The Complex Insurance Coverage Reporter – June 2021

Passive Participants in Human Trafficking Seek Shelter Under Insurance Coverage

By: Marc Penchansky and Gabrielle Morrison

In 2003, Congress passed the Trafficking Victims Protection Reauthorization Act (TVPRA or Act), which established a private right of action allowing victims of human trafficking to sue their traffickers and those that facilitated the trafficking.[1] Between 2004 and 2019, the number of federal civil trafficking cases increased over fourteen-fold.[2] The increase in lawsuits on the federal and state levels involving human trafficking claims (including related insurance coverage litigation) has shattered some commonly held misconceptions. The targets of these lawsuits are not only the active perpetrators of the trafficking but also legitimate businesses that the public interacts with every day.

Civil human trafficking cases have recently focused on the facilitators of trafficking, who sometimes have liability insurance policies with significant limits. For example, 11 Brazilian and Chilean students recently sued Western Iowa Tech Community College alleging that it had conspired with a staffing agency and packaging company to lure the students to America and put them to work at factory jobs with no educational component.[3] The hotel industry also has been a target of civil sex trafficking complaints.[4] A typical complaint contends that staff knew or should have known that the hotel facility was used to host forced sex laborers.

As these examples suggest, there generally are two forms of human trafficking: sex trafficking and forced labor. Sex trafficking involves the forceful, fraudulent, or coercive inducement of a commercial sex act or the inducement of a minor to perform sexual acts regardless of consent.[5] Forced labor refers to the recruitment, harboring, transportation, provision, or obtaining of a person for labor or services through the use of force, fraud, or coercion for the purpose of involuntary servitude, peonage, debt bondage, or slavery.[6] The form of trafficking alleged potentially plays a role in determining which type of liability coverage or exclusionary provisions may be implicated in a particular case.

For both types of trafficking, the Act authorizes a civil remedy when a person or entity knowingly benefits, financially or by receiving something of value, from participating in a venture that the person knew or should have known involved human trafficking. Policyholders may argue that the “should have known” standard triggers a duty to defend under general liability policies because, in their view, it could permit a liability finding not only against those actively engaged in trafficking, but also against a negligent business owner, such as an innkeeper, who did not understand or ignored warning signs that his or her business was used for trafficking.[7] However, mere repetition of the Act’s “should have known” standard might not be enough to establish a duty to defend if, for example, the underlying plaintiffs primarily allege intentional criminal conduct.[8]

Insurance Coverage Issues Arising Out of Human Trafficking Claims

1. Whether Covered “Bodily Injury” or “Personal Injury” is Alleged

When an insurance carrier is tendered a claim against one of its insureds for allegedly facilitating or participating in human trafficking, the threshold question is whether the claim falls within the insuring agreement. Commercial general liability policies typically grant coverage for liability because of “bodily injury” and “property damage” (Coverage A) and “personal and advertising injury” (Coverage B).

Coverage A generally provides coverage for sums the insured is legally obligated to pay as damages because of “bodily injury” or “property damage” caused by an “occurrence.” To qualify as an occurrence, the loss needs to be caused by an accident. Self-evidently, victims are unlikely to allege that the direct perpetrators of the trafficking did so by chance. But the TVPRA also pertains to entities that benefited from trafficking that they “should have known” was occurring. This leaves the door open to a policyholder contending that negligence-based trafficking allegations against a “passive” trafficker constitute a potentially covered “occurrence.”[9] Whether a negligence-based allegation exists may depend on the type of damages alleged by the underlying plaintiff or the conduct at issue. Physical injuries are usually “bodily injury” under the policy language. However, if the victims solely claim emotional impact, whether “bodily injury” is alleged may also depend to a degree on the law in the relevant jurisdiction.[10]

Coverage B generally provides coverage for sums the insured is legally obligated to pay as damages due to “personal and advertising injury.” This coverage typically requires an “offense arising out of your business . . . .” Some courts have found potential coverage where a policyholder was not engaged in the business of trafficking, reasoning that an allegation that the active trafficker used the passive trafficker’s legitimate business to facilitate the trafficking is sufficient.[11]

As with any claim, after determining a potential for coverage exists, the carrier must turn to whether the policy includes any possible limitation or exclusion.

2. Policy Exclusions and Other Potential Limitations to Coverage
a. Abuse or Molestation Exclusion

In a number of coverage cases arising out of sex trafficking claims, “abuse or molestation” exclusions have been at the center of the dispute. A typical exclusion bars coverage for damages caused by bodily injury arising out of

the actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured, or the insured’s negligent employment, investigation, supervision, reporting to the proper authorities or failure to so report, or retention of a person for whom any insured is or ever was legally responsible . . . .

General liability policies with an abuse or molestation exclusion usually do not define the phrase “care, custody or control.” In those instances, courts usually turn to the plain understanding of these words, as captured by popular dictionaries.[12] Ordinarily, the dictionary definition is broad enough to encompass the actions of an active trafficker, such as a coach who chaperones youth athletes during tournament games. In those cases, the exclusion likely will apply and bar coverage. However, the determination may be different for the passive trafficker. For example, in Vasant, supra, the trafficking victims alleged that they were deliberately kept hidden from hotel staff such that the victims could not allege that any member of the hotel staff was ever aware of the victims’ presence on the property.[13] Under that specific factual scenario, the court held that the hotel could not “have had the victims under its ‘care, custody, or control’” because no allegation supported the conclusion that the hotel knew or should have known of the victims’ presence.[14] On the other hand, a court could find a victim of trafficking to be in the hotel’s “care, custody, and control” when the victim, for instance, was in a guest room behind a door locked by an electronic key provided by the hotel when the forced sex acts occurred.[15] Because of the victim’s status as a guest, the hotel could owe the victim a duty of care by law for purposes of the exclusion.[16]

Abuse or molestation exclusions also typically preclude coverage for damages because of injury arising out of the insured’s negligent employment, investigation, supervision, failure to report, or retention of a person for whom the insured is responsible. For example, in 12th Street Gym, Inc. v. Philadelphia Indemnity Insurance Company, No. 03393, 2006 Phila. Ct. Com. Pl. LEXIS 239 (Phila. Ct. Com. Pl. June 12, 2006), the court considered coverage for a gym that purportedly failed to supervise and monitor a massage therapist, and that the gym failed to properly investigate or act upon prior complaints or rumors of inappropriate touching of women during massage sessions. See id. at *9. The court concluded that these allegations fell within the scope of the exclusion and granted the insurer’s motion for judgment on the pleadings. Similarly, in trafficking cases, victims have plead that hotel staff ignored complaints from the victims or missed telltale signs of sex trafficking at its facility such as frequent male visitors, repeated cash payments for a single room, and the victims walking around the hotel dressed in a sexually explicit manner. These types of allegations are likely to be barred from coverage.

b. Assault and Battery Exclusion

Some liability policies also include a broad “All Assault or Battery” exclusion that generally bars coverage, regardless of culpability or intent of any person, for damages because of bodily injury or personal and advertising injury arising out of any actual or alleged assault or battery. All sex trafficking claims against passive traffickers originate from (that is, arise out of) a battery sexual assault. Furthermore, most allegations of forced labor include companion allegations of assault and battery; therefore, this exclusion should be equally applicable to claims of involuntary servitude.[17] The typical claim against a passive trafficker is that it did not intervene to prevent or stop the trafficking. The broad language of the exclusion should encompass these types of claims, as it extends to claims arising both from an assault or battery and from a failure to prevent or suppress an assault or battery.[18]

c. Criminal Acts Exclusion and Expected or Intended Exclusion

Liability policies typically exclude coverage under Coverage B for personal or advertising injuries arising out of criminal acts committed by or at the direction of the insured. Coverage for claims against an active trafficker should be excluded under this provision. However, the analysis is generally not the same for a passive trafficker. The 2000 precursor to the TVPRA established various crimes related to human trafficking.[19] Each criminal provision includes a mens rea prerequisite requiring knowing or reckless conduct. A civil action, on the other hand, requires only that the accused “should have known” he or she violated the TVPRA. Consequently, if the victims pleaded negligence, this exclusion may not serve to bar potential coverage.[20]

Liability policies also often include exclusions for “bodily injury” expected or intended from the standpoint on the insured. A well-pleaded allegation of negligence might complicate the application of this exclusion, but simply labeling conduct as negligent is not the end of the inquiry.[21] As with any case, the pleadings need to be carefully considered to determine the potential application of these exclusions.

d. Public Policy

Another area of potential inquiry is whether coverage would violate public policy concerning insurability of injury caused by intentional torts or criminal acts.[22] Since financially benefiting from human trafficking is a crime, public-policy considerations alone may serve to bar coverage, even if no express policy exclusion applies.[23] One court, in fact, has agreed that public policy considerations preclude coverage for sex trafficking claims. [24]

Considerations Regarding the Evolution of Trafficking Claims

Liability for passive traffickers puts some industries more at risk than others. For example, international sports teams, hospitality businesses, transportation companies, and healthcare providers may unwittingly facilitate sex trafficking by third parties and find themselves susceptible to sex trafficking allegations. Depending on how the courts handle trafficking cases, we might start to see cases against entities even more removed from the active trafficking. For example, victims might attempt to hold a business liable for contracting with a company in its supply chain that uses forced labor or perhaps a contractor might be liable for the practices of a subcontractor. As these claims continue to evolve, more businesses could find themselves ensnarled in cases alleging the facilitation of sex trafficking and may turn to their carriers to provide a defense and indemnity for any loss.

In addressing potential coverage for negligent facilitation of trafficking, underwriters also should keep abreast of developments on trafficking claims. In Great Britain, for instance, some maritime insurers and brokers have introduced provisions that require insureds to comply with legal and regulatory obligations related to trafficking.[25] On the other hand, underwriters may see a market developing for policyholders looking for endorsements to restore coverage for negligent facilitation of trafficking that is otherwise excluded.

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[1] 18 U.S.C. § 1595.


[3] Norambuena v. Western Iowa Tech Community College, No. 5:20-cv-04054-LTS-KEM, (N.D. Iowa, Nov. 25, 2020);

[4] See, e.g., S.W. v. Lorain-Elyria Motel, Inc., No. 2:19-CV-1194, 2020 U.S. Dist. LEXIS 44961 (S.D. Ohio Mar. 16, 2020)(finding hotel liable for sex trafficking because it financially benefited from the trafficking and should have known the illegal activity was occurring on its premises).

[5] 22 U.S.C. § 7102(9).

[6] Id.

[7] E.g., Ricchio v. Bijal, Inc., 424 F. Supp. 3d 182, 193-95 (D. Mass. 2019) (victim sued motel for complicity in sex trafficking because it was receiving rent from the active sex trafficker); see also S.W. v. Lorain-Elyria Motel, Inc., 2020 U.S. Dist. LEXIS 44961.

[8] E.g., Travelers Property Casualty Company of America v. Mericle, 486 F. App’x 233, 236 (3d Cir. 2012) (refusing to find negligence-based claims merely because plaintiff alleged that defendant “knew or should have known” since the rest of the complaint made clear that the allegations concerned intentional acts).

[9] Ricchio, 424 F. Supp. 3d 182 at 193-95 (citing M.A. v. Wyndham Hotels & Resorts, Inc., No. 2:19-CV-849, 2019 U.S. Dist. LEXIS 173675, 2019 WL 4929297 (S.D. Ohio Oct. 7, 2019) (allowing liability claims under the TVPRA to proceed against two hotels and finding that the statute “invokes a negligence standard”)). See also Eldon S. Edson, Liability Coverage Issues Concerning Sex Trafficking Victims’ Civil Suits, Spring 2020 Appleman: Current Critical Issues in Insurance Law V (recognizing and distinguishing between active traffickers and passive traffickers).

[10] Compare, e.g., Lipsky v. State Farm, No. 24 EAP 2012, 2014 Pa. LEXIS 215 (Pa. Jan. 21, 2014) (affirming that emotional injury qualifies as “bodily injury” in the context of an automobile policy) with Taylor v. Mucci, 952 A.2d 776, 784 (Conn. 2008) (finding that “bodily injury” in a liability policy does not include emotional distress unaccompanied by physical harm).

[11] See Ricchio, 424 F. Supp. 3d at 192 (finding potential coverage when underlying complaint alleged that the “injuries were caused, at least in part, by an offense arising out of [policyholder’s] business.”).

[12] See, e.g., Millers Capital Insurance Company v. Vasant, Civ. No. RDB-18-0553, 2018 U.S. Dist. LEXIS 182956 (D. Md. Oct. 25, 2018) (defining the language as the insured’s right to guard and have influence over the activities).

[13] Id. at *16. The victims generally alleged a breach of the hotel’s duty to keep the property safe as well as having actual or constructive notice that its property was used for human trafficking. The victims also based liability on the hotel’s purported failure to train its employees to recognize and report signs of human trafficking.  

[14] Id. at *16-17.

[15] See Holiday Hospitality Franchising, Inc. v. AMCO Insurance Company, 983 N.E.2d 574, 580 (Ind. 2013) (a non-trafficking case that provides some context how the exclusion can be applied against hotels).

[16] Id. at 580-581.

[17] Nautilus Insurance Company v. Motel Management Services, 781 F. App’x 57, 60 n.4 (3d Cir. 2019).

[18] Id. at 60.

[19] See 18 U.S.C. §§ 1589-1592, 1594.

[20] Ricchio, Inc., 424 F. Supp. 3d at 193-195.

[21] See Otra, LLC v. American Safety Indemnity Company, No. 3:20-cv-01063-SB, 2020 U.S. Dist. LEXIS 217933, at *21 (D. Or. Nov. 20, 2020).

[22] See Nautilus Insurance Company v. Motel Management Services, 320 F. Supp. 3d 636, 643 (E.D. Pa. 2018) (citing Gene’s Restaurant, Inc. v. Nationwide Insurance Company, 548 A.2d 246, 247 (Pa. 1988)).

[23] Id.

[24] Although the Third Circuit affirmed the district court’s ruling, it did not reach the public policy issue because the policy expressly excluded coverage. Motel Mgmt, 781 F. App’x at 60 n.5.

[25] Marine insurers introduce clause against forced labor, Business Insurance (July 9, 2020).