Motel targeted in sex trafficking lawsuit loses insurance coverage

An insurance carrier has no obligation to defend against a lawsuit aimed at holding a motel liable for sex trafficking that occurred on its premises.

U.S. District Judge Timothy Savage of the Eastern District of Pennsylvania ruled that Nautilus Insurance Co. does not need to defend or indemnify Motel Management Services Inc. against a 2017 lawsuit that alleged the company’s Neshaminy Inn motel turned a blind eye to the sex trafficking of a minor.

Conduct fell under exclusion; coverage would go against public policy

Savage granted the insurance company’s efforts by finding that, not only did the conduct fall under an exclusion for assault and battery in the policy, but enforcing coverage would also go against public policy.

Related: Insurance company balks at covering strip club in image-misappropriation suit

“As Nautilus points out, financially benefiting from human sex trafficking is criminalized under the Pennsylvania Human Trafficking Law,” Savage said. “Thus, public policy precludes coverage.”

The underlying suit, E.B. v. Motel 6, was filed in Philadelphia court by personal injury firm Kline & Specter in March 2017. Attorneys at the time said it was the first case to be filed in Pennsylvania, and possibly the country, seeking civil penalties against a motel for sex trafficking.

‘Employees knowingly permitted the activity’

The suit brought negligence, negligence per se, negligent infliction of emotional distress, and intentional infliction of emotional distress, alleging, among other things, that sex traffickers took the female minor, identified only as E.B., to the hotel where she was forced to engage in commercial sex. The suit further contends that hotel employees consistently directed the minor and traffickers to the same motel room toward the back of the property, that E.B. was treated very aggressively by the sex traffickers, including pointing a gun at her, and that the hotel employees knowingly permitted the activity on the property.

Kline & Specter attorney Nadeem Bezar, who is representing E.B., said that, at first blush the ruling may seem like a loss for his client, but he said was the ruling was very positive, as it is “part and parcel of the message that we’re sending.”

Sending a message

“It’s sending a message to the hotel and motel industry. Don’t allow this to happen, and if you do, you’re going to be exposed,” he said. “In this area of practice, it’s not just about getting people to pay for their negligence, it’s about stopping the underlying activity.”

Related: Federal judge upholds insurance exclusion in child abuse civil case

Regarding the coverage dispute, the Bensalem, Pennsylvania, hotel said it was owed coverage by Nautilus because the underlying complaint was based on negligence and failure to intervene, or report the conduct. The assault and battery exclusion, the company argued, did not apply.

‘Negligently failing to report sex trafficking’

Savage, however, agreed with the insurance company, saying that sex trafficking, rape, involuntary servitude and pointing a gun at someone all encompass various forms of assault.

“The comprehensive definition of ‘assault and battery’ in the policy encompasses the claims against MMS,” Savage said. “The unambiguous language of the all assault or battery exclusion excludes coverage, even assuming MMS breached its duty to E.B. in negligently failing to report the sex trafficking occurring on its premises.”

Max Mitchell is a reporter with The Legal Intelligencer, focusing on litigation in Pennsylvania with a specific emphasis on Philadelphia courts. Follow him on Twitter @MMitchellTLI.