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Advisen Front Page News - Monday, June 21, 2021

   
NH court says COVID 'distinctly and demonstrably' alters property, allows hotels' claim

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NH court says COVID 'distinctly and demonstrably' alters property, allows hotels' claim

By Erin Ayers, Advisen

A New Hampshire-based hotel firm notched a partial win against a tower of insurers over its $600 million COVID-19 business interruption claim, with a state court judge ruling that novel coronavirus creates a “distinct and demonstrable alteration” to property.

In Schleicher and Stebbins Hotels LLC et al. v. Starr Surplus Lines Insurance Co. et al., Merrimack County Superior Court Judge John C. Kissinger Jr. rejected the insurers’ arguments that property changes “must be readily perceptible by one of the five senses, be incapable or remediation, or result in dispossession.” He granted the hotelier partial summary judgment, relying on a 2015 New Hampshire Supreme Court ruling (Mellin v. Northern Security Insurance Company) in a homeowners’ insurance dispute over cat urine odor.

“That [novel coronavirus] may, like cat urine, be removed from surfaces through cleaning and disinfection … does not prevent a conclusion that the properties have been changed in a ‘distinct and demonstrable’ fashion,” Kissinger wrote, adding that while cat urine can be smelled while coronavirus cannot, the virus can still be detected via testing and contaminated property is distinct from uncontaminated property.

Counsel for the plaintiff said the court got “the right outcome” in the case.

"Policyholders pay premiums for business interruption insurance so that if something happens to property that drives down the policyholder’s revenues, they will be covered. It does not matter if that something is giant earthquake that breaks buildings in half, or an invisible virus that renders property unsafe and unusable. To the policyholder, the effect is the same,” said Marshall Gilinsky, attorney with Anderson Kill P.C. and counsel to Schleicher & Stebbins.

Schleicher & Stebbins have 23 properties in multiple states and sued insurers Starr, underwriters at Lloyd’s of London, Everest Indemnity, Hallmark Speciality, Evanston Insurance, Scottsdale Insurance, AXIS, and Mitsui Sumitomo. Seven of the eight insurers’ claims for summary judgment based on a microorganism exclusion were denied; a motion from AXIS was granted based on the insurer’s pollution exclusion. The microorganism exclusion did not contain a reference to virus, while the pollution exclusion did, according to commentary on the case from Tom Baker, who runs the University of Pennsylvania Law School’s COVID litigation tracker.

The Schleicher case continues the trend of plaintiffs faring better on COVID BI litigation in state court. To date, 40 cases in state court have been fully or partially dismissed and 28 have been allowed to proceed. In federal court, 307 have been dismissed and only 22 motions have been denied.

Editor Erin Ayers can be reached at erin.ayers@zywave.com

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