“Arising Out Of”: The Second Circuit’s Broad Construction of Employment-Related Practices Exclusions for Defamation Claims

1. Introduction

In Alexanian v. Government Employees Insurance Co., No. 24-1114 (2d Cir. July 11 2025) (summary order), the United States Court of Appeals for the Second Circuit affirmed a district court decision that two insurers—GEICO and Travelers—had no duty to defend their insured, veterinarian Garo Alexanian, against a defamation counterclaim brought by a former employee. Although issued as a non-precedential summary order, the ruling is a useful exposition of how New York courts interpret “employment-related practices” exclusions and the “arising out of” language in liability policies, and it reiterates the procedural safeguard that pro se litigants are ordinarily entitled to specialised notice when facing a summary-judgment motion.

Key Issues

Whether defamatory statements made by an employer about an employee fall within the ambit of “employment-related practices” exclusions found in homeowners and umbrella liability policies.
Whether failure to give a Fed. R. Civ. P. 56 notice to a pro se litigant mandates reversal.
The continuing breadth of the insurer’s duty to defend vis-à-vis exclusions.

2. Summary of the Judgment

The Second Circuit conducted a de novo review of the grant of summary judgment. It concluded:

The defamatory statements alleged by former employee Rosa Morales “originated from, were incident to, or had a connection with” Alexanian’s employment of Morales.
Accordingly, they were unequivocally barred by the employment-related practices exclusions contained in both policies.
Although the insurers and the district court failed to serve the customary pro se Rule 56 notice, the omission was harmless because Alexanian’s filings demonstrated his understanding of the summary-judgment standard.
Because the exclusion applied, the court did not reach the alternative “intentional acts” exclusions raised by the insurers.

The panel therefore affirmed the district court’s judgment in favour of GEICO and Travelers.

3. Analysis

3.1 Precedents Cited

Euchner-USA, Inc. v. Hartford Cas. Ins. Co., 754 F.3d 136 (2d Cir. 2014) – Reiterated the distinction and relative breadth of the duty to defend compared to indemnify.
Automobile Ins. Co. of Hartford v. Cook, 7 N.Y.3d 131 (2006) – Set the “reasonable possibility of coverage” test; quoted prominently to frame the duty to defend.
Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640 (1993) – Reinforced liberal construction of pleadings in favour of coverage.
Allstate Ins. Co. v. Mugavero, 79 N.Y.2d 153 (1992) – Underscored that allegations, not actual facts, control the defence duty.
Federal Ins. Co. v. American Home Assurance Co., 639 F.3d 557 (2d Cir. 2011) – Explained that “arising out of” requires only a minimal causal nexus.
Vital v. Interfaith Med. Ctr., 168 F.3d 615 (2d Cir. 1999) – Addressed mandatory notice to pro se litigants facing summary judgment.

Collectively, these cases form the doctrinal scaffolding on which the panel hoisted its analysis: a broad defence obligation counter-balanced by the insurer’s burden to show an exclusive and unambiguous application of an exclusion.

3.2 Legal Reasoning

The court’s reasoning unfolded in two steps:

Determine Potential Coverage: Applying the “four corners” rule, the panel examined Morales’s counterclaim and bill of particulars. Allegations that Alexanian labelled Morales “a thief” and questioned her professionalism—statements allegedly uttered to co-workers at the clinic—were sufficient to invoke potential “personal injury” (defamation) coverage in the abstract.
Apply the Exclusion: Because the policies contained explicit employment-related practices exclusions (the Travelers policy even named “defamation” as an example), the burden shifted to the insurers to prove the exclusion applied in its entirety. Citing Federal Ins., the panel stressed that “arising out of” requires merely a causal connection. Morales’s complaints stemmed from workplace interactions, compensation disputes, and tenancy arrangements tied to her employment. No alternative, non-employment interpretation of the allegations existed. Exclusion therefore extinguished any duty to defend.

3.3 Impact of the Decision

Although a summary order lacks formal precedential value, the opinion is nonetheless instructive:

Insurance Coverage Litigation: The decision augments a body of persuasive authority endorsing an expansive reading of employment-related practices exclusions. Practitioners should expect insurers to cite this order when disclaiming coverage for workplace defamation or similar torts.
Policy Drafting: By emphasising that “defamation” was explicitly enumerated, the court signals that insurers can fortify exclusions with specific examples to avoid ambiguity.
Pro Se Litigation: While the panel excused failure to issue a Rule 56 notice, it reaffirmed that the duty generally exists. District courts should remain vigilant—particularly where a pro se litigant’s submissions do not reflect familiarity with summary-judgment mechanics.
Future Cases: New York trial and appellate courts are likely to continue following the “minimal causal nexus” approach. Insureds trying to escape an exclusion must articulate a theory of liability unconnected to employment—an increasingly high bar.

4. Complex Concepts Simplified

Duty to Defend vs. Duty to Indemnify: The duty to defend obligates an insurer to provide (and pay for) legal counsel if the allegations could fall within coverage. The duty to indemnify—paying a judgment or settlement—arises only if the insured is ultimately liable and the loss is covered.
Employment-Related Practices Exclusion: A clause that removes coverage for claims stemming from employment decisions or conduct—such as hiring, firing, discipline, or workplace defamation.
“Arising Out Of”: Courts interpret this phrase broadly to mean “originating from,” “incident to,” or “connected with.” A mere causal relation suffices; direct proximate causation is unnecessary.
Summary Judgment: A procedural device under Fed. R. Civ. P. 56 allowing a court to resolve a case without trial when no material factual disputes exist.
Pro Se Rule 56 Notice: A document explaining to an unrepresented party that they must submit evidence (affidavits, documents) to oppose summary judgment.

5. Conclusion

Alexanian v. GEICO underscores three critical points:

New York’s liberal standard for the duty to defend yields to the equally broad construction of explicit policy exclusions—particularly employment-related ones.
The phrase “arising out of” provides insurers with a powerful tool to disclaim coverage when a claim’s genesis lies in the workplace, even if the alleged tort (here, defamation) is not inherently an employment tort.
Procedural protections for pro se litigants remain important, but they are not jurisdictional; harmless error will not upset an otherwise correct substantive ruling.

While devoid of precedential force, the ruling will likely influence coverage disputes across New York and the Second Circuit by reinforcing insurers’ ability to rely on employment-related practices exclusions to avoid defence obligations in workplace defamation cases.