NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

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Nos. 18-2290 & 18-3436

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NAUTILUS INSURANCE COMPANY

v.

MOTEL MANAGEMENT SERVICES, INC.,

d/b/a Neshaminy Inn; E. B.

MOTEL MANAGEMENT SERVICES, INC.,

Appellant

______________

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 2-17-cv-04491)

District Judge: Hon. Timothy J. Savage 

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Submitted Pursuant to Third Circuit L.A.R. 34.1(a)

May 24, 2019

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Before: McKEE, SHWARTZ, and FUENTES, Circuit Judges.

(Filed:July 22, 2019)

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OPINION*

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SHWARTZ, Circuit Judge.

 

* This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, 

does not constitute binding precedent.
2

At issue in this appeal is whether Nautilus Insurance Company has a duty to

defend and indemnify Motel Management Services (“MMS”) in a lawsuit minor E.B. 

brought in state court against MMS alleging that MMS failed to intervene or report that 

traffickers enticed E.B. to engage in commercial sex acts at MMS’s motel. Because the 

Court properly determined that the assault and battery exclusion in MMS’s insurance 

policy applies, and therefore Nautilus does not have a duty to defend MMS in E.B.’s suit, 

we will affirm the orders granting Nautilus’s motion for judgment on the pleadings and 

denying MMS’s motion for relief from that judgment. 

I

E.B., a minor female, sued MMS and other motel operators in Pennsylvania state 

court (“the underlying action”), alleging that (1) she “was recruited, enticed, solicited, 

harbored and/or transported to engage in commercial sex acts” in violation of 

Pennsylvania’s Human Trafficking Law, 18 Pa. Cons. Stat. § 3011, including at a motel 

owned and operated by MMS, App. 31 ¶ 27;1(2) she was “held at gun point and 

threatened to engage in sexual acts with multiple traffickers,” App. 33 ¶ 37, “visibly 

treated in an aggressive manner” by those engaging in commercial sex acts with her, 

App. 33 ¶ 41, and suffered physical harm; (3) MMS facilitated her exploitation by 

knowingly renting rooms at its motel to the traffickers; (4) MMS failed to intervene or to 

report the traffickers’ illegal conduct; and (5) MMS financially profited from E.B.’s

 

1 Appendix citations are to the appendix filed in docket number 18-2290. 
3

exploitation. E.B. sought compensatory and punitive damages for negligence per se,

2

negligence, negligent infliction of emotional distress, and intentional infliction of 

emotional distress. 

Nautilus brought this declaratory judgment action asserting that an exclusion in

MMS’s insurance policy with Nautilus for claims arising out of an assault or battery, 

including a failure to prevent or suppress an assault or battery, exempted it from the 

duties to defend and indemnify MMS in E.B.’s suit. 

The District Court granted Nautilus’s motion for judgment on the pleadings,

declaring that Nautilus had no duty to defend and indemnify MMS because E.B.’s claims 

in the underlying action arose from facts alleging negligent failure to prevent an assault 

or battery and therefore were not covered by the insurance policy. Nautilus Ins. Co. v. 

Motel Mgmt. Servs., Inc., 320 F. Supp. 3d 636 (E.D. Pa. 2018). MMS thereafter filed a 

Rule 60(b) motion contending that E.B.’s deposition testimony in the underlying action

conflicted with the allegations in the Complaint. The Court denied the motion. MMS 

appeals both orders. 

 

2 This claim alleges that MMS’s conduct violated Pennsylvania’s Human 

Trafficking Law. 
4

II3

When interpreting an insurance contract under Pennsylvania law, which all parties 

agree governs this dispute, we must ascertain and give effect to the parties’ intent as 

manifested in the terms of the policy. Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 

286, 290 (Pa. 2007). Where the language is clear and unambiguous, we must follow it. 

Minn. Fire & Cas. Co. v. Greenfield, 855 A.2d 854, 861 (Pa. 2004). However, where the 

contract language is ambiguous, we construe that provision in favor of the insured. Id. 

An insurer has a duty to defend the insured in any suit in which the complaint 

alleges potentially covered injuries. Baumhammers, 938 A.2d at 290-91. If an insurer 

relies on a policy exclusion as an affirmative defense to deny coverage, it bears the 

burden of proving that the exclusion applies. Madison Constr. Co. v. Harleysville Mut. 

Ins. Co., 735 A.2d 100, 106 (Pa. 1999). In determining whether Nautilus has a duty to 

defend MMS, “we may not look . . . beyond the four corners of [E.B.’s] complaint and 

 

3 The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction 

under 28 U.S.C. § 1291. “We review a denial of a motion for judgment on the pleadings

de novo.” Zimmerman v. Corbett, 873 F.3d 414, 417 (3d Cir. 2017). In considering a 

motion for judgment on the pleadings, we must accept as true all facts presented in the 

complaint and answer, and draw all reasonable inferences in favor of the non-moving 

party—here, MMS. See Bedoya v. Am. Eagle Express Inc., 914 F.3d 812, 816 n.2 (3d 

Cir. 2019). “Judgment will not be granted unless the movant clearly establishes there are 

no material issues of fact, and he is entitled to judgment as a matter of law.” Id. (internal 

quotation marks and citations omitted). While MMS implores us to look beyond the 

pleadings, we may not. 

“We review the denial of Rule 60(b) relief for an abuse of discretion.” Coltec 

Indus., Inc. v. Hobgood, 280 F.3d 262, 269 (3d Cir. 2002). Under Rule 60(b), “the court 

may relieve a party or its legal representative from a final judgment, order, or 

proceeding” in light of “newly discovered evidence that, with reasonable diligence, could 

not have been discovered” before the judgment was entered. Fed. R. Civ. P. 60(b)(2). 
5

how it matches up with the actual terms of the . . . Policy.” Lupu v. Loan City, LLC, 903 

F.3d 382, 392 (3d Cir. 2018) (citing Kvaerner Metals Div. of Kvaerner U.S., Inc. v. 

Commercial Union Ins. Co., 908 A.2d 888, 896 (Pa. 2006)). Pennsylvania law does not 

recognize any exceptions to this “four corners” rule, even if the insurer knows or should 

know that the allegations in the complaint are untrue. Id. at 390-92. 

Here, Nautilus asserts that its policy excludes from coverage claims “arising out 

of” an assault or battery. The exclusion provides that Nautilus “will have no duty to 

defend or indemnify any insured in any action or proceeding alleging damages arising out 

of any assault or battery,” regardless of culpability, intent, or relationship of the 

perpetrator of the assault or battery to the insured, or whether the damages occurred at 

premises owned or operated by the insured. App. 111. The assault and battery exclusion 

specifically omits from the policy’s coverage “[a]ll causes of action arising out of any 

assault or battery” or “any act, error, or omission relating to such an assault or battery.” 

App. 111. 

The term “arising out of” is interpreted in terms of “but for” causation. See

Madison Constr., 735 A.2d at 109-10 (citing McCabe v. Old Republic Ins. Co., 228 A.2d 

901, 903 (Pa. 1967)). Therefore, if an assault or battery was a “but for” cause of the 

plaintiff’s injuries, the assault and battery exclusion will apply to allegations that the 

insured’s negligence contributed to the injuries. See Acceptance Ins. Co. v. Seybert, 757 

A.2d 380, 383 (Pa. Super. Ct. 2000) (finding no duty to defend where insured bar’s 

negligence in serving alcohol to visibly intoxicated men who subsequently attacked 

plaintiff in underlying action was merely a contributing factor and not a direct cause of 
6

plaintiff’s injuries). The insurer only owes a duty to defend if the complaint alleges the 

insured’s negligence directly led to the injuries. See QBE Ins. Corp. v. M & S Landis 

Corp., 915 A.2d 1222, 1229 (Pa. Super. Ct. 2007) (finding duty to defend nightclub that 

negligently trained staff who restrained a patron because the negligence of the nightclub 

and its staff directly caused plaintiff’s injuries).

All alleged injuries in this complaint are the result of exploitation and assault by 

traffickers and customers with whom E.B. engaged in commercial sex acts.4

Accordingly, the assault and battery were the “but for” causes of the injuries E.B. claims. 

E.B. nowhere alleges that MMS’s negligence directly caused her injuries or caused an 

independent harm. Rather, she alleges that MMS failed to intervene or report the 

traffickers’ activities and MMS they financially benefitted from her abuse. The assault 

and battery exclusion, however, encompasses claims arising both from an assault or 

 

4 MMS argues that the assault and battery exclusion should not apply because 

involuntary servitude under Pennsylvania’s Human Trafficking Law does not 

“necessarily include[] assault.” Appellant’s Br. at 15. However, our focus is on the four 

corners of E.B.’s complaint, in which she alleges that she suffered injury including 

physical harm and mental anguish as a victim of human trafficking, including by being 

“visibly treated in an aggressive manner” and “held at gun point” and forced to engage in 

commercial sex acts. App. 33. These allegations reflect assaults and batteries, and it is 

irrelevant for the purposes of deciding insurance coverage whether they also satisfy the 

elements of Pennsylvania’s Human Trafficking Law. See Mut. Ben. Ins. Co. v. Haver, 

725 A.2d 743, 745 (Pa. 1999) (“[T]he particular cause of action that a complainant pleads 

is not determinative of whether coverage has been triggered. Instead it is necessary to 

look at the factual allegations contained in the complaint.”).
7

battery and from a failure to prevent or suppress an assault or battery. This language 

unambiguously bars coverage for E.B.’s claims.5 

Accordingly, the District Court did not err by holding that Nautilus has no duty to 

defend or indemnify MMS.6

III

For the foregoing reasons, we will affirm the District Court’s orders.

 

5 Because the insurance policy excludes coverage, we need not address whether 

public policy would also preclude insurance coverage for the criminal conduct and 

intentional torts alleged in E.B.’s complaint. 

6 Because Pennsylvania adheres to a strict “four corners” rule, Lupu, 903 F.3d at 

390-92 (citing Kvaerner, 908 A.2d at 896), the District Court did not abuse its discretion 

by denying MMS’s Rule 60(b)(2) motion and declining to consider E.B.’s deposition in 

the underlying action to determine whether Nautilus is obligated to defend MMS.