Public Policy May Not Change Insurance Policy Wording

If Insurer Wanted to Exclude Charges of Sex Trafficking It Can Do So

Post 5410

In Samsung Fire And Marine Insurance Co., LTD, v. RI Settlement Trust; Ace Property And Casualty Insurance Company; Nationwide Mutual Insurance Company; Philadelphia Indemnity Insurance Company; Capitol Specialty Insurance Corporation, No. 61 EAP 2024, No. J-65-2025, Supreme Court of Pennsylvania (July 21, 2026) the Pennsylvania Supreme Court was asked to answer certified questions from the Third Circuit in insurance coverage litigation arising from civil complaints alleging that minors were trafficked at the Roosevelt Inn in Philadelphia.

The questions presented were:

1. Does Pennsylvania have an “overriding public policy” against sex trafficking-as found regarding Schedule I controlled substances in Minnesota Fire & Casualty Co. v. Greenfield, 855 A.2d 854 (Pa. 2004), and as evinced by the state’s anti-trafficking law, 18 Pa.[C.S.] § 3011(a)- such that an insurer’s duty to defend and/or indemnify is abrogated when an insured is alleged to have enabled or profited from such trafficking?
2. If yes, is that duty abrogated whenever the insured’s alleged conduct would constitute a violation of 18 Pa.[C.S.] § 3011(a)

This case arises out of four separate civil complaints in which the respective plaintiffs (“Underlying Plaintiffs”) alleged that, as minors, they were victims of human sex trafficking at various hotels in Philadelphia, Pennsylvania, including the Roosevelt Inn. Each plaintiff filed suit against, inter alia, UFVS Management Company, LLC, Roosevelt Motor Inn, Inc., and Roosevelt Inn, LLC (collectively, “Policyholders”)

The hotel owners, operators, and managers were insured under commercial liability policies. The insurers initially defended under reservations of rights but sought declarations that they owed no duty to defend or indemnify, arguing that Pennsylvania public policy against sex trafficking barred coverage even if the policy language otherwise triggered those duties.

LEGAL ISSUES

Under Pennsylvania law, the duty to defend is broader than the duty to indemnify and is determined by comparing the four corners of the insurance policy with the four corners of the complaint. A duty to defend exists when the complaint alleges an injury that is actually or potentially within the policy’s coverage. Public policy may invalidate contractual obligations only in the clearest cases, and courts generally do not rewrite insurance policies to add exclusions that insurers could have drafted themselves.

DISCUSSION:

The insurers argued that public policy barred coverage for losses arising from an insured’s criminal acts involving Schedule I controlled substances. The Court also noted that the Human Trafficking Law criminalizes sex trafficking but does not address insurance coverage or direct courts to abrogate defense or indemnity obligations.

ANALYSIS:

The Court reasoned that adopting the insurers’ position would require the judiciary to rank the public policies underlying different crimes and insert an unwritten exclusion into policies that did not contain one. That approach would conflict with Pennsylvania’s four-corners rule and the principle that ambiguities or potential coverage are resolved in favor of the insured’s right to a defense. The Court stressed that insurers are sophisticated parties capable of drafting exclusions for trafficking-related, criminal-conduct, abuse, or similar risks if they choose to do so.

CONCLUSION:

The Pennsylvania Supreme Court held that neither the duty to defend nor the duty to indemnify is abrogated on public-policy grounds merely because the insured is alleged to have enabled or profited from sex trafficking.

Because the Court answered the first certified question in the negative, it did not reach the second question concerning the level of mens rea required to abrogate coverage. The case was returned to the Third Circuit.

ZALMA OPINION

Although it is a crime in Pennsylvania traffic sex it does not bar coverage even if the policy language otherwise triggered those duties. The Supreme Court found that neither the duty to defend nor the duty to indemnify is abrogated on public-policy grounds merely because the insured is alleged to have enabled or profited from sex trafficking. Simply alleging that the insured violated a state law does not establish a public policy that creates an unwritten exclusion.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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