N.H. Hotel Group Chalks Rare Win in Pandemic-Related Business Interruption Lawsuit

June 17, 2021

CONCORD, N.H. (AP) — A judge has ruled in favor of a group of hotels whose owners sued their insurance carriers over lost business during the coronavirus pandemic.

Businessman Mark Stebbins of Schleicher & Stebbins Hotels, LLC, one of the plaintiffs, said the pandemic caused tens of millions of dollars in lost revenue for about two dozen hotels in New Hampshire, Massachusetts and New Jersey.

The Union Leader newspaper in Manchester reported that Merrimack County Superior Court Judge John Kissinger ordered the insurers to pay the group of 23 hotels $100 million in damages.

More than 1,700 lawsuits seeking business-interruption losses because of COVID-19 have been filed since the start of the pandemic in early 2020, according to a litigation tracker maintained by the University of Pennsylvania’s Carey Law School. Insurers have won more than 80% of those cases in initial rounds. Most judges have determined that losses caused by a virus are not covered because there is no direct physical damage to the property.

Stebbins’ hotel group had paid nearly $1 million in premiums, according to the Union Leader, for $600 million in insurance. In April 2020, it filed an insurance claim to cover COVID-19-related losses. The insurance companies questioned “direct physical loss of or damage” to property and said the hotels didn’t provide enough details. The hotel owners said they hosted infected guests and staff. They sued the insurance companies; both sides asked for a court ruling.

“The court is satisfied that any requirement under the policies of `loss or damage’ or `direct physical loss of or damage to property’ is met where property is contaminated” by the COVID-19 virus, Kissinger ruled on Tuesday.

Marshall Gilinsky

The Anderson Kill law firm represented Stebbins’ hotel chain. The firm said in a press release that the court based its decision on the 2015 New Hampshire Supreme Court decision in Mellin v. Northern Security Insurance Company, which concerned the impact on property of cat urine odor.

That court found that the SARS-CoV-2 may, like cat urine, be removed from surfaces through cleaning and disinfection, and that certain guests might decide to stay at the plaintiffs’ hotels despite the risks involved, does not prevent a conclusion that the properties have been changed in a ‘distinct and demonstrable’ fashion.

“Like the cat urine in Mellin, SARS-CoV-2 did not originate in the plaintiffs’ properties and cannot be seen or touched,” the opinion says. “Although cat urine may be smelled while a virus may not, the presence of SARS-CoV-2 is detectible, was found by various government authorities to be widespread in the regions in which the Hotels were located, and has been ‘consistent[ly]’ determined to ‘surviv[e] . . . on certain surfaces’ of the kind available within and around the hotels.

“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,” said Marshall Gilinsky, an Anderson Kill shareholder, in a statement. “It does not matter if that something is a giant earthquake that breaks buildings in half, or an invisible virus that renders property unsafe and unusable.

Starr Surplus Lines Insurance Co., Lloyds’ of London, Everest Indemnity Insurance Co., Hallmark Specialty Insurance Co., Evanston Insurance Co., Axis Surplus Insurance Co., Scottsdale Insurance Co., and Mitsui Sumitomo Insurance Co. of America were defendants.

About the photo: The Marriott Residence Inn in downtown Boston’s South End, one of Schleicher & Stebbins’ properties, is shown. Photo courtesy of the owner’s website.

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