An insurer that covers malicious prosecution does not have to defend its policyholder against an abuse of process claim, the Eighth Circuit has ruled.
The United States Court of Appeals for the Eighth Circuit handed down the decision on March 17, affirming a lower court's finding that General Star Indemnity Company owes no duty to defend Toy Quest Ltd. against an abuse of process lawsuit filed by ASI, Inc. The ruling draws a firm line between two torts that are often confused but, as the court made clear, are not interchangeable when it comes to insurance coverage.
The dispute traces back to a personal injury liability policy that General Star sold to Toy Quest. That policy covered injuries arising from a specific list of offenses: false arrest, detention, imprisonment, malicious prosecution, wrongful eviction, slander, libel, and invasion of privacy. Abuse of process was not on the list.
Trouble started when ASI sued Toy Quest in Minnesota federal court, claiming Toy Quest had abused the legal process by filing a frivolous opposition in a separate garnishment proceeding and entering an appearance with the ulterior motive of helping conceal assets. General Star stepped in to defend Toy Quest but reserved its rights, then filed its own lawsuit asking a court to confirm it had no obligation to provide that defense.
The district court in Minnesota agreed with General Star and granted judgment on the pleadings. Toy Quest and ASI appealed, pressing three arguments: the lower court should have waited for the abuse of process case to play out before deciding the coverage question, the policy language was broad enough to cover the claim, and California law rather than Minnesota law should have been applied.
The Eighth Circuit, in an opinion by Circuit Judge Kobes joined by Judges Gruender and Stras, was unconvinced on all three counts.
On the coverage question, the court applied Minnesota's approach to reading insurance contracts. Policy language is interpreted the way a reasonable person in the insured's position would understand it, and courts will not manufacture ambiguity where the language is plain. Minnesota also follows a well-established interpretive principle: if a contract specifically lists certain things, everything not on the list is presumed excluded. Since the policy named malicious prosecution as a covered offense and did not name abuse of process, the court found that coverage did not extend to ASI's claim.
The court noted that Minnesota recognizes the two torts as legally distinct. Malicious prosecution involves initiating a legal action without probable cause, with malicious intent, and where that action ultimately fails. Abuse of process, by contrast, involves misusing legal proceedings for an improper purpose but does not necessarily require that someone started a new lawsuit. In this case, Toy Quest had not initiated an action at all – it had filed an opposition in an existing proceeding. That distinction mattered.
ASI argued that the facts underlying its abuse of process claim could also support a malicious prosecution theory, which would bring the case within the policy's coverage. The court disagreed, noting that ASI's own complaint did not allege that Toy Quest had brought or started a legal action, and did not allege that the proceeding in question had ended in ASI's favor – two essential ingredients for a malicious prosecution claim. The garnishment proceeding had merely been administratively closed pending resolution of the underlying ASI action, which the court found was not a termination in ASI's favor.
Toy Quest suggested that the term malicious prosecution would be ambiguous to an ordinary policyholder who might not appreciate the legal distinction between the two torts. The court was not persuaded, noting that even by dictionary definition, prosecute means to bring or institute a legal action – something Toy Quest had not done.
On the choice of law question, ASI argued that California law should govern and would produce a different result. The court found no meaningful difference between the two states on this issue. California courts also treat abuse of process and malicious prosecution as separate torts and apply the same interpretive principle. ASI pointed to a 1994 Ninth Circuit decision that reached a different conclusion, but the Eighth Circuit noted that ruling represents a minority view and is not binding on the California Supreme Court. The court concluded that California would more likely follow the majority of courts that have considered the question.
The Eighth Circuit also dealt with two procedural motions from Toy Quest. The first was a request to send the coverage question to the Minnesota Supreme Court for guidance. The court declined, noting that certification is discretionary. The second was a motion to disqualify ASI's lawyers on the grounds that the law firm and one of its partners held ownership interests in ASI, which Toy Quest said violated professional conduct rules. The court denied that motion as well, finding that Toy Quest had waited three years after learning about the potential conflict before raising it – far too long to be considered timely.
