Contract analysis

I. Introduction and Purpose of This Letter With the filing of the Stipulation of Dismissal with Prejudice on January 5, 2024, and the formal administrative closure of Matter No. 1021-00003 on today's date, January 12, 2024, Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") is writing to memorialize the lessons learned from the Hurricane Callista business-interruption coverage litigation and to provide

II. Summary of the Matter and Key Coverage Disputes The Hurricane Callista business-interruption claim involved three VHG-owned resort properties in the Florida Keys and Gulf Coast region, each of which sustained significant wind and storm-surge damage when Hurricane Callista made landfall on September 18, 2022, as a Category 4 hurricane with sustained winds of approximately 145 miles per hour near Big Pine Key, Flor

III. Analysis of Settlement Allocation and What It Reveals A. Settlement by Layer The mediated settlement achieved a total recovery of $47,300,000, allocated across the four layers of VHG's insurance tower as follows: Several observations are warranted. Ironclad Indemnity Corporation (Primary Layer). Ironclad paid $24,500,000 of its $25,000,000 policy limit — effectively the full primary layer minus the $500,000 dedu

IV. Lessons Learned Drawing on the experience of the Hurricane Callista litigation, we have identified four principal areas in which VHG's policy procurement, policy language, and claims-management practices can and should be improved. We address each in turn. A. Policy Procurement Process Deficiencies The central and most consequential problem in this matter was a failure in the policy procurement process. As descri

V. Specific Recommendations for the Next Policy Renewal Based on the lessons identified above, Calderwood & Harkness recommends that VHG implement the following eight measures in connection with its upcoming July 1, 2024 policy renewal and, more broadly, as part of its ongoing risk management program. Recommendation 1: Express Deletion of Named-Windstorm Sub-Limit VHG should insist on a standalone, clearly drafted en

VI. Broker Engagement Considerations While we wish to be clear that Tidewater Risk Advisors performed its core brokerage functions competently in many respects — including the successful negotiation of the sub-limit deletion, the timely placement of the insurance tower, and the effective coordination of the claim submission process — the windstorm sub-limit documentation failure was a serious lapse that had material

VII. Financial Summary Reference For ease of reference, we set forth below a summary of the key financial figures associated with the Hurricane Callista claim and the resulting litigation. Total Claimed Loss: Total Recovery: $47,300,000 (78.83% of total claimed loss) Calderwood & Harkness Fees and Expenses: Net Recovery to VHG After Fees and Expenses: Approximately $43,338,300 Annual Premium for Insurance Program: $1

VIII. Availability for Further Discussion Calderwood & Harkness remains available to discuss these recommendations in detail at your convenience. We recognize that implementing these recommendations will require coordination among VHG's legal, risk management, and finance teams, as well as engagement with Tidewater Risk Advisors and the carrier markets. We would welcome the opportunity to participate in VHG's next re

IX. Closing In closing, we wish to express our sincere appreciation for VHG's confidence in Calderwood & Harkness throughout this engagement. The Hurricane Callista matter was a complex, high-stakes coverage dispute that demanded sustained effort and close collaboration between VHG and outside counsel over a period of seventeen months. We are gratified that the result achieved reflects a meaningful recovery for VHG a