Contract analysis

1. The Insured and the Insurance Program VHG is a leading hospitality and real-estate company that owns and operates luxury resort hotels and conference centers in the State of Florida. The company's portfolio includes three premier resort properties situated along Florida's Gulf Coast and the Florida Keys, each of which caters to leisure travelers, corporate groups, and conference clientele. For fiscal year 2021, VH

2. Hurricane Callista and the Loss Event Hurricane Callista was first identified as a tropical disturbance in the western Caribbean Sea in early September 2022. The storm was named by the National Hurricane Center on September 12, 2022, at which point it had intensified to tropical-storm strength. Over the ensuing days, Hurricane Callista underwent rapid intensification as it tracked northward through the warm waters

3. The Insured Properties and Business-Interruption Losses VHG engaged Meridian Forensic Accountants LLP to prepare a comprehensive analysis of the business-interruption losses sustained at each of the three insured properties. That analysis, which incorporates historical revenue data, seasonal occupancy trends, average daily rate ("ADR") history, and contractual event-revenue projections, supports the aggregate loss

4. Notice of Loss, Proof of Loss, and Claim Status VHG has fully and timely complied with all notice and proof-of-loss obligations under the insurance program. The timeline of relevant claim activity is as follows: VHG submitted its initial notice of loss to Ironclad Indemnity Corporation, as lead carrier in the insurance tower, on September 22, 2022—within four (4) calendar days of the September 18, 2022 date of los

5. Pinnacle's Coverage Obligations Pinnacle's first excess layer policy, PSL-XS1-2022-3390, provides $15,000,000 in coverage in excess of the $25,000,000 underlying Ironclad primary layer. Pinnacle's attachment point is therefore $25,000,000 (or, stated differently, $25,500,000 inclusive of the per-occurrence deductible). As set forth above, VHG's total business-interruption losses of $60,000,000 far exceed Pinnacle'

6. Rebuttal of Anticipated Coverage Defenses VHG is aware that Ironclad's reservation of rights letter of October 12, 2022, raised certain potential coverage defenses. To the extent that Pinnacle, as a follow-form excess carrier, may seek to rely upon or assert similar defenses, VHG addresses each of the anticipated defenses below and explains why none of them provides a valid basis for reducing or denying Pinnacle's

7. Formal Demand for Payment Based on the foregoing, Verimark Hospitality Group Inc. hereby formally demands that Pinnacle Surplus Lines Inc. pay the full Fifteen Million Dollars ($15,000,000) in available limits under its first excess layer policy, Policy Number PSL-XS1-2022-3390, to VHG within thirty (30) days of the date of this letter—i.e., on or before December 20, 2022. Payment of Pinnacle's $15,000,000 first e

8. Reservation of Rights and Warning Regarding Bad Faith VHG expressly reserves all rights and remedies available to it under the Pinnacle policy, under the laws of the State of Florida, and in equity, including but not limited to claims for: (a) breach of contract for failure to pay policy benefits; (b) declaratory judgment establishing Pinnacle's coverage obligations; (c) bad faith, both statutory (pursuant to Fla.

9. Request for Response and Contact Information VHG respectfully requests that Pinnacle respond to this demand in writing within thirty (30) days of the date of this letter. VHG's preference is to resolve this matter promptly, cooperatively, and without the need for litigation. However, VHG is prepared to take all necessary legal action to protect its rights if Pinnacle fails to respond or refuses to honor its covera

1. Copy of VHG's Sworn Statement in Proof of Loss, dated November 15, 2022

2. Copy of Pinnacle Surplus Lines Inc. Policy PSL-XS1-2022-3390 (Declarations Page) Layer | Carrier | Limit | Attachment Point | Policy Number Primary | Ironclad Indemnity Corporation | $25,000,000 | $500,000 deductible | IIC-PRP-2022-07541 First Excess | Pinnacle Surplus Lines Inc. | $15,000,000 | $25,000,000 xs deductible | PSL-XS1-2022-3390 Second Excess | Montclair Assurance Company | $10,000,000 | $40,000,000 xs