Several hotels owned by Schleicher & Stebbins Hotels have achieved partial victory over eight insurance companies over denied insurance claims related to damage caused by the pandemic.
New Hampshire State Superior Court released a decision granting a partial summary judgment motion filed by the hotel company, which sought to recover more than $ 100 million in COVID-related business interruption losses -19.
The case had the same pattern of facts that we have seen a thousand times in the COVID-19 and business interruption insurance litigation. Hotels filed business interruption requests after the governor of New Jersey issued executive orders in March 2020 restricting hotel operations in the wake of the global COVID-19 pandemic. Specifically, the ordinance required that the “brick and mortar premises of all non-essential retail businesses” be “closed to the public as long as th[e] Order remains[ed] indeed. “Although hotels were able to provide some services during the pandemic, their operations were significantly reduced and guest hospitality costs increased due to strict security protocols. These insurance claims have been raised. unsuccessful to varying degrees, so the hotels have taken action against the insurers.
The hotels requested a partial summary judgment that the terms “loss or damage” and “direct physical loss or damage to property” as used in insurance contracts encompass the presence of the COVID-19 virus in local. The insurers have filed a concurrent motion for summary judgment.
The court allowed the petition filed by the hotels and dismissed the counterclaim filed on behalf of all the insurance companies; the court applied a precedent set by the New Hampshire Supreme Court and ruled that coverage is triggered when the property undergoes “distinct and demonstrable tampering.” The court rejected the insurance companies’ arguments that such changes in ownership “must be readily perceptible to one of the five senses, be incapable of repair or result in dispossession.”
Cat urine case supports the arguments
This decision was based on a 2015 New Hampshire Supreme Court ruling in Mellin v. Northern Security Insurance Company which involved the impact of the smell of cat urine on the property. The court compared the two situations, noting that while the COVID virus, like cat urine, can be removed from surfaces with cleaning and disinfection, this does not preclude concluding that the property has been altered in a way. “distinct and demonstrable”.
While cat urine has a distinct smell and a virus does not, the presence of the COVID-19 virus is still detectable, has been found by government authorities to be prevalent in areas where the hotels and has been found to be able to survive on certain surfaces such as hotels. The court therefore concluded that the police uses of the terms “loss or damage” and “direct physical loss or damage to property” encompass the type of damage caused by the spread of COVID-19 to hotel properties.
Insurance companies also argued that a “microorganism” exclusion applied because a virus is not clearly understood as a “microorganism” because they are generally not considered to be alive. . The court rejected this argument but allowed a motion filed by a surplus insurance company holding that an exclusion that the insurer added by endorsement for “pollutants or contaminants” applied when “pollutants or contaminants” specifically included “ virus ”.
Marshall Gilinsky, Anderson Kill PC shareholder and legal advisor to Schleicher & Stebbins, said: “Policyholders pay premiums for business interruption insurance so that if something happens to property that reduces income of the insured, they are covered. It doesn’t matter if that something is a giant earthquake that shatters buildings in half, or an invisible virus that renders property unsafe and unusable. For the policyholder, the effect is the same. In its ruling today that the coronavirus causes distinct and demonstrable damage to property for the purposes of business interruption insurance coverage, the court was correct. This is the correct result under New Hampshire law, and it is the correct result in general. “
Schleicher & Stebbins Hotels is represented by Marshall Gilinsky, Dennis J. Artese, Carrie Maylor DiCanio and Ethan W. Middlebrooks of Anderson Kill PC, and Michael S. Lewis and Michael K. O’Neil of Rath Young and Pignatelli PC.
The case is Schleicher & Stebbins Hotels, LLC, et al. vs. Starr Surplus Lines Insurance Companies, et al. No. 217-2020-CV-00309.