteenth Amendments. Initially, Douglas County, Kofoed’s employer, retained outside counsel to defend Kofoed. While the civil case proceeded, Kofoed was charged criminally, tried, and convicted in Nebraska state court for evidence tampering. Subsequent to his conviction, Douglas County terminated Kofoed’s employment and stopped paying for his legal expenses. Kofoed’s counsel withdrew, and Kofoed proceeded pro se.

The police department defendants, without Kofoed, settled with Livers and Sampson, leaving Kofoed the sole remaining defendant in the case.

Kofoed took no action in the suits as a pro se defendant. The district court entered default judgment against Kofoed who failed to appear or attempt to defend himself, in Livers’s case. Sampson then moved for summary judgment against Kofoed, and the district court granted the motion in favor of Sampson, noting that “[t]he uncontroverted evidence submitted by [Sampson] establishes that Kofoed planted evidence in the homicide investigation at issue and conspired with others to fabricate evidence and to falsely implicate [Sampson] in the murders.”  The court awarded Sampson $965,000 in compensatory damages, $965,000 in punitive damages, $129,041.09 in costs, and $199,675 in attorney’s fees. It awarded Livers $1,650,000 in compensatory damages, $1,650,000 in punitive damages, $52,981.32 in costs, and $999,656.50 in attorney’s fees. Kofoed did not appeal the judgment.

Livers and Sampson then sued to collect from St. Paul Insurance based on the County’s insurance policy to protect its law enforcement officers from damage claims filed against them for tortious conduct on the job. The policy expressly excludes “[c]riminal, dishonest, fraudulent, or malicious acts” that was the basis of its refusal to defend or indemnify Kofoed.

The trial court concluded that Kofoed’s act, though criminal, is covered under St. Paul Insurance’s “malicious prosecution” exception; the insurance company thus had a duty to indemnify Kofoed for both compensatory and punitive damages, as well as costs and attorney’s fees. The district court then ordered St. Paul Insurance to pay $1,643,500 to Sampson and $3,356,500 to Livers—totaling $5,000,000, the policy cap—but denied prejudgment interests in the damages award.

DISCUSSION

The Eighth Circuit concluded that, contrary to the plaintiffs’ claims, St. Paul Insurance’s policy coverage is not illusory. It excludes coverage for acts with specific intent, but it covers general intent acts. Neither false arrest nor false imprisonment requires a specific intent.

Finally, while the policy excludes criminal, dishonest, fraudulent, or malicious acts, it also expressly states that it will not “apply [the] exclusion to personal injury caused by malicious prosecution.” Thus, the policy excludes many specific intent acts, but it makes a specific exception for malicious prosecution. The policy also covers general intent acts or omissions, or conduct where intent is not at issue. The policy can provide what it promises and is thus not illusory.

MALICIOUS PROSECUTION EXCEPTION TO COVERAGE EXCLUSION

The interpretation of an insurance policy is a question of law. When an insurer denies coverage, the plaintiff must prove coverage. The burden to prove that an exclusionary clause applies rests upon the insurer. The burden then shifts back to the plaintiff to show that an exception to the insurance exclusion applies.

Under Nebraska law, a person tampers with physical evidence if he, “believing that an official proceeding is pending or about to be instituted and acting without legal right or authority, . . . knowingly makes, presents, or offers any false physical evidence with intent that it be introduced in the pending or prospective official proceeding.” Neb. Rev. Stat. § 28-922(1)(b). In contrast, the tort of malicious prosecution comprises these conjunctive elements: “(1) the commencement or prosecution of the proceeding against the plaintiff, (2) its legal causation by the present defendant, (3) its bona fide termination in favor of the plaintiff, (4) the absence of probable cause for such proceeding, (5) the presence of malice therein, and (6) damages.” McKinney v. Okoye, 842 N.W.2d 581, 591 (Neb. 2014).

Criminal evidence tampering and civil malicious prosecution differ sufficiently such that one is not analogous to the other. A person who tampers with evidence does so either to undermine or to bolster a prosecution. A malicious prosecution purposefully misuses the government’s prosecutorial power to start or sustain criminal charges against a person without probable cause. A person may commit the tort of malicious prosecution without tampering with evidence in violation of the law. Likewise, a person tampering with evidence may not satisfy the elements of malicious prosecution.

The Eighth Circuit appropriately concluded that St. Paul Insurance’s malicious prosecution exception for intentional acts did not include the crime of evidence tampering for which Kofoed was convicted beyond a reasonable doubt.

Other than the conclusory allegation that Kofoed and the other defendants procured false evidence, the complaint pleaded no facts to support a claim of malicious prosecution.

Because Livers and Sampson failed to plead sufficiently the malicious prosecution cause of action in their complaints, the district court’s entry of default judgment against Kofoed did not include malicious prosecution. And, because Kofoed’s judgment did not include malicious prosecution—the sole exception to the excluded acts available to Kofoed under St. Paul Insurance’s policy—Livers and Sampson failed in their burden to show that an exception to the insurance exclusion applied. St. Paul Insurance thus has no duty to indemnify Kofoed. Therefore, the Eighth Circuit reversed the district court’s judgment.

ZALMA OPINION

Since Kofoed was convicted of the crime of tampering with evidence – a specific intent crime – there could be no question his acts were intentional and there was no indication of the fortuity required to allow for insurance coverage. Had the plaintiffs pleaded and presented evidence of malicious prosecution coverage would have been available. They did not and, as a result, they lost the ability to collect their multi-million dollar judgment against Kofoed and the county. Their lawyers should consider advising their E&O insurers of a potential claim.


© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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