The Pennsylvania Supreme Court heard oral arguments in a coverage dispute over claims that a Philadelphia hotel ignored sex trafficking, drawing the attention of policyholder attorneys who believe the hotel's insurers asked the court to step beyond the bounds of insurance contracts by applying an implicit "public policy" exclusion.

Policyholder attorneys emphasized comments made during the Nov. 18 hearing by Justice David N. Wecht, who seemed wary of creating a "slippery slope" if a doctrine allowing insurers to avoid covering conduct that goes against public policy should be expanded.

"I think the justices here, at least so far, have correctly recognized that the courts are not underwriters," Raymond A. Mascia Jr., a shareholder of Anderson Kill PC, said. "We see this time and again where the insurance industry tries to engage in post-claim underwriting, which basically includes the improper practice of asking a court after a loss to include an exclusion that the insurance company failed to include itself in its own policy."

The dispute stems from insurers Samsung Fire & Marine Insurance Co. Ltd. and Harleysville Preferred Insurance Co. going to federal court for a declaration that they should not have to cover or defend the owners of the Roosevelt Inn, which four victims of sex trafficking sued over allegations that it ignored signs that they were being exploited.

Mascia told Law360 that Samsung Fire and Harleysville were aware that the Roosevelt Inn was in the hotel industry and, presumably, could have assessed whether allegations that the hotel was aware of sex trafficking were a potential risk. The insurers could have inserted an exclusion that specifically applied to this potential risk, but didn't, and instead are trying to use the at-issue public policy argument, Mascia said.

"I think the justices are rightly going to reject that concept because the courts are not there to clean up and draft provisions for the insurance company that they fail to include themselves," Mascia said.

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