Insurer must defend motel accused of benefiting from sex trafficking

A federal judge has ruled that an insurer must defend its policyholder in a sex trafficking suit filed by a woman who says a motel and its owners benefited from her being sold into prostitution on the premises.

The woman claimed in her suit filed in 2015 that Bijal Inc., the Shangri-La Motel in Seekonk, Massachusetts, and its operators Ashvinkumar Patel and Sima Patel profited from her being kidnapped on the premises and used by sex traffickers, claims brought under the federal Victims of Trafficking and Violence Protection Act and the Trafficking Victims Protection Reauthorization Act, according to documents in Civil Action No. 15-13519-FDS, filed in the U.S. District Court, District of Massachusetts, in Boston.

The motel’s insurer Peerless Indemnity Insurance Co., a subsidiary of Liberty Mutual Insurance Group, sought a declaration that it had no duty to defend or indemnify the defendants in the case, citing exclusions in several of its policies against criminal acts, that all of the woman’s claims are “barred by exclusion because they ‘arise out of (her) false imprisonment’ and thus arise out of ‘personal injury,’” relying on Massachusetts case law that has “interpreted the phrase ‘arising out of’ broadly in the context of insurance policies,” documents state.

The woman, however, “contends that her personal injury was not her false imprisonment, but rather” the “act” of being trafficked “for labor and sex,” documents state.

Addressing the woman’s specific claims against the motel operators — there are six separate violations of federal trafficking statutes listed — Judge Saylor concluded “that the claims asserted. are reasonably susceptible to a possibility of insurance liability” and “that, in turn, means that Peerless has a duty to defend under the policy,” the ruling states.

The court expressed no judgment on whether the insurer has duty to indemnify.

A spokesman for Liberty Mutual was quoted as saying that it does not comment on litigation; the motel operators could not be reached for comment.

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