Contract analysis

I. PURPOSE AND SCOPE OF THIS MEMORANDUM This memorandum is prepared to assist Dr. Vasquez in preparing for her deposition in Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al., Case No. 2022-CA-031547. The deposition was noticed by Fendowell Rourke & Stanton LLP on behalf of the primary carrier, Ironclad Indemnity Corporation, and the first excess carrier, Pinnacle Surplus Lines Inc. Co-defendant coun

II. BACKGROUND ON THE LITIGATION AND INSURANCE DISPUTE A. Overview of VHG's Claim Verimark Hospitality Group Inc. ("VHG") is a publicly traded Delaware corporation listed on the Nasdaq Stock Market under the ticker symbol VMRK. VHG is headquartered at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129, and its principal business involves the ownership, management, and operation of luxury resort hotels concentrate

III. SUMMARY OF DR. VASQUEZ'S EXPERT OPINIONS This section provides a summary of Dr. Vasquez's expert opinions as set forth in her September 15, 2023 expert report and her October 2, 2023 rebuttal expert report. Dr. Vasquez should be thoroughly familiar with every aspect of these reports before the deposition and should be prepared to defend each element of her analysis. A. Property-by-Property BI Loss Quantification

1. Verimark Grand Key Resort (Marathon, FL — Mile Marker 48) The Verimark Grand Key Resort is a 312-room luxury resort and marina located in Marathon, Florida, at approximately Mile Marker 48 in the Florida Keys. The property features a full-service marina, multiple food-and-beverage outlets, a spa facility, and other resort amenities typical of a luxury Keys property. Grand Key is the largest and most profitable of

2. Verimark Harborview Hotel & Conference Center (Fort Myers Beach, FL — 1400 Estero Boulevard) The Verimark Harborview Hotel & Conference Center is a 224-room hotel with a 40,000-square-foot conference and event facility located at 1400 Estero Boulevard, Fort Myers Beach, Florida. The Harborview is a significant player in the Southwest Florida group and conference market, and its conference and event revenue is a ma

3. Verimark Sunset Shores (St. Pete Beach, FL — 7200 Gulf Boulevard) The Verimark Sunset Shores is a 186-room boutique resort located at 7200 Gulf Boulevard, St. Pete Beach, Florida. Sunset Shores is the smallest of the three affected properties and caters to a leisure-oriented clientele seeking a boutique resort experience on the Gulf Coast. Dr. Vasquez determined the following key assumptions and inputs: • Pre-loss

4. Total Business-Interruption Loss The total claimed business-interruption loss of $60 million is consistent with VHG's sworn statement in proof of loss submitted on November 15, 2022, and represents the aggregate loss across all three properties during their respective periods of interruption. B. Methodology Dr. Vasquez employed a "but-for" lost-profits methodology, which is the standard and widely accepted approac

IV. ANTICIPATED LINES OF CROSS-EXAMINATION AND RECOMMENDED RESPONSES This section identifies the principal areas of cross-examination that we anticipate defense counsel will pursue, together with recommended approaches and key points for Dr. Vasquez to emphasize. The section is organized topically and reflects our assessment of the likely examination strategies of both Gregory Stanton (representing the primary and fi

1. Anticipated Questions Defense counsel will almost certainly begin the deposition with questions directed at Dr. Vasquez's qualifications and potential bias. This is standard practice and serves both to establish a record regarding the expert's background and to plant seeds of doubt about the objectivity of her analysis. Specific lines of questioning in this area are likely to include: • Policyholder vs. Insurer Re

2. Recommended Approach Dr. Vasquez should approach the qualifications and bias portion of the deposition with confidence and directness. She should: • Emphasize her credentials. Dr. Vasquez is a Certified Public Accountant (CPA) and is Certified in Financial Forensics (CFF), a specialized credential issued by the American Institute of Certified Public Accountants. She has extensive experience in business-interruptio

1. Anticipated Challenges The average daily rate assumptions used by Dr. Vasquez — $389 for Grand Key, $295 for Harborview, and $342 for Sunset Shores — will be a significant area of cross-examination, particularly by Gregory Stanton representing Ironclad and Pinnacle. Defense counsel is likely to challenge these figures on several grounds: • Counsel may argue that the ADR figures are inflated because they were deriv

2. Key Points for Dr. Vasquez to Emphasize Dr. Vasquez should be prepared to defend her ADR assumptions vigorously, as this is an area where her methodology is sound and well-supported by the data. Key points include: • ADR figures are based on VHG's actual data. The ADR figures used in her analysis were derived from VHG's actual historical property management system data, corroborated by STR reports and internal rev

1. Anticipated Challenges Defense counsel will also challenge Dr. Vasquez's projected occupancy rates of 82% for Grand Key, 74% for Harborview, and 79% for Sunset Shores. The primary challenges are likely to include: • A general argument that these occupancy rates are overstated relative to what VHG would actually have achieved during the closure period, even absent the hurricane. • A "demand reduction" argument — i.

2. Key Points to Defend Dr. Vasquez should defend her occupancy assumptions on the following grounds: • Occupancy rates are based on pre-loss historical data with seasonal and trend adjustments. The projected occupancy rates are based on trailing-three-year averages for the corresponding seasonal months, adjusted for the documented post-COVID recovery trend in the Florida hospitality market. This approach produces oc

1. Anticipated Challenges The period-of-restoration issue is likely to be the most aggressively contested area of the cross-examination. Ironclad's coverage position rests substantially on the argument that VHG unreasonably delayed the restoration of its properties and that the period of restoration should be shorter than the period used by Dr. Vasquez. The specific challenges anticipated include: • Grand Key (178 da

2. Key Points to Defend Dr. Vasquez should defend the period-of-restoration component of her analysis as follows: • Reliance on Caldwell is the standard approach. It is the standard and universally accepted practice in business-interruption loss quantification for the forensic economist to rely on the engineering and construction expert for the determination of the physical restoration timeline. A forensic economist

1. Anticipated Challenges The concurrent causation / flood exclusion issue is a significant legal and factual dispute in this case, and defense counsel will attempt to use Dr. Vasquez's deposition to advance Ironclad's position that a portion of the BI loss — particularly at Grand Key — should be excluded as attributable to storm surge rather than wind. Anticipated questions include: • Whether Dr. Vasquez's loss calc

2. Key Points to Defend • Total BI loss calculation is appropriate as her primary opinion. Dr. Vasquez calculated total business-interruption losses from all physical damage sustained by VHG's properties. The allocation of losses between covered perils (wind) and potentially excluded perils (flood/storm surge) is fundamentally a legal question governed by the terms of the insurance policy and applicable Florida law.

1. Anticipated Challenges Defense counsel will scrutinize whether Dr. Vasquez properly deducted all non-continuing (or "saved") expenses from her BI loss calculation. The defense theory is that Dr. Vasquez understated the saved-expense deduction — thereby overstating the net BI loss — by treating certain variable costs as continuing expenses when they should have been deducted. Specific challenges may include: • Argu

2. Key Points to Defend • Detailed, line-item analysis. Dr. Vasquez used a detailed, line-item approach to identify and classify continuing versus non-continuing expenses for each of the three affected VHG properties. This analysis was based on VHG's actual financial records, including property-level profit-and-loss statements, general ledger detail, payroll records, vendor invoices, and utility bills. The analysis w

1. Overview of Birk's Report Dr. Warren Birk of Graystone Consulting Group LLC was retained by defense counsel to provide a competing expert analysis of VHG's business-interruption losses. Dr. Birk's expert report was served on September 15, 2023 — the same date as Dr. Vasquez's expert report. Dr. Birk quantified VHG's BI losses at approximately $34–38 million. Dr. Vasquez should have the precise figure from Dr. Birk

2. Key Rebuttals Dr. Vasquez's rebuttal expert report, served on October 2, 2023, addresses each of these points in detail. Dr. Vasquez should be thoroughly familiar with her rebuttal report and prepared to articulate her criticisms of Dr. Birk's methodology clearly and concisely. The key rebuttals are: • Birk's annual ADR approach is methodologically flawed. As discussed in Section IV.B above, using an annual-averag

1. Documents Reviewed and Materials Relied Upon Defense counsel will likely ask Dr. Vasquez to identify all documents, data sources, and materials she reviewed or relied upon in forming her expert opinions. This is a standard area of deposition inquiry for experts and is specifically addressed by Florida's expert-disclosure requirements. Dr. Vasquez should be prepared to identify the principal categories of documents

2. Communications with Counsel Defense counsel will probe Dr. Vasquez's communications with Calderwood & Harkness LLP in an effort to suggest that her opinions were shaped or directed by counsel rather than being the product of her independent professional analysis. Specific questions may include what instructions she received from counsel regarding the scope and methodology of her engagement, whether she provided dr

3. Prior Testimony and Publications Defense counsel may inquire about Dr. Vasquez's prior deposition and trial testimony in similar business-interruption matters, as well as any published articles, presentations, or public statements she has made regarding BI loss quantification methodology. The purpose of this inquiry is to identify any prior statements or positions that may be inconsistent with her opinions in this

4. Errors or Corrections If Dr. Vasquez has identified any errors, in