Independent Contractors Fall within Employment-Related Practices Exclusions Says First Circuit

In Ruksznis v. Argonaut Insurance Co., 2014 U.S. App. LEXIS 23881 (1st Cir. Dec. 18, 2014), the First Circuit affirmed the district court’s grant of summary judgment in favor of Argonaut Insurance Company (Argonaut), finding that the employment-related practices exclusion in the subject Commercial General Liability Policy and Public Officials Liability Policy barred coverage.

The underlying dispute arose out of a lawsuit filed by Frank Ruksznis, the former plumbing inspector for the Town of Sangerville (the Town), against Lance Burgess, a Town Selectman.  Burgess, during a public meeting of the Sangerville Board of Selectmen, made allegedly disparaging remarks concerning Ruksznis’ job performance as plumbing inspector and subsequently took actions that resulted in Ruksznis’ removal from his position. Ruksznis filed suit in federal court, slander and violation of his due process rights. Pursuant to Federal Rule 68, Burgess filed an Offer of Judgment in the amount of $100,000, which Ruksznis accepted.  After the Offer of Judgment was entered, Ruksznis filed a reach and apply action against Argonaut, which insured the Town.  Following cross-motions for summary judgment, the district court denied Ruksznis’ motion and granted Argonaut’s motion, finding that the employment-related practices exclusion barred coverage.

On appeal, Ruksznis argued that the district court erred in finding the language of employment-related practices exclusion unambiguous as it applied to him and that his status as an independent contractor or municipal official removed him from the exclusion. Acknowledging the absence of definitions regarding “employment” in the insurance policies, the First Circuit analyzed a series of dictionary definitions and found compelling the definition of “employ” as “to hire or engage the services” of someone.  Even assuming that Ruksznis was a municipal official or independent contractor, the Court determined that he was employed by the Town. The First Circuit found persuasive that an ordinary person would consider both the status of an employee and an independent contractor to be forms of employment.  Ruksznis’ municipal officer argument similarly failed since he performed services for the Town, thereby satisfying the dictionary definition of employment.

The First Circuit’s broad application here of employment-related practices exclusions is a clear victory for insurers.

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