Contract analysis

I. Introduction and Purpose This firm represents Verimark Hospitality Group Inc. ("VHG"), a Delaware corporation publicly traded on the Nasdaq Stock Market (ticker symbol: VMRK), with its principal offices located at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129, in connection with VHG's claim for business-interruption and property losses arising from Hurricane Callista under the above-referenced all-risk co

II. Background — The Covered Loss A. Hurricane Callista Hurricane Callista was designated as a named tropical cyclone by the National Hurricane Center of the National Oceanic and Atmospheric Administration ("NOAA") on September 12, 2022. After rapidly intensifying over the warm waters of the western Caribbean Sea and the Straits of Florida, Hurricane Callista made landfall as a Category 4 hurricane on September 18, 2

1. Verimark Grand Key Resort — Mile Marker 48, Marathon, Florida 33050. The Grand Key Resort is a 312-room luxury resort and full-service marina situated on the Gulf side of the Florida Keys. Prior to Hurricane Callista, the Grand Key Resort maintained an average daily rate ("ADR") of $389 and an average occupancy rate of 82%. The resort sustained catastrophic structural damage from sustained winds of 145 miles per h

2. Verimark Harborview Hotel & Conference Center — 1400 Estero Boulevard, Fort Myers Beach, Florida 33931. The Harborview is a 224-room hotel with an adjoining 40,000-square-foot conference and convention facility located on Fort Myers Beach. Prior to Hurricane Callista, the Harborview maintained an ADR of $295 and an average occupancy rate of 74%. The property sustained extensive wind damage, including loss of roofi

3. Verimark Sunset Shores — 7200 Gulf Boulevard, St. Pete Beach, Florida 33706. The Sunset Shores is a 186-room boutique resort located on the Gulf of Mexico in St. Pete Beach. Prior to Hurricane Callista, the Sunset Shores maintained an ADR of $342 and an average occupancy rate of 79%. The resort sustained extensive wind damage, including partial roof failure, exterior wall breaches, destruction of beachfront amenit

III. The Insurance Program VHG maintains a comprehensive all-risk property and business-interruption insurance program (the "Program") structured as a layered tower with total aggregate limits of $60,000,000 per occurrence, above a $500,000 per-occurrence deductible. The Program was placed through Tidewater Risk Advisors LLC and was bound effective July 1, 2022, for the policy period July 1, 2022 through July 1, 2023

IV. Ironclad's Reservation of Rights Is Without Merit VHG has carefully reviewed each of the four purported bases for Ironclad's reservation of rights as articulated in the Reservation Letter and addresses each in turn below. As demonstrated, none of Ironclad's asserted coverage defenses has merit, and each should be withdrawn immediately. A. The Named Windstorm Sub-Limit Does Not Apply Ironclad's Reservation Letter

V. Ironclad's Obligation to Investigate and Adjust in Good Faith VHG is deeply concerned by the manner in which Ironclad has handled this claim to date. Ironclad retained Arbor Claims Services LLC as an independent adjuster, and the lead adjuster assigned to VHG's claim, Denise Whitford, conducted an initial inspection of VHG's three properties on October 5, 2022, from Arbor Claims' offices at 3300 W. Cypress Street,

1. Assign adequate adjusting resources to complete a thorough, competent, and timely investigation of VHG's claim across all three properties, including the retention of qualified structural engineers, forensic accountants, and other necessary experts;

2. Communicate substantively with VHG and its representatives — including this firm, VHG's General Counsel Nathaniel Driscoll, VHG's VP of Risk Management Sandra Pellegrini, and VHG's broker Franklin Orde at Tidewater Risk Advisors — regarding the status of the claim, Ironclad's investigation activities, and any additional information or documentation Ironclad requires from VHG;

3. Advance undisputed portions of VHG's claim pending the resolution of any coverage disputes Ironclad may assert. Even under Ironclad's own reservation of rights, substantial portions of VHG's business-interruption and property damage losses are undisputed and should be paid promptly. VHG should not be required to wait months — while its properties remain shuttered and it continues to incur ongoing losses — for Iron

4. Refrain from asserting meritless coverage defenses as a pretext for delaying or denying the payment of VHG's claim. The defenses raised in the Reservation Letter, as addressed in detail above, are each without merit and should not serve as a basis for Ironclad to withhold payment on a catastrophic loss claim from a longstanding policyholder.

VI. Notice to Excess Carriers VHG notes that Ironclad's handling of this claim as lead carrier on the primary layer of the Program directly affects VHG's rights and interests under the three excess layers, each of which follows form to the Ironclad primary policy: • Pinnacle Surplus Lines Inc. (Policy No. PSL-XS1-2022-3390; $15M xs $25M) • Montclair Assurance Company (Policy No. MAC-XS2-2022-09817; $10M xs $40M) • So

VII. Reservation of Rights by VHG VHG expressly reserves all rights and remedies available to it under the Policy, Florida law, and equity, including but not limited to: • Claims for breach of the implied covenant of good faith and fair dealing arising from Ironclad's handling of VHG's Hurricane Callista claim; • Statutory bad-faith claims under Florida Statutes § 624.155 and related provisions, should Ironclad fail

VIII. Demand for Immediate Action VHG demands that Ironclad respond in writing to this letter within ten (10) business days of the date hereof — i.e., no later than November 8, 2022 — confirming the following:

1. That Ironclad will immediately commence a good-faith adjustment of VHG's Hurricane Callista claim, including the assignment of adequate adjusting and expert resources and the establishment of a reasonable timeline for completing the investigation;

2. That Ironclad withdraws its assertion that a named-windstorm sub-limit of $15,000,000 applies to the current policy period, or, in the alternative, that Ironclad provides specific documentary evidence — including underwriting files, renewal correspondence, binder documentation, and policy endorsements — supporting its position that the named-windstorm sub-limit was not deleted at the July 2022 renewal as negotiate

3. That Ironclad will advance interim payments for undisputed portions of VHG's claim, including at a minimum the undisputed property damage and business-interruption losses attributable to covered wind damage, pending the resolution of any coverage issues Ironclad may raise; and

4. A specific timeline for the completion of Ironclad's investigation and the issuance of a final coverage determination on VHG's claim. Failure by Ironclad to respond to this letter within the time specified, or to commence a good-faith adjustment of VHG's claim, will be considered further evidence of bad faith in the handling of this claim and may result in VHG pursuing all available legal remedies — including but