Ruksznis v. Argonaut Insurance Company ( 2014 )


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  •           United States Court of Appeals
    For the First Circuit
    No. 13-2474
    FRANK RUKSZNIS,
    Plaintiff, Appellant,
    v.
    ARGONAUT INSURANCE COMPANY,
    Defendant, Appellee.
    APPEAL FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF MAINE
    [Hon. D. Brock Hornby, U.S. District Judge]
    Before
    Lynch, Chief Judge,
    Lipez, Circuit Judge,
    and Lisi,* District Judge.
    Arthur J. Grief, with whom Julie D. Farr and Gilbert & Grief,
    P.A. were on brief, for appellant.
    Richard R. Eurich, with whom Michael H. Hayden and Morrison
    Mahoney LLP were on brief, for appellee.
    December 18, 2014
    *
    Of the District of Rhode Island, sitting by designation.
    LIPEZ, Circuit Judge.    Appellant Frank Ruksznis, former
    plumbing inspector for the Town of Sangerville ("the Town"),
    obtained a judgment against Lance Burgess, a Town Selectman, for
    slander. Ruksznis sought to collect the judgment through this reach
    and apply action against the Town's insurer, Argonaut Insurance
    Company ("Argonaut"). The district court granted summary judgment
    for Argonaut, finding that the exclusions in the insurance contract
    for "employment-related" practices barred Ruksznis's recovery.
    Because we agree that the term "employment" unambiguously covers
    Ruksznis's relationship with the Town, and the policy therefore
    excludes coverage, we affirm.
    I.
    We draw the facts from the complaint in the underlying
    slander and civil rights action, as well as from the summary
    judgment record in the case before us.
    Ruksznis served as the appointed1 plumbing inspector for
    the Town from approximately 1993 until 2010. Each year from 1993
    until 2010, he was reappointed for an additional one-year post. As
    plumbing inspector, Ruksznis set his own hours, provided his own
    tools, paid for all of his own expenses, and paid for any schooling
    1
    See Me. Rev. Stat. tit. 30-A, § 4221(1) (2011) (providing
    for the appointment of plumbing inspectors by municipal officers,
    compensation as determined by municipal officers, payment for
    services by the respective municipalities, and removal from office
    for cause).
    -2-
    to   update    his   license.2      Ruksznis       describes     himself    as   an
    independent contractor. Although Argonaut describes Ruksznis as an
    employee,     they   argue   that      even   if    he   were    an   independent
    contractor, he was nonetheless in an employment relationship with
    the Town within the meaning of the insurance policies.
    The   Town   held    two   insurance      policies    from     Argonaut
    relevant to this case: a Commercial General Liability ("CGL")
    policy and a Public Officials Liability ("POL") policy. Each policy
    covered personal injury claims generally, but each also contained
    an exclusion for "employment-related" activity. The CGL policy's
    "employment-related practices exclusion" states that insurance for
    personal and advertising injury does not apply to claims "arising
    out of any . . . Employment-related practices, policies, acts or
    omissions, such as coercion, demotion, evaluation, reassignment,
    discipline, defamation, harassment, humiliation, discrimination or
    malicious prosecution directed at that person." The POL policy's
    exclusion precludes coverage for "[a]ny claim arising out of
    employment or application for employment with any insured, or any
    other employment related policies or practices." The policies do
    not define either "employment" or "employment-related."
    At a public meeting of the Sangerville Board of Selectmen
    on April 13, 2010, Selectman Burgess stated that Ruksznis had made
    2
    In his affidavit Ruksznis asserts that he also served as the
    plumbing inspector for Guilford, Abbot, Atkinson, Blanchard, Dover-
    Foxcroft, Monson, Dexter, and Willimantic.
    -3-
    "less than quality decisions" while serving as plumbing inspector,
    and that "there has [sic] been a couple of issues concerning both
    his job performance and actions outside of work. I can't comment on
    what happened last year because I wasn't on the Board and I believe
    the Selectmen discussed it in the executive session."
    At the next Selectmen's meeting on April 22, Burgess took
    unspecified actions that caused Ruksznis to be removed from his
    position as plumbing inspector.                Although informed by the Maine
    Municipal Association that Ruksznis's removal had not complied with
    procedures    required     by    state   law,     Burgess    blocked   Ruksznis's
    reinstatement.
    Ruksznis subsequently filed an action in the District of
    Maine asserting a claim of common law slander and violations of his
    constitutional right to due process under 42 U.S.C. § 1983.
    Pursuant to Federal Rule of Civil Procedure 68, Burgess filed an
    Offer of Judgment in the amount of $100,000, which Ruksznis
    accepted. The Offer of Judgment did not allocate the payment
    between claims nor did it specify that it was for both the slander
    and civil rights claims. After judgment was entered, Ruksznis
    initiated this reach and apply action against Argonaut seeking to
    recover for the slander count under the CGL policy and for the due
    process claims under the POL policy.
    Argonaut    moved     for     summary      judgment,   arguing   that
    exclusions     in   both        policies       barred     Ruksznis's    recovery.
    -4-
    Specifically, it invoked an exclusion for "Governmental Errors and
    Omissions" in the CGL policy and exclusions for "employment-
    related" practices in both policies. In a cross-motion for summary
    judgment, Ruksznis argued that both exclusions were inapplicable.
    He claimed that the employment-related exclusion did not apply
    because he was an independent contractor rather than a Town
    "employee." He further asserted that, at a minimum, the policy
    language was ambiguous and, hence, the provisions must be construed
    in his favor. The district court denied Ruksznis's motion and
    granted Argonaut's motion on the ground that Ruksznis's claim
    "plainly arose from an employment-related dispute" and that the
    exclusion unambiguously covered Ruksznis's relationship with the
    Town.3
    On appeal, Ruksznis argues that the district court erred
    in finding the pertinent policy language unambiguous as applied to
    his circumstances. He reiterates his contention that his status as
    an independent contractor places him outside the scope of the
    policies' exclusions for "employment-related" activity.4
    3
    The district    court   adopted   the   magistrate   judge's
    recommended decision.
    4
    He also argues that the "Government Errors and Omissions"
    exclusion does not bar his slander claim as the slander at issue
    pertained to Burgess's personal opinion of Ruksznis's job
    performance. We do not address the applicability of the "Government
    Errors and Omissions" exclusion because our holding on the
    "employment-related" exclusion resolves the case.
    -5-
    II.
    Our   review    of   a   district   court's    grant   of   summary
    judgment is de novo.       See Johnson v. Univ. of P.R., 
    714 F.3d 48
    , 52
    (1st Cir. 2013).    In conducting our "fresh look" at the record, we
    view the evidence in the light most favorable to the non-moving
    party and draw all reasonable inferences in its favor.              Gerald v.
    Univ. of P.R., 
    707 F.3d 7
    , 16 (1st Cir. 2013).            Summary judgment is
    appropriate only if there is no genuine dispute as to any material
    fact and the moving party is entitled to judgment as a matter of
    law.   Fed. R. Civ. P. 56(a); 
    Gerald, 707 F.3d at 16
    .
    The sole issue before us is whether the judgment obtained
    by Ruksznis against Burgess is excluded from the indemnity coverage
    of either of the two policies issued by Argonaut. The answer turns
    on whether the exclusions in the policies for "employment" or
    "employment-related" practices are ambiguous in their applicability
    to the acts taken by the Town against Ruksznis, who arguably has
    the status of an independent contractor rather than an employee.
    A.     Legal Principles
    We apply Maine law in this diversity action. Elliott v.
    S.D. Warren Co., 
    134 F.3d 1
    , 5 (1st Cir. 1998). Under Maine law,
    whether a policy term is ambiguous is a question of law. Royal Ins.
    Co. v. Pinette, 
    756 A.2d 520
    , 523 (Me. 2000). "As long as language
    in an insurance policy, read in context, has a plain and generally
    accepted meaning, that language is free from ambiguity." Med. Mut.
    -6-
    Ins. Co. of Me. v. Indian Harbor Ins. Co., 
    583 F.3d 57
    , 62 (1st
    Cir. 2009). We will find ambiguity if an ordinary person would not
    understand that the policy affords coverage for the particular
    claim at issue or if the language is susceptible to different
    reasonable interpretations.    Travelers Indem. Co. v. Bryant, 
    38 A.3d 1267
    , 1269 (Me. 2012). Under Maine law, language of an
    insurance contract is construed according to its plain meaning. 
    Id. at 1270.
    When a word in an insurance policy is undefined, Maine
    courts look to its ordinary meaning as appearing in dictionaries.
    Middlesex Mut. Assurance Co. v. Fish, 
    738 F. Supp. 2d 124
    , 137-38
    (D. Me. 2010). Ambiguity, if found, is resolved in favor of the
    insured. Foremost Ins. Co. v. Levesque, 
    868 A.2d 244
    , 246 (Me.
    2005).
    B.   The Policies
    Ruksznis argues that the slander claim is payable under
    the CGL as a "personal and advertising injury" and that the civil
    rights claims fall under the POL policy's "wrongful act" coverage
    provision. Argonaut concedes for purposes of summary judgment that
    Burgess was an insured under both policies and that Ruksznis's
    claims fall within the coverages on which he relies.
    Each   policy,   however,   includes   an   exclusion   for
    "employment-related" practices. The "Employment-Related Practices
    Exclusion" of the CGL policy reads as follows:
    This insurance does not apply to:
    -7-
    "Personal and advertising injury" to:
    (1) A person arising out of any: . . .
    (c) Employment-related practices, policies, acts or
    omissions, such as coercion, demotion, evaluation,
    reassignment, discipline, defamation, harassment,
    humiliation, discrimination . . .
    The POL provision, Exclusion 8, similarly states that the insurance
    provided by the policy does not apply to "[a]ny 'claim' arising out
    of employment or application for employment with any insured, or
    any   other    employment   related   policies   or     practices."5   This
    exclusion removes from coverage any claim which either arises out
    of employment, or arises out of "any other employment related
    polices or practices."
    Ruksznis   maintains   that   references    to   "employment"
    connote an employee-employer relationship, and that his claim as an
    independent contractor is therefore outside the scope of the
    exclusions.     Because his focus is on the word "employment" and the
    5
    The text of the exclusion is as follows:
    This insurance does not apply to:
    1. Any "claim", or any portion of any "claim", alleging
    "bodily injury", "property damage", "personal injury",
    "advertising injury" or "employee benefits injury".
    . . . .
    8. Any "claim" arising out of employment or application
    for employment with any insured, or any other
    employment related policies or practices.
    K. "Personal injury" means:
    . . .
    3. Defamation in any form...
    Ruksznis concedes that because the policy's definition of
    personal injury includes "defamation in any form," the POL's
    exclusion denies coverage for his slander claim.
    -8-
    term "employment-related," both of which appear in each exclusion,
    we must similarly focus our analysis.
    1. The Plain Language and Ordinary Meaning of Employment
    In   the   absence    of   definitions   of   "employment"   and
    "employment-related"    in     the   insurance   contract,   we   consider
    dictionary definitions. Fed. Ins. Co. v. Raytheon Co., 
    426 F.3d 491
    , 498-99 (1st Cir. 2005). "Employment" is defined as "the state
    of being employed; employ; service." The Random House Dictionary of
    the English Language 638 (2d ed. 1987). The definition of "employ"
    is "to hire or engage the services . . . provide employment for;
    have or keep in one's service." 
    Id. "Employment" encompasses
    a
    number of arrangements between two parties in which one party
    performs services or duties for another. See, e.g., American
    Heritage Dictionary 586 (4th ed. 2000) (defining "employ" to mean
    "to engage the services of; put to work," and "employment" to mean
    "the act of employing," "the state of being employed," and "[t]he
    work in which one is engaged; occupation"); Webster’s II New
    Riverside University Dictionary 429 (1994) (same); The American
    Heritage Dictionary 450 (2d col. ed. 1985) (same).
    Despite the breadth of this definition, Ruksznis argues
    that "employment" encompasses only work performed for the Town by
    one who meets the formal requirements of an employee rather than an
    independent contractor. To buttress this argument, Ruksznis cites
    -9-
    three Maine Supreme Judicial Court cases, two6 of which deal with
    the    definition     of   employment      in   the   context      of   collecting
    unemployment       benefits   and    the      third   of   which      defines   the
    distinction between an independent contractor and an employee for
    a     workers'    compensation      claim.7     Ruksznis    insists      that   his
    employment relationship with the Town meets the standard applicable
    to an independent contractor, as articulated in these cases.
    We will assume for purposes of our analysis that he is an
    independent contractor. Nonetheless, 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. As the district court held,
    "although the ordinary person unschooled in the law or in insurance
    appreciates that there is a distinction between being an employee
    and an independent contractor, the ordinary person also appreciates
    that either status is a form of employment." Ruksznis v. Argonaut
    Ins. Co., 
    2013 WL 6063379
    , at *7 (D. Me. Nov. 18, 2013). The broad
    dictionary       definition   of   employment     ("the    act   of     employing";
    "engag[ing]" the services" of someone) supports this understanding.
    6
    Vector Mktg. Corp. v. Me. Unemployment Ins. Comm'n, 
    610 A.2d 272
    , 273 (Me. 1992); Ham v. Me. Emp't Sec. Comm'n, 
    216 A.2d 866
    ,
    868 (Me. 1966) (defining those outside the scope of "employment" as
    individuals free from control, who perform services outside the
    usual course of business for which the service is performed, and
    who are customarily engaged in an independently established trade).
    7
    Pennell v. City of Portland, 
    125 A. 143
    (Me. 1924).
    -10-
    American Heritage Dictionary 586 (4th ed. 2000);                       The Random House
    Dictionary of the English Language 638 (2d ed. 1987).
    Ruksznis    tries     to     confound      the     plain    meaning    of
    employment or employment-related with his resort to the statutory
    framework         relating    to   the       responsibilities,        appointment,      and
    termination of Town plumbing inspectors. Ruksznis contends that
    Maine law treats municipal officials differently than municipal
    employees. In support of his contention, he cites Me. Rev. Stat.
    tit.       30-A    M.R.S.A.    §   2601(1)      which     provides     that    "municipal
    officers      shall     appoint       all    municipal       officials   and      employees
    required by general law." (emphasis added). The term "municipal
    official" is defined as any "elected or appointed member of a
    municipal         government."     Me.      Rev.     Stat.    tit.   30-A,    §   2001(11)
    (emphasis added). Because plumbing inspectors are "appointed for a
    term of one year or more," Ruksznis concludes that plumbing
    inspectors are municipal officials and not employees. Me. Rev.
    Stat. tit. 30-A, § 4221(1) (2011).8 In Ruksznis's view, because
    plumbing inspectors are not employees, they therefore are not
    employed by or in an employment relationship with the Town within
    8
    Maine law provides that municipal officers of a municipality
    shall appoint all municipal officials required by general law and
    may remove those officials for cause, after notice and hearing. Me.
    Rev. Stat. tit. 30-A, § 2601(1) (2011). Municipal officers of a
    town are statutorily empowered to "appoint one or more inspectors
    of plumbing," who "are appointed for a term of one year or more."
    Me. Rev. Stat. tit. 30-A, § 4221(1) (2011).
    -11-
    the meaning of the policies, or, at least, there is ambiguity on
    that point.
    This    argument      suffers    from   the   same   infirmity   as
    Ruksznis's independent contractor argument. We will again assume
    Ruksznis is correct that he is a municipal official. Nonetheless,
    the   ordinary    meaning   of    "employment"     encompasses    Ruksznis's
    relationship with the Town. As previously stated, the definition of
    "employ" is "to hire or engage the services" of someone. The Random
    House Dictionary of the English Language 638 (2d ed. 1987). During
    each of his successive one-year appointments as the Town's plumbing
    inspector, the Town engaged Ruksznis's services. From 1993 until
    2010, he was employed by the Town and performed his duties as a
    municipal official for the Town as part of that employment.
    2. Context
    Ruksznis further argues that because not all of the
    practices listed in the CGL exclusion and the POL exclusion apply
    to independent contractors, the exclusions are inapplicable to him,
    or at least they are ambiguous in their application. The CGL policy
    provides that coverage does not apply to "personal and advertising
    injury" arising out of the following:
    Employment-related   practices,   policies,   acts   or
    omissions, such as coercion, demotion, evaluation,
    reassignment,   discipline,   defamation,   harassment,
    humiliation, discrimination or malicious prosecution
    directed at that person.
    -12-
    Claiming that independent contractors are not demoted, reassigned,
    or disciplined, he argues that the "exclusion cannot, as a matter
    of law, reach an independent contracting relationship."
    Ruksznis cites no statutory or case law to support this
    all   or    nothing    logic.   The   language       of   the   exclusion   states
    "employment-related practices. . . such as." This language provides
    examples of possible actions by the Town that might have an impact
    on a person performing services for the Town. That this person
    might      be   defamed   by   the   Town,    but    could   never   be   demoted,
    reassigned or disciplined, does not affect the applicability of the
    employment-related exclusion.
    Ruksznis similarly argues that the POL policy exclusion
    relates to "claims arising out of employment or application for
    employment." Since an independent contractor does not apply for
    employment, a dubious proposition of appellant's that we will
    accept only for the sake of argument, the exclusion does not apply
    to independent contractors. This all or nothing logic suffers from
    the same infirmity as the version above. That an independent
    contractor might be defamed by the Town only while providing
    services to the Town does not make the employment exclusion
    inapplicable.       The   language    of     the    exclusion   includes    claims
    "arising out of employment." Burgess's slander was a claim arising
    out of Ruksznis's performance of his plumbing inspector office. It
    -13-
    was therefore unambiguously an employment-related claim subject to
    the employment-related practices exclusion.9
    III.
    Ruksznis's    judgment    against     Burgess     arose   from   an
    employment-related     dispute.    The    CGL   and   POL   policies   both
    unambiguously exclude coverage for claims arising from employment-
    related practices. Hence, we affirm the district court's order
    granting Argonaut's motion for summary judgment.
    So ordered.
    9
    Ruksznis cites four cases to support the proposition that
    the "employment-related" practices exclusion is ambiguous, none of
    which apply Maine law and all of which are distinguishable. In
    neither North American Building Maintenance, Inc. v. Fireman's Fund
    Insurance Co. 
    40 Cal. Rptr. 3d 468
    , 470 (Cal Ct. App. 2006), nor
    Career Sys. Dev. Corp. v. Am. Home Assur. Co., No. C. 10-2679 BZ,
    
    2011 WL 4344578
    (N.D. Cal. Sept. 14, 2011), did the court consider
    whether the work of an independent contractor was a type of
    "employment" and, consequently, neither case is relevant. Nor is
    Ruksznis's reliance on Nat'l Union Fire Ins. Co v. Starplex Corp.,
    
    188 P.3d 332
    (Or. Ct. App. 2008) helpful as the employment-related
    practices exclusion did not apply. Finally, the court's holding in
    Clinical Research Inst. of S. Oregon, P.C. v. Kemper Ins.
    Companies, 
    84 P.3d 147
    , 150 (Or. Ct. App. 2004) was limited to
    whether the exclusion applied to former employees and is therefore
    equally inapplicable.
    -14-