A group of New Hampshire hotels are bringing COVID-related BI claims to their insurers. The court decides in their favor.
A number of litigation related to COVID is on the rise, nothing more than claims related to business interruption due to pandemic closures.
Businesses of all kinds have struggled for insurance coverage to make up for losses incurred during the 2020 closings. Most business interruption-related claims, however, remain due to the lack of a physical damage trigger.
The key word is “most”.
A hotel group based in New Hampshire has proven to be an exception. When four hotels filed a lawsuit against their insurance companies looking for millions in losses due to the pandemic, the court sided with the hotels. Here is what happened.
A hotel group consisting of a Residence Inn, Hampton Inn, AC Hotel Portsmouth and the Hilton Garden Inn in Lebanon was run by Schleicher & Stebbins Hotels. In total, the hotels paid around $ 1 million to eight insurers for coverage, including business interruption, with $ 150 million coverage for damage.
When hotels faced ongoing closings related to the coronavirus, hotels said they had lost more than half that amount by November 2020.
All eight insurers denied coverage, claiming that government closures were not “direct physical loss of damage”. Several insurers also pointed to a “microorganism exclusion” within the policies that did not include “loss, damage, claims, costs, expenses or other sums arising directly or indirectly from or in connection with mold, mildew, fungus, spores or others Microorganisms arise “insure of any kind.”
The hotels asked for a summary judgment.
After examining the arguments, the New Hampshire Supreme Court ruled in favor of the hotels and rejected the counter-motion filed on behalf of the insurance companies.
In its reasoning, the court said that coverage was triggered in the event of a “significant and verifiable change” in property and rejected the insurance companies’ argument that such changes in property “need to be clearly perceptible with one of the five senses, not be reparable “. or lead to expropriation. “
The court also rejected the insurance companies’ argument that a “microorganism” exclusion applies because a virus is not clearly understood as a “microorganism”.
However, the court upheld the motion for a summary judgment filed by a deductible insurer – AXIS Surplus Insurance Company – stating that an exclusion from AXIS for “pollutants or contaminants” applies if the meaning of “pollutants or contaminants” specifically includes “virus”. ”
Scorecard: Insurance companies are hooked for over $ 100 million in COVID-related business interruption damage.
Bring away: In most cases, BI does not cover the plaintiffs; However, this is not the standard and insurance companies need to be prepared for any outcome in COVID-related cases. &
Autumn Demberger is a content strategist at Risk & Insurance®. She can be reached at [email protected]
