Contract analysis

1. My name is Sandra Pellegrini. I am over the age of eighteen and am competent to testify to the matters set forth in this declaration. I serve as Vice President of Risk Management for Verimark Hospitality Group Inc. ("VHG" or the "Company"). My business address is 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. I have personal knowledge of each of the facts set forth in this declaration and, if called as a

II. BACKGROUND AND PROFESSIONAL QUALIFICATIONS

2. I have served as Vice President of Risk Management at VHG since January 2016, a tenure of approximately seven years as of the date of this declaration. Prior to joining VHG, I held risk management positions with two other major hospitality companies operating in the southeastern United States. In my current role, I am responsible for overseeing all aspects of VHG's insurance programs, including the procurement, st

3. My responsibilities include, but are not limited to, the following: the procurement, renewal, and management of all insurance programs maintained by VHG; serving as the direct liaison between VHG and Tidewater Risk Advisors LLC ("Tidewater"), VHG's insurance broker of record, with a principal office located at 2600 South Bayshore Drive, Suite 800, Miami, Florida 33133; reviewing and approving policy terms, endorse

4. I am thoroughly familiar with the specific insurance program at issue in this litigation: the all-risk property and business-interruption insurance tower for the policy period effective July 1, 2022 through July 1, 2023 (the "2022–2023 Policy Year"). This insurance tower consists of a primary layer placed with Defendant Ironclad Indemnity Corporation ("Ironclad") under Policy No. IIC-PRP-2022-07541, and three succ

III. VHG'S INSURANCE TOWER STRUCTURE

5. VHG's all-risk property and business-interruption insurance program for the 2022–2023 Policy Year was structured as a layered insurance tower, a customary arrangement in the hospitality and real estate industries for properties with significant insured values. The structure of the tower was as follows: (a) Primary Layer — Ironclad Indemnity Corporation (Policy No. IIC-PRP-2022-07541): Per-occurrence limit of Twent

6. The total annual premium paid by VHG for the 2022–2023 Policy Year insurance tower was One Million Eight Hundred Forty Thousand Dollars ($1,840,000), allocated among the four carriers as follows: VHG paid each premium installment in full and on time throughout the 2022–2023 Policy Year. At no time has any Defendant contended that VHG failed to pay any premium due under the tower.

7. The policies comprising the insurance tower covered "all risks" of direct physical loss of or damage to covered property, including losses arising from named windstorms, and provided coverage for business interruption, loss of business income, and extra expense incurred as a result of covered physical loss or damage at VHG's insured resort properties. The scope of coverage was broad and was intended by VHG to prot

IV. THE JULY 2022 RENEWAL AND THE WINDSTORM SUB-LIMIT

8. In the prior policy year—July 1, 2021 through July 1, 2022 (the "2021–2022 Policy Year")—the Ironclad primary policy contained a named-windstorm sub-limit of Fifteen Million Dollars ($15,000,000) that applied specifically to business-interruption losses arising from named-windstorm events. I was aware of this sub-limit and had been dissatisfied with it for the entirety of the 2021–2022 Policy Year. My dissatisfact

9. In or around April to May 2022, as the renewal process for the 2022–2023 Policy Year commenced, I instructed Franklin Orde, the Account Executive at Tidewater Risk Advisors LLC who was responsible for managing the VHG account, to negotiate the removal of the $15,000,000 named-windstorm sub-limit from the Ironclad primary policy as a top priority for the July 2022 renewal. I communicated this instruction to Mr. Ord

10. In conveying these instructions, I specifically told Mr. Orde that VHG would be willing to accept a reasonable increase in premium in exchange for the deletion of the named-windstorm sub-limit. I authorized Mr. Orde to communicate this willingness to Ironclad's underwriting department as part of the renewal negotiations. I made clear that VHG viewed the deletion of the sub-limit as a material term of the renewal—

11. Following the initiation of renewal negotiations, Mr. Orde reported back to me, in or around May to June 2022, that Ironclad's underwriting department had agreed to delete the $15,000,000 named-windstorm sub-limit for the July 1, 2022 renewal in exchange for an increased premium on the primary layer. Mr. Orde conveyed this information to me during one or more telephone calls and, to the best of my recollection, c

12. Consistent with the negotiated deletion of the windstorm sub-limit, VHG's premium for the Ironclad primary layer increased from the 2021–2022 Policy Year to the 2022–2023 Policy Year. The total primary-layer premium for the 2022–2023 Policy Year was Nine Hundred Eighty Thousand Dollars ($980,000). I understood that a portion of this premium increase was directly attributable to the deletion of the named-windstorm

13. Based on Mr. Orde's representations regarding Ironclad's agreement, and based on the premium negotiations that reflected the expanded coverage, VHG bound the July 2022 renewal with the understanding and expectation that the named-windstorm sub-limit of $15,000,000 had been deleted from the Ironclad primary policy. VHG entered into the 2022–2023 Policy Year insurance program with the express understanding that the

14. At or around the time of binding the 2022–2023 Policy Year renewal, I received and reviewed the policy binder and summary of coverage documents prepared and provided by Tidewater Risk Advisors. I reviewed these documents carefully, as was my customary practice. The binder and summary of coverage did not reference a named-windstorm sub-limit for business-interruption losses. The absence of any such sub-limit refer

15. At no time prior to the issuance of Ironclad's reservation of rights letter dated October 12, 2022, did Ironclad Indemnity Corporation, Tidewater Risk Advisors LLC, Franklin Orde, or any other party inform me—or, to the best of my knowledge, inform anyone else at VHG—that the $15,000,000 named-windstorm sub-limit remained in effect for the July 1, 2022 through July 1, 2023 policy period. VHG was first made aware

V. HURRICANE CALLISTA AND VHG'S CLAIMS SUBMISSION

16. Hurricane Callista was a major Category 4 hurricane on the Saffir-Veltason Hurricane Wind Scale. Hurricane Callista made landfall on September 18, 2022, at approximately 1:30 PM Eastern Daylight Time in the Lower Florida Keys, near Big Pine Key in Monroe County, Florida. At the time of landfall, Hurricane Callista had maximum sustained winds of approximately 145 miles per hour and generated a devastating storm su

17. In advance of Hurricane Callista's landfall, mandatory evacuation orders were issued by the relevant county authorities. Monroe County, Florida issued a mandatory evacuation order on September 16, 2022, applicable to all residents and visitors in the Florida Keys, including Marathon. Lee County, Florida issued a mandatory evacuation order on September 17, 2022, applicable to coastal areas including Fort Myers Bea

18. All three VHG resort properties sustained catastrophic damage from Hurricane Callista, including wind damage, storm-surge inundation, flooding, debris impact, and extensive structural and infrastructure damage. The resulting property closures and reduced operations were as follows: (a) Verimark Grand Key Resort (Mile Marker 48, Marathon, Florida 33050): This 312-room luxury resort and marina sustained the most se

19. VHG submitted its initial notice of loss to Ironclad Indemnity Corporation on September 22, 2022, four days after Hurricane Callista made landfall. This notice was submitted promptly following the storm, as soon as VHG personnel were able to access the damaged properties, conduct preliminary assessments, and compile sufficient information to provide meaningful notice to the carrier. VHG also provided contemporane

20. On November 15, 2022, VHG submitted its sworn statement in proof of loss to Ironclad Indemnity Corporation. The proof of loss documented VHG's total claimed business-interruption losses of Sixty Million Dollars ($60,000,000) across the three resort properties, exclusive of the $500,000 per-occurrence deductible. The breakdown of claimed business-interruption losses by property was as follows: These loss figures w

VI. IRONCLAD'S RESERVATION OF RIGHTS AND DENIAL

21. On October 12, 2022, Ironclad Indemnity Corporation issued a reservation of rights letter addressed to VHG. Among the several bases stated in the reservation of rights letter was the assertion that a named-windstorm sub-limit of Fifteen Million Dollars ($15,000,000) applied to VHG's business-interruption claim under the Ironclad primary policy for the 2022–2023 Policy Year. Specifically, Ironclad's reservation of

22. I was surprised and alarmed by this assertion. Ironclad's position that the named-windstorm sub-limit remained in effect was directly contrary to VHG's understanding of the July 2022 renewal terms, as those terms had been communicated to me by Franklin Orde of Tidewater Risk Advisors throughout the renewal process. At no time during the renewal negotiations, at the time of binding, or at any point prior to receip

23. Mr. Orde confirmed to me, during our telephone conversation following receipt of the reservation of rights letter, that the named-windstorm sub-limit had been negotiated for deletion during the renewal process and that Ironclad's underwriting department had agreed to the deletion as part of the terms for the July 1, 2022 renewal. Mr. Orde expressed his own surprise at Ironclad's assertion in the reservation of ri

24. On February 3, 2023, Ironclad Indemnity Corporation issued a formal denial of coverage letter to VHG. In its denial, Ironclad again asserted the named-windstorm sub-limit of $15,000,000 as one of four stated bases for denying or limiting coverage for VHG's business-interruption claim. Ironclad's denial letter stated that, under the sub-limit, VHG's business-interruption recovery for losses caused by Hurricane Cal

VII. VHG'S RELIANCE ON DELETION OF THE SUB-LIMIT

25. VHG relied on the deletion of the $15,000,000 named-windstorm sub-limit in making critical business decisions regarding its insurance program for the 2022–2023 Policy Year. Had VHG known that the windstorm sub-limit remained in effect—contrary to Mr. Orde's representations and contrary to VHG's understanding of the renewal terms—VHG would have sought alternative or additional coverage to protect against named-win

26. The windstorm sub-limit issue is material to the amount of VHG's recovery in this litigation. If the $15,000,000 named-windstorm sub-limit were applied to business-interruption losses arising from Hurricane Callista, VHG's recovery under the Ironclad primary policy would be reduced by Ten Million Dollars ($10,000,000)—from the full $25,000,000 primary-layer limit to the $15,000,000 sub-limit for business-interrup

27. VHG paid a total premium of $980,000 for the Ironclad primary layer for the 2022–2023 Policy Year, an amount that reflected, and was understood by VHG to reflect, the broader coverage afforded by the deletion of the windstorm sub-limit. The premium increase from the prior policy year was consistent with and attributable in part to the deletion of the sub-limit—a coverage enhancement that would be expected, in the

VIII. DOCUMENTS REVIEWED AND REFERENCED

28. In connection with the preparation of this declaration, I have reviewed the following documents, each of which I am familiar with from my role as Vice President of Risk Management at VHG and my direct involvement in the matters described herein: (a) The Ironclad Indemnity Corporation primary policy, Policy No. IIC-PRP-2022-07541, for the policy period July 1, 2022 through July 1, 2023, including all endorsements,

IX. CONCLUSION AND VERIFICATION

29. Based on my personal knowledge and my direct involvement in the July 2022 renewal process for VHG's all-risk property and business-interruption insurance program, I declare that VHG understood, and was expressly told by its broker of record, Franklin Orde of Tidewater Risk Advisors LLC, that the $15,000,000 named-windstorm sub-limit applicable to business-interruption losses was deleted from the Ironclad Indemnit

30. I declare under penalty of perjury under the laws of the State of Florida that the foregoing is true and correct. I have read this declaration in its entirety and affirm that each statement contained herein is based on my personal knowledge and is accurate to the best of my information and belief. Executed on November 1, 2023, at Miami, Florida. ________________________________________ Sandra Pellegrini Vice Pres