Whether the tort of malicious prosecution occurs, for insurance and indemnity purposes, on the date the malicious lawsuit is filed, or on the date it is terminated in the defendant’s favor.

In 1998, the plaintiff, Billings, sued the Petersons over a proposed wetlands development. The case was dismissed in April 2000 as a result of an earlier settlement.

In March 2000, Billings obtained an umbrella insurance policy from the Commerce Insurance Company. The policy provided, inter alia, that Commerce would defend Billings against claims of malicious prosecution and defamation.

In December 2000, the Petersons sued Billings for malicious prosecution (relating to the 1998-2000 lawsuit), and intentional and negligent infliction of emotional distress (relating to the lawsuit and to rumors that Billings allegedly spread that they were planning to fill wetlands). Commerce declined to defend Billings, on the grounds that the lawsuit related to injuries occurring prior to March 2000. Billings successfully defended against the Petersons and then sued Commerce for attorney’s fees.

A Superior Court judge granted summary judgment for Commerce, Billings appealed, and the SJC transferred the case sua sponte from the Appeals Court.

1. Effective date of a malicious prosecution. One element of malicious prosecution is that the case be terminated in the defendant’s favor. Therefore, under the ordinary rule that a cause of action ripens when all elements are satisfied, the Petersons’ malicious prosecution claim accrued in April 2000 when the case was dismissed, within Billing’s coverage period from Commerce. The judge found, however, that malicious prosecution occurs for insurance purposes when the case is filed, not when it is dismissed, following the rule of City of Erie v. Guaranty Nat’l Ins. Co., 109 F.3d 156, 159-163 (3rd Cir. 1997) and Royal Indemnity Co. v. Werner, 979 F.2d 1299, 1299-1300 (8th Cir. 1992). The apparent rationale is that plaintiffs might be able to “lull” insurers into offering malicious prosecution insurance once they realize that a case is unsupportable.
   
   Billings argues that Massachusetts should not deviate from the usual all-elements rule. Billings suggests that insurers could easily protect against the “lulling” scenario by asking applicants if they are party to any lawsuit — and that in fact bad-actor plaintiffs will be more able to take advantage of insurers if they can plan for a date certain (the filing date) instead of uncertain (the dismissal date).
2. Emotional distress as an allegation of defamation. Billings argues that the emotional distress claims, arising from his alleged spreading of rumors, effectively stated claims for defamation. Commerce contests that argument and argues that any such defamation would have happened prior to the coverage period. It is difficult to evaluate these claims without access to the full record.

The SJC likely transferred this case from the Appeals Court because Massachusetts has not yet adopted a rule on the effective date of a malicious prosecution for insurance purposes, even though a number of other states have. Commerce argues effectively that the majority rule is to fix the date of malicious prosecution at the time of filing, and that termination of the suit is “in the nature of a threshold requirement,” citing Cole v. Pulley, 18 Mass.App.Ct. 950, 951 (1984). On balance, the Court is likely to follow the majority rule.