On Tuesday, a New Hampshire trial court awarded summary judgment to the owner of scores of hotels after finding that the hotels sustained covered “physical loss of or damage to” insured property caused by the pandemic presence of COVID-19 and its viral agent, SARS-CoV-2. The merits ruling is yet another recent victory for policyholders who continue to make headway against an early wave of insurance company dismissals, most of which, unlike the ruling on Tuesday, never considered evidence in support of their decisions.

In Schleicher & Stebbins Hotels, LLC v. Starr Surplus Lines Ins. Cos., No. 217-2020-CV-00309 (N.H. Super. Ct. Merrimack Cty. June 15, 2021), the court granted the policyholder’s summary judgment motion as to all but one insurer, finding that the presence of COVID-19, as demonstrated by myriad governmental closure orders and restrictions, caused physical loss of or damage to property. Central to the court’s decision was its determination that the phrase “physical loss or damage” does not require (as insurers routinely contend) structural alteration. Relying on Mellin v. Northern Security Insurance Co., 115 A.3d 799 (N.H. 2015) (“physical loss” 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 found that “the presence of SARS-CoV-2 is detectable, 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.”

In addition to ruling for the policyholder on the core “physical loss” and “damage” issues, the court ruled in favor of one insurer, Axis, finding that the insurer’s contamination exclusion barred coverage because SARS-CoV-2 is a “virus” that is “dispersed” by persons with COVID-19. However, the court rejected the other insurers’ attempt to apply their policies’ Microorganism Exclusion to a similar end. The court reasoned that there are competing views on whether a virus, such as SARS-CoV-2, is a “microorganism and that, since an exclusion to coverage must be construed narrowly and against the insurer, the competing views meant that “a virus is not unambiguously understood to be a ‘microorganism.’” As such, the exclusion could not apply.

Policyholders continue to make progress in educating courts about the true nature of COVID-19 and the manner by which it physically alters property. As more courts actually consider the evidence and allegations, policyholders can expect the volume of favorable decisions to increase.