302 A.3d 67
N.H.2023Background
- Plaintiffs own and operate 23 hotels and purchased commercial property/time‑element insurance for the period Nov. 1, 2019–Nov. 1, 2020.
- COVID‑19 public‑health orders in 2020 restricted hotel operations; plaintiffs claimed substantial business‑income losses and submitted claims alleging SARS‑CoV‑2 contamination of hotel premises.
- Policies cover loss resulting from "direct physical loss of or damage to property" and include business interruption and Extensions of Time Element Coverage (ETEC) tied to such loss or damage.
- The superior court granted partial summary judgment to plaintiffs, holding that the presence of SARS‑CoV‑2 satisfies the policies’ “loss or damage” requirement; AXIS had received partial summary judgment below on a pollutants exclusion.
- New Hampshire Supreme Court accepted an interlocutory appeal and addressed whether virus presence constitutes "direct physical loss of or damage to property," answering that question and declining to decide the exclusion questions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether presence of SARS‑CoV‑2 in air or on surfaces constitutes "direct physical loss of or damage to property" under Mellin | Mellin's "distinct and demonstrable" standard supports coverage; virus contamination materially alters property, rendering it unsafe/unusable | Mellin was misapplied; virus does not physically alter property, harms people not things, and is remediable or transient so no physical loss requiring repair/replacement | No — the mere presence of SARS‑CoV‑2 does not satisfy "direct physical loss of or damage to property." Trial court reversed. |
| Whether "mold, mildew & fungus" clause and microorganism exclusion unambiguously preclude coverage | Plaintiffs: exclusions do not clearly preclude COVID‑related losses | Defendants: exclusions bar coverage for losses caused by microorganisms/contamination | Court declined to decide on appeal. |
| Whether AXIS pollutants & contaminants exclusion unambiguously precludes coverage | Plaintiffs: exclusion ambiguous or inapplicable | AXIS: exclusion plainly bars coverage for losses caused or aggravated by spread of COVID‑19 | Court declined to decide on appeal. |
Key Cases Cited
- Mellin v. Northern Security Insurance Co., 167 N.H. 544 (N.H. 2015) (adopts "distinct and demonstrable alteration" standard for "physical loss")
- Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20 F.4th 327 (7th Cir. 2021) (SARS‑CoV‑2 is transient/remediable and does not cause physical alteration of property)
- Colectivo Coffee Roasters v. Society Ins., 974 N.W.2d 442 (Wis. 2022) (virus harms people, not intact buildings; no physical loss)
- Verveine Corp. v. Strathmore Insurance, 184 N.E.3d 1266 (Mass. 2022) (ephemeral airborne/subsurface contagion does not constitute physical alteration)
- Pentair v. American Guarantee & Liability Ins. Co., 400 F.3d 613 (8th Cir. 2005) (limits on interpreting "physical loss" to avoid covering mere inability to use property)
- Western Fire Ins. Co. v. First Presbyterian Church, 437 P.2d 52 (Colo. 1968) (contamination may constitute physical loss where it renders property unfit and requires replacement/repair)