v. Argonaut Ins. Co., 774 F.3d 784 (1st Cir.
2014) faced similar arguments and came
to the same conclusion.
The case of the town
Frank Ruksznis was the appointed
plumbing inspector for the town of
Sangerville from 1993 until 2010. Each
year he was reappointed for an additional
one-year post. Ruksznis described himself as an independent contractor — he
set his own hours, provided his own
tools, and paid for his own expenses and
schooling to update his license.
At a public meeting, Selectman Burgess made negative statements about
Ruksznis and decisions he had made
while serving as plumbing inspector.
At a different meeting, Burgess took actions that caused Ruksznis to be removed
from his position as plumbing inspector.
Ruksznis filed an action asserting a claim
of common law slander and received a
judgment of $100,000, which he accepted. After the judgment was entered, Ruksznis brought action against Argonaut to
recover for the slander count under the
town’s CGL policy.
Argonaut stated that the CGL policy’s
employment-related practices exclusion
applied, but Ruksznis claimed that the
exclusion could not apply because he
was an independent contractor and not a
The court, however, found that “the
distinction between an employee and
an independent contractor, critical in
the context of collecting unemployment
benefits and workers’ compensation, is
immaterial in the instant case.” The court
said that whether he considered himself
an independent contractor or a municipal
official, the ordinary meaning of “
employment” (to hire or engage the services of
someone) encompassed his relationship
with the town. The court ruled that the
defamation was an employment-related
dispute and excluded by the CGL policy.
On the other hand, claims for post-em-
ployment defamation may net different
results, such as in Owners Ins. Co. v. Clay-
ton, 614 S.E.2d 611 (S.C. 2015), where the
Supreme Court of South Carolina ruled
that defamation against a former employ-
ee did not amount to an employment-
Janette Clayton was the manager of
the Lands Inn motel. She was fired for
allegedly embezzling funds. After her
termination, two individuals who called
and asked for her were told that she had
been fired for stealing funds. No criminal
charges were pressed, and she filed suit
against Lands Inn for malicious prosecution, slander and negligence. A jury
awarded her $1.25 million.
Lands Inn was covered by a CGL policy issued by Owners Insurance Company.
Owners defended the action under a reservation of rights, but filed a declaratory
judgment suit stating that the allegations
within the suits were excluded by the
employment-related practices exclusion.
The court said that “in determining
whether post-termination defamations
such as the ones here fall within an ERP
[employment-related practices] exclu-
sion, courts generally inquire whether
the statement was made in the context
of employment, and whether the state-
ment’s content describes the employee’s
The court noted that while the sub-
stance of the statements regarding Clay-
ton’s termination were employment-re-
lated, the context was not. Lands Inn told
the callers that Clayton had been fired
and why, but the callers were not po-
tential employers asking about her work
performance, and the information was
not told to other employees to explain
Thus, the court found that, because the
employment context was not present, the
employment-related practices exclusion
did not apply. Owners was responsible for
indemnifying Lands Inn.
As these cases demonstrate, being in
any type of employment situation with
the insured and suffering defamation can
trigger the employment-related practices
exclusion on the CGL form; however, the
defamation must be in an employment
Susan Massmann, CPCU, is managing
editor of electronic publications for the
reference division of ALM, the parent
company of PropertyCasualty360-
National Underwriter. She may be
reached at email@example.com.