Motel owner not covered in sex trafficking case

A W.R. Berkley Corp. unit is not obligated to defend or indemnify a motel management company being charged with negligence for failing to prevent human sex trafficking on its property, says a U.S. District Court.

In 2014, a minor female, “E.B.,” charged she was recruited to engage in “commercial sex acts” at a motel owned and operated by Feasterville-Trevose, Pennsylvania-based Motel Management Services Inc., according to Thursday’s ruling by the U.S. District Court in Philadelphia in Nautilus Insurance Co. v. Motel Management Services Inc.

E.B. charged that motel employees consistently directed her and the traffickers to the same room toward the back of the property, with the room paid for in cash, according to the ruling.

E.B. charged the motel company in state court with negligence, negligent infliction of emotional distress and intentional infliction of emotional distress, and that the company’s conduct violated Pennsylvania’s Human Trafficking Law.

At the time of the alleged sex trafficking incidents, the company was covered by an insurance policy issued by Berkley unit Nautilus Insurance, based in Scottsdale Arizona. The insurer filed suit in District Court, seeking a declaration it had no duty to defend or indemnify in the pending state court action.

Nautilus argues it has no duty to defend or indemnify the company because assault and battery are explicitly excluded from coverage, said the ruling.

Motel Management contends the assault or battery exclusion does not apply because the underlying complaint says it was negligent in failing to report the trafficking that was a direct cause of the girl’s injuries.

The court disagreed. “Essentially, negligent conduct contributing to an assault and battery falls within the exclusion,” said the ruling. The policy’s unambiguous language “excludes coverage, even assuming (the company) breached its duty to E.B. in negligently failing to report the sex trafficking occurring on its premises,” the ruling said. “Therefore, claims arising from such conduct are excluded from coverage.”

“Under Pennsylvania law, it is against public policy to insure against claims for intentional torts or criminal acts … Thus, public policy precludes coverage,” the ruling added, in granting Nautilus’ motion.

Experts have said the hospitality industry must rethink its approach to service, privacy and security as it faces growing allegations that, at best, it is not doing enough to combat sex trafficking in hotels and motels.