Courts Reinforce Limits on Insurers’ Efforts to Avoid Coverage

Insurance companies regularly try to avoid paying claims by invoking various exclusions, limitations, or defenses that they contend negate coverage. Two recent appellate decisions reinforce the limits on those efforts. The decisions do not announce a broader doctrinal trend. Instead, they are important because they apply established rules that can be outcome-determinative: Exclusions must be written in the policy, exclusionary language is construed narrowly, and the insurer bears the burden of proving that an exclusion applies.

In Samsung Fire & Marine Insurance Co. v. RI Settlement Trust,¹ the Pennsylvania Supreme Court rejected an aggressive attempt by insurers to create, through public policy, an exclusion that the insurers had not written into their policies. In Caliciotti v. Progressive Garden State Insurance Co.,² the New Jersey Appellate Division enforced the rule that a policyholder is not required to disprove exclusions; instead, the insurer must prove that an exclusion bars coverage.

Pennsylvania Supreme Court Rejects a Judicially Created Exclusion

The underlying tort cases in Samsung involved allegations of sex trafficking at several Philadelphia hotels. Although hotel employees were not directly involved in that activity, the underlying plaintiffs alleged that the hotels were negligent in failing to stop the trafficking from occurring. The hotels’ insurers initially defended them under reservations of rights but later argued that Pennsylvania’s “overriding public policy” against sex trafficking eliminated any duty to defend or indemnify – even assuming the policies otherwise provided coverage.

The Pennsylvania Supreme Court, answering certified questions from the Third Circuit, unanimously rejected the insurers’ position. The court acknowledged that the allegations against the hotel, if true, could violate a Pennsylvania criminal statute related to human trafficking. However, the court held that the existence of a criminal statute did not justify judicially crafting an exception to insurance policies that were silent on the subject. The court reasoned that the legislature’s decision to criminalize conduct did not give courts license to, in essence, rank crimes according to their perceived moral gravity and then decide which liabilities should or should not be insured.

The insurers relied principally on Minnesota Fire & Casualty Co. v. Greenfield,³ an earlier Pennsylvania decision involving a heroin overdose. There, the insured had repeatedly used heroin with the decedent, supplied her with the heroin that caused her death, and later pleaded guilty to crimes including involuntary manslaughter and unlawful delivery of heroin. In finding for the insurer on public policy grounds, the plurality in Greenfield emphasized that both the insured and the decedent had repeatedly violated narcotics laws, and described the decedent as a willing and frequent participant in the illegal activity.

The Samsung court declined to adopt or extend Greenfield. First, the court explained that Greenfield was a three-justice plurality opinion and therefore lacked precedential force. Second, the court distinguished Greenfield on its facts. While in Greenfield the insured pleaded guilty to multiple crimes and the victim willingly participated in criminal conduct, the hotel policyholders had not been convicted of criminal behavior and the underlying plaintiffs were innocent victims. Accepting the insurers’ position would have required the court both to adopt a nonbinding plurality rationale and to expand it beyond the unusual facts on which it rested.

Most importantly, the Samsung court grounded its holding in the language of the insurance contract. As the court explained, insurers routinely evaluate risks and draft exclusions for conduct they do not wish to cover. The court stated that it would not “act as a ‘super-scrivener’ to insert coverage exclusions that could have been made part of the insurance policy when drafted.”

In a concurring opinion, Justice David Wecht also correctly noted that other recognized public policies cut against the insurers’ position. For example, Pennsylvania public policy favors (a) a broad duty to defend, (b) enforcement of contracts, and (c) compensation of innocent tort victims. Justice Wecht further explained:

It is not the role of the courts to establish public policy, rooting around until we find a dominant public policy solely to let the insurance carriers out of the contractual obligations to which they freely agreed to be bound. To pitch the vague notion of “public policy” as a tool to override clear contractual language is to ask the courts to save the insurers from the consequences of their own actions. . . .

To be clear: Insurers are asking the courts to create an extra-contractual exclusion after the fact, and after the Insurers received compensation for the precise coverage they now abdicate.

Accordingly, the Samsung decision emphasizes that if an insurer wants to exclude claims arising from human trafficking, criminal conduct, or another specific risk, it should draft an exclusion in clear policy language and price the coverage accordingly. It cannot leave the policy silent and ask a court to add the exclusion after a claim arises.⁴

New Jersey Appellate Division Enforces the Insurer’s Burden

Caliciotti is a simple case, yet it serves as a reminder that insurers (not policyholders) bear the burden of proving that an exclusion bars coverage for a loss.

The case involved a comprehensive automobile claim after a vehicle suddenly lost power and suffered engine damage from a blown head gasket. The policy covered sudden, direct, and accidental non-collision loss, but excluded loss due and confined to wear and tear or mechanical breakdown. Progressive denied the claim. The trial court barred Progressive’s sole trial witness from offering expert testimony regarding the cause of the loss. Nevertheless, after a bench trial, the trial court dismissed the policyholder’s case because she had not presented expert testimony addressing the specific cause of the failure.

The Appellate Division reversed. The court determined that the policyholder had established a prima facie covered loss because the loss was sudden, direct, and accidental. At that point, the burden shifted to the insurer to prove that the loss was not “due and confined to” wear and tear or mechanical failure. Thus, it was the insurer – not the policyholder – that needed expert proof on that issue. The holding is not new law, but it illustrates why the allocation of burdens is more than a technicality: Applying the rule correctly changed the outcome.

Practical Takeaways for Policyholders

1. Exclusions must be written into the policy.

An insurer cannot replace missing policy language with an after-the-fact appeal to public policy. If the insurer intends to exclude a category of risk, it must say so in the contract in clear terms.

2. Exclusionary language is construed narrowly.

Coverage grants are read broadly, while exclusions are strictly construed against the insurer. Courts should not expand an exclusion beyond the language the insurer selected.

3. The insurer must prove that an exclusion applies.

Once a policyholder establishes a prima facie covered loss, the policyholder does not have to disprove every potentially applicable exclusion. The insurer bears the burden of proving the facts necessary to bring the claim within an exclusion.

4. Coverage denials should be tested, not assumed to be correct.

Policyholders facing a significant denial should consult experienced coverage counsel. Samsung and Caliciotti show that insurers frequently deny claims for spurious reasons. They sometimes rely on defenses that are absent from the policy, construe exclusions too broadly, or make arguments that are unsupported by the evidence. A careful challenge can restore the benefit of the coverage the policyholder purchased.

¹ Samsung Fire & Marine Insurance Co. v. RI Settlement Trust, --- A.3d ---, 2026 WL 211725 (Pa. July 21, 2026).
² Caliciotti v. Progressive Garden State Ins. Co., No. A-2182-24, 2026 WL 2056482 (N.J. Super. Ct. App. Div. July 16, 2026) (unpublished).
³ Minnesota Fire & Casualty Co. v. Greenfield, 855 A.2d 854 (Pa. 2004) (plurality opinion).
⁴ That is not to say that coverage can never be eliminated on public policy grounds. For example, several state courts have held that punitive damages are uninsurable as a matter of public policy. See, e.g., Home Ins. Co. v. Am. Home Prods. Corp., 75 N.Y.2d 196, 201, 550 N.E.2d 930, 933 (1990). The Samsung decision confirms that this doctrine remains narrow.