Contract analysis

I. Executive Summary This memorandum presents a preliminary analysis of the all-risk property and business-interruption insurance program maintained by Verimark Hospitality Group Inc. ("VHG" or the "Company"). The purpose of this analysis is to assess the scope and adequacy of VHG's coverage in advance of the 2022 Atlantic hurricane season and to identify any coverage gaps, ambiguities, or potential disputes that cou

1. Named-Windstorm Sub-Limit ($15M). The most critical issue identified concerns a named-windstorm sub-limit of $15,000,000 for business-interruption losses. The prior policy year (2021–2022) contained this sub-limit. VHG's broker, Tidewater Risk Advisors LLC ("Tidewater"), through account executive Franklin Orde, represented to VHG that the sub-limit was deleted as part of the July 2022 renewal. However, upon prelim

2. Flood Exclusion and Anti-Concurrent Causation Clause. The Ironclad primary policy contains a flood exclusion coupled with an anti-concurrent causation ("ACC") clause. In a major hurricane, the interplay of wind damage (covered) and storm surge or flooding (potentially excluded) will be a central coverage battleground, particularly at the Grand Key Resort in Marathon, which is acutely vulnerable to storm surge. The

3. Period-of-Restoration Definition. The Ironclad primary policy defines the "period of restoration" using the standard "with reasonable speed" formulation. Insurers routinely challenge the duration of business-interruption claims by arguing that the insured failed to restore operations with reasonable speed. Given the unique post-hurricane reconstruction environment in coastal Florida — including contractor scarcity

4. Duty-to-Mitigate Provisions. The policy contains standard duty-to-mitigate language that insurers frequently invoke to reduce business-interruption claims. VHG must be prepared to demonstrate that it took all reasonable steps to minimize interruption. We recommend that the firm immediately contact Tidewater Risk Advisors to obtain the complete renewal negotiation file to resolve the windstorm sub-limit issue, and

II. Background A. The Client Verimark Hospitality Group Inc. is a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol "VMRK." The Company is headquartered at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG is a leading owner and operator of luxury resort hotels and conference centers in the state of Florida, catering primarily to leisure travelers, corporate groups, and

III. Insurance Tower — Overview A. Summary Table of Layers The following table summarizes the four layers of VHG's property and business-interruption insurance tower: B. Common Policy Period All four policies share a common policy period of July 1, 2022 through July 1, 2023. This is a standard twelve-month policy term. The common inception and expiration dates ensure that all layers are co-extensive in time, avoiding

IV. Primary Layer — Ironclad Indemnity Corporation A. Policy Identification The primary layer of VHG's insurance tower is written by Ironclad Indemnity Corporation ("Ironclad"), a Connecticut-domiciled stock insurance company with a principal office at 55 Constitution Boulevard, Hartford, Connecticut 06103. Ironclad is assigned NAIC number 20537 and is a well-established admitted carrier with an A.M. Best financial s

I. Conditions and Claims Procedures The Ironclad primary policy contains standard conditions and claims procedures that VHG must comply with in order to preserve its coverage rights: Notice of Loss. The policy requires the insured to provide prompt written notice of any loss to Ironclad. While the policy does not specify a precise number of days within which notice must be given, "prompt" notice is generally interpre

V. First Excess Layer — Pinnacle Surplus Lines Inc. A. Policy Identification The first excess layer of VHG's insurance tower is written by Pinnacle Surplus Lines Inc. ("Pinnacle"), a Texas-domiciled surplus-lines insurer with a principal office at 200 Congress Avenue, Suite 1400, Austin, Texas 78701. Pinnacle is assigned NAIC number 38214. The policy is identified as Policy Number PSL-XS1-2022-3390. The Pinnacle poli

VI. Second Excess Layer — Montclair Assurance Company A. Policy Identification The second excess layer of VHG's insurance tower is written by Montclair Assurance Company ("Montclair"), a New York-domiciled admitted carrier with a principal office at 1 Liberty Plaza, 38th Floor, New York, New York 10006. Montclair is assigned NAIC number 15692 and maintains an A.M. Best financial strength rating of "A-" (Excellent). T

VII. Third Excess Layer — Sovereign Re Ltd. A. Policy Identification The third and highest excess layer of VHG's insurance tower is written by Sovereign Re Ltd. ("Sovereign Re"), a Bermuda-domiciled reinsurer and excess insurance carrier with its principal office at 14 Front Street, Hamilton HM 11, Bermuda. The policy is identified as Policy Number SRL-XS3-2022-5102. The Sovereign Re policy provides a limit of liabil

VIII. Cross-Cutting Coverage Issues This section consolidates and expands upon the key coverage issues that affect VHG's insurance program across multiple layers of the tower. These are the issues most likely to be contested in the event of a major hurricane loss and should be the focus of further legal research and pre-loss preparation. A. Named Windstorm Sub-Limit ($15M) As discussed in detail in Section IV.E above