Insurers' Duty to Defend Motels in Trafficking Cases: A Complex Legal Landscape

The Growing Nexus Between Motels and Human Trafficking

Human trafficking, a crime with profound individual and societal impacts, often relies on legitimate businesses to sustain it. Motels, in particular, have been routinely used for sex trafficking, according to the Polaris Project. Recent lawsuits involving insurers of motels used by traffickers underscore the complexity of determining who bears the legal costs associated with such activities.

Duty to Defend: A Legal Obligation

The concept of 'duty to defend' is central to these cases—an insurer's obligation to provide a legal defense for claims made under a liability policy. In one case, a woman sued motel operators for allowing her to be trafficked at their motels when she was a minor. The motel sought defense from its insurer, Nautilus Insurance Co., which argued it was not obligated to defend based on a policy exclusion for claims arising out of assault or battery. The court agreed, leaving the motel owners to bear their own legal costs.

Policy Language and Its Impact

The differences in these rulings seem to hinge more on nuances in policy language than on the facts of the trafficking cases. In the Nautilus case, the appeals court found the exclusion unambiguous, stating Nautilus had no duty to defend or indemnify because the claims arose from facts alleging negligent failure to prevent an assault or battery. Conversely, in the Peerless case, the court found the insurer must defend its client due to the inclusion of false imprisonment within the definition of personal injury under the policy.

Insurers might want to review and possibly tighten their policy language to avoid funding defenses of criminals and businesses that enable them. Trafficking is a $32 billion-a-year industry, and with that kind of money involved, cases like these won't just go away.

For readers, it's crucial to consult with an attorney to understand the specifics of insurance policies and their implications, especially in complex cases involving human trafficking.