[sheet: Cover]

[sheet: Cover]
Field | Value
Document Title | Policy Comparison Chart — Primary and Excess Layers
Matter | Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al.
Case No. | 2022-CA-031547
Engagement No. | 1021-00003
Client | Verimark Hospitality Group Inc. (Nasdaq: VMRK)
Prepared By | Andrew Fitzpatrick, Working Associate, Calderwood & Harkness LLP
Reviewed By | Tiffany Rosenthal, Lead Associate; Elaine Forsythe, Responsible Partner
Date Prepared | September 8, 2022
Classification | ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL
Purpose | Side-by-side comparison of key terms across all four layers of VHG's property/BI insurance tower for coverage analysis
Policy Period (All Layers) | July 1, 2022 – July 1, 2023
Insured | Verimark Hospitality Group Inc.
Broker of Record | Tidewater Risk Advisors LLC (Franklin Orde, Account Executive)
[sheet: Tower Summary]
Layer | Carrier Full Legal Name | Carrier Short Name | Domicile / Jurisdiction | Carrier Type | NAIC No. | Policy Number | Policy Period | Per-Occurrence Limit — BI | Attachment Point | Deductible | Annual Premium | Follow-Form Basis | Outside Counsel | Claims Contact
Primary | Ironclad Indemnity Corporation | Ironclad | Connecticut | Stock insurance company (admitted) | 20537 | IIC-PRP-2022-07541 | 07/01/2022 – 07/01/2023 | 25000000 | 0 | 500000 | 980000 | N/A — Manuscript primary form | Fendowell Rourke & Stanton LLP (Gregory Stanton) | Victor Haddon, SVP Claims
1st Excess | Pinnacle Surplus Lines Inc. | Pinnacle | Texas | Surplus-lines insurer | 38214 | PSL-XS1-2022-3390 | 07/01/2022 – 07/01/2023 | 15000000 | 25000000 | 0 | 410000 | Follow form to Ironclad primary (IIC-PRP-2022-07541) | Fendowell Rourke & Stanton LLP (Gregory Stanton) — joint defense | N/A — follows Ironclad claims handling
2nd Excess | Montclair Assurance Company | Montclair | New York | Admitted insurance carrier | 15692 | MAC-XS2-2022-09817 | 07/01/2022 – 07/01/2023 | 10000000 | 40000000 | 0 | 265000 | Follow form to Ironclad primary (IIC-PRP-2022-07541) | Delvecchio & Kraus LLP (Patricia Kraus) | N/A
3rd Excess | Sovereign Re Ltd. | Sovereign Re | Bermuda | Excess/reinsurance carrier | N/A (non-US domiciled) | SRL-XS3-2022-5102 | 07/01/2022 – 07/01/2023 | 10000000 | 50000000 | 0 | 185000 | Follow form to Ironclad primary (IIC-PRP-2022-07541) | Delvecchio & Kraus LLP (Patricia Kraus) — joint representation with Montclair | N/A
TOTAL | — | — | — | — | — | — | — | 60000000 | — | 500000 | 1840000 | — | — | Max Recovery (above deductible) = $60,000,000
[sheet: Coverage Grant Comparison]
Coverage Provision | Ironclad — Primary (IIC-PRP-2022-07541) | Pinnacle — 1st Excess (PSL-XS1-2022-3390) | Montclair — 2nd Excess (MAC-XS2-2022-09817) | Sovereign Re — 3rd Excess (SRL-XS3-2022-5102) | Notes / Key Differences
Insuring Agreement — Property Damage | All risks of direct physical loss or damage to covered property unless excluded | Follow form to Ironclad primary | Follow form to Ironclad primary | Follow form to Ironclad primary | All layers provide 'all-risk' coverage; excess layers follow form to the primary insuring agreement
Insuring Agreement — Business Interruption | Covers actual loss of business income sustained due to necessary suspension of operations caused by direct physical loss or damage to covered property from a covered cause of loss | Follow form | Follow form | Follow form | BI coverage is triggered by physical loss or damage causing 'necessary suspension of operations'
Extra Expense Coverage | Covers reasonable and necessary extra expenses incurred to avoid or minimize suspension of operations | Follow form | Follow form | Follow form | Extra expense is part of the BI coverage section; subject to same per-occurrence limits
Covered Causes of Loss | All risks of direct physical loss or damage not otherwise excluded | Follow form | Follow form | Follow form | Open-peril form; burden on insurer to prove exclusion applies
Named Insured | Verimark Hospitality Group Inc. and its subsidiaries | Same as primary | Same as primary | Same as primary | All entities under VHG corporate umbrella
Additional Insured | Mortgagees and lenders as their interests may appear (ATIMA); property managers | Follow form | Follow form | Follow form | Standard additional insured provisions for lenders and managers
Covered Locations | Scheduled locations including: (1) Verimark Grand Key Resort, MM 48, Marathon, FL 33050; (2) Verimark Harborview Hotel & Conference Center, 1400 Estero Blvd, Fort Myers Beach, FL 33931; (3) Verimark Sunset Shores, 7200 Gulf Blvd, St. Pete Beach, FL 33706; plus corporate HQ and other scheduled properties | Follow form — same scheduled locations | Follow form — same scheduled locations | Follow form — same scheduled locations | Three resort properties are the primary locations at issue in the Hurricane Callista claim
Covered Property | Buildings, structures, fixtures, machinery, equipment, furniture, improvements and betterments, stock and supplies, and personal property of the insured at scheduled locations | Follow form | Follow form | Follow form | Broad covered property definition consistent with commercial property policies
Valuation Basis — Property Damage | Replacement cost value (RCV) — cost to repair or replace with materials of like kind and quality without deduction for depreciation | Follow form | Follow form | Follow form | RCV basis provides full replacement cost recovery
Valuation Basis — BI | Actual loss sustained — based on net income that would have been earned plus continuing expenses, less income from resumed or substitute operations | Follow form | Follow form | Follow form | Standard 'actual loss sustained' valuation; does not cap at a fixed daily indemnity
Contingent Business Interruption | Covers loss of business income resulting from physical loss or damage to property of a direct supplier or customer (subject to $2,000,000 sub-limit) | Follow form | Follow form | Follow form | May be relevant if key suppliers (food service, laundry) were also impacted by Hurricane Callista
Service Interruption / Utility Coverage | Covers loss of business income due to interruption of specified utility services (electric, water, sewer, gas, communications) caused by covered peril at the utility provider premises (subject to $5,000,000 sub-limit) | Follow form | Follow form | Follow form | Extended power outages in Monroe and Lee Counties post-hurricane may trigger this provision
Policy Territory | Continental United States, its territories and possessions | Follow form | Follow form | Follow form | All insured properties located within FL; no territory issues
Choice of Law / Governing Law | Florida law governs interpretation and enforcement | Follow form — Florida law | Follow form — Florida law (notwithstanding NY arbitration clause) | Follow form — Florida law (per service-of-suit clause) | All layers subject to Florida law; favorable to VHG on efficient proximate cause doctrine
[sheet: Limits, Deductibles & Sub-Limit]
Provision | Ironclad — Primary | Pinnacle — 1st Excess | Montclair — 2nd Excess | Sovereign Re — 3rd Excess | Notes / Dispute Flag
Per-Occurrence Limit — All Perils (Property + BI Combined) | $25,000,000 | $15,000,000 xs $25,000,000 | $10,000,000 xs $40,000,000 | $10,000,000 xs $50,000,000 | Total tower: $60,000,000 above deductible
Per-Occurrence Limit — Business Interruption Only | $25,000,000 (shared with property damage limit) | $15,000,000 (follow form — shared limit) | $10,000,000 (follow form — shared limit) | $10,000,000 (follow form — shared limit) | BI limit is not separate; shares per-occurrence limit with property damage
Annual Aggregate Limit | None stated — per occurrence only | None stated — per occurrence only | None stated — per occurrence only | None stated — per occurrence only | No annual aggregate cap; each occurrence stands alone
Deductible / Self-Insured Retention | $500,000 per occurrence | $0 (attaches above primary limit after deductible exhaustion) | $0 (attaches above 1st excess limit) | $0 (attaches above 2nd excess limit) | Only Ironclad primary carries a deductible; excess layers attach net of deductible
Named Windstorm Sub-Limit — BI | $15,000,000 per occurrence — DISPUTED: Ironclad asserts this sub-limit applies; VHG contends it was deleted at the July 2022 renewal per broker negotiations with Tidewater Risk Advisors (Franklin Orde) | Follow form — if sub-limit exists in primary, Pinnacle's exposure is affected | Follow form — Montclair asserts its layer ($40M–$50M) is not reached if $15M sub-limit applies | Follow form — Sovereign Re asserts its layer ($50M–$60M) is not reached if $15M sub-limit applies | KEY DISPUTED ISSUE: VHG position — sub-limit deleted per 2022 renewal endorsement; Ironclad position — sub-limit remains in force. If sub-limit applies, maximum BI recovery for named windstorm = $15M (within primary layer only), leaving excess layers untriggered. This is the central coverage dispute.
Named Windstorm Sub-Limit — Property Damage | No separate property damage sub-limit for named windstorm identified | Follow form | Follow form | Follow form | Sub-limit dispute pertains specifically to BI coverage
Waiting Period / Time Deductible (BI) | 72 hours from the time of direct physical loss or damage | Follow form — 72 hours | Follow form — 72 hours | Follow form — 72 hours | BI coverage does not begin until 72 hours after the covered loss event
Flood Sub-Limit | $10,000,000 per occurrence for flood as separately defined (rising water, surface water, tidal water) | Follow form | Follow form | Follow form | Flood sub-limit is separate from the named-windstorm sub-limit; interaction with storm surge at Grand Key Resort is at issue
Earthquake Sub-Limit | $5,000,000 per occurrence | Follow form | Follow form | Follow form | Not at issue in this claim
Ordinance or Law Sub-Limit | $2,500,000 per occurrence | Follow form | Follow form | Follow form | May be relevant to rebuilding costs but not primary BI dispute
Civil Authority / Ingress-Egress Coverage | 30 days maximum; 1-mile radius requirement | Follow form | Follow form | Follow form | Potentially applicable to pre-storm evacuation period (Monroe County Sept 16, Lee County Sept 17)
Extended Period of Indemnity | 180 days beyond completion of repairs | Follow form | Follow form | Follow form | Extends BI recovery period to account for ramp-up after reopening
Contingent BI Sub-Limit | $2,000,000 per occurrence | Follow form | Follow form | Follow form | Covers BI losses from damage to supplier/customer property; secondary to direct BI claim
Service Interruption / Utility Sub-Limit | $5,000,000 per occurrence | Follow form | Follow form | Follow form | Covers BI from utility outages; relevant to post-hurricane power outages in Monroe/Lee Counties
Mold Remediation Sub-Limit | $500,000 per occurrence (when mold results from covered cause of loss) | Follow form | Follow form | Follow form | Limited coverage for post-storm mold; potentially relevant at Grand Key and Harborview
Maximum BI Recovery — No Sub-Limit Scenario | $25,000,000 | $15,000,000 | $10,000,000 | $10,000,000 | Total: $60,000,000 — full tower available if windstorm sub-limit does not apply
Maximum BI Recovery — $15M Windstorm Sub-Limit Applies | $15,000,000 (capped by sub-limit) | $0 (layer not reached) | $0 (layer not reached) | $0 (layer not reached) | Total: $15,000,000 — coverage gap of $45,000,000 if sub-limit enforced
[sheet: Exclusions Comparison]
Exclusion | Ironclad — Primary | Pinnacle — 1st Excess | Montclair — 2nd Excess | Sovereign Re — 3rd Excess | Relevance to Hurricane Callista Claim
Flood Exclusion | Excludes loss or damage caused by or resulting from flood, including surface water, waves, tidal water, overflow of any body of water, or spray from any of the foregoing, whether or not driven by wind. Contains anti-concurrent causation (ACC) language: 'regardless of any other cause or event that contributes concurrently or in any sequence to the loss.' | Follow form to Ironclad primary flood exclusion and ACC clause | Follow form to Ironclad primary flood exclusion and ACC clause | Follow form to Ironclad primary flood exclusion and ACC clause | INVOKED BY IRONCLAD: Argues storm surge (8–14 ft in Monroe County) at Grand Key Resort constitutes 'flood' and that ACC clause bars recovery for all concurrent wind/surge damage. VHG position: Florida efficient proximate cause doctrine applies; wind was the dominant cause; ACC clause unenforceable under Florida law for covered windstorm peril.
War / Terrorism Exclusion | Standard war, military action, terrorism exclusion | Follow form | Follow form | Follow form | Not at issue
Nuclear Hazard Exclusion | Standard nuclear hazard exclusion | Follow form | Follow form | Follow form | Not at issue
Government Action / Seizure Exclusion | Excludes loss caused by government seizure, confiscation, or destruction — but does not exclude losses from mandatory evacuation orders where underlying cause is a covered peril | Follow form | Follow form | Follow form | Evacuation orders (Monroe County Sept 16, Lee County Sept 17) preceded landfall; civil authority coverage may apply to bridge the gap
Wear and Tear / Deterioration Exclusion | Standard wear and tear, gradual deterioration, inherent vice exclusion | Follow form | Follow form | Follow form | Not at issue — damage was caused by catastrophic hurricane event
Mold / Fungi Exclusion | Excludes loss caused by mold, mildew, fungi, or bacteria — with limited exception for mold resulting from a covered cause of loss (sub-limit $500,000) | Follow form | Follow form | Follow form | Potentially relevant to post-storm mold remediation at Grand Key Resort and Harborview; mold was consequence of water intrusion from covered windstorm
Earth Movement Exclusion | Standard earth movement exclusion (earthquake, landslide, mudflow) | Follow form | Follow form | Follow form | Not at issue
Intentional Acts Exclusion | Standard intentional or criminal acts exclusion | Follow form | Follow form | Follow form | Not at issue
Faulty Design / Construction Exclusion | Excludes loss caused by faulty design, materials, or workmanship — but resulting damage from a covered peril is covered (ensuing loss provision) | Follow form | Follow form | Follow form | Not at issue
Voluntary Parting / Dishonesty Exclusion | Standard crime / dishonesty exclusion | Follow form | Follow form | Follow form | Not at issue
Pollution / Contamination Exclusion | Standard pollution and contamination exclusion; exception for hostile fire and sudden/accidental discharge | Follow form | Follow form | Follow form | Not at issue; no pollution event alleged
Cyber / Electronic Data Exclusion | Excludes loss or damage to electronic data, software, and cyber-related perils | Follow form | Follow form | Follow form | Not at issue
Communicable Disease Exclusion | Excludes loss arising out of communicable disease, epidemic, or pandemic (added at 2022 renewal) | Follow form | Follow form | Follow form | Not at issue — claim arises from hurricane, not communicable disease
Delay / Loss of Market Exclusion | Excludes loss caused by delay, loss of market, or loss of use, unless resulting from direct physical loss or damage by a covered peril | Follow form | Follow form | Follow form | Potentially raised in connection with BI claim, but exception for covered-peril damage applies
[sheet: Period of Restoration]
Provision | Ironclad — Primary | Pinnacle — 1st Excess | Montclair — 2nd Excess | Sovereign Re — 3rd Excess | Dispute Analysis
Definition — Period of Restoration | Begins 72 hours after the time of direct physical loss or damage and ends on the earlier of: (a) the date when the property should be repaired, rebuilt, or replaced with reasonable speed and similar quality; or (b) the date when business is resumed at a new permanent location. | Follow form to Ironclad primary definition | Follow form to Ironclad primary definition | Follow form to Ironclad primary definition | DISPUTED: Ironclad argues 'should be repaired with reasonable speed' means repairs 'could have been completed' faster than actual restoration. VHG argues actual reasonable restoration period must account for post-hurricane contractor shortages, permitting delays, and supply chain disruptions.
Commencement | 72 hours after the time of direct physical loss or damage (i.e., 72 hours after September 18, 2022 = September 21, 2022) | Follow form | Follow form | Follow form | Commencement date is not disputed; all parties agree BI coverage begins September 21, 2022
Termination — Ironclad's Position | N/A (this is Ironclad's asserted position, not policy language) | N/A | N/A | N/A | Ironclad asserts properties could have been repaired with 'reasonable speed' earlier than actual reopening dates, arguing VHG unreasonably delayed restoration: Grand Key could have reopened by ~Jan 2023 (vs. March 15, 2023); Harborview by ~Dec 2022 (vs. Jan 31, 2023); Sunset Shores by ~Oct 2022 (vs. Nov 30, 2022 partial / Feb 28, 2023 full)
Termination — VHG's Position (Actual Closure Periods) | N/A (this is VHG's asserted position) | N/A | N/A | N/A | VHG asserts actual restoration periods were reasonable: Grand Key — 178 days (Sept 18, 2022 – Mar 15, 2023); Harborview — 135 days (Sept 18, 2022 – Jan 31, 2023); Sunset Shores — 73 days full closure (Sept 18 – Nov 30, 2022) + reduced capacity through Feb 28, 2023. Supported by Dr. Vasquez expert analysis and Caldwell Engineering report on structural damage timelines.
Extended Period of Indemnity | 180 days following completion of repairs to allow for business ramp-up | Follow form | Follow form | Follow form | Provides additional recovery period after reopening to account for diminished occupancy during ramp-up; relevant for all three properties
Duty to Mitigate / Resume Operations | Insured must use due diligence and dispatch to resume operations and reduce loss; must use substitute premises or methods if practicable | Follow form | Follow form | Follow form | INVOKED BY IRONCLAD: Fourth basis for denial — alleges VHG failed to take reasonable steps to reduce the period of interruption. VHG rebuts citing immediate engagement of contractors, emergency repairs, and documented permitting delays.
Partial Resumption of Operations | If insured resumes partial operations, BI loss is reduced by net income generated from partial operations | Follow form | Follow form | Follow form | Applicable to Sunset Shores which partially reopened Nov 30, 2022 while not at full capacity until Feb 28, 2023; VHG's claim accounts for reduced revenue during partial operations
Hypothetical Repair Standard | Period of restoration based on time it 'should' take to repair with 'reasonable speed and similar quality' — does not require cheapest or fastest method | Follow form | Follow form | Follow form | VHG argues 'similar quality' standard requires luxury-grade restoration consistent with resort properties; Ironclad argues generic commercial repair timeline
Exclusion of Increased Time Due to Ordinance/Law | Period of restoration does not include additional time to comply with ordinance or law unless Ordinance or Law coverage applies (separate sub-limit of $2,500,000) | Follow form | Follow form | Follow form | Post-hurricane building code upgrades required by Monroe and Lee Counties may have extended restoration; VHG argues this time is separately covered under O&L sub-limit
Impact of Contractor / Supply Chain Delays | Policy silent on post-catastrophe market conditions; standard is 'reasonable speed' | Follow form | Follow form | Follow form | VHG expert Dr. Vasquez (Meridian Consulting) opines that post-Cat 4 hurricane conditions (labor shortages, material delays, permitting backlogs) must be considered in assessing 'reasonable speed.' Ironclad argues hypothetical, pre-catastrophe repair timeline.