Supreme Court rules against hotels for a second time on COVID-related cases

May 12—A New Hampshire-based hotel company that lost millions during the 2020 COVID-19 shutdown cannot collect under the business interruption protection clause of its insurance policy, the New Hampshire Supreme Court ruled Thursday.

The unanimous four-judge ruling reverses a trial court decision that favored Schleicher & Stebbins Hotels. The New Hampshire-based company includes four hotels in New Hampshire and 19 other hotels in Massachusetts and New Jersey. The company had listed the late Mark Stebbins of ProCon as its managing partner.

This week's ruling follows a similar ruling issued last month that said hotels could not use the shutdown as a reason to avoid property taxes.

The Schleicher & Stebbins hotels had pointed out that their insurance policy specifically lacked an exclusion for virus, bacteria and pandemics, an exclusion found in the vast majority of such policies.

But in its ruling, the court keyed in on the phrase "direct physical loss of or damage to property" and rejected the idea the property suffered long-term damage because of COVID-19.

The virus could be eradicated either by cleaning or about 28 days of waiting, the ruling says.

"As has been noted by a number of courts, the virus can be cleaned from surfaces, and it eventually disintegrates on its own," wrote Justice Gary Hicks.

Schleicher & Stebbins had filed claims of nearly $100 million in lost business, according to previous articles.

Just last month, the Supreme Court rejected a tax case brought by a different group of hotels. They had pointed to a state law that would exempt them from property taxes if damaged from "unintended fire or natural disaster."

In that ruling, justices said they wanted to see physical damage before the tax exemption could take place.

But they could not do so with the Schleicher & Stebbins case, given a 2015 insurance case where the Supreme Court ruled that coverage applied to a condominium owner driven out of his home due to cat urine odors from an adjoining condo.

Different from COVID, Hicks wrote. The urine had saturated the building materials, it could not be remediated for months, the smells were toxic and it's possible the only way to address it would be to remove contaminated materials, Hicks wrote.

"While we have, indeed, long recognized that the right to use property is an 'essential quality' of the property rights protected under New Hampshire law ... an insured's right to use its property does not operate to create coverage under an insurance policy where none exists," he wrote.

The case generated friend-of-the court briefs from several organizations. Insurance industry groups downplayed the dangers of the virus. The New Hampshire Medical Society rejected those notions and specifically said the virus could not be easily cleaned and the virus was continuously reintroduced into the air.

The New Hampshire Lodging and Restaurant Association filed papers in support of the hotels, as did United Policyholder.

The ruling remands the matter back to Merrimack County Superior Court Judge John Kissinger.