In City of Newport v. Westport Insurance Co., the Kentucky Court of Appeals addressed whether coverage existed for a malicious prosecution claim in a law enforcement liability policy that covered only periods of time during the claimant’s incarceration, but not when the claimant was originally arrested and wrongfully convicted of the crimes.

In the late 1980s, William Virgil was convicted of crimes he did not commit and spent 28 years in prison before DNA testing revealed there was no evidence connecting Virgil to the crimes. Following his release from prison, Virgil filed a federal lawsuit against the Newport Police Department, the city of Newport, and other various individuals (collectively, “the insureds”) under 26 U.S.C. § 1983, claiming the insureds violated his constitutional rights by arresting and charging him with crimes for which they knew there was no probable cause. Because of the alleged violations of his constitutional rights, Virgil sought compensation for personal injuries.

The insureds subsequently tendered their defense to several insurance carriers that had provided coverage to them between 1987 and 2015. In 2017, the insureds tendered Virgil’s claim for defense and indemnification to Westport Insurance Co. Westport, as the successor of another carrier, had issued several policies of insurance to the insureds between 1997 and 2000.

The Westport policies provided coverage for personal injury only if the “personal injury is caused by an occurrence that takes place in the coverage territory” and the personal injury “occurs during the policy period.” Westport denied coverage for the claim because no “triggering event” occurred during the Westport policy period. In addition, another carrier that had insured the insureds from 2007 to 2010, St. Paul Guardian Insurance Co. and its successors, also denied coverage on similar grounds.

In 2020, the Sixth Circuit Court of Appeals ruled against St. Paul in St. Paul Guardian Insurance Co. v. City of Newport, finding that under the St. Paul policies, Virgil suffered “continuous and ongoing injury” triggering coverage.

However, Westport continued to deny coverage for the Virgil claim, but it did agree to defend the insureds under a reservation of rights while it sought declaratory relief in Kentucky state court that it had no obligation to either defend or indemnify the insureds.

As to Westport’s claim its policies did not provide coverage for Virgil’s claim, the Kentucky trial court granted summary judgment in favor of Westport. The trial court rejected the argument of the insureds that Westport had to cover the “ongoing injuries” sustained by Virgil from his incarceration during the applicable policy periods from 1997 to 2000. The insureds appealed.

The Kentucky Court of Appeals analyzed the Westport policies, as well as the St. Paul policies. In affirming the ruling of the trial court, the court noted how Kentucky law distinguishes between the “legal injury” and the “damage that may flow from the injury.” The court found that Virgil’s “injury” occurred when he was wrongfully charged and incarcerated in 1987. And the fact that he continued to suffer damages during the Westport policy periods (1997–2000) did not alter when the injury occurred.

Further, the Kentucky appellate court drew a distinction between the St. Paul policies and the Westport policies. In the St. Paul policies, coverage existed for injury and damage that occurred during the policy period. In contrast, the Westport policies only provided coverage if the “personal injury” occurred during the policy periods. Accordingly, because Virgil was arrested and charged in 1987 (i.e., the “injury”), 10 years before the coverage period of Westport, the court found that Westport had neither a duty to defend nor indemnify the insureds for the claim brought by Virgil.