Ohio District Court Rejects Insurer’s “Occurrence” Construction
By David A. Gauntlett*
Introduction
A typical Commercial General Liability (“CGL”) insurance policy includes two forms of coverage labeled as Coverage A and Coverage B. While the latter provides coverage for specific enumerated defenses and only addresses scienter via exclusions, the former includes a requirement that the covered “bodily injury” or “property damage” be the result of an “occurrence,” which is traditionally defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” While many courts unfortunately construe this term narrowly, it is properly interpreted as broadly as possible in favor of the insured since it functions as a limitation on coverage, which is indistinguishable from a policy exclusion.[1]
Liberty Mutual Fails to Persuade Ohio District Court
In Red Roof Inns, Inc. v. Liberty Mut. Fire Ins. Co.,[2] the district court was tasked with analyzing whether allegations that the insured hotel company violated the Trafficking Victims Protection Reauthorization Act (“TVRPA”) could potentially be construed as an “occurrence,” which would trigger Liberty Mutual’s duty to defend the underlying lawsuit.[3] No criminal case was brought against Red Roof, but the company was named as a defendant pursuant to the civil penalties portion of the TVRPA, which states:
An individual who is a victim of a violation of this chapter may bring a civil action against the perpetrator (or whoever knowingly benefits, or attempts or conspires to benefit, financially or by receiving anything of value from participation in a venture which that person knew or should have known has engaged in an act in violation of this chapter) in an appropriate district court of the United States and may recover damages and reasonable attorneys fees.[4]
Liberty argued that the TVPRA language precludes coverage for Red Roof because that element requires a level of intent that is at odds with an “occurrence” under the policies. Red Roof contested that the relevant inquiry is not whether “participation in a venture” requires an intent to act, but whether it requires an intent to cause harm.
The court sided with Red Roof in concluding that there was no statutory requirement of intent to cause harm.
Turning to the statute's context and structure, both support the conclusion that a defendant can be liable under the civil provisions of the TVPRA without evidence of an intent to cause harm. For example, and by contrast, the TVPRA's criminal provisions define “participation in a venture” as “knowingly assisting, supporting, or facilitating” a violation. 18 U.S.C. § 1591(e)(4) (emphasis added). If Congress intended the civil remedy to also have a scienter requirement for “participation,” it would have used the criminal provision's definition. But Congress did not, and courts have refused to apply a standard not required by Congress.[5]
The court also highlighted the statutory text that “speaks to the requisite state of mind, i.e., that a defendant ‘knew’ or ‘should have known’ the venture was engaged in sex trafficking.”[6] The court concluded that this language was consistent with the widely used standard for negligence, which further supported the conclusion that intent was not required.
It should also be noted that the court applied Ohio law, which is among the most conservative states in terms of coverage law. In other states with laws more beneficial to policyholders, the rationale is even more persuasive.
Hawaii Supreme Court Case Supports Conclusion
In Aloha Petroleum, Ltd. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA,[7] the court held that “accident,” as used in definition of “occurrence,” included the company's allegedly reckless conduct in producing fossil fuels contributing to climate change. It explained, “[a]wareness of risk differs from awareness of certain harm. Insurance covers risks. Per Tri-S, we hold that covered ‘accidents’ differ from non-covered expected or intended injuries when the harm was intended or practically certain.”[8]
Therein, Aloha's gasoline produced greenhouse gasses, which cause environmental damage because of their presence in the atmosphere. The products there were inherently polluting when used in their intended way. But, where the injury is not “practically certain” to occur, it is not “expected” or “intended,” it can be an “accident.”
[I]f we ruled that recklessness is not an “accident,” we risk inviting duty-to-defend litigation due to the possibly fine-grained distinction between a policyholder's recklessness and negligence.
Thus, Tri-S provides a logical and reasoned approach. “Accidents” are not intended or practically certain from the insured's standpoint. This rule aligns with the risks that liability insurance is designed to cover. It also comports with the plain meaning of “accident,” the reasonable expectations of policyholders, and the principle of fortuity.[9]
Scienter Allegations Should Never Be Taken at Face Value
As identified in KM Strategic Mgmt., LLC v. Am. Cas. Co. of Reading PA, unproven allegations of scienter are not enough to justify denial of an insurer’s duty to defend.[10]
Other decisions provide additional insight and explain why reliance on such allegations is inherently improper. For example, the court in Hudson Ins. Co. v. Colony Ins. Co. identified that allegations in a Complaint are often crafted with specific language in order to avoid triggering insurance benefits “for strategic adversarial reasons.”[11]
Even more pertinently, Allied Property & Casualty Insurance Co. v. Armadillo Distribution Enterprises[12] recently engaged in thorough analysis of alleged scienter and whether it should be accepted at face value. The court first identified that heightened scienter should not accepted unless it is the only scienter that could result in liability.[13] The Armadillo court went a step further and explained the logical motivation for alleging unnecessarily heightened scienter.
Thus, although Gibson's complaint alleged Armadillo's intentional or willful conduct in support of Gibson's request for certain enhanced remedies provided by statute for intentional or willful behavior, it is far from apparent that Gibson's claims do not also contemplate and encompass the lesser compensatory relief available for less egregious conduct.[14]
Although these cases were analyzing explicit exclusions, those are indistinguishable from limiting policy language that is built in as part of a coverage provision.[15]
Conclusion
Despite Liberty Mutual’s arguments, the Red Roof court properly determined that a defense was owed since the “occurrence” definition was potentially met by conduct falling within the scope of liability under the TVPRA. While that court had no need to develop further legal analysis, other courts have provided compelling rationale to support a broader understanding of what claims may trigger a defense under a CGL policy’s standard Coverage A and any other “occurrence” based insuring agreements.
*David A. Gauntlett is a principal of Gauntlett Law and represents policyholders in insurance coverage disputes regarding intellectual property, antitrust, and business tort claims, as well as in the underlying actions. Mr. Gauntlett can be reached at (949) 514-5662 or dag@gauntlettlaw.com. For more information, visit Gauntlett Law at www.gauntlettlaw.com.
[1]Pennsylvania Gen. Ins. Co. v. Am. Safety Indem. Co., 185 Cal. App. 4th 1515, 1526–27 (2010) (“When construing an insurance policy, we must resolve ambiguities in coverage clauses most broadly in favor of coverage, and we concomitantly must narrowly construe exclusions and limitations on coverage.”) (emphasis added)
[2]Red Roof Inns, Inc. v. Liberty Mut. Fire Ins. Co., No. 2:25-cv-00352, 2026 U.S. Dist. LEXIS 57780 (S.D. Ohio Mar. 19, 2026).
[3] Red Roof also asserted a defense was owed under Coverage B, but the court declined to address those arguments since the Coverage A requirements were met. Id. at *6.
[4] 18 U.S.C. § 1595(a).
[5]Red Roof, 2026 U.S. Dist. LEXIS 57780 at *10–11.
[6]Id. at *11.
[7]Aloha Petroleum, Ltd. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 155 Haw. 108 (Haw. Oct. 7, 2024).
[8]Id. at 118.
[9]Id. at 121.
[10]KM Strategic Mgmt., LLC v. Am. Cas. Co. of Reading PA, 156 F. Supp. 3d 1154, 1170 (C.D. Cal. 2015) (“(“An insurer does not meet its burden of establishing an exclusion's application by pointing to unproven and disputed allegations in the very complaint it is called upon to defend.”); see also Arch Specialty Ins. Co. v. Beacon Healthcare Servs., Inc., No. 822CV00305MCSDFM, 2023 WL 2347396, at *4–5 (C.D. Cal. Jan. 18, 2023) (dispute over consensual nature of sexual relationship precluded use of “Abuse or Molestation” exclusion).
[11]Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264, 1296 (9th Cir. (Cal.) 2010) (recognizing plaintiffs may omit valid negligence counts “for strategic adversarial reasons”).
[12]Allied Prop. & Cas. Ins. Co. v. Armadillo Distribution Enters., Inc., No. 4:21-CV-00617-ALM, 2022 WL 3568482, *9–11 (E.D. Tex. Aug. 18, 2022).
[13]Id. at *10 (“For example, count one of Gibson's complaint alleged a violation of the Lanham Act, 15 U.S.C. § 1114(1), and requested damages based on Armadillo's ‘intentional and willful infringement.’ To establish a violation of the Lanham Act, ‘[i]t is not necessary to show an intent to deceive.’ [citation].”)
[14]Id. (emphasis added).
[15]In re Adelphia Commc'ns Corp., 638 B.R. 506, 515 (Bankr. S.D.N.Y. 2022) (“In the absence of such a clear expression of limitation, or if the policy provisions are inconsistent or ambiguous, the insurance contract must be construed in favor of coverage and against limitations.”)