(Article from Insurance Law Alert, July/August 2026)
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Holding
The Pennsylvania Supreme Court held that Pennsylvania’s public policy against sex trafficking does not, standing alone, abrogate an insurer’s contractual duty to defend or indemnify an insured alleged to have enabled or profited from sex trafficking. Samsung Fire and Marine Ins. Co., Ltd (U.S. Branch) v. RI Settlement Tr., 2026 Pa. LEXIS 1276 (Pa. July 21, 2026).
Background
The case arose from four lawsuits alleging that minors were victims of sex trafficking at a Philadelphia hotel. The plaintiffs sued the hotel’s owners, operators, and managers (collectively, “Policyholders”) alleging that the Policyholders negligently failed to prevent the trafficking. The Policyholders’ commercial general liability insurers initially defended the lawsuits subject to reservations of rights.
An insurer subsequently commenced a declaratory judgment action seeking a declaration that it had no duty to defend or indemnify the Policyholders. After the Policyholders filed a Third-Party Complaint seeking a declaration that the insurers had a duty to defend, the insurers argued, among other grounds, that coverage would violate public policy because the allegations, if proven, would establish conduct prohibited by Pennsylvania’s Human Trafficking Law, 18 Pa.C.S. § 3011. The district court granted judgment for the insurers without reaching their policy-language defenses. Relying on Minnesota Fire & Casualty Co. v. Greenfield, 855 A.2d 854 (Pa. 2004), a federal district court concluded that public policy barred a defense or indemnity because the policyholders allegedly had, at minimum, acted with reckless disregard of the trafficking occurring at the hotel.
On appeal, the Third Circuit certified to the Pennsylvania Supreme Court the question of whether Pennsylvania has an overriding public policy against sex trafficking that abrogates an insurer’s duty to defend or indemnify an insured alleged to have enabled or profited from trafficking.
Decision
The Pennsylvania Supreme Court answered the certified question in the negative.
Because the district court had not reached the insurers’ policy-language defenses, the court assumed, without deciding, that the policies otherwise imposed a duty to defend and considered only whether public policy could override those contractual obligations.
The court first rejected the premise that Greenfield established a controlling public policy exception. Greenfield was a nonprecedential plurality decision involving an insured who had pleaded guilty to criminal conduct involving heroin, and the plurality expressly limited its reasoning to criminal acts involving Schedule I controlled substances. The court declined both to adopt that reasoning and to extend it to sex trafficking.
The court further reasoned that Pennsylvania’s anti-trafficking statute, standing alone, does not establish a public policy bar to otherwise available insurance coverage. In reaching that conclusion, the court emphasized that the duty to defend ordinarily should be resolved by reference to the policy language and the allegations of the underlying complaint, rather than through judicially created exclusions based on criminal statutes. The court noted that insurers remain free to address such risks through appropriate policy language and exclusions.
Accordingly, the 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. The court did not determine whether the underlying claims actually fall within coverage or are barred by any policy exclusion.
Comments
The decision limits the availability of public policy as an independent basis for denying coverage under Pennsylvania law and underscores the importance of addressing criminal and other intentional conduct through express policy language. In concurrence, Justice Wecht criticized Greenfield’s public policy analysis more broadly, concluding that courts should not use public policy to rewrite insurance contracts.