Contract analysis

1. VHG is a Delaware corporation with its principal place of business at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG is publicly traded on the Nasdaq Stock Market under the ticker symbol "VMRK." VHG was incorporated in 2006 and has maintained continuous operations since that date. Complaint ¶ 1; Deposition of Marcus Ellsworth (Aug. 7, 2023) ("Ellsworth Dep.") at 12:3–10.

2. VHG owns and operates luxury resort hotel properties concentrated in the Florida Keys and Gulf Coast region of the State of Florida. For fiscal year 2021, VHG reported revenues of approximately $412 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $78 million. VHG's Florida resort properties constitute the core revenue-generating assets of the company's operat

3. Sandra Pellegrini serves as VHG's Vice President of Risk Management and, during all times relevant to this action, was the individual responsible for overseeing VHG's insurance program, including the procurement, placement, and renewal of property and business-interruption coverage for VHG's resort properties. Ms. Pellegrini has served in that role since 2018 and reports directly to VHG's Chief Financial Officer.

4. Defendant Ironclad Indemnity Corporation ("Ironclad") is a Connecticut-domiciled stock insurance company with its principal office at 55 Constitution Boulevard, Hartford, Connecticut 06103. Ironclad is assigned NAIC No. 20537. Ironclad serves as the lead carrier in VHG's property insurance program and issued the primary property and business-interruption policy to VHG for the policy period at issue in this action.

5. Defendant Pinnacle Surplus Lines Inc. ("Pinnacle") is a Texas-domiciled surplus-lines insurer with its principal office at 200 Congress Avenue, Suite 1400, Austin, Texas 78701. Pinnacle is assigned NAIC No. 38214. Pinnacle issued the first excess layer policy to VHG on a follow-form basis, following the terms, conditions, and exclusions of the Ironclad primary policy. Complaint ¶ 6; Pinnacle's Answer ¶ 6.

6. Defendant Montclair Assurance Company ("Montclair") is a New York-domiciled admitted carrier with its principal office at 1 Liberty Plaza, 38th Floor, New York, New York 10006. Montclair is assigned NAIC No. 15692. Montclair issued the second excess layer policy to VHG for the policy period at issue. Complaint ¶ 7; Montclair's Answer ¶ 7.

7. Defendant Sovereign Re Ltd. ("Sovereign Re") is a Bermuda-domiciled reinsurer and excess carrier with its principal office at 14 Front Street, Hamilton HM 11, Bermuda. Sovereign Re issued the third excess layer policy to VHG for the relevant policy period. Complaint ¶ 8; Sovereign Re's Answer ¶ 8.

II. VHG'S INSURANCE PROGRAM AND THE INSURANCE TOWER

8. VHG's property and business-interruption insurance program for the policy period July 1, 2022 to July 1, 2023 (the "Policy Period") was placed by Tidewater Risk Advisors LLC ("Tidewater"), VHG's insurance broker of record, through its account executive, Franklin Orde. Tidewater's principal office is located at 2600 S. Bayshore Drive, Suite 800, Miami, Florida 33133. Tidewater has served as VHG's broker of record f

9. The insurance program for the Policy Period consisted of four layers providing a total tower limit of $60,000,000 above a $500,000 per-occurrence deductible, structured as follows: Exhibit 2 (Ironclad Primary Policy Declarations Page); Exhibit 3 (Pinnacle Excess Policy Declarations Page); Exhibit 4 (Montclair Excess Policy Declarations Page); Exhibit 5 (Sovereign Re Excess Policy Declarations Page); Orde Dep. at 1

10. All four policies in the insurance tower covered "all risks" of physical loss or damage to covered property, including loss of business income (business interruption) and extra expense resulting from covered causes of loss. The policy period for each of the four layers was July 1, 2022 to July 1, 2023. The insuring agreements of the primary policy and each excess layer policy did not exclude losses arising from n

11. VHG paid a total annual premium of $1,840,000 for the complete four-layer insurance program for the Policy Period. The annual premium was allocated as follows: $980,000 to Ironclad for the primary layer; $410,000 to Pinnacle for the first excess layer; $265,000 to Montclair for the second excess layer; and $185,000 to Sovereign Re for the third excess layer. All premiums were timely paid in full prior to the ince

III. THE PRIOR POLICY YEAR AND THE NAMED WINDSTORM SUB-LIMIT

12. During the prior policy year (July 1, 2021 to July 1, 2022), the Ironclad primary policy contained a named-windstorm sub-limit endorsement—specifically designated as Endorsement No. 14 in that prior-year policy's schedule of endorsements—that capped business-interruption coverage arising from named windstorm events at $15,000,000. The sub-limit applied solely to business-interruption losses and did not cap physic

13. VHG, acting through Sandra Pellegrini in her capacity as Vice President of Risk Management, instructed Tidewater to negotiate the removal of the $15,000,000 named-windstorm sub-limit as a condition of the July 2022 renewal. Ms. Pellegrini communicated this instruction to Franklin Orde of Tidewater in writing by email on April 18, 2022, and reiterated it during a telephone call on or about April 20, 2022. Ms. Pell

14. Sandra Pellegrini testified under oath that VHG would not have renewed the primary policy with Ironclad if the named-windstorm sub-limit had not been deleted, given VHG's concentration of assets in hurricane-prone areas along the Florida Keys and Gulf Coast. Ms. Pellegrini explained that VHG's board of directors had specifically identified the sub-limit as an unacceptable gap in coverage in light of the company's

IV. THE JULY 2022 RENEWAL NEGOTIATIONS AND DELETION OF THE SUB-LIMIT

15. Franklin Orde, VHG's account executive at Tidewater, negotiated with Ironclad's underwriting department during the spring and early summer of 2022 regarding the terms of the July 2022 renewal. The renewal negotiations included, among other matters, the express deletion of the $15,000,000 named-windstorm sub-limit from the Ironclad primary policy. Mr. Orde engaged in multiple rounds of email correspondence and at

16. On June 14, 2022, Ironclad's underwriter communicated to Franklin Orde via email that Ironclad would agree to delete the named-windstorm sub-limit endorsement from the renewal policy in exchange for a premium increase. The email stated, in substance, that the underwriting department had obtained internal authorization to remove the sub-limit endorsement upon VHG's acceptance of the revised premium terms. The June

17. Franklin Orde confirmed to Ironclad in a reply email on June 16, 2022 that VHG agreed to the premium increase and expected the renewal policy to be issued without the named-windstorm sub-limit endorsement. Mr. Orde's email expressly stated that the deletion of the sub-limit endorsement was a material term of the renewal and that VHG's acceptance of the premium increase was contingent upon the removal of the sub-l

18. Franklin Orde testified at deposition that, based on his communications with Ironclad's underwriting department throughout the renewal process, it was his understanding that the named-windstorm sub-limit had been deleted from the July 2022 renewal policy and that the primary policy's full $25,000,000 limit would apply to business-interruption losses arising from named windstorm events without any reduction or sub

19. Following the completion of renewal negotiations and VHG's acceptance of the revised premium, Tidewater issued a binder confirmation to VHG on June 28, 2022, summarizing the terms of the renewed coverage effective July 1, 2022. The binder confirmation identified the per-occurrence limit as $25,000,000 and listed several sub-limits applicable under the renewed policy—including sub-limits for flood, earthquake, and

20. The annual premium for the primary layer increased from $890,000 in the prior policy year (July 2021–July 2022) to $980,000 in the July 2022 renewal year—a $90,000 increase representing an approximately 10.1% premium increase. Franklin Orde testified that the premium increase reflected, in part, the deletion of the named-windstorm sub-limit and the corresponding expansion of Ironclad's exposure to business-interr

V. THE IRONCLAD POLICY AS ISSUED AND THE SUB-LIMIT AMBIGUITY

21. Ironclad issued the renewal policy (Policy No. IIC-PRP-2022-07541) effective July 1, 2022 (the "Ironclad Renewal Policy"). The Ironclad Renewal Policy as issued contains a schedule of endorsements listing each endorsement forming part of the policy. The named-windstorm sub-limit endorsement that appeared in the prior-year policy as Endorsement No. 14 does not appear as a listed endorsement in the Ironclad Renewal

22. However, the declarations page of the Ironclad Renewal Policy contains a reference to "Named Windstorm Sub-Limit: $15,000,000" in a summary table of sub-limits that also lists sub-limits for flood, earthquake, and other specified perils. Ironclad contends that this declarations-page reference constitutes a binding sub-limit applicable to VHG's business-interruption claim. VHG contends that this reference is a ves

23. Victor Haddon, Ironclad's Senior Vice President of Claims, testified at his deposition that he was not involved in the underwriting or renewal negotiations for the VHG policy and had no personal knowledge of whether the named-windstorm sub-limit was intended to be deleted or retained at the July 2022 renewal. Mr. Haddon stated that his involvement with the VHG account began only after Hurricane Callista occurred

24. When asked at deposition whether Ironclad's underwriting department maintained any records, memoranda, or internal communications confirming the intent to retain the named-windstorm sub-limit for the 2022–2023 policy year, Victor Haddon testified that he was not aware of any such records and stated that the question should be directed to underwriting personnel. Ironclad did not designate any representative from i

25. Through the completion of discovery in this action, Ironclad has not produced any written communication from its underwriting department to Tidewater or to VHG, generated during the renewal period, that stated or confirmed that the named-windstorm sub-limit would be retained in the July 2022 renewal policy. VHG served two sets of requests for production specifically seeking all documents relating to the decision

VI. THE EXCESS LAYER POLICIES AND FOLLOW-FORM PROVISIONS

26. Pinnacle's first excess layer policy (Policy No. PSL-XS1-2022-3390) is written on a follow-form basis, following the terms, conditions, and exclusions of the Ironclad primary policy, including any sub-limits, unless otherwise specified in the Pinnacle policy. The Pinnacle policy does not independently impose a named-windstorm sub-limit or any other limitation on business-interruption coverage for named windstorm

27. Montclair and Sovereign Re each issued reservation of rights letters in response to VHG's claim but did not issue formal denial letters. Both carriers took the position that the resolution of the named-windstorm sub-limit issue in the Ironclad primary policy would determine whether VHG's claimed business-interruption losses would reach their respective attachment points of $40,000,000 (Montclair) and $50,000,000

VII. HURRICANE CALLISTA AND PROPERTY DAMAGE

28. Hurricane Callista was named by the National Hurricane Center on September 12, 2022. Hurricane Callista intensified rapidly over the warm waters of the Gulf of Mexico and made landfall as a Category 4 hurricane on the Saffir-Veltason Hurricane Wind Scale, with maximum sustained winds of approximately 145 miles per hour, in the Lower Florida Keys near Big Pine Key at approximately 1:30 PM Eastern Daylight Time on

29. In advance of Hurricane Callista's landfall, Monroe County issued a mandatory evacuation order for all residents and visitors in the Florida Keys on September 16, 2022. Lee County issued a similar mandatory evacuation order on September 17, 2022. VHG evacuated all guests, staff, and non-essential personnel from each of its three resort properties in compliance with these orders and in accordance with VHG's emerge

30. VHG owns and operates three resort properties that sustained significant physical damage and prolonged business-interruption losses as a result of Hurricane Callista: (a) Verimark Grand Key Resort, located at Mile Marker 48, Marathon, Florida 33050. The Grand Key Resort is a 312-room luxury resort and marina. Prior to Hurricane Callista, the property maintained a pre-loss average daily rate ("ADR") of $389 and an

VIII. THE INSURANCE CLAIM AND DENIAL

31. VHG submitted an initial notice of loss to Ironclad on September 22, 2022, four days after Hurricane Callista's landfall. The notice of loss identified Hurricane Callista as the cause of loss, described the damage to each of VHG's three resort properties, and requested that Ironclad assign an adjuster to inspect the properties and commence the claims process. Exhibit 18 (VHG Notice of Loss dated Sept. 22, 2022);

32. Following receipt of VHG's notice of loss, Ironclad retained Arbor Claims Services LLC ("Arbor Claims"), an independent adjusting firm based in Tampa, Florida, to conduct physical inspections of the VHG properties and to assist in the adjustment of VHG's claim. Denise Whitford, a licensed independent adjuster employed by Arbor Claims, conducted initial site inspections of all three VHG resort properties on Octobe

33. On October 12, 2022, Ironclad issued a reservation of rights letter to VHG, reserving its rights under the Ironclad Renewal Policy on multiple grounds. Among the grounds identified in the reservation of rights letter, Ironclad expressly reserved its right to assert the applicability of the named-windstorm sub-limit as a limitation on VHG's business-interruption recovery. Exhibit 19 (Ironclad Reservation of Rights

34. On November 15, 2022, VHG submitted a sworn statement in proof of loss to Ironclad claiming total business-interruption losses of $60,000,000 across VHG's three resort properties, allocated as follows: $31,400,000 for the Grand Key Resort; $18,700,000 for the Harborview Hotel & Conference Center; and $9,900,000 for Sunset Shores. The sworn statement in proof of loss was prepared with the assistance of Diane Calde

35. On February 3, 2023, Ironclad issued a formal coverage denial letter to VHG. The denial letter identified four bases for Ironclad's denial of VHG's business-interruption claim. Among the four stated bases for denial, Ironclad asserted that the Ironclad Renewal Policy contains a named-windstorm sub-limit of $15,000,000 for business-interruption losses arising from named windstorm events and that VHG's business-int

36. On February 10, 2023, Pinnacle issued a follow-form denial letter to VHG, declining coverage under the first excess layer on the same bases asserted by Ironclad in its February 3, 2023 denial letter, including the asserted applicability of the named-windstorm sub-limit. Pinnacle's denial rested on its follow-form obligation and deferred to Ironclad's coverage determination with respect to the primary policy. Exhi

IX. THE WINDSTORM SUB-LIMIT IS THE CENTRAL ISSUE FOR PARTIAL SUMMARY JUDGMENT

37. If the named-windstorm sub-limit of $15,000,000 applies as Defendants contend, VHG's recovery under the Ironclad primary policy would be capped at $15,000,000 for business-interruption losses caused by Hurricane Callista. Because a $15,000,000 cap would fall well below the $25,000,000 attachment point of the first excess layer, none of the excess layers would be triggered, and VHG's total business-interruption re

38. If, as VHG contends, the named-windstorm sub-limit was deleted at the July 2022 renewal and does not apply, the full $25,000,000 primary layer limit applies to VHG's business-interruption losses from Hurricane Callista without any windstorm-specific sub-limitation. In that event, VHG's claimed business-interruption losses of $60,000,000 would potentially reach all four layers of the insurance tower, triggering co

39. Dr. Helen Vasquez, CPA, CFF, a forensic economist retained by VHG through Meridian Forensic Economics LLC, opined in her expert report served September 15, 2023, that VHG's total business-interruption losses resulting from Hurricane Callista exceed $60,000,000, irrespective of the resolution of the windstorm sub-limit dispute. Dr. Vasquez's analysis considered lost room revenue, lost food and beverage revenue, lo

X. DEFENDANTS HAVE NOT PRODUCED EVIDENCE SUPPORTING RETENTION OF THE SUB-LIMIT

40. Through the close of fact and expert discovery in this action, Defendants have not produced any written agreement, endorsement, policy amendment, or contemporaneous underwriting communication from the July 2022 renewal period that affirmatively confirms the parties' intent to retain the named-windstorm sub-limit in the Ironclad Renewal Policy. VHG's First and Second Requests for Production specifically requested

41. Victor Haddon, Ironclad's designated corporate representative for claims-related matters, acknowledged at deposition that he could not identify any Ironclad employee who had personal knowledge that the named-windstorm sub-limit was intended to remain in effect for the 2022–2023 policy year. Mr. Haddon testified that he had not spoken with anyone in Ironclad's underwriting department about whether the sub-limit wa

42. The named-windstorm sub-limit endorsement (Endorsement No. 14) that was present in the prior-year Ironclad policy and that imposed the $15,000,000 sub-limit does not appear in the schedule of endorsements for the Ironclad Renewal Policy (Policy No. IIC-PRP-2022-07541). No replacement endorsement, amended endorsement, or substitute endorsement imposing a named-windstorm sub-limit was issued for the 2022–2023 renew