Pennsylvania Court Rules Carrier Has No Duty to Defend or Indemnify Security Company Named in Sex Trafficking Suit
Case Study

Pennsylvania Court Rules Carrier Has No Duty to Defend or Indemnify Security Company Named in Sex Trafficking Suit

As high-profile civil and criminal cases brighten the national spotlight on sex trafficking, businesses and insurers across the country are grappling with evolving liability concerns arising from sex trafficking claims. The hospitality sector in particular has seen an increase in risk. The alleged participation of hospitality businesses in human sex trafficking is not based upon claims of criminal activity, but rather that hotel owners, operators, or licensees failed to prevent sex trafficking and ignored signs of the criminal activity occurring at their properties. Other businesses that depend on or regularly interact with hospitality companies—including transportation and security companies—have also been named defendants in a rising number of sex trafficking claims. In turn, the insurance industry is facing increasing exposure from its insureds’ potential liability in these lawsuits.

One insurance carrier retained Goldberg Segalla partner Michael A. Hamilton and associate Sean P. Hvisdas, members of the Global Insurance Services practice based in Philadelphia, to evaluate coverage with respect to a sex trafficking personal injury lawsuit pending in the Pennsylvania state court. The insurer issued a commercial liability policy to a security company, named as a defendant in the lawsuit. The lawsuit alleged that an unidentified minor suffered injuries as a victim of sex trafficking while on the property of a motel in Philadelphia. The security company allegedly provided security services at the motel. The complaint asserted, in part, that the security company committed violations of the Pennsylvania Human Trafficking Law, negligence, negligent infliction of emotional distress, and intentional infliction of emotional distress.

Mike and Sean took a proactive approach, filing a declaratory judgment lawsuit against the insured and the claimant in federal court, asserting that evidence obtained in the underlying lawsuit revealed that the alleged sex trafficking did not implicate the client’s policy, thus barring coverage and entitling the insurer to withdraw from the security company’s defense in the underlying litigation. The Goldberg Segalla litigators also pointed to deposition testimony, party admissions, and family court filings to make their case. Recently, the court ultimately agreed and granted judgment in the insurer’s favor.

Attorneys in Goldberg Segalla’s Global Insurance Services practice are representing insurers across the country in addressing their potential exposure stemming from the proliferation of civil sex trafficking lawsuits being filed against the hospitality industry.

For more information about these types of exposures and possible coverage defenses, contact Mike Hamilton.

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