Contract analysis

I. INTRODUCTION Plaintiff Verimark Hospitality Group Inc. ("VHG" or "Plaintiff") is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol VMRK, with its principal executive offices located at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG respectfully submits this Case Management Statement pursuant to this Court's scheduling order dated March 27, 2023, and in accordan

II. NATURE OF THE ACTION This is a first-party insurance coverage dispute. VHG seeks declaratory judgment, breach of contract damages, and bad-faith damages arising from the Defendants' denial and/or failure to pay business-interruption coverage under an all-risk property insurance program. The dispute centers on the scope and application of VHG's layered property insurance tower, the enforceability of an allegedly d

1. Verimark Grand Key Resort — Located at Mile Marker 48, Marathon, Florida 33050, the Grand Key Resort is a 312-room luxury resort and marina facility situated on approximately 28 acres of waterfront property in the heart of the Florida Keys. The Grand Key Resort is VHG's flagship property in the Florida Keys and a premier destination for leisure and corporate group travel. The resort features four on-site restauran

2. Verimark Harborview Hotel & Conference Center — Located at 1400 Estero Boulevard, Fort Myers Beach, Florida 33931, the Harborview Hotel & Conference Center is a 224-room full-service hotel featuring a 40,000-square-foot conference and event facility, two restaurants, a pool and beach complex, and ancillary amenities. The Harborview is a significant venue for regional and national corporate conferences and conventi

3. Verimark Sunset Shores — Located at 7200 Gulf Boulevard, St. Pete Beach, Florida 33706, Sunset Shores is a 186-room boutique resort on the Gulf Coast of Florida, featuring an award-winning restaurant, a beachfront pool complex, and a rooftop lounge. While located farther north of Hurricane Callista's direct path, the resort sustained significant wind and rain damage requiring a full closure from September 18 throu

III. IDENTIFICATION OF THE PARTIES AND COUNSEL A. Plaintiff. Verimark Hospitality Group Inc. is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol VMRK, with its principal executive offices and headquarters located at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG is a hospitality and resort management company that owns, operates, and manages luxury resort properti

IV. SUMMARY OF KEY CLAIMS AND DEFENSES A. Plaintiff's Claims (As Alleged in the Complaint) VHG's Complaint, filed March 1, 2023, asserts the following claims against the Defendants:

1. Count I — Breach of Contract (All Defendants). VHG alleges that all four Defendants breached their respective contractual obligations under the all-risk property insurance policies by failing and refusing to pay business-interruption benefits totaling $60,000,000 to which VHG is entitled as a result of the covered loss caused by Hurricane Callista. VHG alleges that it suffered a direct physical loss to its three i

2. Count II — Declaratory Judgment (All Defendants). VHG seeks a declaration from this Court that: (a) The all-risk policies issued by the Defendants provide coverage for VHG's business-interruption losses arising from Hurricane Callista; (b) The $15,000,000 named-windstorm sub-limit that appeared in the prior policy period was deleted effective at the July 1, 2022 renewal, and the current policies do not contain any

3. Count III — Bad Faith (Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.). VHG asserts a claim for statutory bad faith under Section 624.155 of the Florida Statutes against Ironclad and Pinnacle. VHG alleges that Ironclad's denial of coverage, issued on February 3, 2023, was made without a reasonable basis and in bad faith, in that Ironclad knew or should have known that the named-windstorm sub-limit

1. Named-Windstorm Sub-Limit. Ironclad contends that the primary policy, Policy No. IIC-PRP-2022-07541, contains a $15,000,000 sub-limit on business-interruption coverage for losses caused by named windstorms, including hurricanes. Ironclad asserts that this sub-limit caps VHG's total recoverable business-interruption loss at $15,000,000 for Hurricane Callista, regardless of the actual amount of the loss. This defens

2. Period of Restoration. Ironclad argues that business-interruption coverage under the policy terminates when repairs to the insured property "could have been completed with reasonable speed and similar quality," and that VHG unreasonably delayed the restoration of all three properties. Ironclad asserts that VHG's actual closure periods exceeded what was reasonably necessary and that VHG is entitled to business-inte

3. Concurrent Causation / Flood Exclusion. Ironclad asserts that a substantial portion of the damage at the Grand Key Resort in Marathon resulted from storm surge, which constitutes "flood" under the policy's flood exclusion. Ironclad invokes the policy's anti-concurrent causation clause, which purports to exclude coverage for any loss caused directly or indirectly by flood, regardless of whether other covered causes

4. Failure to Mitigate. Ironclad alleges that VHG failed to take reasonable steps to reduce the period of business interruption, including by failing to engage contractors promptly, failing to pursue expedited permitting, and failing to implement temporary operating measures to resume partial operations at the earliest possible date.

5. Pinnacle Surplus Lines Inc. Pinnacle has adopted and incorporated by reference all of the affirmative defenses asserted by Ironclad on a follow-form basis, consistent with the follow-form structure of its excess policy.

6. Montclair Assurance Company and Sovereign Re Ltd. Montclair and Sovereign Re assert that their respective policy layers are not reached if the named-windstorm sub-limit applies, as the sub-limit would cap total recoverable BI losses at $15,000,000 — an amount entirely within the Ironclad primary layer. Montclair and Sovereign Re have reserved all other defenses, including all affirmative defenses available under t

V. KEY LEGAL AND FACTUAL ISSUES FOR RESOLUTION A. Dispositive Legal Issues The following legal issues are likely to be dispositive or substantially affect the scope of coverage and the amount of damages recoverable in this action:

1. Deletion of the Named-Windstorm Sub-Limit. The central coverage issue in this case is whether the $15,000,000 named-windstorm sub-limit was deleted from the Ironclad primary policy effective July 1, 2022. Resolution of this issue will require the Court to interpret the policy binder issued for the 2022–2023 policy period, any endorsements or amendments to the policy form, and the broker correspondence exchanged be

2. Enforceability of the Anti-Concurrent Causation Clause. The second major legal issue is whether the anti-concurrent causation clause in the Ironclad primary policy is enforceable under Florida law to exclude coverage for wind damage that was concurrent with storm-surge/flood damage at the Grand Key Resort. Florida courts have addressed the enforceability of anti-concurrent causation clauses in the hurricane contex

3. Period of Restoration Standard. The parties dispute the proper legal standard for measuring the "period of restoration" under Florida law. VHG contends that the period of restoration is the actual time reasonably required to repair and restore the insured properties to their pre-loss condition, taking into account real-world conditions such as post-hurricane supply-chain constraints, contractor availability, and g

1. Renewal Negotiations and the Windstorm Sub-Limit. The parties are expected to present conflicting evidence regarding the content and outcome of renewal negotiations between Tidewater Risk Advisors LLC (Franklin Orde) and Ironclad's underwriting department during the June–July 2022 renewal period. The critical factual question is whether the parties agreed to delete the named-windstorm sub-limit in exchange for an

2. Wind vs. Storm Surge Causation at Grand Key Resort. The parties are expected to present competing expert testimony regarding the extent to which damage at the Grand Key Resort was attributable to wind versus storm surge/flood. VHG contends that the vast majority of damage was caused by sustained Category 4 winds, while Ironclad contends that significant portions of the damage, particularly to ground-level structur

3. Reasonableness of Restoration Timelines. The parties dispute whether VHG's actual restoration timelines — 178 days at Grand Key Resort, 135 days at Harborview Hotel & Conference Center, and 73 days (full closure) at Sunset Shores — were reasonable given post-hurricane conditions in the affected regions of Florida. VHG will present evidence of the extraordinary challenges faced in restoring the properties, includin

4. Quantum of Business-Interruption Losses. The parties are expected to dispute the proper calculation of VHG's business-interruption losses, including the appropriate pre-loss revenue benchmarks (average daily rate ("ADR"), occupancy rates, revenue per available room ("RevPAR")), the treatment of ancillary revenue streams (restaurants, marina, spa, conference/event revenue), the calculation of saved expenses, and th

VI. PLAINTIFF'S PROPOSED DISCOVERY PLAN A. Fact discovery

1. Proposed Fact discovery Period. Plaintiff proposes a fact discovery period of five months, commencing on June 1, 2023 and closing on September 30, 2023. This period is sufficient to allow the parties to complete written discovery, obtain and review document productions, and conduct all necessary fact depositions. Given the complexity of the coverage issues and the number of parties involved, Plaintiff believes tha

2. Written discovery. Interrogatories. Plaintiff intends to propound interrogatories to each Defendant pursuant to Rule 1.340 of the Florida Rules of Civil Procedure. Initial sets of interrogatories are anticipated to be served in early June 2023. Plaintiff's interrogatories will address the following key topics, among others: the factual and legal basis for each Defendant's denial or reservation of rights; the ident

3. Depositions. Plaintiff anticipates conducting the following depositions during the fact discovery period: (a) Victor Haddon — Senior Vice President of Claims, Ironclad Indemnity Corporation. Mr. Haddon is the senior claims officer who oversaw Ironclad's handling of VHG's Hurricane Callista claim, issued the reservation of rights letter, and authorized the formal denial of coverage dated February 3, 2023. His depos

1. Proposed Expert discovery Schedule. Plaintiff proposes the following schedule for expert discovery: • Expert Report Disclosures: September 15, 2023, which is approximately two weeks before the close of fact discovery, allowing initial expert reports to be prepared while the final depositions and document productions are being completed. • Rebuttal Expert Reports: October 2, 2023, which is seventeen (17) days after

2. Anticipated Expert Witnesses. Plaintiff's Expert Witnesses: Plaintiff anticipates retaining the following expert witnesses: (a) Dr. Helen Vasquez, CPA, CFF — Meridian Forensic Economics LLC, 1201 Peachtree Street NE, Suite 1000, Atlanta, Georgia 30361. Dr. Vasquez is a forensic economist and certified public accountant who will be retained to quantify VHG's $60,000,000 in claimed business-interruption losses. Dr.

VII. PLAINTIFF'S PROPOSED TRIAL DATE AND SCHEDULE A. Proposed Trial Date Plaintiff proposes that this case be set for trial in the first quarter of 2024 (January through March 2024), which would be approximately twelve (12) months after the filing of the Complaint. This timeline is consistent with the complexity of the case and the proposed discovery schedule, which contemplates the completion of all fact and expert

VIII. MEDIATION / ALTERNATIVE DISPUTE RESOLUTION Plaintiff is amenable to mediation or other alternative dispute resolution and recognizes the potential benefits of such processes in resolving complex insurance coverage disputes. However, Plaintiff respectfully submits that mediation will be most productive after the completion of fact and expert discovery, when all parties have a full understanding of the evidentiar

IX. RELATED CASES AND CONSOLIDATION Plaintiff is not aware of any related pending cases in this Court or in any other court that involve the same or substantially similar parties, claims, or issues as those presented in this action. No consolidation issues are anticipated at this time. Should any related cases come to Plaintiff's attention, VHG will promptly advise the Court and opposing counsel.

X. POTENTIAL DISPOSITIVE OR SIGNIFICANT MOTIONS Plaintiff anticipates filing the following motions during the course of this litigation:

1. Motion for Partial Summary Judgment on the Named-Windstorm Sub-Limit. Plaintiff anticipates filing a motion for partial summary judgment on the issue of whether the $15,000,000 named-windstorm sub-limit was deleted from the Ironclad primary policy effective July 1, 2022. This is the central coverage issue in the case, and Plaintiff believes it may be amenable to resolution on summary judgment after the completion

2. Motion for Partial Summary Judgment on the Flood Exclusion / Anti-Concurrent Causation Clause. Depending on the state of the evidence developed during fact and expert discovery, Plaintiff may file a motion for partial summary judgment seeking a ruling that the anti-concurrent causation clause in the Ironclad primary policy is unenforceable under Florida law as applied to the facts of this case, or that the flood e

3. Defendants' Anticipated Motions. Plaintiff anticipates that Defendants may file their own dispositive motions on the windstorm sub-limit issue, the flood exclusion / anti-concurrent causation clause, and/or other coverage defenses. Plaintiff will be prepared to respond to any such motions within the time periods prescribed by the applicable rules and any scheduling order entered by the Court.

XI. JURISDICTIONAL AND PROCEDURAL ISSUES Subject-Matter Jurisdiction. This Court has subject-matter jurisdiction over this action pursuant to Article V, Section 5 of the Florida Constitution and Section 26.012 of the Florida Statutes. The amount in controversy exceeds $30,000, exclusive of interest, costs, and attorneys' fees. Personal Jurisdiction. This Court has personal jurisdiction over all Defendants. Ironclad I

XII. DAMAGES VHG's total claimed business-interruption losses are $60,000,000, allocated among the three insured properties as follows:

1. Verimark Grand Key Resort — $31,400,000. This figure is based on the Grand Key Resort's 312 rooms, a pre-loss average daily rate (ADR) of $389, a pre-loss occupancy rate of 82%, and a full closure period of 178 days (September 18, 2022 through March 15, 2023). The loss calculation includes lost room revenue, lost ancillary revenue from the resort's restaurants, marina, spa, and retail operations, and extra expense

2. Verimark Harborview Hotel & Conference Center — $18,700,000. This figure is based on the Harborview's 224 rooms, a pre-loss ADR of $295, a pre-loss occupancy rate of 74%, and a full closure period of 135 days (September 18, 2022 through January 31, 2023). The loss calculation includes lost room revenue, lost conference and event revenue from the 40,000-square-foot conference facility, lost food and beverage revenu

3. Verimark Sunset Shores — $9,900,000. This figure is based on the Sunset Shores' 186 rooms, a pre-loss ADR of $342, a pre-loss occupancy rate of 79%, a full closure period of 73 days (September 18 through November 30, 2022), and an extended partial-closure period through February 2023 during which the resort operated at reduced capacity. The loss calculation includes lost room revenue, lost food and beverage revenu

XIII. DOCUMENT PRESERVATION AND LITIGATION HOLDS VHG issued a comprehensive litigation hold on September 19, 2022, the day following Hurricane Callista's landfall. The litigation hold was directed to all key custodians within VHG whose files, documents, communications, and electronically stored information could be relevant to VHG's insurance claims and any potential litigation. The custodians identified in the litig

XIV. STIPULATIONS Plaintiff is willing to enter into the following stipulations with the Defendants in order to facilitate the efficient management of discovery and pretrial proceedings:

1. ESI Protocols. Plaintiff is prepared to negotiate and agree upon an ESI protocol governing custodians, search terms, production format, de-duplication, and related matters, as described in Section VI.C above.

2. Deposition Scheduling. Plaintiff is willing to work cooperatively with Defendants' counsel to schedule depositions in a manner that minimizes disruption and travel costs, including conducting certain depositions by videoconference where appropriate and mutually agreeable.

3. Confidentiality / Protective Order. Plaintiff proposes that the parties negotiate and submit to the Court a jointly agreed protective order to govern the treatment of confidential business information, insurance and claims information, financial data, and other sensitive materials exchanged during discovery. Plaintiff has prepared a draft proposed protective order and is prepared to circulate it to Defendants' cou

XV. OTHER MATTERS FOR THE COURT'S ATTENTION Plaintiff respectfully brings the following additional matters to the Court's attention:

1. Public-Company Reporting Obligations. VHG is a publicly traded company listed on the Nasdaq Stock Market under the ticker symbol VMRK. As a public reporting company, VHG has disclosure obligations under the Securities Exchange Act of 1934 and the regulations of the U.S. Securities and Exchange Commission regarding the pendency and potential outcome of material litigation. VHG respectfully requests that any protect

2. Third-Party Witness — Tidewater Risk Advisors LLC. The insurance broker, Tidewater Risk Advisors LLC, is a non-party to this action but is a critical fact witness. Tidewater's Account Executive, Franklin Orde, was directly involved in the June–July 2022 renewal negotiations with Ironclad's underwriting department and is expected to have firsthand knowledge of the discussions and agreements regarding the deletion o

3. Multiple Defense Counsel Teams. Plaintiff notes that there are two separate defense counsel teams in this action: Fendowell Rourke & Stanton LLP represents Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc. jointly, while Delvecchio & Kraus LLP represents Montclair Assurance Company and Sovereign Re Ltd. jointly. The involvement of multiple defense counsel teams may require coordination of discovery sc

XVI. CONCLUSION AND PRAYER For the foregoing reasons, Plaintiff Verimark Hospitality Group Inc. respectfully requests that the Court:

1. Adopt the proposed discovery schedule set forth in this Case Management Statement, including a fact discovery period of June 1, 2023 through September 30, 2023, expert report disclosures by September 15, 2023, rebuttal reports by October 2, 2023, and expert depositions completed by October 31, 2023;

2. Set the case for trial in the first quarter of 2024 (January through March 2024), or alternatively no later than April 2024;

3. Enter a scheduling and case management order incorporating the proposed pretrial schedule set forth herein;

4. Schedule mediation for November or December 2023, following the completion of discovery;

5. Address any additional case management requirements the Court deems necessary and appropriate at the May 1, 2023 Case Management Conference; and

6. Grant such other and further relief as the Court deems just and proper. Respectfully submitted, CALDERWOOD & HARKNESS LLP By: ________ Elaine Forsythe, Esq. Florida Bar No. 0847291 E-mail: eforsythe@calderwoodharkness.com Tiffany Rosenthal, Esq. Florida Bar No. 1023764 E-mail: trosenthal@calderwoodharkness.com Andrew Fitzpatrick, Esq. Florida Bar No. 1135820 E-mail: afitzpatrick@calderwoodharkness.com 333 SE 2nd A