Contract analysis

I. INTRODUCTION AND EXECUTIVE SUMMARY Verimark Hospitality Group Inc. ("VHG" or the "Company") respectfully submits this Confidential Mediation Position Statement to Hon. Richard Mendelson (Ret.) in advance of the mediation scheduled for December 4–5, 2023. VHG appreciates the Mediator's willingness to assist the parties in reaching a resolution of this significant insurance coverage dispute, and VHG is committed to

II. THE PARTIES A. Plaintiff — Verimark Hospitality Group Inc. Verimark Hospitality Group Inc. is a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol "VMRK." The Company maintains its principal executive offices at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG's Employer Identification Number is 59-3841276. VHG owns and operates a portfolio of luxury resort hotels a

III. THE INSURANCE PROGRAM A. Tower Structure VHG's 2022–2023 property and business-interruption insurance program was structured as a four-layer tower providing aggregate limits of $60 million above a $500,000 deductible. The tower structure is summarized in the table below: All four layers share a common policy period of July 1, 2022, through July 1, 2023. Hurricane Callista made landfall on September 18, 2022, wel

IV. HURRICANE CALLISTA AND THE INSURED LOSSES A. Hurricane Callista — Overview Hurricane Callista was first identified and named by the National Hurricane Center on September 12, 2022, as a tropical storm forming in the western Caribbean Sea. The storm rapidly intensified over the following days, reaching Category 4 strength with maximum sustained winds of 145 miles per hour as it approached the Florida Keys. Hurrica

1. Verimark Grand Key Resort — Marathon, Florida. The Verimark Grand Key Resort is a 312-room luxury resort and marina facility located at Mile Marker 48 in Marathon, Florida 33050. The property is one of VHG's flagship assets and is situated in the heart of the Florida Keys, a geographic location that placed it squarely in the path of Hurricane Callista's most destructive forces. Prior to the loss, the Grand Key Res

2. Verimark Harborview Hotel & Conference Center — Fort Myers Beach, Florida. 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 33931. The Harborview is a critical asset for VHG's group and corporate meeting business, hosting numerous conferences, conventions, and corporate retreats

3. Verimark Sunset Shores — St. Pete Beach, Florida. The Verimark Sunset Shores is a 186-room boutique resort located at 7200 Gulf Boulevard, St. Pete Beach, Florida 33706. While geographically more distant from Hurricane Callista's landfall point than the Grand Key Resort or the Harborview, the Sunset Shores nonetheless sustained significant wind damage from the hurricane's expansive wind field. Prior to the loss, t

4. Total Claimed Business-Interruption Losses. The total documented business-interruption losses across VHG's three affected properties are summarized as follows: The aggregate business-interruption loss of $60,000,000 equals the full tower limit of VHG's insurance program above the $500,000 deductible. These losses have been quantified by Dr. Helen Vasquez, CPA, CFF, of Meridian Forensic Economics LLC, using standar

V. PROCEDURAL HISTORY A. Claim Submission and Insurer Response The following timeline summarizes the claim submission process and the insurers' responses: September 22, 2022: VHG submitted its initial notice of loss to Ironclad Indemnity Corporation, providing preliminary information regarding the Hurricane Callista damage at all three affected properties. Notice was provided within four days of the hurricane's landf

VI. ANALYSIS OF COVERAGE ISSUES — VHG'S POSITION VHG's position on each of the four coverage issues raised by Ironclad is set forth below. As the Mediator will see, VHG holds a strong position on each issue, and the cumulative weight of the evidence and applicable law heavily favors VHG's full recovery. A. The Named-Windstorm Sub-Limit Was Deleted The windstorm sub-limit issue is the single most significant coverage