Insurers largely lose COVID-19 BI cover ruling

A New Hampshire state court ruled largely in favor of a hotel chain Tuesday in a COVID-19 business interruption coverage lawsuit filed against a group of insurers.

Judge John C. Kissinger Jr., of state superior court in Keene, New Hampshire, denied a motion filed by most of the insurers for partial summary judgment in his ruling in Schleicher & Stebbins Hotels LLC et al. v. Starr Surplus Lines Insurance Co. et al.

“The Court rejects the argument of the Defendants that ‘distinct and demonstrable’ changes to property must be readily perceptible by one of the five senses, be incapable of remediation, or result in dispossession,” the decision said, in ruling in favor of the Hooksett, New Hampshire-based chain.

The ruling cited an earlier decision by the New Hampshire Supreme Court that held that “’physical loss,’ when used in an insurance agreement,  includes ‘not only tangible changes to (an) insured property, but also changes…that exist in the absence of structural damage,’ provided only that such changes be both ‘distinct and demonstrable.’”

The court did grant Axis Surplus Insurance Co.’s separate motion for partial summary judgment based on a virus exclusion in its coverage, which the other insurers did not have.

Plaintiff attorney in the case Marshall Gilinsky, a shareholder with Anderson Kill P.C. in New York, said, “It’s the right result. It’s clearly required under New Hampshire law, and I think it’s the right result anywhere.”

A spokesman for Starr said in a statement it does not normally comment on individual policyholder litigation.

The 23-unit hotel chain, which has four hotels in New Hampshire, 18 in Massachusetts and one in New Jersey, had a total of $600 million in coverage, for which it paid $1 million in premiums, according to the ruling. 

Starr, Everest Indemnity Insurance Co. and certain underwriters at Lloyd’s insured respectively 50%, 30% and 20% of the first $10 million of coverage; Everest, Evanston Insurance Co., Axis and Hallmark Specialty Insurance Co., respectively insured 30%, 25%, 25% and 20% of the following $40 million in liability; Scottsdale Insurance Co. insured the next $50 million in liability; and Mitsui Sumitomo Insurance Co. of America insured the next $150 million in coverage.

An additional $350 million in excess coverage was provided by One Beacon Insurance Co./Homeland Insurance Co. of New York and by RSUI Group Inc., which were not parties to the litigation, according to the ruling. 

More insurance and risk management news on the coronavirus crisis here.