PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
INTERNAL MEMORANDUM
September 5, 2023
FROM: Tiffany Rosenthal, Lead Associate, Calderwood & Harkness LLP
TO: Elaine Forsythe, Responsible Partner, Calderwood & Harkness LLP
CC: Howard Bellamy, Billing Partner; Andrew Fitzpatrick, Working Associate
RE: Post-Deposition Summary & Key Admissions — Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al., Case No. 2022-CA-031547 (Eleventh Judicial Circuit, Miami-Dade County, Florida)
ENGAGEMENT NO.: 1021-00003
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I. PURPOSE AND EXECUTIVE SUMMARY
This memorandum summarizes the key testimony and admissions obtained during the fact-discovery deposition phase conducted between July 10 and August 28, 2023, in the above-captioned matter. Its purpose is to provide the litigation team with a consolidated reference document cataloging favorable admissions, identifying testimony that supports our client Verimark Hospitality Group Inc.'s ("VHG") anticipated motion for partial summary judgment on the windstorm sub-limit deletion issue, flagging potential vulnerabilities revealed during the deposition phase, and recommending concrete next steps for expert discovery and dispositive motions.
During the fact-discovery phase, six depositions were conducted. Calderwood & Harkness, on behalf of plaintiff VHG, noticed and examined four witnesses: (1) Victor Haddon, Senior Vice President of Claims at Ironclad Indemnity Corporation ("Ironclad"); (2) Denise Whitford, Lead Independent Adjuster at Arbor Claims Services LLC ("Arbor Claims"); (3) Franklin Orde, Account Executive at Tidewater Risk Advisors LLC ("Tidewater"); and (4) Sandra Pellegrini, VHG's Vice President of Risk Management, who was examined by defense counsel. In addition, defense counsel at Fendowell Rourke & Stanton LLP ("Fendowell"), representing Ironclad, conducted depositions of two VHG personnel: Marcus Ellsworth, Chief Executive Officer, and Diane Calder, Chief Financial Officer. Counsel for co-defendants Montclair Assurance Company ("Montclair") and Sovereign Re Ltd. ("Sovereign Re"), represented by Delvecchio & Kraus LLP, participated in the Pellegrini deposition through examination by Patricia Kraus.
Overall Assessment. The deposition record developed during this phase is highly favorable to VHG on the critical windstorm sub-limit deletion issue, which forms the centerpiece of our case. Every material witness who had first-hand knowledge of the July 2022 renewal negotiations — Franklin Orde, Sandra Pellegrini, and, by negative inference, Victor Haddon — confirmed that the $15 million named-windstorm sub-limit was deleted at renewal in exchange for an increased premium. The record is moderately favorable on Ironclad's period-of-restoration defense and its failure-to-mitigate argument, both of which are undermined by the testimony of Ironclad's own independent adjuster and the consistent, well-documented account of VHG's restoration efforts. The record presents a mixed picture on the concurrent causation and flood exclusion issue, particularly as it relates to Grand Key Resort, where storm surge contributed approximately 40% of the physical damage. A more detailed analysis of each issue follows in Section IX below.
This memorandum is organized as follows: Section II provides a summary schedule of all depositions. Sections III through VIII contain deposition-by-deposition summaries, including background information on each deponent, key admissions and testimony, cross-examination analysis, and individual assessments. Section IX provides a consolidated analysis of the four principal coverage issues in the case. Section X sets forth our recommendations and next steps. Section XI contains an appendix of deposition transcript citations for quick reference during briefing.
II. DEPOSITION SCHEDULE SUMMARY
The following table summarizes the six fact depositions conducted during the July 10 through August 28, 2023 discovery period:
All depositions were conducted in person and reported by a certified court reporter. Videography was utilized for the depositions of Victor Haddon, Denise Whitford, and Franklin Orde. Transcripts have been ordered on an expedited basis; rough transcripts are currently available for all six depositions. Final certified transcripts are expected by approximately September 12, 2023. All page and line citations in this memorandum reference the rough transcripts and will be updated upon receipt of the final versions.
III. DEPOSITION OF VICTOR HADDON (IRONCLAD SVP CLAIMS) — JULY 10, 2023
A. Background and Role
Victor Haddon has served as Ironclad Indemnity Corporation's Senior Vice President of Claims for approximately eleven years. In his capacity as SVP of Claims, Haddon is responsible for supervising all property and casualty claims with reserves exceeding $5 million. He reports directly to Ironclad's Executive Vice President of Operations, Richard Blaine, and maintains ultimate claims authority on matters within his portfolio, subject to board-level approval for claims or settlements exceeding $25 million.
Haddon testified that he personally supervised the VHG Hurricane Callista claim from the date of initial loss notice on September 22, 2022, through the formal denial issued on February 3, 2023. In this capacity, he was the primary decision-maker on all coverage determinations, engaged outside counsel (Fendowell Rourke & Stanton LLP), and directed the retention of Arbor Claims Services LLC as the independent adjusting firm. Specifically, Haddon testified that he retained Arbor Claims and designated Denise Whitford as lead adjuster on or about September 28, 2022, approximately ten days after Hurricane Callista's landfall and six days after receiving VHG's initial loss notice.
B. Key Admissions — Windstorm Sub-Limit
The most significant testimony elicited from Haddon relates to the windstorm sub-limit issue. In what constitutes one of the most important admissions in the case, Haddon testified that he was not personally involved in the July 2022 underwriting renewal of policy IIC-PRP-2022-07541 and was, in his own words, "not aware of the specific negotiations" between Ironclad's underwriting department and Tidewater Risk Advisors regarding the named-windstorm sub-limit. This admission is critical because it means that Ironclad's senior claims officer — the individual who made the coverage determination and authored the denial — lacked personal knowledge of whether the sub-limit had been retained or deleted at renewal.
When confronted with internal Ironclad emails exchanged between Ironclad underwriters and Franklin Orde of Tidewater during the May–June 2022 renewal period, Haddon acknowledged that the emails "could be read" as reflecting an agreement to remove the $15 million named-windstorm sub-limit in exchange for an increased premium. While Haddon stopped short of conceding that the sub-limit had in fact been deleted — maintaining that interpretation of the emails was a matter for the court — his inability to offer any contrary explanation is highly probative.
Haddon further admitted that the policy as issued for the 2022–2023 policy year did not include a standalone endorsement expressly imposing the $15 million windstorm sub-limit. Rather, the sub-limit language appeared in a prior-year endorsement form — specifically, Endorsement No. 7 from the 2021–2022 policy year — that was not expressly carried forward into the 2022–2023 policy through a new or renewed endorsement. When questioned on this point, Haddon could not explain why Endorsement No. 7 was referenced in the 2022–2023 policy form if the sub-limit had been deleted during renewal negotiations. He speculated that the policy issuance may have involved a "forms error" but emphasized he was not involved in the underwriting or policy issuance process.
In a particularly damaging concession, Haddon confirmed that Ironclad's underwriting file for the 2022–2023 renewal was "incomplete" regarding the sub-limit issue. He acknowledged that certain internal correspondence and underwriting notes that would ordinarily document a sub-limit decision were not present in the file maintained by the underwriting department. Haddon explained that the underwriter who handled the 2022 renewal, Gerald Pace, had left Ironclad in early 2023, shortly after the denial was issued, and that Pace's departure may have contributed to the incomplete state of the file. Haddon could not confirm whether Pace was interviewed regarding the sub-limit issue before leaving Ironclad, and he acknowledged that no exit-interview memorandum or file-transition document addressing the VHG account had been located.
Most critically for summary judgment purposes, Haddon could not identify any signed endorsement for the 2022–2023 policy year that expressly included or reimposed the $15 million windstorm sub-limit. When asked directly whether he could point to a single document generated during the 2022–2023 renewal that affirmatively established Ironclad's intent to maintain the sub-limit, Haddon was unable to do so.
Assessment for Summary Judgment: Haddon's admissions strongly support VHG's position that the windstorm sub-limit was deleted at renewal. His inability to point to a specific 2022–2023 endorsement imposing the sub-limit is powerful evidence that no such endorsement exists. His acknowledgment that the underwriting file is "incomplete" and that the responsible underwriter is no longer available further undermines Ironclad's ability to defend the sub-limit's continued existence. We recommend citing Haddon's deposition transcript extensively in our statement of undisputed material facts accompanying the partial summary judgment motion.
C. Key Testimony — Reservation of Rights and Denial
Haddon provided testimony regarding the procedural history of the claim that is relevant to both the coverage issues and the anticipated bad-faith claim. He confirmed that Ironclad's October 12, 2022 reservation of rights letter was drafted with substantive input from outside counsel at Fendowell Rourke & Stanton LLP, specifically Gregory Stanton. Haddon testified that Stanton reviewed and revised the reservation of rights letter before it was sent to VHG.
Haddon confirmed that Ironclad's February 3, 2023 formal denial of VHG's claim was based on four grounds: (1) application of the $15 million named-windstorm sub-limit; (2) assertion that VHG's claimed period of restoration was unreasonable; (3) the concurrent causation/flood exclusion defense as to damage caused by storm surge; and (4) VHG's alleged failure to mitigate its losses. Haddon testified that he personally approved the denial letter after review by Stanton and Fendowell.
In a noteworthy admission, Haddon conceded that Ironclad did not conduct its own engineering analysis of the cause of loss prior to issuing the denial. Instead, Ironclad relied solely on the adjustment report prepared by Arbor Claims Services, including Denise Whitford's property inspection findings and her causation assessments. Haddon acknowledged that Ironclad did not retain an independent engineer, meteorologist, or other expert to evaluate the relative contributions of wind and storm surge to the damage at VHG's properties before denying the claim.
Additionally, Haddon conceded that Ironclad never formally quantified what it believed the covered loss amount to be if the windstorm sub-limit were found not to apply. In other words, Ironclad denied the claim in its entirety without calculating a covered-loss figure under an alternative coverage scenario. This admission may be relevant to a future bad-faith analysis and suggests that Ironclad's denial was influenced heavily by the sub-limit argument rather than a good-faith assessment of the actual covered loss.
D. Key Testimony — Flood Exclusion / Concurrent Causation
Haddon's testimony on the concurrent causation and flood exclusion defense provides useful parameters for analyzing this issue. He testified that the concurrent causation/flood exclusion defense was "primarily applicable" to the Grand Key Resort property located at Mile Marker 48, Marathon, Florida 33050, where storm surge of approximately 8 to 14 feet was documented by both Arbor Claims and the National Weather Service.
Significantly, Haddon admitted that the Harborview Hotel & Conference Center (Fort Myers Beach) and Sunset Shores (St. Pete Beach) sustained "predominantly wind damage" based on Arbor Claims' inspections. This concession is important because it effectively narrows the scope of the flood exclusion defense to a single property — Grand Key Resort — and removes it as a viable defense to the BI claims arising from the other two properties.
Haddon acknowledged that Ironclad's policy contains an anti-concurrent causation clause, but when pressed on the specifics of its application, he could not recall whether the clause operated to exclude all concurrent losses (i.e., both the wind and flood components where the two causes are concurrent) or only the flood component. This lack of familiarity with the specific mechanics of a key policy provision in a $60 million claim is noteworthy and may be exploitable at trial.
E. Key Testimony — Period of Restoration
Haddon testified that Ironclad's position on the period of restoration was that Grand Key Resort's 178-day closure following Hurricane Callista was unreasonable and that repairs "could have been completed within 120 days with reasonable speed." This position, if sustained, would reduce VHG's BI claim by approximately 58 days' worth of lost income for Grand Key alone.
However, when pressed on the factual basis for the 120-day estimate, Haddon was unable to identify any specific contractor bid, engineering estimate, construction timeline, or project management analysis supporting that figure. He acknowledged that the 120-day estimate was not based on any formal assessment by Arbor Claims, an engineer, or a construction consultant. When asked directly where the number came from, Haddon testified it reflected his "experience with similar claims," but he could not identify any specific comparable claim.
Furthermore, Haddon admitted that he was not personally aware of the well-documented post-hurricane contractor shortage in the Florida Keys or the supply-chain delays affecting construction materials during the fall and winter of 2022–2023. He conceded that he did not investigate labor or materials availability in Monroe County before concluding that VHG's restoration timeline was unreasonable. This testimony significantly undermines the credibility of Ironclad's period-of-restoration defense.
F. Potential Vulnerabilities
While Haddon's testimony was overwhelmingly favorable to VHG, it is important to note certain aspects that may be used by defense counsel. Haddon's testimony regarding Ironclad's good-faith claims-handling process was generally consistent and disciplined. He maintained throughout the deposition that Ironclad believed in good faith that the windstorm sub-limit applied based on the policy form as issued, and that the denial was supported by a reasonable interpretation of the policy language and the Arbor Claims adjustment report.
Additionally, Haddon's testimony that Ironclad "relied on the policy as written" — i.e., the policy form as actually issued in September 2022, which referenced the prior-year Endorsement No. 7 containing the sub-limit — could be invoked by defense counsel to argue that the sub-limit issue is a question of contract interpretation rather than bad faith. Defense may contend that regardless of the renewal negotiations, the issued policy form governs, and Ironclad was entitled to rely on that form in making its coverage determination. While we believe this argument is ultimately unpersuasive under Florida law — particularly in light of the authenticated pre-policy correspondence and the binder — it should be anticipated and addressed in our briefing.
IV. DEPOSITION OF DENISE WHITFORD (ARBOR CLAIMS SERVICES) — JULY 24, 2023
A. Background and Role
Denise Whitford is the lead independent adjuster at Arbor Claims Services LLC, a Tampa, Florida-based independent adjusting firm. Whitford has approximately eighteen years of experience in property and casualty adjusting, with particular expertise in catastrophic weather-related losses. Arbor Claims was retained by Ironclad on approximately September 28, 2022, to inspect and adjust VHG's Hurricane Callista claim. Whitford was assigned as the lead adjuster and personally conducted the initial site inspections of all three VHG properties on October 5, 2022 — approximately seventeen days after Hurricane Callista's landfall.
Whitford testified that her engagement was limited to assessing physical damage, estimating repair costs, and providing causation opinions regarding the relative contributions of wind versus storm surge to the observed damage at each property. She confirmed that she prepared a comprehensive adjustment report for Ironclad dated November 30, 2022, which was one of the primary documents Ironclad relied upon in issuing its February 3, 2023 denial.
B. Key Admissions — Property Damage and Causation
Whitford provided detailed testimony regarding the nature and extent of damage at each of VHG's three Florida resort properties. Her testimony is significant because she was the only independent adjuster to physically inspect all three properties and because Ironclad relied on her report as the principal factual basis for its coverage determination.
Whitford confirmed that all three VHG properties sustained "significant" physical damage from Hurricane Callista consistent with Category 4 wind forces. She acknowledged that Hurricane Callista made landfall on September 18, 2022, with sustained winds of approximately 145 miles per hour and that the wind forces observed at VHG's properties were consistent with those sustained-wind measurements.
With respect to Grand Key Resort (Marathon, Florida), Whitford documented extensive roof damage across all guest room buildings, structural damage to the marina and dock facilities, and significant interior water intrusion from both wind-driven rain and storm surge. Whitford estimated that approximately 60% of the total physical damage at Grand Key was attributable to wind forces and approximately 40% was attributable to storm surge and flood-related inundation. She testified that the storm surge at Grand Key reached approximately 8 to 14 feet, consistent with NOAA post-storm survey data for the Marathon area. She noted that the first floor of the main lodge building and several ground-level guest units were significantly affected by storm surge penetration.
With respect to Harborview Hotel & Conference Center (Fort Myers Beach, Florida), Whitford estimated that "approximately 85% to 90%" of the physical damage was attributable to wind forces, with minimal storm surge impact. She attributed this to the property's slightly elevated position relative to the immediate shoreline and the presence of a reinforced seawall that reduced surge penetration. The primary damage at Harborview consisted of roof failures, window and curtain-wall damage, and extensive interior damage from wind-driven rain infiltration through compromised building envelopes.
With respect to Sunset Shores (St. Pete Beach, Florida), Whitford estimated that "approximately 80%" of the physical damage was attributable to wind forces, with the remainder resulting from wind-driven rain and minor surge intrusion. Sunset Shores was slightly farther from the hurricane's track and experienced somewhat lower surge levels than the other two properties.
In a particularly significant admission, Whitford testified that she did not disaggregate business-interruption losses between wind and flood causes in her adjustment report. Her causation analysis was limited to physical damage percentages at each property. She did not attempt to allocate the BI losses — which constitute the majority of VHG's $60 million claim — between covered (wind) and excluded (flood) causes. When asked why she did not perform this analysis, Whitford stated that such an allocation was "beyond the scope" of her engagement and would require forensic economic analysis rather than physical damage assessment. This is a critical gap in Ironclad's evidentiary position because it means Ironclad denied VHG's BI claim under the flood exclusion without any expert or adjuster analysis supporting the applicability of the exclusion to the business-interruption component of the loss.
C. Key Testimony — Period of Restoration
Whitford provided testimony that supports VHG's position on the reasonableness of the restoration timeline. She agreed that Grand Key Resort required "extensive structural repairs" including full roof replacement on multiple buildings, marina reconstruction, interior remediation and rebuild on the first floor of the main lodge and ground-level guest units, and significant mechanical, electrical, and plumbing system repairs. She confirmed that the property was not habitable for guests until the structural repairs were completed and that partial reopening was not feasible given the scope of the damage.
Critically, Whitford testified that she did not independently assess whether 178 days was a reasonable period for Grand Key restoration. She stated that evaluating the reasonableness of the restoration period was "beyond the scope" of her engagement with Ironclad. This admission is significant because it means that Ironclad's assertion that Grand Key could have been restored in 120 days was not supported by its own independent adjuster.
Additionally, Whitford noted, based on her personal observations during the October 2022 inspection and subsequent site visits, that contractor availability in Monroe County was "severely constrained" during the post-Callista period. She observed that multiple properties in the Marathon and Key West areas were competing for the same limited pool of licensed contractors, and that materials such as roofing supplies, impact-resistant glass, and structural steel were subject to extended lead times. This testimony directly corroborates VHG's position that the 178-day restoration timeline at Grand Key was reasonable given the extraordinary post-hurricane conditions in the Florida Keys.
D. Key Testimony — Mitigation
Whitford's testimony on VHG's mitigation efforts further undermines Ironclad's failure-to-mitigate defense. When asked about VHG's cooperation during the adjustment process, Whitford acknowledged that VHG's risk management team, led by Sandra Pellegrini, was "cooperative and responsive" throughout the claim. She testified that VHG provided requested documentation promptly, facilitated access to the properties for inspection, and maintained open lines of communication with Arbor Claims.
When asked directly whether she could identify any specific mitigation step that VHG failed to take, Whitford could not identify any such failure. She confirmed that VHG engaged emergency response contractors shortly after the storm, took steps to secure damaged structures, and initiated water extraction and mold remediation at the earliest safe opportunity. This testimony from Ironclad's own independent adjuster is powerful evidence against the failure-to-mitigate defense.
E. Assessment.  Whitford's testimony is favorable to VHG on multiple fronts. Her causation analysis — attributing 85–90% of Harborview damage and 80% of Sunset Shores damage to wind — effectively eliminates the flood exclusion as a meaningful defense for two of the three properties. Even at Grand Key, her 60/40 wind/surge allocation means that the majority of physical damage is covered.
Her failure to disaggregate BI losses between wind and flood causes creates a significant evidentiary gap for Ironclad. Without an adjuster or expert analysis allocating BI losses by cause, Ironclad cannot demonstrate entitlement to exclude any specific portion of the BI claim under the flood exclusion.
Her concession on contractor shortages in Monroe County directly supports VHG's period-of-restoration position and contradicts Haddon's unsupported assertion that Grand Key could have been restored in 120 days.
Finally, her positive assessment of VHG's mitigation efforts undermines one of the four stated bases for Ironclad's denial. We anticipate that Ironclad will have difficulty sustaining this defense at summary judgment or trial.
V. DEPOSITION OF FRANKLIN ORDE (TIDEWATER RISK ADVISORS) — AUGUST 28, 2023
A. Background and Role
Franklin Orde is the account executive at Tidewater Risk Advisors LLC, located at 2600 South Bayshore Drive, Suite 800, Miami, Florida 33133. Orde has served as VHG's insurance broker and risk advisor since 2018, managing the placement and renewal of VHG's comprehensive property and business-interruption insurance program. In this capacity, Orde is responsible for negotiating policy terms, premium structures, and coverage modifications with the various carriers in VHG's insurance tower.
For the July 1, 2022 through July 1, 2023 policy period at issue in this litigation, Orde placed VHG's layered property/BI program, which consisted of the following structure: Ironclad Indemnity Corporation as the primary-layer carrier; Pinnacle Insurance Group as the first excess carrier (follow-form); Montclair Assurance Company as the second excess carrier; and Sovereign Re Ltd. as the third excess carrier. Orde testified that the total insured limit across all layers was $150 million, with the Ironclad primary layer providing the first $50 million of coverage.
B. Key Admissions — Windstorm Sub-Limit Deletion
Franklin Orde's testimony constitutes the single most important piece of evidence in this case on the windstorm sub-limit issue. His testimony, corroborated by contemporaneous documentary evidence, establishes that the $15 million named-windstorm sub-limit was affirmatively deleted during the 2022 renewal negotiations.
Orde testified unequivocally that during the May–June 2022 renewal negotiation period, VHG, acting through its Vice President of Risk Management Sandra Pellegrini, specifically requested the deletion of the $15 million named-windstorm sub-limit that had appeared in the prior-year Ironclad policy (policy year 2021–2022). Orde confirmed that he conveyed this request to Ironclad's designated underwriter, Gerald Pace, and that after a series of negotiations, Ironclad agreed to delete the sub-limit in exchange for an additional premium of approximately $120,000 on the primary layer. This premium increase brought the Ironclad primary-layer premium from approximately $860,000 to $980,000 for the 2022–2023 policy year.
In what represents the most compelling evidentiary foundation for our summary judgment motion, Orde produced and authenticated email correspondence between himself and Gerald Pace. Two emails are of particular significance:
•  June 8, 2022 email (Orde to Pace): In this email, Orde formally requested, on behalf of VHG, the deletion of the named-windstorm sub-limit and proposed payment of an additional premium to compensate for the increased windstorm exposure.
•  June 14, 2022 email (Pace to Orde): In this responsive email, Pace confirmed on behalf of Ironclad: "windstorm sub-limit removed per insured's request; revised premium confirmed at $980K." This email constitutes direct, contemporaneous evidence that Ironclad's underwriter agreed to delete the sub-limit.
Both emails were authenticated by Orde during the deposition, marked as deposition exhibits, and are available for use in the summary judgment motion. The emails were produced by Tidewater from its files; notably, Ironclad's production did not include these emails, which is consistent with Haddon's admission that Ironclad's underwriting file is "incomplete."
Orde further testified that the binder issued by Ironclad on June 28, 2022, did not reference the windstorm sub-limit. The binder stated that coverage was to be provided "per expiring, except as amended per renewal agreement." Orde testified that the phrase "as amended per renewal agreement" encompassed, among other modifications, the deletion of the windstorm sub-limit as confirmed in the June 14, 2022 Pace email.
Orde testified that the formal policy document was not issued by Ironclad until approximately September 2022 — after Hurricane Callista had already struck. When Orde reviewed the issued policy form, he noticed that it still referenced the prior-year Endorsement No. 7, which contained the $15 million windstorm sub-limit language from the 2021–2022 policy year. Orde testified that he believed this reference was an error — that the policy issuance department had inadvertently included the outdated endorsement reference — and that the binder and renewal negotiations, rather than the erroneously issued policy form, governed the actual terms of coverage.
Orde's testimony on this point was emphatic. When asked to state his understanding of the status of the windstorm sub-limit at the time Hurricane Callista made landfall, Orde testified:
"It was my understanding, and the understanding I communicated to Verimark, that the named-windstorm sub-limit had been removed as part of the 2022 renewal. The additional premium was specifically for that deletion."
This testimony, coupled with the authenticated Orde-Pace email chain, forms the evidentiary backbone of VHG's partial summary judgment motion.
C. Key Testimony — Communications with VHG
Orde's testimony also establishes the information flow between Tidewater and VHG regarding the sub-limit deletion. Orde confirmed that he advised Sandra Pellegrini in June 2022 — following receipt of the Pace confirmation email — that the windstorm sub-limit had been successfully deleted from the renewed Ironclad primary policy. He testified that this communication was made both verbally and in writing.
Orde further confirmed that he provided VHG with a summary of coverage document reflecting the terms of the 2022–2023 insurance program. This coverage summary did not include a windstorm sub-limit for the Ironclad primary layer. Pellegrini's testimony (discussed in Section VIII below) corroborates that she reviewed and relied upon this coverage summary.
D. Cross-Examination by Defense
Gregory Stanton of Fendowell Rourke & Stanton LLP conducted cross-examination of Orde. Stanton pursued two principal lines of attack.
First, Stanton attempted to establish that the formal policy, as physically issued by Ironclad in September 2022, contained the sub-limit endorsement reference and should be treated as the governing document regardless of the pre-policy negotiations. Orde maintained his position that the formal policy was issued in error, that the binder and renewal negotiations controlled, and that the reference to Endorsement No. 7 in the issued policy was an administrative mistake by Ironclad's policy issuance department. Orde was consistent and firm on this point throughout the cross-examination.
Second, and more aggressively, Stanton attempted to establish that Orde had a potential errors-and-omissions ("E&O") exposure if the windstorm sub-limit were ultimately found to exist in the policy. Stanton's theory was that if the sub-limit was in fact never deleted — and VHG had requested its deletion — then Tidewater and Orde may have failed to procure the coverage VHG requested, exposing Tidewater to an E&O claim by VHG. Stanton's evident purpose was to suggest that Orde's testimony was influenced by self-interest in avoiding personal and professional liability. Orde acknowledged that he was aware of the theoretical possibility of an E&O claim but maintained his testimony without qualification, stating that the sub-limit was deleted and that his testimony reflected the facts as they occurred.
This line of cross-examination presents a minor concern but is unlikely to undermine Orde's credibility at summary judgment for several reasons: (a) Orde's testimony is corroborated by authenticated documentary evidence (the Pace emails); (b) Orde's account is consistent with Pellegrini's independent testimony; (c) Haddon's admissions regarding the incomplete file and the absence of a 2022–2023 sub-limit endorsement support Orde's version of events; and (d) Ironclad cannot produce Gerald Pace to contradict Orde's account.
E. Assessment.  Franklin Orde's testimony is the single most important piece of evidence on the windstorm sub-limit issue. His authenticated emails with Gerald Pace provide contemporaneous, written documentation that Ironclad agreed to delete the sub-limit. His testimony regarding the premium increase — from approximately $860,000 to $980,000 — provides the economic rationale for the deletion and demonstrates consideration for the coverage modification. His testimony regarding the binder and coverage summary further corroborates the deletion.
Ironclad's inability to produce Gerald Pace — who left Ironclad in early 2023 and who was the only Ironclad employee with first-hand knowledge of the renewal negotiations — further strengthens VHG's position. Ironclad cannot rebut Orde's account of the negotiations with Pace's live testimony, and any effort to introduce Pace's version of events through hearsay or secondary sources will face significant evidentiary challenges.
We strongly recommend obtaining a declaration from Franklin Orde in support of our partial summary judgment motion. The declaration should attach and authenticate the June 8 and June 14, 2022 emails, confirm the binder terms, and restate Orde's understanding that the sub-limit was deleted at renewal.
VI. DEPOSITION OF MARCUS ELLSWORTH (VHG CEO) — AUGUST 7, 2023
A. Background.  Marcus Ellsworth, Chief Executive Officer of Verimark Hospitality Group Inc. (Nasdaq: VMRK), was deposed by Gregory Stanton of Fendowell Rourke & Stanton LLP at VHG's corporate headquarters at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. Elaine Forsythe attended and defended the deposition on behalf of VHG. The deposition lasted approximately six hours, including breaks.
Ellsworth has served as CEO of VHG since 2016 and has been with the company in various executive capacities since 2009. VHG is a publicly traded hospitality company operating luxury resort properties in Florida, the Caribbean, and the Gulf Coast region. The three properties at issue in this litigation — Grand Key Resort, Harborview Hotel & Conference Center, and Sunset Shores — represent a significant portion of VHG's Florida portfolio and are among the company's highest-revenue-producing assets.
B. Key Testimony — Business Impact
Ellsworth provided extensive testimony regarding VHG's overall business operations and the catastrophic financial impact of Hurricane Callista on the company. He testified that VHG's consolidated fiscal year 2021 revenue was approximately $412 million, with EBITDA of approximately $78 million. The three affected Florida properties collectively contributed approximately $95 million in annual revenue and approximately $28 million in EBITDA during the 2021 fiscal year, representing roughly 23% and 36% of the company's total revenue and EBITDA, respectively.
Ellsworth described the timeline of events surrounding Hurricane Callista in detail. He testified that VHG initiated its hurricane preparedness protocols on approximately September 14, 2022, when Hurricane Callista was upgraded to a Category 3 storm and placed on a projected track toward the Florida Keys and southwest Florida coast. VHG evacuated all guests and non-essential staff from Grand Key Resort on September 16, 2022, following Monroe County's issuance of a mandatory evacuation order. Harborview and Sunset Shores were evacuated on September 17, 2022, when Lee County issued its own evacuation order for barrier island communities.
Ellsworth testified to his personal inspection of Grand Key Resort on September 22, 2022, four days after Hurricane Callista's landfall. He described what he observed as "devastation," including catastrophic roof failures across multiple guest room buildings, complete destruction of the marina and dock facilities, and significant interior flood damage from storm surge that had inundated the first floor of the main lodge building and ground-level guest units to a depth of several feet. His firsthand account is consistent with Whitford's inspection findings and photographs in the Arbor Claims adjustment report.
Ellsworth confirmed that VHG's board of directors authorized the filing of the $60 million business-interruption claim based on pre-loss financial projections prepared by VHG's finance team, led by CFO Diane Calder, and subsequently supported by the forensic economic analysis conducted by Dr. Helen Vasquez of Meridian Forensic Economics.
C. Key Testimony — Restoration Decisions
Defense counsel pressed Ellsworth on whether VHG could have reopened the affected properties sooner than it did. This line of questioning was directed at establishing the foundation for Ironclad's period-of-restoration and failure-to-mitigate defenses.
Ellsworth testified that VHG retained general contractors at all three properties "within days" of the storm. Specifically, he stated that VHG engaged its pre-existing disaster-response contractor, Atlantic Restoration Group, on September 20, 2022, and that Atlantic Restoration mobilized crews to each property as soon as conditions permitted safe access. However, Ellsworth explained that VHG faced acute labor shortages, as contractors and construction workers throughout southwest Florida and the Keys were overwhelmed with demand from residential, commercial, and governmental storm-recovery projects. He also testified to significant materials supply-chain disruptions, noting that roofing materials, impact-resistant window systems, and structural steel were subject to lead times of six to twelve weeks during the post-Callista period. Finally, Ellsworth described permitting delays caused by overwhelmed local building departments in Monroe County (Grand Key), Lee County (Harborview), and Pinellas County (Sunset Shores), where building inspectors and permit processors were dealing with unprecedented volumes of post-storm construction applications.
Ellsworth stated that VHG authorized overtime for all construction crews and implemented emergency procurement procedures at all three properties to accelerate the restoration timeline. He testified that VHG's management team held weekly progress meetings with the general contractor and that he personally received status reports on restoration progress at each property.
The actual restoration timelines for the three properties were as follows:
•  Sunset Shores (St. Pete Beach): The least-damaged of the three properties, Sunset Shores partially reopened on November 30, 2022 (73 days after the storm), with approximately 60% of guest rooms available. The property reached full capacity by February 28, 2023 (163 days).
•  Harborview Hotel & Conference Center (Fort Myers Beach): Harborview reopened on January 31, 2023 (135 days after the storm). The conference center wing required additional repairs and was not fully operational until approximately March 1, 2023.
•  Grand Key Resort (Marathon, FL): The most severely damaged property, Grand Key Resort reopened on March 15, 2023 (178 days after the storm). The marina facilities required additional reconstruction and were not fully operational until May 2023.
D. Defense Attempts to Establish Failure to Mitigate
Stanton questioned Ellsworth extensively about whether VHG had considered alternative strategies to mitigate its business-interruption losses during the property closures. In particular, Stanton asked whether VHG had considered transferring displaced guests to other VHG properties located outside the hurricane-affected zone.
Ellsworth explained that VHG's other properties were operating at or near capacity during the peak fall and winter season — traditionally the highest-demand period for Florida and Caribbean resort properties — and that transferring a meaningful number of guests from the three closed properties to other VHG locations was not feasible at scale. He noted that the three affected properties collectively had 722 guest rooms, and absorbing that capacity across VHG's remaining portfolio would have been logistically impractical.
However, Ellsworth did testify that VHG made efforts to redirect confirmed bookings to non-affected VHG properties "to the extent possible." He stated that VHG's central reservations team contacted guests with existing reservations at the three closed properties and offered alternative accommodations at other VHG resorts, where available, as well as credits for future stays. Ellsworth estimated that VHG was able to accommodate approximately 8% to 12% of displaced reservations at other properties during the closure period.
E. Assessment.  Ellsworth performed well as a deposition witness. His testimony was consistent with VHG's document production, the Arbor Claims adjustment report, and the testimony of other witnesses. He presented as knowledgeable, forthcoming, and credible, and he avoided overstatement or speculation.
No significant damaging admissions were made regarding mitigation or delay. Ellsworth's testimony on the severity of the storm damage, the extraordinary post-storm conditions in the affected areas, and VHG's diligent restoration efforts is credible and consistent with Whitford's observations and the contemporaneous documentary record. His testimony regarding guest-diversion efforts, while acknowledging the practical limitations, demonstrates that VHG took reasonable steps to mitigate its losses.
We anticipate that defense counsel may attempt to use Ellsworth's acknowledgment that only 8–12% of displaced reservations were accommodated at other properties as evidence of insufficient mitigation. However, this figure should be contextualized by the limited available capacity at VHG's other properties and the practical impossibility of absorbing 722 rooms of displaced demand during peak season.
VII. DEPOSITION OF DIANE CALDER (VHG CFO) — AUGUST 8, 2023
A. Background.  Diane Calder, Chief Financial Officer of Verimark Hospitality Group Inc., was deposed by Gregory Stanton and Meredith Liang of Fendowell Rourke & Stanton LLP on August 8, 2023, at VHG's corporate headquarters. Tiffany Rosenthal defended the deposition on behalf of VHG. The deposition lasted approximately seven hours, reflecting the depth and complexity of the financial testimony.
Calder has served as VHG's CFO since 2019 and was previously the company's Vice President of Finance. She holds a CPA license in Florida and an MBA from the University of Florida. In her role as CFO, Calder oversees all financial reporting, budgeting, forecasting, and financial analysis for VHG's portfolio of properties, including the preparation of the financial data underlying VHG's business-interruption claim.
B. Key Testimony — BI Loss Calculations
Calder provided detailed testimony regarding the financial methodology underlying VHG's $60 million business-interruption claim. Her testimony addressed the pre-loss performance metrics for each property, the projection methodology used to estimate lost income during the closure periods, and the treatment of saved expenses.
Calder confirmed the following pre-loss performance metrics for each of the three affected properties, based on the trailing twelve-month period ending September 2022:
Calder explained that VHG's BI loss calculation encompassed not only lost room revenue but also ancillary revenue streams that were directly affected by the property closures. These ancillary revenue streams included food and beverage operations at all three properties, marina slip fees and boat charter revenue at Grand Key Resort, conference center rental and event revenue at Harborview Hotel & Conference Center, and spa and wellness center revenue at Sunset Shores. Calder testified that ancillary revenue represented approximately 25% to 35% of total property-level revenue, depending on the property, and that the loss of these revenue streams during the closure periods was a significant component of VHG's total BI claim.
Calder further confirmed that saved expenses — i.e., variable costs that were not incurred during the closure periods — were properly deducted from the gross loss figures to arrive at the net BI loss. Saved expenses included variable labor costs (seasonal and hourly staff who were not retained during closures), utilities, guest supplies, food and beverage cost of goods sold, and other variable operating costs. Calder testified that fixed costs, including management salaries, insurance premiums, property taxes, and debt service, continued during the closure period and were not deducted. The net BI loss, after deduction of saved expenses, formed the basis of VHG's $60 million claim.
C. Key Testimony — Financial Records
Calder authenticated a substantial volume of financial records during her deposition, including VHG's monthly consolidated and property-level financial statements, property-level profit and loss reports for the 2020, 2021, and 2022 fiscal years, historical occupancy and ADR data, and advance booking reports for the Q4 2022 and Q1 2023 periods. These records form the foundation of the expert analysis being prepared by Dr. Helen Vasquez of Meridian Forensic Economics, and Calder confirmed that she provided these materials to Dr. Vasquez's team for use in the expert report.
Defense counsel questioned whether the Q4 2022 season would have matched prior-year performance levels absent Hurricane Callista, suggesting that VHG's projections may overstate what the properties would have earned in a no-loss scenario. Calder testified that VHG's advance booking data — which she described as "robust demand" for the 2022–2023 winter season — supported the projections. She stated that as of the date of the storm, Grand Key Resort had confirmed bookings representing approximately 78% of its Q4 2022 room inventory, Harborview was at approximately 71%, and Sunset Shores was at approximately 74%. These booking levels were consistent with or slightly above the properties' historical Q4 booking pace.
D. Defense Attempts to Challenge Projections
Stanton and Liang devoted a significant portion of the deposition to challenging the assumptions underlying VHG's financial projections. This line of questioning is plainly designed to lay the foundation for defense expert testimony from Dr. Warren Birk of Graystone Consulting Group, who we anticipate will challenge VHG's BI loss calculations in his expert report.
Specifically, Stanton and Liang questioned whether VHG's projections adequately accounted for general tourism-industry headwinds that existed in late 2022, including elevated inflation, rising interest rates, increased travel costs (particularly airfare and gasoline), and general consumer price sensitivity. Calder acknowledged that there was "some potential softening in demand" in the broader hospitality industry during late 2022, but she maintained that VHG's luxury resort segment was "less price-sensitive" than the broader market and that VHG's advance booking data, guest demographics, and average daily rate trends supported the projections. She noted that VHG's clientele skewed toward high-net-worth individuals and corporate groups, who historically demonstrated lower price elasticity.
This is a potential vulnerability for expert cross-examination. Dr. Birk may argue that VHG's projections are overstated because they fail to account for macroeconomic headwinds that would have reduced demand and ADR even absent the hurricane. While Calder's testimony on the luxury-segment distinction is helpful, we should ensure that Dr. Vasquez's expert report directly addresses this issue and incorporates a sensitivity analysis that demonstrates VHG's claim is well-supported even under conservative assumptions.
E. Assessment.  Calder was a well-prepared and effective witness. Her testimony was consistent with VHG's financial records, internally coherent, and presented with the precision and confidence appropriate for a CFO testifying about her company's financial performance. She avoided speculative or unsupported claims and appropriately qualified her projections by reference to historical data and advance booking information.
The defense's strongest line of attack during this deposition was the challenge to VHG's projection assumptions, particularly for the extended closure period at Grand Key Resort (178 days, extending through mid-March 2023). If VHG's projections for the Q1 2023 period at Grand Key are found to be overstated — because the spring season is traditionally a step-down from the winter peak — this could reduce the BI claim for that property. However, Calder testified that March is still within Grand Key's high season due to its Florida Keys location, and historical data supports strong ADR and occupancy through at least mid-April.
To mitigate this vulnerability, Dr. Vasquez's expert report should directly incorporate and analyze the advance booking data that Calder referenced, provide a comparison to historical booking pace and realized performance, and include a sensitivity analysis addressing the potential impact of macroeconomic conditions on demand.
VIII. DEPOSITION OF SANDRA PELLEGRINI (VHG VP RISK MANAGEMENT) — AUGUST 14, 2023
A. Background.  Sandra Pellegrini, Vice President of Risk Management at Verimark Hospitality Group Inc., was deposed on August 14, 2023. She was examined by Gregory Stanton and Colin Ashford of Fendowell Rourke & Stanton LLP on behalf of Ironclad, and by Patricia Kraus of Delvecchio & Kraus LLP on behalf of co-defendants Montclair Assurance Company and Sovereign Re Ltd. Elaine Forsythe defended the deposition on behalf of VHG.
Pellegrini has served as VHG's VP of Risk Management since 2017. In this role, she is responsible for the design, placement, and management of VHG's comprehensive insurance program, including the property and business-interruption coverage at issue in this litigation. She works directly with VHG's insurance broker, Tidewater Risk Advisors (Franklin Orde), on policy renewals, coverage negotiations, and claims management. Pellegrini reports to VHG's CFO, Diane Calder, and works closely with CEO Marcus Ellsworth on major risk-management decisions.
B. Key Admissions — Windstorm Sub-Limit Deletion (Corroborates Orde)
Pellegrini's testimony on the windstorm sub-limit issue directly corroborates the testimony of Franklin Orde and provides the insured's perspective on the deletion.
Pellegrini testified that she personally directed Franklin Orde at Tidewater Risk Advisors to negotiate deletion of the $15 million named-windstorm sub-limit at the July 2022 renewal. She explained that the sub-limit had been a concern for VHG's management team since its introduction in the 2021–2022 policy year, particularly given VHG's significant exposure to hurricane risk at its Florida Keys property (Grand Key Resort). Pellegrini testified that following internal discussions with Ellsworth and Calder in early 2022, VHG determined that the $15 million sub-limit was insufficient to cover a major hurricane loss and that VHG was willing to pay additional premium to obtain full windstorm coverage without a sub-limit.
Pellegrini stated that Orde confirmed to her in June 2022 — following his negotiations with Ironclad underwriter Gerald Pace — that the windstorm sub-limit had been removed from the renewed policy. She testified that she relied on this confirmation in managing VHG's risk profile and in reporting to VHG's senior management and board that the company had full windstorm coverage for the 2022–2023 policy year.
Pellegrini further testified that she reviewed and approved the coverage summary provided by Tidewater Risk Advisors for the 2022–2023 policy year. This coverage summary reflected no windstorm sub-limit on the Ironclad primary layer. Pellegrini relied on this document as the definitive statement of VHG's coverage terms.
When asked why she did not review the formal policy form when it was issued in September 2022, Pellegrini testified that she relied on the binder and Tidewater's coverage summary as the governing documents, and that she did not routinely review the full policy forms in detail when they were issued. She also noted that Hurricane Callista struck before she had the opportunity to conduct her usual post-issuance review. This testimony is significant because it demonstrates VHG's reasonable reliance on the broker's representations and the pre-policy documentation, and it negates any inference that VHG was aware of or acquiesced in the purported continuation of the sub-limit.
Pellegrini's testimony included a key statement that should be quoted in the summary judgment motion:
"I specifically asked Franklin [Orde] to get the windstorm sub-limit removed. He told me it was done. I relied on that."
This statement succinctly captures VHG's subjective intent, the broker's confirmation, and VHG's reliance — all of which are relevant to the windstorm sub-limit analysis under Florida law.
C. Key Testimony — Notice of Loss and Mitigation
Pellegrini provided detailed testimony regarding VHG's prompt notice of loss and comprehensive mitigation efforts following Hurricane Callista.
She testified that she coordinated VHG's notice of loss to Ironclad on September 22, 2022, four days after Hurricane Callista's landfall. The notice was submitted via email and certified mail to Ironclad's claims department, with a courtesy copy to Franklin Orde at Tidewater. Pellegrini confirmed that the notice was provided as soon as VHG was able to conduct preliminary assessments of the damage and confirm that a significant loss had occurred.
Pellegrini described VHG's mitigation efforts in detail:
•  Engagement of emergency response contractors (Atlantic Restoration Group) on September 20, 2022, before the formal notice of loss was submitted;
•  Boarding up of damaged windows, doors, and roof penetrations at all three properties to prevent further water intrusion;
•  Deployment of temporary generators to maintain essential building systems and prevent secondary damage (e.g., freezer operations, sump pumps, elevator controls);
•  Immediate commencement of water extraction and mold remediation upon safe access to the properties;
•  Engagement of licensed general contractors for permanent restoration work within the first week following the storm;
•  Coordination with local building departments to initiate the permitting process for structural repairs.
Pellegrini confirmed that VHG submitted its sworn statement in proof of loss in the amount of $60 million to Ironclad on November 15, 2022, approximately 58 days after the storm. The sworn statement was accompanied by supporting financial documentation prepared by Calder's finance team and a preliminary damage assessment from the general contractor.
D. Cross-Examination by Patricia Kraus (Montclair/Sovereign Re Counsel)
Patricia Kraus of Delvecchio & Kraus LLP, appearing on behalf of co-defendants Montclair Assurance Company and Sovereign Re Ltd., conducted a separate examination of Pellegrini that focused on issues specific to the excess layers of VHG's insurance program.
Kraus asked Pellegrini whether VHG had considered purchasing separate flood insurance, such as a National Flood Insurance Program ("NFIP") policy or a standalone private flood policy, to address the storm-surge risk at its coastal properties. Pellegrini testified that VHG's all-risk commercial property policies were intended to provide comprehensive coverage for all perils, including windstorm and associated storm surge, and that separate flood coverage was not necessary given the scope of the all-risk policy terms. She noted that VHG's risk management philosophy was to consolidate its property risk within a single comprehensive program rather than purchasing overlapping or siloed coverage from multiple sources.
Kraus also probed whether Pellegrini understood the scope and application of the flood exclusion contained in the Ironclad policy. Pellegrini testified that she was aware of a flood exclusion in the policy but understood it to apply to "rising waters unrelated to named windstorms" — such as riverine flooding, flash flooding, or groundwater intrusion — rather than storm surge directly caused by a named hurricane. She testified that this understanding was consistent with her discussions with Orde and with her experience managing VHG's insurance program over multiple policy years.
This testimony is potentially significant with respect to the concurrent causation issue. Under Florida law, the insured's reasonable expectations of coverage may be relevant to the interpretation of policy exclusions, particularly where the exclusionary language is ambiguous. Pellegrini's testimony regarding her understanding of the flood exclusion supports VHG's position that the exclusion was not intended to apply to hurricane-generated storm surge.
E. Assessment.  Pellegrini's testimony is critical to the windstorm sub-limit motion because she directly corroborates Franklin Orde's account of the deletion and provides VHG's subjective intent and documented reliance on the deletion. Her testimony, combined with Orde's authenticated emails and Haddon's admissions, creates a compelling evidentiary record that the sub-limit was affirmatively deleted at renewal.
We recommend obtaining a supporting declaration from Sandra Pellegrini for the partial summary judgment motion. The declaration should confirm her directive to Orde, Orde's confirmation that the deletion was accomplished, her review and approval of the coverage summary reflecting no sub-limit, and her reliance on the binder and coverage summary as the governing coverage documents.
Pellegrini's testimony on mitigation is uniformly strong and undercuts Ironclad's failure-to-mitigate defense. Her detailed account of VHG's prompt and comprehensive response to Hurricane Callista, corroborated by Whitford's acknowledgment that VHG was "cooperative and responsive," effectively eliminates this defense from the case.
IX. CONSOLIDATED ANALYSIS OF KEY ISSUES
This section consolidates the deposition testimony and documentary evidence bearing on the four principal coverage issues in the case and provides an overall assessment of VHG's position on each issue as we approach the dispositive motion and expert discovery phases.
A. Windstorm Sub-Limit Deletion — Summary of Evidence
The following table consolidates the evidence on the windstorm sub-limit issue — the central issue in this case and the subject of VHG's anticipated motion for partial summary judgment:
Assessment: The evidence strongly supports a motion for partial summary judgment on the windstorm sub-limit issue. VHG can demonstrate that the sub-limit was deleted as a matter of undisputed fact through multiple converging lines of evidence: (1) the testimony of the broker who negotiated the deletion (Orde); (2) the testimony of the insured's representative who directed the deletion (Pellegrini); (3) authenticated contemporaneous emails confirming the deletion by Ironclad's own underwriter (Pace); (4) the premium increase reflecting the economic value of the deletion; (5) the binder omitting any reference to a sub-limit; and (6) the absence of any 2022–2023 endorsement affirmatively imposing the sub-limit.
In the alternative, even if the Court determines that a genuine issue of material fact exists regarding whether the sub-limit was actually deleted, VHG can argue that the policy is at minimum ambiguous — the issued policy form references a prior-year endorsement, while the binder, the pre-policy correspondence, and the coverage summary all reflect no sub-limit — a