A W.R. Berkley Corp. unit is not obligated to defend or indemnify a motel management company charged with negligence for failing to protect a minor who was forced into prostitution on its property, based on an “assault and battery” exclusion in its policy, says a federal appeals court, in affirming a lower court ruling.

E.B., a minor, charged she was recruited to engage in sex acts at a motel owned and operated by Feasterville-Trevose, Pennsylvania-based Motel Management Services Inc. as well as at other motels, according to Monday’s ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in Nautilus Insurance Co. v. Motel Management Services Inc.

She charged she was held at gunpoint and forced to engage in sexual acts with “multiple traffickers,” according to the ruling.

E.B. filed suit in U.S. District Court in Philadelphia, which ruled in favor of Berkley Corp. unit Nautilus. The ruling was upheld by a unanimous three-judge appeals court panel.

An exclusion in the policy provided by Berkley unit Nautilus provides the insurer “’will have no duty to defend or indemnify any insured in any action or proceeding alleging damages arising out of any assault or battery,’ regardless of culpability, intent, or relationship of the perpetrator of the assault or battery to the insured, or whether the damages occurred at premises owned or operated by the insured,” said the ruling.

“The insurer only owed a duty to defend if the complaint alleges the insured’s negligence directly led to the injuries,” the ruling said.

“E.B. nowhere alleges that MMS’s negligence directly caused her injuries or caused an independent harm. Rather, she alleges that MMS failed to intervene or report the traffickers’ activities and MMS …financially benefited from her abuse,” said the ruling.

The exclusion’s language “unambiguously bars coverage for E.B.’s claims,” said the ruling, in affirming the lower court ruling.

Nautilus attorney Louis E. Bricklin, a member of Bennett Bricklin & Saltzburg LLC in Philadelphia, said, “I think the decision followed closely the language of the policy and the applicable Pennsylvania law and therefore came as no surprise.” MMS’s attorneys did not respond to a request for comment.

A federal appeals court upheld a lower court ruling and held last week that a Berkley unit is not obligated to indemnify a defamation award against a policyholder because of a “knowledge of falsity” exclusion in its policy.