Insurance Services – Coverage & Bad Faith Litigation

On July 21, 2026, the Supreme Court of Pennsylvania issued an opinion emphasizing the limited circumstances in which courts may invoke public policy to bar insurance coverage, holding in Samsung Fire & Marine Insurance Co., Ltd. (U.S. Branch) v. RI Settlement Trust that Pennsylvania public policy does not preclude coverage for claims alleging that insureds enabled or profited from human sex trafficking. The decision rejects a line of federal district court decisions predicting otherwise and reinforces that Pennsylvania courts will invoke the public policy doctrine only in the clearest of circumstances. RI Settlement is particularly significant because it arose on certified questions from the United States Court of Appeals for the Third Circuit, giving the Supreme Court the opportunity to resolve an issue on which federal courts had predicted Pennsylvania law differently. RI Settlement arose out of four separate civil complaints in which the underlying plaintiffs alleged that, as minors, they were the victims of human sex trafficking at various hotels in Philadelphia. The plaintiffs claimed that the hotel owners were negligent in failing to stop the sex trafficking from happening at their hotels. After the filing of the lawsuits, the hotel owners sought coverage under their Commercial General Liability policies. The insurers initially defended the hotels under Reservation of Rights letters, though the carriers later filed Declaratory Judgment actions seeking declarations that they did not owe a duty to defend or indemnify. In short, the insurers argued in the alternative that they did not owe any obligation to provide coverage based upon Pennsylvania public policy (because the claims violated the Human Trafficking Law – 18 Pa.C.S. § 3011) and the terms and conditions of the policy. On motions for judgment on the pleadings, the District Court found for the insurers on the basis of public policy: There is no duty to defend or indemnify against actions arising out of an insured's criminal conduct related to the sex trafficking of minors. The Court appreciates that it may make public policy the basis of a judicial decision only in “the clearest of cases.” See Minnesota Fire & Cas. Co. v. Greenfield, 589 A.2d 854, 868 (Pa. 2004) (quoting Hall v. Amica Mut. Ins. Co., 648 A.2d 755, 760 (Pa. 1994)). Yet, the Court strains to imagine a clearer case than the one presented here in which the facts alleged indicate that Policyholders engaged in criminal conduct in violation of Pennsylvania's Human Trafficking Law. The hotel owners appealed the matter to the Third Circuit, which petitioned the Supreme Court of Pennsylvania to grant review of two certified questions of law: (1) whether Pennsylvania law had an “overriding public policy” against sex trafficking, such that an insurer’s duty to defend and/or indemnify is abrogated when an insured is alleged to have enabled or profited from such trafficking; and (2) if yes, is that duty abrogated whenever the insured’s alleged conduct would constitute a violation of the Pennsylvania Human Trafficking statute. Importantly, the certified questions did not ask the Supreme Court to determine whether the policies afforded coverage under their terms. Rather, the court was asked only whether Pennsylvania public policy independently barred coverage. As a result, the court assumed for purposes of answering the certified questions that the insurers otherwise owed a duty to defend and addressed only the public policy issue, leaving all policy-based coverage defenses for further proceedings. Because the court concluded that the answer to the first certified question was “no”, it did not reach the second issue. In reaching its determination that Pennsylvania public policy does not prohibit insurance coverage for sex trafficking claims, the court limited the impact of its decision in Minnesota Fire & Cas. Co. v. Greenfield, 855 A. 2d 854, 855 (Pa. 2004), which the RI Settlement opinion emphasized as having been an “Opinion Announcing Judgment of the Court” – or a plurality opinion. In Greenfield, the insured homeowner was sued by the estate of his houseguest who overdosed from heroin that he sold to her. The matter wound its way to the Supreme Court, which determined that the insurer did not owe a duty to defend or indemnify based upon Pennsylvania public policy, which criminalized the sale and use of heroin as a Schedule I narcotic. In RI Settlement, the court “decline[d] the invitation” to extend the rationale of the three-justice plurality in Greenfield beyond cases involving Schedule I controlled substances. In so holding, the justices in RI Settlement refused to “divine an overriding public policy pronouncement by the General Assembly by virtue of its enactment of the Human Trafficking Law.” The opinion further states that it is not “within the purview of this Court to rank the magnitude of the public policy underlying the various crimes defined in the Crimes Code. It is sufficient for the work of the courts to know that the General Assembly has identified conduct it deems harmful and dangerous to the maintenance of an orderly society and criminalized it.” While the court declined to declare that Pennsylvania public policy prohibits coverage for sex trafficking claims, the opinion in RI Settlement expressly states that insurers are free to include appropriate exclusionary language for such causes of actions in their policies if they desire to do so. It will certainly be interesting to see whether the insurance industry accepts the court’s invitation, or perhaps whether the Pennsylvania legislature steps in to clarify that sex trafficking claims are indeed of the type or magnitude that they should not be covered by insurance. In any event, we will, of course, continue to monitor this and other insurance coverage issues that arise before courts in Pennsylvania, New Jersey and throughout our firm’s geographic footprint and around the country.