Court rejects insurance coverage for sex trafficking allegations
Nautilus Insurance Company had no duty to defend a motel that failed to intervene or report sex trafficking activity.
An insurance company did not have to defend or indemnify its insured in a lawsuit brought by a female minor alleging that the insured failed to intervene or report that sex traffickers had enticed her to engage in commercial sex acts at the insured’s motel, a court ruled.
The lawsuit
E.B., a minor female, sued Motel Management Services (“MMS”) and other motel operators in Pennsylvania state court, alleging that:
- She “was recruited, enticed, solicited, harbored and/or transported to engage in commercial sex acts,” including at a motel owned and operated by MMS;
- She was “held at gun point and threatened to engage in sexual acts with multiple traffickers,” “visibly treated in an aggressive manner” by those engaging in commercial sex acts with her, and suffered physical harm;
- MMS facilitated her exploitation by knowingly renting rooms at its motel to the traffickers;
- MMS failed to intervene or to report the traffickers’ illegal conduct; and
- MMS financially profited from E.B.’s exploitation.
E.B. sought compensatory and punitive damages for negligence per se, negligence, negligent infliction of emotional distress, and intentional infliction of emotional distress.
MMS’s insurance carrier, Nautilus Insurance Company, asked the U.S. District Court for the Eastern District of Pennsylvania to declare that an exclusion in MMS’s insurance policy with Nautilus for claims arising out of an assault or battery, including a failure to prevent or suppress an assault or battery, exempted it from any duty to defend and indemnify MMS in E.B.’s suit.
The district court granted Nautilus’ motion for judgment on the pleadings, declaring that Nautilus had no duty to defend and indemnify MMS because E.B.’s claims arose from facts alleging negligent failure to prevent an assault or battery and, therefore, were not covered by the insurance policy.
MMS appealed.
The appeal
The U.S. Court of Appeals for the Third Circuit affirmed the district court’s decision
In its decision, the circuit court explained that under the assault or battery exclusion in the Nautilus insurance policy, if an assault or battery was a “but for” cause of the plaintiff’s injuries, the exclusion applied to allegations that the insured’s negligence contributed to the injuries.
Here, the court found, all of E.B.’s alleged injuries were the result of alleged exploitation and assault by traffickers and customers with whom E.B. engaged in commercial sex acts. Accordingly, the circuit court held, assault and battery were the “but for” causes of the injuries E.B. claimed.
The Third Circuit pointed out that E.B. nowhere alleged that MMS’s negligence had directly caused her injuries or caused an independent harm. Rather, the circuit court continued, E.B. alleged that MMS failed to intervene or report the traffickers’ activities and that MMS financially benefited from her abuse. The assault or battery exclusion encompassed claims “arising both from an assault or battery and from a failure to prevent or suppress an assault or battery,” the circuit court noted.
This language, the Third Circuit concluded, “unambiguously” barred coverage for E.B.’s claims and the district court did not err by holding that Nautilus had no duty to defend or indemnify MMS.
The case is Nautilus Ins. Co. v. Motel Management Services, Inc.
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