Ohio Federal Court Says Human Trafficking Claims Can Be Covered “Occurrences” Under CGL Policy

Hotels across the country in the past decade have experienced a wave of litigation under the Trafficking Victims Protection Reauthorization Act (TVPRA). The law provides victims of certain human trafficking crimes with a civil cause of action against both the traffickers and those who knowingly benefited from their participation in a venture with those traffickers. In 2015, Congress revised the statute to expand the statute of limitations, causing a wave of litigation. In the typical case, the plaintiff alleges that he or she was trafficked through a hotel owned and/or operated by the defendant-insured, that the insured knew or should have known the trafficking was happening, and that the insured knowingly benefited from the trafficking.

Of course, with lawsuits come insurance claims. Hotels carrying commercial general liability (CGL) policies have submitted these claims to their insurers, seeking a defense and indemnity. That was the situation recently faced by the U.S. District Court for the Southern District of Ohio in Red Roof Inns Inc. v. Liberty Mutual Fire Insurance Co. The insured — Red Roof Inns — sued Liberty Mutual after it refused to defend Red Roof Inns in 11 lawsuits alleging violations of the TVPRA. Liberty Mutual took the position that, because a TVPRA claim requires a claimant to prove that the insured “knowingly participated in a venture” in violation of human trafficking laws, that means Red Roof Inns’ conduct cannot constitute an “occurrence,” as defined by the Liberty Mutual CGL policy.

 The CGL policy at issue contained the standard definition of an “occurrence” — an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Liberty Mutual argued that one of the elements of a TVPRA claim — that the defendant knowingly participated in a venture that violated the TVPRA — categorically precluded the possibility of coverage for the underlying suits, as coverage was limited to injury caused by an accidental “occurrence.” This was so, Liberty Mutual argued, because proof of “participation in a venture” necessarily requires proof that the defendant engaged in intentional — not accidental — conduct.

The court disagreed. It rejected Liberty Mutual’s argument that intent to participate in the venture was enough to make a claim non-accidental. Instead, the relevant question, the court concluded, was whether the TVPRA required that a defendant intended to cause harm. Because that question has not yet been addressed by the Sixth Circuit, the court looked to the text of the statute and other decisions from the Southern District of Ohio. It concluded that “participation” may be proved by showing a continuous business relationship with the traffickers without the need to show any specific acts in furtherance of the trafficking itself. From this perspective, the court ruled, the TVPRA did not necessarily require a showing of intent to cause harm. Accordingly, the court found a claim of beneficiary liability under the TVPRA was not categorically non-accidental within the meaning of the Liberty Mutual CGL policy.

The court also rejected Liberty Mutual’s secondary arguments. Specifically, the court concluded that Ohio’s “inferred intent doctrine” only applied in cases in which an insured’s action was so “intrinsically tied” to the resulting harm that an inference of intentional harm arose. Because a TVPRA claim requires intervening intentional harm by the traffickers, the court found the level of connection necessary to invoke the inferred intent doctrine need not be established for purposes of a TVPRA claim. Finally, the court rejected Liberty Mutual’s argument that TVPRA claims were uninsurable as a matter of Ohio public policy. Although intentional torts and certain criminal conduct is considered uninsurable under Ohio law, the court found that prohibition did not extend to allegations of mere negligence just because it was “related” to intentional conduct.

The Southern District of Ohio’s decision appears to be one of very few federal district court rulings directly addressing whether a beneficiary claim under the TVPRA can constitute or involve an “occurrence” under a CGL policy. Last year, the Northern District of Georgia addressed the same issue (in a suit involving the same parties) and likewise concluded that a beneficiary liability claim under the TVPRA could alleged an “occurrence.”