Business interruption

By judgment of 11.5.2023, the Supreme Court of New Hampshire reversed a trial judgment issued in favor of a group of hotels in a covid-related business interruption case, thus joining a growing number of High State Courts that have progressively aligned with the Federal Courts’ trend of dismissing suits of such nature, especially when they relate to all-risk commercial property insurance policies.

In the case at hand, the trial court had granted summary judgment to the policyholders deeming that the relevant 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”. In so ruling, the trial court had relied on a judgment issued by the Supreme Court in 2015, where it had recognized that contamination of a structure by a toxic cat-urine odor which seriously impaired the structure’s function may qualify as a direct physical loss.

On the contrary, in its judgment the Supreme Court held that the presence of SARS-CoV-2 on property - whether by aerosolized particles suspended in the air, or by fomites that come to rest on surfaces - would not satisfy a requirement under a property insurance policy of “direct physical loss of or damage to property” since it does not render the property useless or uninhabitable; the mere adherence of molecules to surfaces does not alter the property in a distinct and demonstrable manner, the Court held. Instead, the presence of the virus could be eradicated by cleaning the property itself and would otherwise dissipate on its own. For this reason, the case at hand was different from that referred to by the trial court to ground its judgment. The judgment in question represents yet another loss for policyholders. It has been reported that Vermont’s high court is the only state supreme court to rule in a policyholder’s favor to date.

Reference: Schleicher & Stebbins Hotels, LLC v. Starr Surplus Lines Ins. Co., Supreme Court of New Hampshire, 11.5.2023

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