1021-00003 · Verimark Hospitality Group · Expert Engagement

expert-retention-letter-meridian.docx DOCUMENT Antitrust

34 / 75 ← → ✕

Contract analysis Extract to table

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 333 SE 2nd Avenue, Suite 4400 Miami, FL 33131

Telephone: (305) 555-7200 Facsimile: (305) 555-7201

April 20, 2023

VIA ELECTRONIC MAIL AND FACSIMILE

Meridian Forensic Economics LLC

Attn: Dr. Helen Vasquez, CPA, CFF, Managing Principal

1201 Peachtree Street NE, Suite 1000 Atlanta, GA 30361

Re: Retention of Meridian Forensic Economics LLC as Expert Consultant and Testifying Expert — Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al., Case No. 2022-CA-031547, Eleventh Judicial Circuit of Florida, Miami-Dade County

Engagement No.: 1021-00003

Dear Dr. Vasquez:

Thank you for your willingness to assist our client in this matter. This letter sets forth the terms upon which Calderwood & Harkness LLP ("the Firm" or "Calderwood & Harkness") proposes to retain Meridian Forensic Economics LLC ("Meridian" or "the Expert Firm") and you personally, Dr. Helen Vasquez, CPA, CFF (together with Meridian, the "Expert"), as a forensic accounting and damages expert in connection with the above-referenced litigation. We ask that you review the terms set forth herein carefully and, if they are acceptable, execute the acceptance block at the conclusion of this letter and return one fully executed copy to our offices.

1. Engagement Purpose and Overview

Calderwood & Harkness LLP 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. VHG is a hospitality and real-estate company that owns and operates resort properties across the southeastern United States and the Caribbean. For its fiscal year ending December 31, 2021, VHG reported consolidated revenue of approximately $412 million and adjusted EBITDA of approximately $78 million.

VHG is the plaintiff in civil litigation currently pending before the Honorable Catherine Embry in the Eleventh Judicial Circuit of Florida, in and for Miami-Dade County, styled Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al., Case No. 2022-CA-031547 (the "Action" or the "Litigation"). The purpose of this engagement letter is to formally retain Dr. Helen Vasquez and Meridian Forensic Economics LLC as the forensic accounting and damages expert for VHG in connection with VHG's business-interruption insurance coverage claims arising from Hurricane Callista. In this capacity, the Expert will be expected to serve as both a consulting expert—to assist counsel in understanding damages issues and developing case strategy—and a testifying expert—to prepare written expert reports and to deliver expert testimony at deposition and at trial.

This engagement has been authorized at the direction of Elaine Forsythe, Partner, who serves as the Responsible Partner on this matter. Day-to-day coordination of the engagement, including the transmission of documents, scheduling of calls, and management of billing, will be handled by Tiffany Rosenthal, Lead Associate. Andrew Fitzpatrick, Working Associate, will also be involved in document production and coordination with the Expert on an as-needed basis.

2. Background of the Matter

The following summary is provided so that the Expert may understand the factual and legal context of the Litigation. This summary is based on information available to the Firm as of the date of this letter and is not intended to be exhaustive. Additional facts and documents will be provided to the Expert in the course of the engagement.

2.1 The Parties

Plaintiff. As noted above, Verimark Hospitality Group Inc. is a publicly traded hospitality and real-estate company headquartered in Miami, Florida. VHG owns and operates a portfolio of resort, hotel, and conference-center properties. For purposes of this engagement, the relevant properties are three resort facilities located in the State of Florida, each of which sustained catastrophic damage as a result of Hurricane Callista in September 2022. VHG's reported financial performance for fiscal year 2021—revenue of $412 million and EBITDA of $78 million—provides general context for the scale of VHG's operations and the materiality of the losses at issue.

Defendants. VHG has named as defendants the four insurers comprising VHG's property-and-casualty insurance tower for the relevant policy period:

1. Ironclad Indemnity Corporation — the primary-layer carrier, domiciled in the State of Connecticut. Ironclad issued all-risk commercial property policy number IIC-PRP-2022-07541, providing $25,000,000 in coverage above a $500,000 per-occurrence deductible. Ironclad is represented by Fendowell Rourke & Stanton LLP.

2. Pinnacle Surplus Lines Inc. — the first excess-layer carrier, domiciled in the State of Texas. Pinnacle issued excess policy number PSL-XS1-2022-3390, providing $15,000,000 in coverage excess of the underlying $25,000,000 primary limit (i.e., $15,000,000 excess of $25,000,000, attaching at $25,500,000 inclusive of the deductible). Pinnacle is represented by Fendowell Rourke & Stanton LLP.

3. Montclair Assurance Company — the second excess-layer carrier, domiciled in the State of New York. Montclair issued excess policy number MAC-XS2-2022-09817, providing $10,000,000 in coverage excess of the aggregate of the primary and first excess layers (i.e., $10,000,000 excess of $40,000,000, attaching at $40,500,000 inclusive of the deductible). Montclair is represented by Delvecchio & Kraus LLP.

4. Sovereign Re Ltd. — the third excess-layer carrier, domiciled in Bermuda. Sovereign Re issued excess policy number SRL-XS3-2022-5102, providing $10,000,000 in coverage excess of the aggregate of the underlying layers (i.e., $10,000,000 excess of $50,000,000, attaching at $50,500,000 inclusive of the deductible). Sovereign Re is represented by Delvecchio & Kraus LLP.

In total, VHG's insurance tower provides $60,000,000 in available coverage above a $500,000 per-occurrence deductible. The annual aggregate premium for the four-layer tower was $1,840,000 for the relevant policy period. Copies of all four policies will be provided to the Expert for review.

2.2 The Loss Event — Hurricane Callista

The insured loss at issue arose from Hurricane Callista, a Category 4 hurricane that struck the State of Florida in September 2022. The following is a brief chronology of the storm:

• September 12, 2022: The National Hurricane Center designated the tropical system as Tropical Storm Callista and began issuing advisories.

• September 16, 2022: Monroe County issued a mandatory evacuation order for all residents and visitors in the Florida Keys, including the Marathon area.

• September 17, 2022: Lee County issued a mandatory evacuation order for barrier islands and low-lying coastal areas, including Fort Myers Beach and surrounding communities.

• September 18, 2022, approximately 1:30 PM EDT: Hurricane Callista made landfall in the Lower Florida Keys near Big Pine Key as a Category 4 hurricane with maximum sustained winds of approximately 145 miles per hour. The storm produced catastrophic storm surge of 8 to 14 feet in Monroe County and 6 to 10 feet in Lee County, along with widespread wind damage, flooding, and infrastructure destruction throughout the affected area.

All three of VHG's Florida resort properties were forced to close their operations on or before September 18, 2022, as a direct result of Hurricane Callista and the associated evacuation orders. The damage sustained at each property, and the duration of the resulting business interruption, is summarized in Section 2.3 below.

2.3 The Insured Properties

VHG's claim encompasses business-interruption losses at three resort properties located in Florida:

Property 1: Verimark Grand Key Resort

• Location: Mile Marker 48, Marathon, Florida 33050

• Description: A 312-room luxury resort and full-service marina situated on the Gulf side of the Florida Keys

• Pre-Loss Performance Metrics: Average Daily Rate (ADR) of $389; average occupancy rate of 82%

• Closure Period: September 18, 2022, through March 15, 2023 — a total of 178 consecutive days of full closure

• Estimated Business-Interruption Loss: $31,400,000

• Nature of Damage: The Grand Key Resort sustained the most severe damage of the three properties, including catastrophic storm-surge inundation of the ground-floor guest rooms and public areas, extensive wind damage to the roof and exterior envelope, near-total destruction of the marina and dock facilities, and prolonged loss of utility services and road access

Property 2: Verimark Harborview Hotel & Conference Center

• Location: 1400 Estero Boulevard, Fort Myers Beach, Florida 33931

• Description: A 224-room full-service hotel with a 40,000-square-foot conference and event facility, located on Fort Myers Beach

• Pre-Loss Performance Metrics: Average Daily Rate (ADR) of $295; average occupancy rate of 74%

• Closure Period: September 18, 2022, through January 31, 2023 — a total of 135 consecutive days of full closure

• Estimated Business-Interruption Loss: $18,700,000

• Nature of Damage: The Harborview sustained significant storm-surge and wind damage, particularly to the conference-center wing and ground-level mechanical systems. The property's beachfront location resulted in severe erosion and sand intrusion that required extensive remediation before reopening

Property 3: Verimark Sunset Shores

• Location: 7200 Gulf Boulevard, St. Pete Beach, Florida 33706

• Description: A 186-room boutique resort on St. Pete Beach

• Pre-Loss Performance Metrics: Average Daily Rate (ADR) of $342; average occupancy rate of 79%

• Closure Period: Full closure from September 18, 2022, through November 30, 2022 (73 consecutive days); the property thereafter operated at reduced capacity through February 2023, with full capacity restored by February 28, 2023

• Estimated Business-Interruption Loss: $9,900,000

• Nature of Damage: Sunset Shores sustained moderate wind damage and limited storm-surge impact; the primary drivers of the extended closure and reduced-capacity period were damage to the roof structure, disruption of HVAC systems, and the unavailability of certain guest-room wings during restoration

Total Claimed Business-Interruption Loss: The sum of the estimated business-interruption losses across the three properties is $60,000,000 ($31,400,000 + $18,700,000 + $9,900,000), which equals the full available limit of VHG's insurance tower.

2.4 Coverage Dispute Summary

VHG promptly notified its insurers of the Hurricane Callista losses. The following summarizes the key events in the coverage dispute:

• September 22, 2022: VHG submitted an initial notice of loss to Ironclad Indemnity Corporation as the primary-layer carrier, with copies to the excess-layer carriers.

• October 12, 2022: Ironclad issued a reservation of rights letter, identifying several potential coverage defenses.

• November 15, 2022: VHG submitted a sworn statement in proof of loss to Ironclad in the amount of $60,000,000, representing the total business-interruption loss across all three properties.

• February 3, 2023: Ironclad issued a formal coverage denial, declining to pay any portion of VHG's claim.

• February 10, 2023: Pinnacle Surplus Lines Inc., as the first excess carrier, followed Ironclad's denial and likewise declined coverage.

• February 2023 (various dates): Montclair Assurance Company and Sovereign Re Ltd. issued reservation of rights letters but did not issue formal denials of coverage. Both carriers have indicated that their coverage obligations are contingent on the resolution of the underlying primary and first-excess coverage disputes.

• March 1, 2023: VHG, through Calderwood & Harkness LLP, filed the Complaint initiating the Action.

The key coverage issues currently in dispute include the following:

(i) Named-Windstorm Sub-Limit. Ironclad contends that the primary policy contains a $15,000,000 sub-limit applicable to losses caused by named windstorms. VHG's position is that this sub-limit was deleted at the July 2022 policy renewal and that the full $25,000,000 policy limit applies to VHG's Hurricane Callista losses. Documentary evidence regarding the deletion of the sub-limit at renewal is a central issue in the Litigation.

(ii) Period of Restoration. The defendants contend that VHG unreasonably delayed restoration of the insured properties, thereby extending the period of business interruption beyond what was necessary. VHG's position is that the closure periods at each property were reasonable and dictated by the severity of the physical damage, supply-chain disruptions for building materials, and labor shortages in the post-hurricane environment.

(iii) Concurrent Causation / Flood Exclusion. Ironclad has asserted that a portion of the damage at the Grand Key Resort was caused by flood (storm surge) rather than wind, and that the flood exclusion in the policy precludes coverage for flood-related business-interruption losses. VHG contends that the concurrent-causation doctrine under Florida law, together with the anti-concurrent-causation language in the policy, supports coverage for the entire loss.

(iv) Failure to Mitigate. The defendants have alleged that VHG failed to take reasonable steps to mitigate its business-interruption losses, including by failing to implement interim revenue-generating measures and by allegedly delaying the procurement of restoration contractors.

Each of these coverage issues has potential implications for the damages analysis. The Expert's work will be central to quantifying VHG's losses and rebutting the defendants' challenges to the claimed damages.

3. Scope of Engagement

3.1 Primary Assignment

Calderwood & Harkness retains Dr. Vasquez and Meridian Forensic Economics LLC to serve as VHG's forensic accounting and damages expert in this matter. The primary assignment is to quantify the business-interruption losses suffered by VHG at the three insured properties identified in Section 2.3 above as a result of Hurricane Callista. The Expert's opinion must address the total claimed business-interruption loss of approximately $60,000,000, including the allocation of that loss among the three individual properties, the applicable periods of restoration, and the methodology employed to calculate each component of the loss.

3.2 Specific Tasks

The Expert's engagement will encompass the following specific tasks, subject to modification or supplementation as the Litigation progresses and as directed by counsel:

a. Historical Financial Analysis. Review and analyze VHG's historical financial performance at each of the three resort properties for the three fiscal years preceding the loss event—fiscal years 2019, 2020, and 2021—as well as all available fiscal year 2022 pre-loss data (January 1 through September 17, 2022). This analysis should encompass revenue by department (rooms, food and beverage, marina, conference and events, spa, and other ancillary revenue streams), operating expenses (both fixed and variable), departmental profit and loss statements, and overall property-level profitability. The Expert should identify and account for the impact of the COVID-19 pandemic on fiscal year 2020 and 2021 financial performance and determine the appropriate baseline for projecting but-for revenue and profitability.

b. Revenue Projection / But-For Analysis. Project the revenue each property would have earned during its respective period of closure and reduced-capacity operation absent Hurricane Callista. This but-for analysis should incorporate property-level performance metrics including average daily rate (ADR), occupancy rates, revenue per available room (RevPAR), ancillary revenue streams (food and beverage, marina operations, conference-center bookings, spa revenue, and other sources), and seasonal adjustments reflecting the historical demand patterns at each property. The Expert should also consider broader market conditions, competitive-set performance data (STR reports or equivalent), and any VHG-specific factors (such as capital improvements, marketing initiatives, or new contracts) that would have affected the properties' performance during the loss period.

c. Saved Expenses Analysis. Identify and quantify the expenses saved by VHG during the closure and reduced-capacity periods at each property. This analysis should distinguish between fixed costs that continued during the closure (such as property taxes, insurance premiums, debt service, management fees, and certain labor costs) and variable costs that were not incurred as a result of the closure (such as food and beverage cost of goods sold, housekeeping supplies, guest amenities, utilities consumption above base levels, and seasonal or temporary labor). The saved-expenses analysis is a necessary component of the net business-interruption loss calculation and must be performed at the individual property level.

d. Extra Expense Analysis. Review and opine on the extra expenses reasonably incurred by VHG during the post-loss period to mitigate or reduce the period of business interruption. This may include costs associated with temporary facilities, employee relocation and retention, expedited procurement of building materials, temporary utility and generator costs, accelerated contractor mobilization, guest relocation assistance, and other incremental costs incurred to resume operations at the earliest practicable date. The Expert should evaluate whether these extra expenses were reasonable and whether they reduced the overall period of interruption.

e. Period of Restoration Analysis. Opine on the appropriate period of restoration for each property under the applicable policy definitions and Florida law. This analysis should address whether the actual closure periods—178 days for the Grand Key Resort, 135 days for the Harborview Hotel & Conference Center, and 73 days of full closure plus approximately 90 days of reduced capacity for Sunset Shores—were reasonable in light of the scope of physical damage, the availability of contractors and building materials in the post-hurricane environment, applicable governmental and regulatory requirements, and industry standards for the restoration of comparable hospitality facilities. The Expert should coordinate with Jeffrey Caldwell, PE, of Caldwell Engineering Associates Inc. (the Firm's retained forensic engineer) to the extent the period-of-restoration analysis requires engineering input regarding the timeline for physical repairs.

f. Mitigation Analysis. Address any contentions by the defendants that VHG failed to mitigate its business-interruption losses. The Expert should evaluate, with supporting financial analysis, whether VHG took reasonable steps to mitigate losses, including the timing of contractor engagement, the feasibility of interim revenue-generating measures (such as partial reopening or alternative-use strategies), and the reasonableness of VHG's decisions regarding the sequencing of restoration activities.

g. Rebuttal Work. Review and respond to any expert opinions offered by the defendants' damages expert. As of the date of this letter, defense counsel has not yet identified its damages expert, but we anticipate that one or more experts will be retained. The Expert should be prepared to analyze the opposing expert's methodology, assumptions, data sources, and conclusions, and to prepare a rebuttal expert report addressing any areas of disagreement.

3.3 Deliverables. The Expert is expected to produce the following deliverables over the course of the engagement:

1. Preliminary Findings Memorandum. A memorandum setting forth the Expert's preliminary findings and analysis for counsel's use in connection with case strategy and mediation preparation. This memorandum is intended for internal use by the Firm and VHG and is not intended for production to opposing parties.

2. Draft Expert Report. A draft of the Expert's written report, to be submitted to counsel for review and comment prior to finalization. The draft report should set forth the Expert's opinions, the bases for those opinions, the data and methodology relied upon, and all exhibits and supporting schedules. Counsel's review of the draft is intended to ensure completeness, clarity, and compliance with applicable procedural requirements, and not to influence the substance of the Expert's opinions.

3. Final Expert Report. A final expert report suitable for service on opposing parties and filing with the Court, prepared in accordance with the applicable rules of the Eleventh Judicial Circuit of Florida and any applicable case management orders entered by Judge Embry. The final report must comply with all requirements for expert disclosures under Florida Rule of Civil Procedure 1.280(b)(5) and any other applicable provisions.

4. Rebuttal Expert Report. If warranted by the opinions offered by the defendants' expert(s), a rebuttal expert report addressing the areas of disagreement and responding to the opposing expert's methodology, assumptions, and conclusions.

5. Testimony. Availability for deposition testimony and trial testimony as required by the course of the Litigation. The Expert should anticipate a deposition of approximately one day in duration, to be taken in Miami, Florida or such other location as the parties may agree. Trial testimony may require the Expert's availability for multiple days, depending on the trial schedule.

4. Consulting vs. Testifying Expert Status

Dr. Vasquez's initial retention is in a dual capacity. She will serve as a consulting expert—assisting counsel in understanding damages issues, analyzing financial data, and developing case strategy—and as a testifying expert—preparing written expert reports and delivering expert testimony at deposition and at trial.

Dr. Vasquez should be aware that, under Florida law, communications between a testifying expert and retaining counsel regarding the expert's opinions and the bases and reasons therefor may be subject to discovery by opposing parties. Calderwood & Harkness will provide specific guidance on the scope of discoverable materials under Florida Rule of Civil Procedure 1.280(b)(5) and applicable case law. In general, the Expert should be mindful that draft reports, notes reflecting the Expert's analysis and opinions, and communications with counsel regarding the Expert's methodology and conclusions may fall within the scope of permissible discovery.

To protect privileged and work-product materials to the extent permitted by law, Calderwood & Harkness requests that all draft reports, preliminary analyses, and communications with counsel regarding analysis methodology be clearly labeled in accordance with counsel's instructions. The Firm will provide the Expert with specific protocols for document labeling, communication channels, and the segregation of consulting-capacity work product from testifying-capacity work product.

5. Fee Terms and Billing

5.1 Hourly Rates

The Expert will be compensated on an hourly basis at the following rates:

These hourly rates are effective as of the date of this letter. In the event that Meridian proposes to increase any hourly rate during the course of the engagement, such increase must be communicated to Calderwood & Harkness in writing at least thirty (30) days in advance and must be approved in writing by the Responsible Partner or her designee before becoming effective. No rate increase shall apply retroactively to services already rendered.

The Expert's compensation is not contingent upon the outcome of the Litigation. The Expert will be compensated for all time reasonably expended in connection with the engagement, regardless of whether VHG prevails in the Litigation.

5.2 Billing Procedures

Meridian shall submit monthly invoices to:

Calderwood & Harkness LLP

Attn: Tiffany Rosenthal

333 SE 2nd Avenue, Suite 4400 Miami, FL 33131

Email: trosenthal@calderwoodharkness.com

All invoices must reference the matter name (Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al.) and the engagement number 1021-00003. Each invoice shall include detailed time entries specifying the description of work performed, the date of the work, the identity of the timekeeper who performed the work, and the number of hours expended. Invoices shall also include an itemized listing of all out-of-pocket expenses incurred during the billing period, with supporting documentation as reasonably available.

Payment shall be due within thirty (30) days of receipt of each invoice. Calderwood & Harkness LLP shall be solely responsible for the payment of all fees and expenses; Verimark Hospitality Group Inc. is not directly liable to Meridian Forensic Economics LLC for any fees or expenses under this engagement. Calderwood & Harkness reserves the right to review invoices and to request clarification or additional detail regarding any time entries or expense items.

5.3 Expenses. Reasonable out-of-pocket expenses incurred by the Expert in connection with this engagement—including, without limitation, travel expenses (airfare, ground transportation, parking), lodging, meals during travel, printing and reproduction costs, data acquisition costs, and specialized software or database access fees—will be reimbursed at cost upon submission of itemized receipts. The Expert shall exercise reasonable judgment in incurring expenses and shall seek the most cost-effective alternatives consistent with the requirements of the engagement.

Any single expense item exceeding $2,500.00 requires prior written approval from Tiffany Rosenthal before the expense is incurred. For purposes of clarity, this threshold applies to individual expense items (e.g., a single airfare, a single hotel booking, or a single data-acquisition fee), not to aggregate monthly expenses.

Travel expenses associated with site inspections of the three VHG properties located in Marathon, Fort Myers Beach, and St. Pete Beach, Florida, are anticipated in connection with this engagement and are hereby pre-approved, provided that the Expert coordinates the scheduling of such site visits with Tiffany Rosenthal in advance. Overnight lodging at reasonable market rates in the vicinity of each property during site inspections is also pre-approved.

6. Data and Document Access

Calderwood & Harkness will provide the Expert with access to the documents and data necessary to perform the engagement. The Firm anticipates that the following categories of documents and data will be made available to the Expert, either through a secure electronic document-review platform or by other agreed-upon means:

• VHG Financial Records: Property-level income statements, revenue reports, occupancy data, average daily rate data, departmental profit and loss statements, general ledgers, chart of accounts, and other financial records for the three insured properties for fiscal years 2019, 2020, 2021, and 2022 (through the date of loss and post-loss).

• Insurance Policies: Complete copies of all four insurance policies comprising VHG's property-and-casualty insurance tower—the Ironclad primary policy (IIC-PRP-2022-07541), the Pinnacle first excess policy (PSL-XS1-2022-3390), the Montclair second excess policy (MAC-XS2-2022-09817), and the Sovereign Re third excess policy (SRL-XS3-2022-5102)—together with all endorsements, riders, and renewal documentation.

• Sworn Statement in Proof of Loss: VHG's sworn statement in proof of loss dated November 15, 2022, claiming $60,000,000 in business-interruption losses, together with all supporting schedules and exhibits submitted therewith.

• Property Damage Reports and Repair Timelines: Reports documenting the physical damage sustained at each property, contractor proposals and invoices, restoration timelines, building permits, inspection reports, and certificates of occupancy.

• Forensic Engineering Reports: Reports and analyses prepared by Caldwell Engineering Associates Inc. (Jeffrey Caldwell, PE), the forensic engineer retained by Calderwood & Harkness to provide causation and damage analysis. Mr. Caldwell's reports may contain information relevant to the period-of-restoration analysis and the concurrent-causation issues.

• Independent Adjuster Reports: Reports prepared by Arbor Claims Services LLC (Denise Whitford), the independent adjuster retained in connection with the claim, including preliminary loss estimates, site inspection reports, and correspondence with the carriers.

• Deposition Transcripts: Transcripts of depositions taken in the Litigation, as they become available, including depositions of VHG personnel, carrier representatives, adjusters, and other fact witnesses.

• Pre-Loss Budgets, Forecasts, and Booking Data: VHG's internal budgets, financial forecasts, and reservation and booking data for the three insured properties, including forward-looking booking data as of the date of loss.

Tiffany Rosenthal will serve as the primary point of contact for all data requests submitted by the Expert. The Expert should direct all requests for documents or data to Ms. Rosenthal in writing (email is acceptable), and the Firm will endeavor to respond to such requests on a timely basis. Andrew Fitzpatrick will assist with document production and coordination and may serve as an alternative point of contact for data-related inquiries.

The Expert should promptly notify Calderwood & Harkness if, at any point during the engagement, the Expert identifies documents or data that are needed but have not yet been provided, or if the Expert has concerns regarding the completeness or accuracy of the data made available.

7. Confidentiality and Privilege

7.1 Confidentiality Obligations

All information, documents, data, communications, and materials provided to the Expert or to any member of the Expert's team in connection with this engagement are strictly confidential (collectively, "Confidential Information"). Confidential Information includes, without limitation, all VHG financial data, operational data, trade secrets, and proprietary business information; all documents and communications relating to the Litigation, including pleadings, discovery materials, and deposition transcripts; all attorney-client privileged materials and attorney work product; and all information regarding the litigation strategy, legal theories, and settlement positions of VHG and Calderwood & Harkness.

The Expert and Meridian Forensic Economics LLC shall not disclose, disseminate, publish, or otherwise communicate any Confidential Information to any third party without the prior written consent of Calderwood & Harkness, except as may be required by court order, subpoena, or applicable law. In the event the Expert receives a subpoena or other legal process seeking the disclosure of Confidential Information, the Expert shall promptly notify Calderwood & Harkness before making any disclosure so that the Firm may seek appropriate protective relief.

The Expert shall ensure that all members of the Expert's team—including supporting analysts, staff, and any other personnel who may have access to Confidential Information—are informed of and comply with these confidentiality obligations.

7.2 Work Product and Privilege

The Expert's work in this engagement is performed at the direction of counsel in connection with pending litigation. Certain communications between the Expert and counsel, as well as certain work product prepared by the Expert at counsel's direction, may be protected by the attorney work-product doctrine under Florida law. The Expert should be mindful of the following:

• The Expert should maintain a clear separation between (a) her independent expert analysis and opinions, which are based on her professional judgment and the data available to her, and (b) any communications with counsel regarding litigation strategy, case assessment, or the legal implications of the Expert's findings.

• Draft reports, preliminary analyses, working papers, and communications with counsel should be clearly labeled in accordance with the document-management protocols that Calderwood & Harkness will provide. Materials prepared in the Expert's consulting capacity should be segregated from materials prepared in the Expert's testifying capacity to the extent practicable.

• All draft reports, notes, working papers, electronic files, and communications shall be preserved in accordance with Calderwood & Harkness's document retention instructions. The Expert should not destroy, delete, or discard any materials relating to this engagement without prior written authorization from Calderwood & Harkness.

7.3 Return and Destruction of Materials

Upon the conclusion of the engagement—whether by completion of the Litigation, termination of the engagement, or otherwise—the Expert and Meridian Forensic Economics LLC shall, at Calderwood & Harkness's direction, either (a) return all Confidential Information, documents, and data received from Calderwood & Harkness or VHG, including all copies, summaries, and extracts thereof, to Calderwood & Harkness, or (b) destroy all such materials and provide written certification of destruction to Calderwood & Harkness. The Firm will provide specific instructions regarding the disposition of materials at the appropriate time. The Expert's obligations under this Section 7 shall survive the termination or conclusion of the engagement.

8. Independence and Conflicts

The integrity and credibility of the Expert's testimony depend upon the Expert's independence and freedom from conflicts of interest. Accordingly, Dr. Vasquez and Meridian Forensic Economics LLC confirm the following:

• Neither Dr. Vasquez nor Meridian Forensic Economics LLC has any prior professional relationship with, or financial interest in, any of the defendants in the Litigation: Ironclad Indemnity Corporation, Pinnacle Surplus Lines Inc., Montclair Assurance Company, or Sovereign Re Ltd.

• Neither Dr. Vasquez nor Meridian has any prior professional relationship with, or financial interest in, any of the law firms representing the defendants in the Litigation: Fendowell Rourke & Stanton LLP and Delvecchio & Kraus LLP.

• Neither Dr. Vasquez nor Meridian has been previously engaged by Arbor Claims Services LLC, Graystone Consulting Group LLC, or any other entity that is a party to or participant in this matter.

• Neither Dr. Vasquez nor Meridian has any other relationship, financial interest, or circumstance that could reasonably be expected to impair the Expert's objectivity or independence in this engagement.

If, at any time during the course of the engagement, an actual or potential conflict of interest arises—including, but not limited to, a new engagement by Meridian involving any of the parties or counsel in this Litigation—the Expert shall promptly notify Calderwood & Harkness in writing so that the Firm may evaluate the situation and determine the appropriate course of action.

9. Term and Termination

This engagement shall commence as of the date of this letter and shall continue until the conclusion of the matter, including any post-trial proceedings, appeals, or remand proceedings, unless terminated earlier in accordance with this Section.

Either party may terminate this engagement upon thirty (30) days' prior written notice to the other party. Notwithstanding the foregoing, any termination shall be subject to the Expert's professional obligations regarding pending testimony, including any obligation to appear for a scheduled deposition or trial for which the Expert has been designated and noticed.

In the event of termination, Meridian Forensic Economics LLC shall be entitled to payment for all services rendered and expenses incurred through the effective date of termination, in accordance with the fee terms and billing procedures set forth in Section 5 of this letter. Upon termination, the Expert shall cooperate with Calderwood & Harkness in the orderly transition of the engagement, including the return of all Confidential Information and the provision of reasonable assistance to any successor expert, if one is retained.

10. No Guarantee of Outcome

The retention of Meridian Forensic Economics LLC and Dr. Helen Vasquez does not guarantee any particular outcome in the Litigation. Calderwood & Harkness does not represent that any specific damages amount will be awarded to VHG, and the Expert should not rely upon any such representation. The Expert's opinions must be based on her independent professional judgment, her analysis of the available data and information, and the application of generally accepted forensic accounting methodologies. Calderwood & Harkness does not seek to influence the substance of the Expert's professional opinions; the Firm's role in reviewing draft reports and providing feedback is limited to ensuring completeness, clarity, and compliance with procedural requirements, and to identifying factual or legal issues that the Expert should consider.

11. Acceptance and Execution

If the foregoing terms are acceptable, please execute this letter in the space provided below and return one fully executed copy to the undersigned. We suggest that you retain a copy for your files. Upon execution by both parties, this letter shall constitute the binding agreement between Calderwood & Harkness LLP and Meridian Forensic Economics LLC with respect to the Expert's engagement in this matter.

We look forward to working with you and your team on this important matter, Dr. Vasquez. Please do not hesitate to contact me or Tiffany Rosenthal if you have any questions regarding the terms of this engagement or the substance of the Litigation.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Elaine Forsythe

Title: Partner

Date: ________

ACCEPTANCE

The undersigned hereby accepts the terms of the engagement set forth in this letter, confirms the representations regarding independence and conflicts of interest set forth in Section 8, and agrees to be bound by the terms and conditions herein.

MERIDIAN FORENSIC ECONOMICS LLC

By: ________

Name: Dr. Helen Vasquez, CPA, CFF

Title: Managing Principal

Date: ________

cc: (via electronic mail)

Nathaniel Driscoll, Esq., General Counsel, Verimark Hospitality Group Inc. Tiffany Rosenthal, Esq., Calderwood & Harkness LLP Andrew Fitzpatrick, Esq., Calderwood & Harkness LLP Howard Bellamy, Esq., Calderwood & Harkness LLP (Billing Partner)

Timekeeper	Rate
Dr. Helen Vasquez, CPA, CFF — Managing Principal	$625.00 per hour
Supporting analysts and staff at Meridian Forensic Economics LLC	$375.00 per hour

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 333 SE 2nd Avenue, Suite 4400 Miami, FL 33131
Telephone: (305) 555-7200 Facsimile: (305) 555-7201
April 20, 2023
VIA ELECTRONIC MAIL AND FACSIMILE
Meridian Forensic Economics LLC
Attn: Dr. Helen Vasquez, CPA, CFF, Managing Principal
1201 Peachtree Street NE, Suite 1000 Atlanta, GA 30361
Re: Retention of Meridian Forensic Economics LLC as Expert Consultant and Testifying Expert — Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al., Case No. 2022-CA-031547, Eleventh Judicial Circuit of Florida, Miami-Dade County
Engagement No.: 1021-00003
Dear Dr. Vasquez:
Thank you for your willingness to assist our client in this matter. This letter sets forth the terms upon which Calderwood & Harkness LLP ("the Firm" or "Calderwood & Harkness") proposes to retain Meridian Forensic Economics LLC ("Meridian" or "the Expert Firm") and you personally, Dr. Helen Vasquez, CPA, CFF (together with Meridian, the "Expert"), as a forensic accounting and damages expert in connection with the above-referenced litigation. We ask that you review the terms set forth herein carefully and, if they are acceptable, execute the acceptance block at the conclusion of this letter and return one fully executed copy to our offices.
1. Engagement Purpose and Overview
Calderwood & Harkness LLP 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. VHG is a hospitality and real-estate company that owns and operates resort properties across the southeastern United States and the Caribbean. For its fiscal year ending December 31, 2021, VHG reported consolidated revenue of approximately $412 million and adjusted EBITDA of approximately $78 million.
VHG is the plaintiff in civil litigation currently pending before the Honorable Catherine Embry in the Eleventh Judicial Circuit of Florida, in and for Miami-Dade County, styled Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al., Case No. 2022-CA-031547 (the "Action" or the "Litigation"). The purpose of this engagement letter is to formally retain Dr. Helen Vasquez and Meridian Forensic Economics LLC as the forensic accounting and damages expert for VHG in connection with VHG's business-interruption insurance coverage claims arising from Hurricane Callista. In this capacity, the Expert will be expected to serve as both a consulting expert—to assist counsel in understanding damages issues and developing case strategy—and a testifying expert—to prepare written expert reports and to deliver expert testimony at deposition and at trial.
This engagement has been authorized at the direction of Elaine Forsythe, Partner, who serves as the Responsible Partner on this matter. Day-to-day coordination of the engagement, including the transmission of documents, scheduling of calls, and management of billing, will be handled by Tiffany Rosenthal, Lead Associate. Andrew Fitzpatrick, Working Associate, will also be involved in document production and coordination with the Expert on an as-needed basis.
2. Background of the Matter
The following summary is provided so that the Expert may understand the factual and legal context of the Litigation. This summary is based on information available to the Firm as of the date of this letter and is not intended to be exhaustive. Additional facts and documents will be provided to the Expert in the course of the engagement.
2.1 The Parties
Plaintiff. As noted above, Verimark Hospitality Group Inc. is a publicly traded hospitality and real-estate company headquartered in Miami, Florida. VHG owns and operates a portfolio of resort, hotel, and conference-center properties. For purposes of this engagement, the relevant properties are three resort facilities located in the State of Florida, each of which sustained catastrophic damage as a result of Hurricane Callista in September 2022. VHG's reported financial performance for fiscal year 2021—revenue of $412 million and EBITDA of $78 million—provides general context for the scale of VHG's operations and the materiality of the losses at issue.
Defendants. VHG has named as defendants the four insurers comprising VHG's property-and-casualty insurance tower for the relevant policy period:
1.  Ironclad Indemnity Corporation — the primary-layer carrier, domiciled in the State of Connecticut. Ironclad issued all-risk commercial property policy number IIC-PRP-2022-07541, providing $25,000,000 in coverage above a $500,000 per-occurrence deductible. Ironclad is represented by Fendowell Rourke & Stanton LLP.
2.  Pinnacle Surplus Lines Inc. — the first excess-layer carrier, domiciled in the State of Texas. Pinnacle issued excess policy number PSL-XS1-2022-3390, providing $15,000,000 in coverage excess of the underlying $25,000,000 primary limit (i.e., $15,000,000 excess of $25,000,000, attaching at $25,500,000 inclusive of the deductible). Pinnacle is represented by Fendowell Rourke & Stanton LLP.
3.  Montclair Assurance Company — the second excess-layer carrier, domiciled in the State of New York. Montclair issued excess policy number MAC-XS2-2022-09817, providing $10,000,000 in coverage excess of the aggregate of the primary and first excess layers (i.e., $10,000,000 excess of $40,000,000, attaching at $40,500,000 inclusive of the deductible). Montclair is represented by Delvecchio & Kraus LLP.
4.  Sovereign Re Ltd. — the third excess-layer carrier, domiciled in Bermuda. Sovereign Re issued excess policy number SRL-XS3-2022-5102, providing $10,000,000 in coverage excess of the aggregate of the underlying layers (i.e., $10,000,000 excess of $50,000,000, attaching at $50,500,000 inclusive of the deductible). Sovereign Re is represented by Delvecchio & Kraus LLP.
In total, VHG's insurance tower provides $60,000,000 in available coverage above a $500,000 per-occurrence deductible. The annual aggregate premium for the four-layer tower was $1,840,000 for the relevant policy period. Copies of all four policies will be provided to the Expert for review.
2.2 The Loss Event — Hurricane Callista
The insured loss at issue arose from Hurricane Callista, a Category 4 hurricane that struck the State of Florida in September 2022. The following is a brief chronology of the storm:
•  September 12, 2022: The National Hurricane Center designated the tropical system as Tropical Storm Callista and began issuing advisories.
•  September 16, 2022: Monroe County issued a mandatory evacuation order for all residents and visitors in the Florida Keys, including the Marathon area.
•  September 17, 2022: Lee County issued a mandatory evacuation order for barrier islands and low-lying coastal areas, including Fort Myers Beach and surrounding communities.
•  September 18, 2022, approximately 1:30 PM EDT: Hurricane Callista made landfall in the Lower Florida Keys near Big Pine Key as a Category 4 hurricane with maximum sustained winds of approximately 145 miles per hour. The storm produced catastrophic storm surge of 8 to 14 feet in Monroe County and 6 to 10 feet in Lee County, along with widespread wind damage, flooding, and infrastructure destruction throughout the affected area.
All three of VHG's Florida resort properties were forced to close their operations on or before September 18, 2022, as a direct result of Hurricane Callista and the associated evacuation orders. The damage sustained at each property, and the duration of the resulting business interruption, is summarized in Section 2.3 below.
2.3 The Insured Properties
VHG's claim encompasses business-interruption losses at three resort properties located in Florida:
Property 1: Verimark Grand Key Resort
•  Location: Mile Marker 48, Marathon, Florida 33050
•  Description: A 312-room luxury resort and full-service marina situated on the Gulf side of the Florida Keys
•  Pre-Loss Performance Metrics: Average Daily Rate (ADR) of $389; average occupancy rate of 82%
•  Closure Period: September 18, 2022, through March 15, 2023 — a total of 178 consecutive days of full closure
•  Estimated Business-Interruption Loss: $31,400,000
•  Nature of Damage: The Grand Key Resort sustained the most severe damage of the three properties, including catastrophic storm-surge inundation of the ground-floor guest rooms and public areas, extensive wind damage to the roof and exterior envelope, near-total destruction of the marina and dock facilities, and prolonged loss of utility services and road access
Property 2: Verimark Harborview Hotel & Conference Center
•  Location: 1400 Estero Boulevard, Fort Myers Beach, Florida 33931
•  Description: A 224-room full-service hotel with a 40,000-square-foot conference and event facility, located on Fort Myers Beach
•  Pre-Loss Performance Metrics: Average Daily Rate (ADR) of $295; average occupancy rate of 74%
•  Closure Period: September 18, 2022, through January 31, 2023 — a total of 135 consecutive days of full closure
•  Estimated Business-Interruption Loss: $18,700,000
•  Nature of Damage: The Harborview sustained significant storm-surge and wind damage, particularly to the conference-center wing and ground-level mechanical systems. The property's beachfront location resulted in severe erosion and sand intrusion that required extensive remediation before reopening
Property 3: Verimark Sunset Shores
•  Location: 7200 Gulf Boulevard, St. Pete Beach, Florida 33706
•  Description: A 186-room boutique resort on St. Pete Beach
•  Pre-Loss Performance Metrics: Average Daily Rate (ADR) of $342; average occupancy rate of 79%
•  Closure Period: Full closure from September 18, 2022, through November 30, 2022 (73 consecutive days); the property thereafter operated at reduced capacity through February 2023, with full capacity restored by February 28, 2023
•  Estimated Business-Interruption Loss: $9,900,000
•  Nature of Damage: Sunset Shores sustained moderate wind damage and limited storm-surge impact; the primary drivers of the extended closure and reduced-capacity period were damage to the roof structure, disruption of HVAC systems, and the unavailability of certain guest-room wings during restoration
Total Claimed Business-Interruption Loss: The sum of the estimated business-interruption losses across the three properties is $60,000,000 ($31,400,000 + $18,700,000 + $9,900,000), which equals the full available limit of VHG's insurance tower.
2.4 Coverage Dispute Summary
VHG promptly notified its insurers of the Hurricane Callista losses. The following summarizes the key events in the coverage dispute:
•  September 22, 2022: VHG submitted an initial notice of loss to Ironclad Indemnity Corporation as the primary-layer carrier, with copies to the excess-layer carriers.
•  October 12, 2022: Ironclad issued a reservation of rights letter, identifying several potential coverage defenses.
•  November 15, 2022: VHG submitted a sworn statement in proof of loss to Ironclad in the amount of $60,000,000, representing the total business-interruption loss across all three properties.
•  February 3, 2023: Ironclad issued a formal coverage denial, declining to pay any portion of VHG's claim.
•  February 10, 2023: Pinnacle Surplus Lines Inc., as the first excess carrier, followed Ironclad's denial and likewise declined coverage.
•  February 2023 (various dates): Montclair Assurance Company and Sovereign Re Ltd. issued reservation of rights letters but did not issue formal denials of coverage. Both carriers have indicated that their coverage obligations are contingent on the resolution of the underlying primary and first-excess coverage disputes.
•  March 1, 2023: VHG, through Calderwood & Harkness LLP, filed the Complaint initiating the Action.
The key coverage issues currently in dispute include the following:
(i) Named-Windstorm Sub-Limit. Ironclad contends that the primary policy contains a $15,000,000 sub-limit applicable to losses caused by named windstorms. VHG's position is that this sub-limit was deleted at the July 2022 policy renewal and that the full $25,000,000 policy limit applies to VHG's Hurricane Callista losses. Documentary evidence regarding the deletion of the sub-limit at renewal is a central issue in the Litigation.
(ii) Period of Restoration. The defendants contend that VHG unreasonably delayed restoration of the insured properties, thereby extending the period of business interruption beyond what was necessary. VHG's position is that the closure periods at each property were reasonable and dictated by the severity of the physical damage, supply-chain disruptions for building materials, and labor shortages in the post-hurricane environment.
(iii) Concurrent Causation / Flood Exclusion. Ironclad has asserted that a portion of the damage at the Grand Key Resort was caused by flood (storm surge) rather than wind, and that the flood exclusion in the policy precludes coverage for flood-related business-interruption losses. VHG contends that the concurrent-causation doctrine under Florida law, together with the anti-concurrent-causation language in the policy, supports coverage for the entire loss.
(iv) Failure to Mitigate. The defendants have alleged that VHG failed to take reasonable steps to mitigate its business-interruption losses, including by failing to implement interim revenue-generating measures and by allegedly delaying the procurement of restoration contractors.
Each of these coverage issues has potential implications for the damages analysis. The Expert's work will be central to quantifying VHG's losses and rebutting the defendants' challenges to the claimed damages.
3. Scope of Engagement
3.1 Primary Assignment
Calderwood & Harkness retains Dr. Vasquez and Meridian Forensic Economics LLC to serve as VHG's forensic accounting and damages expert in this matter. The primary assignment is to quantify the business-interruption losses suffered by VHG at the three insured properties identified in Section 2.3 above as a result of Hurricane Callista. The Expert's opinion must address the total claimed business-interruption loss of approximately $60,000,000, including the allocation of that loss among the three individual properties, the applicable periods of restoration, and the methodology employed to calculate each component of the loss.
3.2 Specific Tasks
The Expert's engagement will encompass the following specific tasks, subject to modification or supplementation as the Litigation progresses and as directed by counsel:
a. Historical Financial Analysis. Review and analyze VHG's historical financial performance at each of the three resort properties for the three fiscal years preceding the loss event—fiscal years 2019, 2020, and 2021—as well as all available fiscal year 2022 pre-loss data (January 1 through September 17, 2022). This analysis should encompass revenue by department (rooms, food and beverage, marina, conference and events, spa, and other ancillary revenue streams), operating expenses (both fixed and variable), departmental profit and loss statements, and overall property-level profitability. The Expert should identify and account for the impact of the COVID-19 pandemic on fiscal year 2020 and 2021 financial performance and determine the appropriate baseline for projecting but-for revenue and profitability.
b. Revenue Projection / But-For Analysis. Project the revenue each property would have earned during its respective period of closure and reduced-capacity operation absent Hurricane Callista. This but-for analysis should incorporate property-level performance metrics including average daily rate (ADR), occupancy rates, revenue per available room (RevPAR), ancillary revenue streams (food and beverage, marina operations, conference-center bookings, spa revenue, and other sources), and seasonal adjustments reflecting the historical demand patterns at each property. The Expert should also consider broader market conditions, competitive-set performance data (STR reports or equivalent), and any VHG-specific factors (such as capital improvements, marketing initiatives, or new contracts) that would have affected the properties' performance during the loss period.
c. Saved Expenses Analysis. Identify and quantify the expenses saved by VHG during the closure and reduced-capacity periods at each property. This analysis should distinguish between fixed costs that continued during the closure (such as property taxes, insurance premiums, debt service, management fees, and certain labor costs) and variable costs that were not incurred as a result of the closure (such as food and beverage cost of goods sold, housekeeping supplies, guest amenities, utilities consumption above base levels, and seasonal or temporary labor). The saved-expenses analysis is a necessary component of the net business-interruption loss calculation and must be performed at the individual property level.
d. Extra Expense Analysis. Review and opine on the extra expenses reasonably incurred by VHG during the post-loss period to mitigate or reduce the period of business interruption. This may include costs associated with temporary facilities, employee relocation and retention, expedited procurement of building materials, temporary utility and generator costs, accelerated contractor mobilization, guest relocation assistance, and other incremental costs incurred to resume operations at the earliest practicable date. The Expert should evaluate whether these extra expenses were reasonable and whether they reduced the overall period of interruption.
e. Period of Restoration Analysis. Opine on the appropriate period of restoration for each property under the applicable policy definitions and Florida law. This analysis should address whether the actual closure periods—178 days for the Grand Key Resort, 135 days for the Harborview Hotel & Conference Center, and 73 days of full closure plus approximately 90 days of reduced capacity for Sunset Shores—were reasonable in light of the scope of physical damage, the availability of contractors and building materials in the post-hurricane environment, applicable governmental and regulatory requirements, and industry standards for the restoration of comparable hospitality facilities. The Expert should coordinate with Jeffrey Caldwell, PE, of Caldwell Engineering Associates Inc. (the Firm's retained forensic engineer) to the extent the period-of-restoration analysis requires engineering input regarding the timeline for physical repairs.
f. Mitigation Analysis. Address any contentions by the defendants that VHG failed to mitigate its business-interruption losses. The Expert should evaluate, with supporting financial analysis, whether VHG took reasonable steps to mitigate losses, including the timing of contractor engagement, the feasibility of interim revenue-generating measures (such as partial reopening or alternative-use strategies), and the reasonableness of VHG's decisions regarding the sequencing of restoration activities.
g. Rebuttal Work. Review and respond to any expert opinions offered by the defendants' damages expert. As of the date of this letter, defense counsel has not yet identified its damages expert, but we anticipate that one or more experts will be retained. The Expert should be prepared to analyze the opposing expert's methodology, assumptions, data sources, and conclusions, and to prepare a rebuttal expert report addressing any areas of disagreement.
3.3 Deliverables.  The Expert is expected to produce the following deliverables over the course of the engagement:
1.  Preliminary Findings Memorandum. A memorandum setting forth the Expert's preliminary findings and analysis for counsel's use in connection with case strategy and mediation preparation. This memorandum is intended for internal use by the Firm and VHG and is not intended for production to opposing parties.
2.  Draft Expert Report. A draft of the Expert's written report, to be submitted to counsel for review and comment prior to finalization. The draft report should set forth the Expert's opinions, the bases for those opinions, the data and methodology relied upon, and all exhibits and supporting schedules. Counsel's review of the draft is intended to ensure completeness, clarity, and compliance with applicable procedural requirements, and not to influence the substance of the Expert's opinions.
3.  Final Expert Report. A final expert report suitable for service on opposing parties and filing with the Court, prepared in accordance with the applicable rules of the Eleventh Judicial Circuit of Florida and any applicable case management orders entered by Judge Embry. The final report must comply with all requirements for expert disclosures under Florida Rule of Civil Procedure 1.280(b)(5) and any other applicable provisions.
4.  Rebuttal Expert Report. If warranted by the opinions offered by the defendants' expert(s), a rebuttal expert report addressing the areas of disagreement and responding to the opposing expert's methodology, assumptions, and conclusions.
5.  Testimony. Availability for deposition testimony and trial testimony as required by the course of the Litigation. The Expert should anticipate a deposition of approximately one day in duration, to be taken in Miami, Florida or such other location as the parties may agree. Trial testimony may require the Expert's availability for multiple days, depending on the trial schedule.
4. Consulting vs. Testifying Expert Status
Dr. Vasquez's initial retention is in a dual capacity. She will serve as a consulting expert—assisting counsel in understanding damages issues, analyzing financial data, and developing case strategy—and as a testifying expert—preparing written expert reports and delivering expert testimony at deposition and at trial.
Dr. Vasquez should be aware that, under Florida law, communications between a testifying expert and retaining counsel regarding the expert's opinions and the bases and reasons therefor may be subject to discovery by opposing parties. Calderwood & Harkness will provide specific guidance on the scope of discoverable materials under Florida Rule of Civil Procedure 1.280(b)(5) and applicable case law. In general, the Expert should be mindful that draft reports, notes reflecting the Expert's analysis and opinions, and communications with counsel regarding the Expert's methodology and conclusions may fall within the scope of permissible discovery.
To protect privileged and work-product materials to the extent permitted by law, Calderwood & Harkness requests that all draft reports, preliminary analyses, and communications with counsel regarding analysis methodology be clearly labeled in accordance with counsel's instructions. The Firm will provide the Expert with specific protocols for document labeling, communication channels, and the segregation of consulting-capacity work product from testifying-capacity work product.
5. Fee Terms and Billing
5.1 Hourly Rates
The Expert will be compensated on an hourly basis at the following rates:
These hourly rates are effective as of the date of this letter. In the event that Meridian proposes to increase any hourly rate during the course of the engagement, such increase must be communicated to Calderwood & Harkness in writing at least thirty (30) days in advance and must be approved in writing by the Responsible Partner or her designee before becoming effective. No rate increase shall apply retroactively to services already rendered.
The Expert's compensation is not contingent upon the outcome of the Litigation. The Expert will be compensated for all time reasonably expended in connection with the engagement, regardless of whether VHG prevails in the Litigation.
5.2 Billing Procedures
Meridian shall submit monthly invoices to:
Calderwood & Harkness LLP
Attn: Tiffany Rosenthal
333 SE 2nd Avenue, Suite 4400 Miami, FL 33131
Email: trosenthal@calderwoodharkness.com
All invoices must reference the matter name (Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al.) and the engagement number 1021-00003. Each invoice shall include detailed time entries specifying the description of work performed, the date of the work, the identity of the timekeeper who performed the work, and the number of hours expended. Invoices shall also include an itemized listing of all out-of-pocket expenses incurred during the billing period, with supporting documentation as reasonably available.
Payment shall be due within thirty (30) days of receipt of each invoice. Calderwood & Harkness LLP shall be solely responsible for the payment of all fees and expenses; Verimark Hospitality Group Inc. is not directly liable to Meridian Forensic Economics LLC for any fees or expenses under this engagement. Calderwood & Harkness reserves the right to review invoices and to request clarification or additional detail regarding any time entries or expense items.
5.3 Expenses.  Reasonable out-of-pocket expenses incurred by the Expert in connection with this engagement—including, without limitation, travel expenses (airfare, ground transportation, parking), lodging, meals during travel, printing and reproduction costs, data acquisition costs, and specialized software or database access fees—will be reimbursed at cost upon submission of itemized receipts. The Expert shall exercise reasonable judgment in incurring expenses and shall seek the most cost-effective alternatives consistent with the requirements of the engagement.
Any single expense item exceeding $2,500.00 requires prior written approval from Tiffany Rosenthal before the expense is incurred. For purposes of clarity, this threshold applies to individual expense items (e.g., a single airfare, a single hotel booking, or a single data-acquisition fee), not to aggregate monthly expenses.
Travel expenses associated with site inspections of the three VHG properties located in Marathon, Fort Myers Beach, and St. Pete Beach, Florida, are anticipated in connection with this engagement and are hereby pre-approved, provided that the Expert coordinates the scheduling of such site visits with Tiffany Rosenthal in advance. Overnight lodging at reasonable market rates in the vicinity of each property during site inspections is also pre-approved.
6. Data and Document Access
Calderwood & Harkness will provide the Expert with access to the documents and data necessary to perform the engagement. The Firm anticipates that the following categories of documents and data will be made available to the Expert, either through a secure electronic document-review platform or by other agreed-upon means:
•  VHG Financial Records: Property-level income statements, revenue reports, occupancy data, average daily rate data, departmental profit and loss statements, general ledgers, chart of accounts, and other financial records for the three insured properties for fiscal years 2019, 2020, 2021, and 2022 (through the date of loss and post-loss).
•  Insurance Policies: Complete copies of all four insurance policies comprising VHG's property-and-casualty insurance tower—the Ironclad primary policy (IIC-PRP-2022-07541), the Pinnacle first excess policy (PSL-XS1-2022-3390), the Montclair second excess policy (MAC-XS2-2022-09817), and the Sovereign Re third excess policy (SRL-XS3-2022-5102)—together with all endorsements, riders, and renewal documentation.
•  Sworn Statement in Proof of Loss: VHG's sworn statement in proof of loss dated November 15, 2022, claiming $60,000,000 in business-interruption losses, together with all supporting schedules and exhibits submitted therewith.
•  Property Damage Reports and Repair Timelines: Reports documenting the physical damage sustained at each property, contractor proposals and invoices, restoration timelines, building permits, inspection reports, and certificates of occupancy.
•  Forensic Engineering Reports: Reports and analyses prepared by Caldwell Engineering Associates Inc. (Jeffrey Caldwell, PE), the forensic engineer retained by Calderwood & Harkness to provide causation and damage analysis. Mr. Caldwell's reports may contain information relevant to the period-of-restoration analysis and the concurrent-causation issues.
•  Independent Adjuster Reports: Reports prepared by Arbor Claims Services LLC (Denise Whitford), the independent adjuster retained in connection with the claim, including preliminary loss estimates, site inspection reports, and correspondence with the carriers.
•  Deposition Transcripts: Transcripts of depositions taken in the Litigation, as they become available, including depositions of VHG personnel, carrier representatives, adjusters, and other fact witnesses.
•  Pre-Loss Budgets, Forecasts, and Booking Data: VHG's internal budgets, financial forecasts, and reservation and booking data for the three insured properties, including forward-looking booking data as of the date of loss.
Tiffany Rosenthal will serve as the primary point of contact for all data requests submitted by the Expert. The Expert should direct all requests for documents or data to Ms. Rosenthal in writing (email is acceptable), and the Firm will endeavor to respond to such requests on a timely basis. Andrew Fitzpatrick will assist with document production and coordination and may serve as an alternative point of contact for data-related inquiries.
The Expert should promptly notify Calderwood & Harkness if, at any point during the engagement, the Expert identifies documents or data that are needed but have not yet been provided, or if the Expert has concerns regarding the completeness or accuracy of the data made available.
7. Confidentiality and Privilege
7.1 Confidentiality Obligations
All information, documents, data, communications, and materials provided to the Expert or to any member of the Expert's team in connection with this engagement are strictly confidential (collectively, "Confidential Information"). Confidential Information includes, without limitation, all VHG financial data, operational data, trade secrets, and proprietary business information; all documents and communications relating to the Litigation, including pleadings, discovery materials, and deposition transcripts; all attorney-client privileged materials and attorney work product; and all information regarding the litigation strategy, legal theories, and settlement positions of VHG and Calderwood & Harkness.
The Expert and Meridian Forensic Economics LLC shall not disclose, disseminate, publish, or otherwise communicate any Confidential Information to any third party without the prior written consent of Calderwood & Harkness, except as may be required by court order, subpoena, or applicable law. In the event the Expert receives a subpoena or other legal process seeking the disclosure of Confidential Information, the Expert shall promptly notify Calderwood & Harkness before making any disclosure so that the Firm may seek appropriate protective relief.
The Expert shall ensure that all members of the Expert's team—including supporting analysts, staff, and any other personnel who may have access to Confidential Information—are informed of and comply with these confidentiality obligations.
7.2 Work Product and Privilege
The Expert's work in this engagement is performed at the direction of counsel in connection with pending litigation. Certain communications between the Expert and counsel, as well as certain work product prepared by the Expert at counsel's direction, may be protected by the attorney work-product doctrine under Florida law. The Expert should be mindful of the following:
•  The Expert should maintain a clear separation between (a) her independent expert analysis and opinions, which are based on her professional judgment and the data available to her, and (b) any communications with counsel regarding litigation strategy, case assessment, or the legal implications of the Expert's findings.
•  Draft reports, preliminary analyses, working papers, and communications with counsel should be clearly labeled in accordance with the document-management protocols that Calderwood & Harkness will provide. Materials prepared in the Expert's consulting capacity should be segregated from materials prepared in the Expert's testifying capacity to the extent practicable.
•  All draft reports, notes, working papers, electronic files, and communications shall be preserved in accordance with Calderwood & Harkness's document retention instructions. The Expert should not destroy, delete, or discard any materials relating to this engagement without prior written authorization from Calderwood & Harkness.
7.3 Return and Destruction of Materials
Upon the conclusion of the engagement—whether by completion of the Litigation, termination of the engagement, or otherwise—the Expert and Meridian Forensic Economics LLC shall, at Calderwood & Harkness's direction, either (a) return all Confidential Information, documents, and data received from Calderwood & Harkness or VHG, including all copies, summaries, and extracts thereof, to Calderwood & Harkness, or (b) destroy all such materials and provide written certification of destruction to Calderwood & Harkness. The Firm will provide specific instructions regarding the disposition of materials at the appropriate time. The Expert's obligations under this Section 7 shall survive the termination or conclusion of the engagement.
8. Independence and Conflicts
The integrity and credibility of the Expert's testimony depend upon the Expert's independence and freedom from conflicts of interest. Accordingly, Dr. Vasquez and Meridian Forensic Economics LLC confirm the following:
•  Neither Dr. Vasquez nor Meridian Forensic Economics LLC has any prior professional relationship with, or financial interest in, any of the defendants in the Litigation: Ironclad Indemnity Corporation, Pinnacle Surplus Lines Inc., Montclair Assurance Company, or Sovereign Re Ltd.
•  Neither Dr. Vasquez nor Meridian has any prior professional relationship with, or financial interest in, any of the law firms representing the defendants in the Litigation: Fendowell Rourke & Stanton LLP and Delvecchio & Kraus LLP.
•  Neither Dr. Vasquez nor Meridian has been previously engaged by Arbor Claims Services LLC, Graystone Consulting Group LLC, or any other entity that is a party to or participant in this matter.
•  Neither Dr. Vasquez nor Meridian has any other relationship, financial interest, or circumstance that could reasonably be expected to impair the Expert's objectivity or independence in this engagement.
If, at any time during the course of the engagement, an actual or potential conflict of interest arises—including, but not limited to, a new engagement by Meridian involving any of the parties or counsel in this Litigation—the Expert shall promptly notify Calderwood & Harkness in writing so that the Firm may evaluate the situation and determine the appropriate course of action.
9. Term and Termination
This engagement shall commence as of the date of this letter and shall continue until the conclusion of the matter, including any post-trial proceedings, appeals, or remand proceedings, unless terminated earlier in accordance with this Section.
Either party may terminate this engagement upon thirty (30) days' prior written notice to the other party. Notwithstanding the foregoing, any termination shall be subject to the Expert's professional obligations regarding pending testimony, including any obligation to appear for a scheduled deposition or trial for which the Expert has been designated and noticed.
In the event of termination, Meridian Forensic Economics LLC shall be entitled to payment for all services rendered and expenses incurred through the effective date of termination, in accordance with the fee terms and billing procedures set forth in Section 5 of this letter. Upon termination, the Expert shall cooperate with Calderwood & Harkness in the orderly transition of the engagement, including the return of all Confidential Information and the provision of reasonable assistance to any successor expert, if one is retained.
10. No Guarantee of Outcome
The retention of Meridian Forensic Economics LLC and Dr. Helen Vasquez does not guarantee any particular outcome in the Litigation. Calderwood & Harkness does not represent that any specific damages amount will be awarded to VHG, and the Expert should not rely upon any such representation. The Expert's opinions must be based on her independent professional judgment, her analysis of the available data and information, and the application of generally accepted forensic accounting methodologies. Calderwood & Harkness does not seek to influence the substance of the Expert's professional opinions; the Firm's role in reviewing draft reports and providing feedback is limited to ensuring completeness, clarity, and compliance with procedural requirements, and to identifying factual or legal issues that the Expert should consider.
11. Acceptance and Execution
If the foregoing terms are acceptable, please execute this letter in the space provided below and return one fully executed copy to the undersigned. We suggest that you retain a copy for your files. Upon execution by both parties, this letter shall constitute the binding agreement between Calderwood & Harkness LLP and Meridian Forensic Economics LLC with respect to the Expert's engagement in this matter.
We look forward to working with you and your team on this important matter, Dr. Vasquez. Please do not hesitate to contact me or Tiffany Rosenthal if you have any questions regarding the terms of this engagement or the substance of the Litigation.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Elaine Forsythe
Title: Partner
Date: ________
ACCEPTANCE
The undersigned hereby accepts the terms of the engagement set forth in this letter, confirms the representations regarding independence and conflicts of interest set forth in Section 8, and agrees to be bound by the terms and conditions herein.
MERIDIAN FORENSIC ECONOMICS LLC
By: ________
Name: Dr. Helen Vasquez, CPA, CFF
Title: Managing Principal
Date: ________
cc: (via electronic mail)
Nathaniel Driscoll, Esq., General Counsel, Verimark Hospitality Group Inc. Tiffany Rosenthal, Esq., Calderwood & Harkness LLP Andrew Fitzpatrick, Esq., Calderwood & Harkness LLP Howard Bellamy, Esq., Calderwood & Harkness LLP (Billing Partner)
Timekeeper | Rate
Dr. Helen Vasquez, CPA, CFF — Managing Principal | $625.00 per hour
Supporting analysts and staff at Meridian Forensic Economics LLC | $375.00 per hour

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

VIA ELECTRONIC MAIL AND FACSIMILE

CALDERWOOD & HARKNESS LLP

ACCEPTANCE

MERIDIAN FORENSIC ECONOMICS LLC

Record

Parties

Dates

Amounts