SLANDER AFTER EMPLOYMENT NOT SUBJECT TO THE EMPLOYMENT-RELATED EXCLUSION

Commercial General Liability	Employment-related Practices
Exclusions

Janette Clayton, a former manager of Lands Inn was fired due to allegations of theft and embezzlement. Afterward, two different persons called Lands Inn asking for Clayton and were told by employees that she had been fired because she had stolen funds.

Criminal charges were filed but dismissed. Clayton then sued Lands Inn for malicious prosecution, slander and negligence. Lands Inn requested coverage for the suit from Owners Insurance Company, its CGL carrier.

Although coverage for slander and malicious prosecution was covered actions within the definition of personal and advertising injury under Coverage B-Personal and Advertising Liability Coverage, Owners denied coverage based on the employment-related exclusion which read in part:

c. “Personal injury” arising out of any:

(1) Refusal to employ;

(2) Termination of employment;

(3) Coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or other employment-related practices, policies, acts, or omissions;  or

(4) Consequential “personal injury” as a result of (1) through (3) above.

The trial court determined that the defamation occurred after Clayton had left Lands Inn’s employment. The statements were not made as part of management explaining to fellow employees why Clayton had left, nor were they made to potential employers enquiring about Clayton’s work performance so, according to the court, the statements could not be considered employment-related.

Owners appealed.

The South Carolina Supreme Court affirmed the judgment regarding the defamation allegation not being subject to the employment-related exclusion.

Note: The Supreme Court did not affirm two other parts of the trial court decision but even without those affirmations, the decision remained for Lands Inn and against Owners.

Owners Insurance Company, Appellant, v. Janette Clayton, Richard Johnston, Jr. a/k/a A.R. Johnston, Jr., Lands Inn, Inc., d/b/a Lands Inn and Comfort Inn, Johnston Company, Inc., Robert Bowen, a/k/a Robert Bowners, Linda Silver-Jones, R.C. McEntire, Jr., and Carol Stanley, Defendants, of whom Janette Clayton, Lands Inn, Inc. d/b/a Lands Inn and Comfort Inn are, Respondents. Supreme Court of South Carolina, No. 25986. Decided: May 23, 2005