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A W.R. Berkley unit does not have to defend or indemnify a hotel charged with harboring sex traffickers under an assault-or-battery exclusion in its commercial general liability policy, a federal appeals court said Friday, in affirming a lower court ruling.
The Neshaminy Inn in Trevose, Pennsylvania, was sued by three Philadelphia women, two of whom were teenagers at the time, alleging they were trafficked for sex at the inn while the policy was in effect, according to the ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in Nautilus Insurance Co. v. Motel Management Services Inc., dba Neshaminy Inn et al.
Two of the women were recruited as prostitutes by a now-convicted trafficker who kept them dependent on him by shooting them up with heroin, forcing them to smoke crack cocaine in between customers and treating them in an aggressive manner that further instilled a sense of fear and anxiety, the ruling said.
The third woman alleged a similar pattern of victimization, claiming she was the victim of violent criminal acts, suffered serious bodily harm and “exhibited fear and anxiety.”
The lawsuit sought compensatory and punitive damages for the inn’s alleged negligence in failing to prevent or disrupt the alleged human trafficking and for its violation of the Pennsylvania Human Trafficking Law, the ruling said.
Berkley unit Nautilus initially assumed the inn’s defense under a reservation of rights but then believed the claims fell within its commercial general liability policy’s assault-or-battery exclusion.
It filed suit in U.S. District Court in Philadelphia seeking a declaratory judgment it did not have to defend or indemnify the inn. The district court ruled in the insurer’s favor and was affirmed by a three-judge appeals court panel.
“In this case, the decisive language of the insurance policy excludes all claims ‘arising out of ant assault or battery,’” the ruling said. This “ambiguously applies to the underlying claims against Neshaminy Inn.’
“Each victim alleged that their traffickers treated them in an aggressive or violent manner and made them feel a sense of fear and anxiety while being trafficked,” it said.
“Selling the women for sex under these circumstances qualified as assault because it placed them in imminent apprehension of a harmful or offensive bodily contact,” it said.
“Similarly, the allegations in each of the complaints suffice for battery: by using force and drugs to compel the women’s participation in the sex trade, the traffickers subjected the women to harmful or offensive bodily contact without their consent,” it said, in affirming the lower court’s ruling.
Attorneys had no comment or did not respond to a request for comment.