The insurance landscape continues to evolve, shaped by litigation that tests the limits of policy language, coverage obligations, and public policy considerations. In 2025, courts across the country issued several significant rulings that will influence how insurers and policyholders navigate claims and risks. Notable trends in 2025 include disputes over property coverage for wildfire and smoke damage, the treatment of interrelated claims under successive D&O policies, enforcement of arbitration clauses in international insurance contracts, and general liability coverage issues—such as construction exclusions for phased projects and limits on coverage for losses tied to the opioid crisis.
This publication spotlights the top insurance cases of 2025, highlighting their legal reasoning, practical implications, and impact for policyholders—plus a look ahead at key cases to watch in 2026.
CASE NUMBER 1:
Bottega, LLC v. Natl. Sur. Corp.-Chicago, IL
No. 21-CV-03614-JSC, 2025 WL 71989 (N.D. Cal. 2025)
United States District Court, Northern District of California
January 10, 2025
Gharibian v. Wawanesa Gen. Ins. Co.
329 Cal. Rptr. 3d 574 (Cal. App. 2d Dist. 2025), review denied (Apr. 30, 2025)
California Court of Appeals
February 7, 2025
Maxus Metro. LLC v. Travelers Prop. Cas. Co.
No. 24-1176, 2025 WL 3204154 (8th Cir. 2025)
United States Court of Appeals, Eighth Circuit
November 17, 2025
Does damage from smoke, soot, and char constitute “direct physical loss or damage” under a property policy?
Yes, according to the Eighth Circuit (applying Missouri law). However, the answer under California law is unclear.
In two recent California cases and one Eighth Circuit decision, policyholders sought insurance coverage under their commercial and personal property policies after wildfire smoke, soot, and debris affected their properties. Two courts ruled in favor of coverage, while one sided with the insurer. At the core of each case was the same fundamental question: what constitutes “direct physical loss or damage” under a property policy?
In Bottega, a restaurant owner sought coverage under its commercial property policy after nearby wildfires caused heavy smoke, soot, and ash to infiltrate the restaurant, forcing it to suspend operations, even though the building itself was not burned. The insurer denied coverage for business income losses, arguing there was no “direct physical loss or damage” because the structure remained intact. The court rejected this narrow interpretation, holding that coverage may be triggered where there is “some physicality to the loss of property, such as a physical alteration, physical contamination, or physical destruction.” The court reasoned that smoke physically alters property and requires extensive remediation, analogizing the damage to asbestos contamination and distinguishing it from COVID-19 cases where no physical alteration was shown.
In Maxus Metro., a fire damaged a multi-building apartment complex, leaving soot throughout the property and necessitating significant remediation. The building owner’s commercial property insurer argued that microscopic soot did not constitute “direct physical loss or damage” unless it was visible or affected the object’s structural integrity. Applying Missouri law, the Eighth Circuit disagreed, holding that soot damage constitutes physical damage because it is “directly material, perceptible, or tangible,” necessitates extensive remediation, and is permanent absent intervention. Accordingly, Missouri law treats soot contamination as tangible physical damage.
While Bottega and Maxus Metro marked wins for policyholders, the California Court of Appeals reached a different result in Gharibian. There, homeowners sought coverage after wildfire soot and ash settled on their property, and smoke odors lingered inside the home, despite the fire never reaching the structure. The court held that a “direct physical loss to property” requires a “distinct, demonstrable, physical alteration” of property. Since debris could be “easily cleaned or removed from the property,” the court concluded that the smoke and soot did not “alter the property itself in a lasting and persistent manner” and was not covered under the homeowners’ property policy.
Taken together, these decisions highlight the continued divide over what qualifies as “direct physical loss or damage.” This is underscored by the fact that two California courts reached starkly different holdings just one month apart from each other, based on fact-intensive inquiries on the nature and extent of the smoke and soot contamination. As a result, policyholders should carefully document the extent of contamination, operational impacts, and remediation efforts, and consider expert support to strengthen coverage claims.
CASE NUMBER 2:
In re Alexion Pharm., Inc. Ins. Appeals
339 A.3d 694 (Del. 2025)
Supreme Court of Delaware
February 4, 2025
Does the “meaningful linkage” inquiry under an Interrelated Wrongful Acts provision in a D&O policy turn on whether the claims share common underlying wrongful acts, regardless of differences in parties, theories, relief or timing?
Yes, according to the Supreme Court of Delaware.
The court held that the “meaningful linkage” inquiry focuses on whether the claims involve the same alleged wrongful acts; differences in proceedings, parties, theories, relief, or timing are irrelevant.
Alexion Pharmaceuticals, a drug development company, was insured under two D&O liability towers: Tower 1 covered claims made between June 27, 2014 and June 27, 2015, and Tower 2 covered claims made between June 27, 2015 and June 27, 2017. Alexion notified Tower 1 insurers in June 2015 of an SEC subpoena regarding possible securities law violations. In December 2016, stockholders filed a federal securities class action alleging violations of the same laws. Alexion sought coverage under Tower 2, but the Tower 2 insurers treated the claim as arising under Tower 1, arguing it involved the same underlying acts.
The trial court found that there was no “meaningful linkage” between the SEC subpoena and the securities class action because the SEC’s findings were not used to prove the class action’s allegations. The Delaware Supreme Court reversed stating that the Superior Court erred by treating the SEC notice as a claim. Instead, the court should have asked whether the alleged wrongful acts disclosed in the securities class action were meaningfully linked to the alleged wrongful acts disclosed in the SEC notice. The court concluded that both matters involved the same alleged wrongdoing, and this is the controlling factor in determining whether two claims have a “meaningful linkage;” differences in parties, theories of liability, or relief sought are irrelevant. As a result, the claims were interrelated, covered under Tower 1, and excluded from coverage under Tower 2.
This decision broadens the “meaningful linkage” test, showing that claims can be considered related based on overlapping wrongful acts, despite key differences. Where multiple claims involve similar wrongful acts and implicate successive policies, policyholders should thoroughly examine their policies’ interrelated claims provisions and assess the coverage implications of the acts being treated as related at the onset. Policyholders should clearly report each claim as a separate act, because while linking claims may reduce out-of-pocket deductible payments, it can also restrict coverage or available limits under other policies.
CASE NUMBER 3:
Liberty Surplus Ins. Corp. v. Kaufman Lynn Constr., Inc.
130 F.4th 903 (11th Cir. 2025)
United States Court of Appeals, Eleventh Circuit
March 5, 2025
Does a “course of construction” exclusion in a CGL policy bar coverage for property damage to completed portions of a phased project when other phases remain uncompleted?
Yes, under Florida law.
In a matter of first impression, the Eleventh Circuit held that the course of construction exclusion (“COCE”) bars coverage for property damage occurring during construction until the entire project is completed, even if the damaged portions were finished, occupied, and put to their intended use at the time of loss.
JM Family Enterprises hired Kaufman Lynn Construction (“Kaufman”) to build a multi-building corporate campus constructed in phases. After several buildings were completed and occupied, a tropical storm caused significant water damage to those finished structures. Kaufman sought coverage under the CGL portion of its Contractor Controlled Insurance Program (CCIP) with Liberty Surplus Insurance. Liberty denied coverage based on the COCE, which excluded coverage for property damage to any insured project “during the course of construction until the project is completed.”
The Eleventh Circuit affirmed the district court’s decision, holding that the phrase “until the project is completed” in the COCE exclusion precludes coverage until the entire project is finished—not merely a single building or phase. The court explained that even if the project has distinct phases, as identified in the insurance application but not in the policy itself, coverage is still precluded while any portion remains incomplete. Here, at the time of the water damage, some buildings were still under construction, triggering the exclusion. The court acknowledged concerns about potential coverage gaps but noted that the owner was required to carry builder’s risk insurance and declined to address whether a gap existed.
The decision underscores the risk of coverage gaps in phased construction projects and the importance for owners and contractors to closely review COCE language and understand how “project” and “completion” are defined prior to policy procurement. Insureds must press their builder’s risk insurers for modifications to these definitions that describe the project to include multiple phases and treat “completion” as applying to the conclusion of any given phase of the project’s completion. Alternatively, insureds should request carve out exceptions for COCEs limiting their applicability to a particular phase of the project. If this is not possible, additional insureds under CCIP or OCIP policies should require supplemental coverage to be in place to avoid uninsured losses during ongoing construction.
CASE NUMBER 4:
Trustees of Boston U. v. Clough, Harbour & Associates LLP
255 N.E.3d 596 (Mass. 2025)
Supreme Judicial Court of Massachusetts
April 16, 2025
Does the statute of repose for tort actions bar contractual indemnification claims when the indemnity is tied to negligence?
No, under Massachusetts law.
The Massachusetts Supreme Judicial Court held that the six-year statute of repose for construction-related tort claims does not bar a claim to enforce an express contractual indemnity obligation, even if the indemnity arises from another party’s negligence.
Boston University (“BU”) hired an architect to design a new athletic field on BU’s campus. The parties’ contract included an express indemnification provision requiring the architect to indemnify BU for losses arising out of the architect’s negligent acts or omissions in performing its design services. More than six years after project completion, BU discovered design-related defects causing safety issues. BU sued the architect seeking indemnification for costs incurred to correct the design defects. The trial court dismissed the claim, ruling that it was barred by Massachusetts’ six-year statute of repose for actions “in tort” arising out of construction and design defects.
The Supreme Judicial Court reversed, holding that BU’s claim was not barred by the statute of repose. The Court explained that BU’s complaint sought to enforce an express contractual indemnification provision, not to recover tort damages for negligent design. Because the statute of repose only applies to tort-based construction claims and does not limit contractual claims, it did not bar BU’s contractual indemnity action, allowing BU to pursue recovery even though more than six years had passed.
The ruling expands plaintiffs’ right to bring construction defect claims in Massachusetts even after the statute of repose has passed. As a result, contractors and design professionals face increased liability and should carefully draft risk transfer language and indemnity provisions in their contracts to reflect the parties’ intent and prevent their liability exposure extending beyond the repose period for negligence claims.
CASE NUMBER 5:
Twigg v. Admiral Ins. Co.
568 P.3d 156 (Or. 2025)
Supreme Court of Oregon
April 17, 2025
Does a contractor’s defective work, performed pursuant to a settlement agreement, constitute an “accident” under a CGL policy when the homeowner’s claim is framed solely as a breach of contract rather than a tort claim?
Yes, under Oregon law.
The Supreme Court of Oregon held that a claim framed solely as a breach of contract for a contractor’s defective work can constitute an “accident” under a CGL policy if the specific facts underlying the defective work give rise to tort liability.
In Twigg, homeowners initiated arbitration against their general contractor (“GC”) for various construction defects and settled through a Repair Agreement requiring the GC to make specific repairs. Dissatisfied with the repairs, they reinitiated arbitration for breach of the Repair Agreement and were awarded damages. When they were unsuccessful in enforcing the award, they sued the GC’s CGL insurer, claiming it had a duty to indemnify the GC because the defective work caused “property damage” to their home. The insurer contended that no coverage applied, as the damages arose from breach of contract, which does not constitute “property damage” caused by an “occurrence.” The Court of Appeals held that no “accident” was alleged, as the homeowners only brought a breach of contract claim, not a tort claim.
The Supreme Court of Oregon reversed, concluding that homeowners “were not required to formally allege a tort claim or obtain an award in tort” to trigger the policy. Instead, whether an “accident” exists depends on “whether there is a basis in fact for imposing tort liability,” not on how the claim is pleaded. In other words, if the contractor’s defective work could have supported a tort claim—such as negligent construction—the work constitutes an “accident” and triggers coverage under the policy, even if the homeowners asserted only a breach of contract claim. Here, the record contained evidence that the property damage may have resulted from negligent work, creating a basis for recovery under the CGL policy.
This decision relaxes the prior assumption that both breach of contract and tort claims must be asserted to trigger coverage under a CGL policy for a contractor’s deficient work. Accordingly, insurers may be required to indemnify their insureds for claims that allege only breach of contract if the underlying facts could support tort liability. Although claimants may still want to assert both contractual and negligence claims to ensure coverage, this decision offers potential coverage to insureds facing purely contractual causes of action if the allegations could have sounded in tort.
CASE NUMBER 6:
Certain Underwriters at Lloyds, London v. 3131 Veterans Blvd LLC
136 F.4th 404 (2d Cir. 2025)
United States Court of Appeals, Second Circuit
May 8, 2025
Are arbitration clauses in international insurance contracts enforceable in states that prohibit the arbitration of insurance disputes?
Yes, under New York law.
The Second Circuit resolved a major uncertainty regarding the arbitrability of international insurance contracts, holding that arbitration agreements in such contracts take priority over state laws prohibiting insurance arbitration.
Certain Underwriters involved surplus insurance contracts covering Louisiana properties damaged by Hurricane Ida. The contracts provided for arbitration in New York and designated New York law, but Louisiana law prohibits arbitration of insurance disputes. When the insureds filed suit in Louisiana state court, the insurers countersued in the Southern District of New York to compel arbitration. The district court initially denied the petitions, applying Louisiana law.
Federal law generally preempts conflicting state law, including in arbitration. The Federal Arbitration Act (“FAA”) governs domestic and international arbitration and preempts state laws restricting enforcement of arbitration agreements, though the McCarran-Ferguson Act (“MFA”) allows state insurance laws to override federal law—a principle called “reverse preemption.” The international chapter of the FAA implements the New York Convention, which requires enforcement of international arbitration agreements unless invalid or unenforceable. While courts have applied reverse preemption to state insurance laws under the FAA, it was unclear whether such laws could preempt the New York Convention—Certain Underwriters provides clarity.
The Second Circuit held that the New York Convention takes priority over restrictive state laws, so Louisiana’s arbitration prohibition did not apply. The court reasoned that the MFA applies only to “Acts of Congress,” and because the New York Convention is self-executing—operating independently of congressional legislation—it is not subject to reverse preemption. As a result, the policyholders were required to arbitrate despite Louisiana’s anti-arbitration statute.
Certain Underwriters clarifies that arbitration provisions in international insurance contracts selecting New York law and venue are enforceable. This decision brings the Second Circuit in line with the First, Fourth, Fifth, and Ninth Circuits, harmonizing enforcement of arbitration agreements across federal and state courts. However, the ruling applies only to international contracts, so policyholders with purely domestic contracts may still be subject to restrictive state laws prohibiting arbitration of insurance disputes.
CASE NUMBER 7:
Illinois Cas. Co. v. Kladek, Inc.
792 F. Supp. 3d 930 (D. Minn. 2025)
United States District Court, District of Minnesota
July 23, 2025
Can a single claim trigger multiple coverages under a business owner’s policy when the policy does not specify whether the coverages are mutually exclusive, and the coverages differ in scope and terms?
Yes, under Minnesota law.
The U.S. District Court for the District of Minnesota held that a single claim can trigger multiple coverages under a businessowners policy when the policy does not clearly state that only one coverage applies and the coverages are contained in separate grants with distinct scopes and terms.
In this case, Models sued Kladek, Inc., a gentleman’s club, for using their images in social media advertisements without permission. Kladek sought coverage under two distinct sections of its business owner’s policy: (1) the Cyber Protection Endorsement and (2) the General Liability (GL) coverage. The insurer sought a declaratory judgment denying any duty to defend or indemnify. The court referred the matter to an arbitration panel, which determined the insurer owed a duty to defend under the Cyber Endorsement, but did not address indemnification under that endorsement or coverage under the GL section. The court then considered whether the GL coverage could also apply to the same claim.
The court held that the insurer had a duty to defend under both the cyber and GL coverage sections. It emphasized that the two coverages were distinct—GL coverage was on an occurrence basis while cyber coverage was claims-made, and cyber disputes were subject to mandatory arbitration. Additionally, the cyber coverage carried a lower limit than GL coverage, making dual coverage especially significant. The policy did not state that triggering one coverage would preclude the other, and any ambiguity must be resolved in favor of the insured.
The court’s decision underscores that when a policy includes separate coverage grants, a single claim can trigger defense—and potentially indemnity—under more than one section if the policy does not clearly limit coverage to a single part. When tendering notice of claims to insurers, policyholders should identify all implicated coverages to maximize the potential for coverage. This is especially important where one coverage may be more viable or beneficial than another due to more favorable coverage forms, terms, lower deductibles, or higher limits.
CASE NUMBER 8:
In re Aearo Techs. LLC,
346 A.3d 584 (Del. 2025)
Supreme Court of Delaware
August 12, 2025
Can an insured’s parent company satisfy the insured’s self-insured retention (SIR) under a CGL policy when the policy requires payment of the SIR by the “named insured”?
No, under Delaware law.
The Delaware Supreme Court held that payment by a non-insured, including the named insured’s parent company, does not satisfy the named insured’s obligation to pay the SIR, which is a condition precedent to coverage.
The dispute arose when Aearo Technologies LLC’s (“Aearo”) CGL insurers denied reimbursement for defense costs in hundreds of thousands of lawsuits over allegedly defective earplugs. The policies required Aearo, as the named insured, to satisfy the SIR. Aearo and its parent company, 3M Company (“3M”), argued that 3M’s payment of defense costs on Aearo’s behalf satisfied the SIR. The trial court disagreed, and the Supreme Court affirmed.
The Court concluded that each policy unambiguously required the named insured to satisfy the SIR, defining it as the amount “you” must pay before the insurer’s obligations are triggered and specifying that “you” refers to the Named Insured shown in the Declarations. Because Aearo, as the named insured, did not satisfy the SIR, coverage was never triggered. The Court also rejected Aearo’s and 3M’s argument that coverage was nevertheless afforded even if the SIR is unsatisfied, because the insurer could offset the SIR amount from coverage payments. That argument relied on the policies’ maintenance clauses, which mandated that the insurers’ obligations are not excused if the SIR is unsatisfied due to the insureds’ bankruptcy or insolvency. The Court explained that none of those circumstances existed, so the maintenance clauses did not apply.
The dissent disagreed that SIR satisfaction is a condition precedent to coverage, arguing that the policies did not unambiguously create a condition precedent and criticizing the majority for relying on the “nature of the SIR” rather than the policy language. It noted that the majority’s holding conflicts with Delaware law, which requires conditions precedent to be clearly stated and disfavors forfeitures.
While Aearo is unfavorable for policyholders, the majority’s decision hinges on the specific language of the policies at issue and does not create a blanket rule for SIR satisfaction. The dissent also emphasizes that courts may be hesitant to enforce forfeitures based on ambiguous policy language. Nevertheless, insureds should carefully review their policies’ SIR provisions and, where possible, negotiate broader definitions that allow other entities to satisfy the SIR to avoid a coverage dispute.
CASE NUMBER 9:
In re CVS Opioid Ins. Litig.
346 A.3d 81 (Del. 2025)
Supreme Court of Delaware
August 18, 2025
Is an insurer’s duty to defend under a GL policy triggered when a complaint only seeks generalized economic or public costs rather than damages for specific, individualized bodily injury or property damage?
No, according to the Supreme Court of Delaware.
The Court held that a GL insurer’s duty to defend arises only when claims allege specific, individualized injury. Generalized or aggregate economic losses—such as costs claimed by governments, hospitals, or third-party payors related to the opioid epidemic—do not trigger coverage.
CVS faced thousands of lawsuits seeking reimbursement for healthcare and treatment costs related to opioid users. CVS sought defense from its insurers, Chubb and AIG, whose GL policies covered sums “because of” bodily injury or property damage caused by an “occurrence.” The insurers filed a declaratory judgment that they owed no duty to defend.
Both the lower court and the Supreme Court of Delaware agreed with the insurers. The courts held that the underlying lawsuits did not seek damages for any specific person’s bodily injury or property damage but instead sought economic and public harms, such as costs to states and municipalities. The court clarified that coverage for claims “for” or “because of” bodily injury does not extend to purely economic losses and emphasized that damages must be “connected to personal injury, independently proven and caused by the insured.” The Court also rejected CVS’s argument that the suits were derivative actions on behalf of injured individuals, noting that the claims sought generalized municipal or state damages, not individual injuries. Because coverage was not triggered, endorsements such as the “Pharmacist Liability Endorsement” or “Druggist Liability Endorsement,” which expand “occurrence” to include pharmacist-related bodily injury, were immaterial.
This decision reminds insureds to ensure that claim notices and tenders identify particularized damages and to engage coverage counsel early to collaborate with defense counsel and reframe issues and pleadings to align with the scope of coverages afforded under the relevant policies and applicable law.
CASE NUMBER 10:
Federated Mutual Ins. Co. v. Peterson’s Oil Service, Inc.
155 F.4th 1 (1st Cir. 2025)
United States Court of Appeals, First Circuit
September 8, 2025
Does a CGL insurer have a duty to defend its insured in a class action when only some of the alleged property damage occurred after the policy’s inception, even if similar damage was known to the insured before the policy period?
Yes, under Massachusetts law.
The First Circuit held that the CGL insurer had a duty to defend even if the insured had prior knowledge of earlier damage, because that does not equate to knowledge about future damage from separate occurrences.
The case arose from a Massachusetts class action against Peterson’s Oil Service, Inc., a heating oil supplier. Customers alleged that Peterson’s sold heating oil containing excessive biodiesel, which damaged their heating systems. Peterson’s received notice of the lawsuit in March 2019 but did not obtain commercial general liability coverage from Federated Mutual until July 2019. Federated denied a defense, relying on its “known-loss” provision (which excludes damage known prior to the policy period), “loss-in-progress” provision (which deems any continuation, change, or resumption of preexisting damage during or after the policy period as known), and “deemer” clause (which deems the insured aware of damage upon any notice, claim, or other indication), arguing that Peterson’s knew of the alleged damage before the policy period began.
The district court held that Federated had a duty to defend because some of the underlying claims alleged property damage that occurred after coverage began, which triggered Federated’s obligation to defend the entire lawsuit. The First Circuit affirmed, explaining that each delivery of oil to a customer constituted a separate “occurrence” under the policy. Knowledge of prior alleged damage did not mean Peterson’s knew of future damage that had not yet occurred. The court likewise rejected Federated’s argument that Peterson’s receipt of the class action complaint before the policy period barred coverage for later-occurring claims. As a result, Federated was obligated to defend the entire class action, even though some alleged damages predated the policy.
The decision limits insurers’ ability to rely on “known loss” and “loss in progress” exclusions to deny a defense where at least some of the alleged damage occurred during the policy period. Where a complaint alleges any potentially covered damage, the insurer must defend the entire lawsuit. Insureds should carefully assess the scope of these exclusions against the facts of their claims and pushback where insurers liberally rely on known-loss type exclusions based on the insured’s knowledge of certain related circumstances—but not the claim itself.
CASES TO WATCH OUT FOR IN 2026:
CASE NUMBER 1:
Allied Prop. Cas. Ins. Co. v. Bloodworth Wholesale Drugs, Inc.
727 F. Supp. 3d 1404 (M.D. Ga. 2024)
United States District Court, Middle District of Georgia
March 27, 2024
Does economic loss stemming from opioid-related injuries, sickness, and death constitute “damages because of ‘bodily injury’” under a CGL policy?
The Eleventh Circuit is expected to address this question in 2026 under Georgia law.
This case arises from insurers’ denial of coverage to Bloodworth, a Georgia pharmacy distributor named in 26 opioid lawsuits filed between 2017 and 2019. The suits—brought by counties, municipalities, hospitals, and medical management entities—alleged that Bloodworth improperly distributed opioids and failed to comply with reporting requirements, thereby contributing to the opioid epidemic. None of the complaints sought damages for specific individuals’ bodily injuries; instead, plaintiffs sought reimbursement for public health, treatment, and abatement costs. Bloodworth’s insurers filed a declaratory judgment action, and the parties stipulated that the sole issue was whether these economic losses constituted “damages because of bodily injury” under the policies.
The district court held that the insurers owed no duty to defend or indemnify. It concluded that “damages because of bodily injury” is unambiguous and requires a causal connection to a specific, identifiable bodily injury suffered by a person. Generalized economic losses—such as government and healthcare costs tied to the opioid epidemic—do not meet that standard. The court further held that the alleged conduct did not constitute an “occurrence” under the policies and that extending coverage would improperly expand the policies’ plain terms.
The Eleventh Circuit’s decision will be pivotal in defining what damages qualify as “because of ‘bodily injury’” under Georgia law and whether courts will continue to side with insurers in opioid litigation, as illustrated by the Delaware Supreme Court’s decision in In re CVS Opioid Ins. Litig., which held that generalized or aggregate economic losses—such as costs claimed by governments, hospitals, or third-party payors—do not trigger coverage.
CASE NUMBER 2:
Samsung Fire and Marine Ins. Co., Ltd. (U.S. Branch) v. RI Settle. Tr.
No. 23-1988, 2024 WL 4921644 (3d Cir. 2024)
United States Court of Appeals, Third Circuit
August 12, 2024
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Does Pennsylvania law recognize a public policy against sex trafficking that would relieve an insurer of its duty to defend or indemnify an insured accused of enabling or profiting from such trafficking?
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If so, does the insurer’s duty end whenever the insured allegedly acted with recklessness or knowingly benefited financially under 18 Pa. Cons. Stat. § 3011(a), or only when the insured’s conduct was intentional?
The United States Court of Appeals for the Third Circuit certified these questions to the Pennsylvania Supreme Court to answer in 2026.
The underlying cases allege that a motel failed to prevent four women from being subjected to sex trafficking despite obvious warning signs. At the time, the motel maintained CGL and umbrella insurance policies with Samsung, Nationwide, and ACE, covering liability for bodily injury and property damage. Samsung sought a declaration that it had no duty to defend or indemnify the motel in the underlying cases because the claims were excluded and otherwise uninsurable under public policy. The issue hinged on whether the insurers owed a duty to defend and indemnify the motel against the allegations that it enabled and profited from sex trafficking on its premises.
The District Court agreed with the insurer, finding no duty to defend or indemnity. The Third Circuit, however, sought guidance from the Pennsylvania Supreme Court, noting that while Pennsylvania generally favors broad coverage—particularly for the duty to defend—it recognizes a public-policy exception for conduct so criminal and repugnant that insurance protection would violate societal norms. Because resolving the issue required balancing Pennsylvania’s strong presumption of coverage against its public policy against sex trafficking, and the Third Circuit could not predict how the Supreme Court would rule, it certified the question for review.
The Pennsylvania Supreme Court’s decision on sex trafficking and public policy will determine whether insurers can deny coverage when an insured is alleged to have enabled or profited from sex trafficking, clarifying the balance between broad insurance coverage and public-policy exceptions under Pennsylvania law.
CONCLUSION
Thank you for reading SDV’s “Top 10 Insurance Cases of 2025.” The decisions highlighted above reflect the evolving landscape of insurance coverage litigation and the practical challenges policyholders continue to face in securing the coverage they expect. Careful policy review and early strategic planning remain critical to managing risk and protecting coverage rights. Saxe Doernberger & Vita, P.C. is available to assist with both active coverage disputes and proactive risk management strategies.
For more information or questions, contact Jeffrey J. Vita at JVita@sdvlaw.com, Michelle Grieco at MGrieco@sdvlaw.com, or Kiley Stackpole at KStackpole@sdvlaw.com.
*SDV extends special thanks to Rebecca Mielnicki, Associate Attorney, and Jacquelyn Matthews and Shaun Hillis, Law Clerks, for their valuable contributions to the research and production of this article.