What hoteliers need to know about human trafficking lawsuits

Hotels have recently faced a flood of human trafficking related lawsuits. In these lawsuits, human trafficking victims and their families are alleging negligence and violations of state and federal human trafficking laws against hotels. Several human trafficking lawsuits against hotels have alleged violations of the Trafficking Victim Protection Reauthorization Act. 

Pursuant to the TVPRA, victims and their families can file lawsuits against not only overt facilitators of their injuries but any entity, like a hotel, that knew or should have known it was doing business with a trafficker. TVPRA plaintiffs, if successful, can recover actual damages, punitive damages and reasonable attorneys’ fees. To mitigate the damages from TVPRA and other human trafficking claims, hotels are looking to their commercial general liability policies for insurance coverage. Whether CGL policies provide coverage for human trafficking claims is a relatively new question that has become the subject of judicial discourse. In particular, several courts have focused in on whether an assault and battery exclusion precludes GCL coverage for these types of claims. 

In Nautilus Insurance Co. v. Motel Management Services, Inc., Motel Management Services sought coverage from its CGL carrier Nautilus for damages arising out of underlying human trafficking lawsuits. The underlying lawsuits against Motel Management Services were filed by three women who alleged that it was negligent in failing to prevent or disrupt the alleged human trafficking and by failing to prevent the human trafficking, therefore violating Pennsylvania Human Trafficking laws. Nautilus agreed to defend the underlying action subject to a reservation of rights and then filed a declaratory judgment action against Motel alleging that the assault and battery exclusion in its CGL policy precluded coverage. 

In determining whether the assault and battery exclusion applied, the court considered that the exclusion excluded all coverage “arising out of any assault or battery exclusion” and since the Nautilus policy did not define “assault” or “battery,” it had to look to other sources for their definitions. The court held that, based on the broad nature of the “arising out of” language and the generally accepted definitions of “assault” and “battery,” the assault and battery exclusion “unambiguously” precluded coverage.

In Mesa Underwriters Specialty Insurance Co. LLC v. Khamlai Lodging LLC, insured Khamlai sought coverage from its CGL insurer Mesa for damages arising out of underlying human trafficking lawsuits. The underlying plaintiffs alleged that as minors they were trafficked for sex at the Khamlai Lodging hotels and brought claims against Khamlai for (1) negligence for failure to prevent the sex trafficking that occurred on the premises, and (2) a Racketeer Influenced and Corrupt Organizations Act claim for “benefiting from or conspiring in racketeering activities with regard to the sex trafficking” of the plaintiffs. Mesa agreed to defend the underlying action subject to a reservation of rights and then filed a declaratory judgment action against Khamlai alleging that the assault and battery exclusion in its CGL policy precluded coverage. 

In its analysis, the court considered the CGL policy language and in particular, the definitions of “assault” and “battery.” The court determined that because the underlying complaint did not contain allegations that fit within these definitions (namely, that the complaint alleged trafficking but did not allege an intentional act to inflict injury or an intentional or reckless use of force as these definitions required), the assault and battery exclusion did not apply.

Nautilus and Mesa reached differing conclusions on whether the assault and battery exclusion precludes coverage for human trafficking claims. However, the courts’ analyses and conclusions highlight the following items of note for those in the hotel industry.

  • The question of whether the assault and battery exclusion in a CGL policy precludes coverage for human trafficking claims is not settled. Therefore, do not assume there is no coverage based on this exclusion. 
  • The language of policies can vary greatly. Read your policy and do not assume that the exclusionary language in one CGL policy is the same as that in another policy. 
  • Whether there is coverage under a CGL policy can turn on what law applies. Consider choice of law issues early on in a coverage dispute. 
  • The specific allegations in the underlying human trafficking lawsuit determine coverage. These types of suits are relatively new and can contain a variety of allegations such as negligence, statutory violations, bodily injury, and more. Read the underlying complaint carefully and in conjunction with your insurance policy. 
  • Remember, if you do not notice the claim, there is no possibility of coverage. 

Mikaela Whitman is a partner and Arianna Young is a managing associate at Pasich, an insurance recovery law firm based in Los Angeles.