New Hampshire Superior Court Grants Partial Summary Judgment in Favor Schleicher and Stebbins Hotels in $100 Million Coronavirus Coverage Dispute


In a decision handed down on June 15, the Superior Court for the State of New Hampshire granted a motion for partial summary judgment filed by a New Hampshire-based hotel company seeking to recover over $100,000,000 in COVID-related business interruption losses from eight insurance companies. Schleicher and Stebbins Hotels LLC et al. v. Starr Surplus Lines Insurance Co. et al., case number 217-2020-CV-00309, in the Merrimack Superior Court.

In granting the motion filed by Schleicher and Stebbins Hotels and denying the cross-motion filed on behalf of all of the insurance companies, the Court applied established New Hampshire Supreme Court precedent holding that coverage is triggered where there is a “distinct and demonstrable alteration” to property and rejected the insurance companies’ argument that such changes to property “must be readily perceptible by one of the five senses, be incapable of remediation, or result in dispossession.”

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, comparing the two loss situations as follows:

That 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. 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. The Court concludes the Policies’ use of the terms ‘loss or damage’ and ‘direct physical loss of or damage to property’ encompasses the kind of damage caused by the spread of SARS-CoV-2 to the Plaintiffs’ properties.

The Court also rejected the insurance companies’ argument that a “microorganism” exclusion applied because a virus – which is not commonly thought to be alive – is not unambiguously understood to be a “microorganism.”

Marshall Gilinsky, a Shareholder at Anderson Kill P.C. and counsel to Schleicher & Stebbins, commented, "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 a 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. In its decision today that the Coronavirus causes a distinct and demonstrable alteration to property for purposes of business interruption insurance coverage, the Court got that right. It’s the right outcome under New Hampshire law, and it’s the right outcome in general.”

Schleicher and Stebbins 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.

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