1021-00003 · Verimark Hospitality Group · Expert Engagement

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

INTERNAL MEMORANDUM

September 10, 2023

TO: Elaine Forsythe, Responsible Partner, Calderwood & Harkness LLP

FROM: Andrew Fitzpatrick, Working Associate, Calderwood & Harkness LLP

RE: Review and Analysis of Draft Forensic Engineering Report of Jeffrey Caldwell, PE — Caldwell Engineering Associates Inc.

MATTER: 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

EXPERT REPORT SERVICE DEADLINE: September 15, 2023

I. Executive Summary

This memorandum presents my review and assessment of the draft forensic engineering report prepared by Jeffrey Caldwell, PE, of Caldwell Engineering Associates Inc. (7900 NW 25th Street, Suite 210, Doral, FL 33122). Mr. Caldwell was retained by Calderwood & Harkness on behalf of our client, Verimark Hospitality Group Inc. ("VHG"), pursuant to an expert retention letter dated April 22, 2023. The purpose of this review is to evaluate the report's substantive findings, identify its strengths and any potential vulnerabilities, and recommend revisions before the report is finalized and served on opposing counsel in advance of the September 15, 2023 expert report service deadline.

Mr. Caldwell's report addresses the cause-of-loss analysis and differentiation between wind damage and storm surge/flood damage at VHG's three resort properties, each of which sustained significant physical damage during Hurricane Callista, a Category 4 hurricane that made landfall in the Lower Florida Keys on September 18, 2022. The three properties at issue are: (1) Verimark Grand Key Resort in Marathon, Florida; (2) Verimark Harborview Hotel & Conference Center in Fort Myers Beach, Florida; and (3) Verimark Sunset Shores in St. Pete Beach, Florida.

My overall assessment is that the draft report is strong, methodologically sound, and well-supported by the physical evidence, meteorological data, and engineering analysis presented therein. Mr. Caldwell's conclusions are favorable to VHG's position in this litigation. Specifically, the report concludes that wind — a covered peril under the Ironclad all-risk commercial property policy — was the predominant cause of physical damage at all three properties, with wind-attributable damage percentages ranging from 72% at Grand Key Resort to 92% at Sunset Shores. Additionally, Mr. Caldwell concludes that the wind damage and storm surge damage at each property are separable and independently quantifiable, which directly undermines Ironclad Indemnity Corporation's concurrent causation and flood exclusion defense.

The critical importance of this report cannot be overstated. It directly addresses the central coverage dispute in this matter: Ironclad's contention that storm surge damage at Grand Key Resort triggers the flood exclusion in the policy, and that, by operation of the anti-concurrent causation clause, the flood exclusion bars recovery for all related damage — including damage otherwise attributable to covered wind perils. Mr. Caldwell's separability analysis, if credited by the court, would permit VHG to recover for the wind-damaged portions of each property even if the flood exclusion applies to the surge-damaged portions.

The report also provides important support for VHG's position on the reasonableness of the restoration period at each property, which is relevant to the period-of-restoration dispute raised by Ironclad in its third affirmative defense. Mr. Caldwell validates the closure durations at each property as reasonable from an engineering and construction-management perspective.

While the report is strong as drafted, I have identified several areas where refinements and clarifications would strengthen the report and reduce its vulnerability to anticipated defense attacks. These recommendations are detailed in Section VI of this memorandum. I recommend that we transmit these suggested revisions to Mr. Caldwell no later than September 11, 2023, to allow adequate time for him to incorporate the changes before the September 15 service deadline.

II. Scope of Caldwell's Engagement

Mr. Caldwell was retained by Calderwood & Harkness on behalf of VHG pursuant to an expert retention letter dated April 22, 2023. A detailed scope memorandum was transmitted from the undersigned to Mr. Caldwell on May 1, 2023, further delineating the parameters of the engagement and the specific issues upon which opinions were requested.

Under the terms of his retention, Mr. Caldwell was tasked with the following:

(1) Conducting comprehensive on-site inspections of all three VHG properties damaged by Hurricane Callista — Grand Key Resort, Harborview Hotel & Conference Center, and Sunset Shores — to assess the nature, extent, and cause of physical damage at each location;

(2) Determining the cause or causes of physical damage observed at each property, with particular attention to distinguishing between damage attributable to different meteorological forces associated with Hurricane Callista;

(3) Differentiating between damage caused by wind and wind-driven rain (covered perils under the Ironclad policy) and damage caused by storm surge, tidal action, and flooding (perils that Ironclad contends are excluded under the policy's flood exclusion);

(4) Assessing structural damage timelines and reasonable restoration periods for each property, taking into account the scope and nature of the damage, the sequential requirements of construction and remediation, and any external constraints on the restoration process; and

(5) Providing expert engineering opinions on whether the damage at each property was predominantly caused by a covered peril (windstorm) versus an excluded peril (flood/storm surge), and whether the damage attributable to each cause is separable and independently quantifiable.

Mr. Caldwell conducted on-site inspections at each of the three properties over the course of May and June 2023. His inspection of Grand Key Resort took place on May 8–10, 2023; his inspection of Harborview Hotel & Conference Center took place on May 22–23, 2023; and his inspection of Sunset Shores took place on June 5–6, 2023. In addition to the on-site inspections, Mr. Caldwell reviewed an extensive body of documentary evidence, including meteorological data from the National Hurricane Center and the National Oceanic and Atmospheric Administration, original building plans and construction documents for each property, pre- and post-hurricane repair records, damage photographs taken by VHG personnel and third-party contractors in the days immediately following the storm, insurance inspection reports, and engineering assessments prepared by VHG's retained contractors during the restoration process.

The draft report, which was delivered to the undersigned on September 1, 2023, is approximately 87 pages in length, exclusive of appendices. The appendices themselves are voluminous, consisting of annotated photographs of damage at each property, engineering drawings illustrating failure modes and damage patterns, meteorological data compilations, wind-field models, tide-gauge readings, and detailed damage matrices that catalog each identified area of damage by building component, cause, and estimated repair cost.

III. Summary of Hurricane Callista Meteorological Data Used by Caldwell

Mr. Caldwell's report devotes substantial attention to the meteorological characteristics of Hurricane Callista, which forms the factual foundation for his cause-of-loss analysis. The key meteorological data points set forth in the report are summarized below.

Hurricane Callista was first named by the National Hurricane Center ("NHC") on September 12, 2022, when it was designated a tropical storm in the central Caribbean Sea. The storm intensified rapidly over the subsequent days, reaching Category 4 strength on the Saffir-Veltason Hurricane Wind Scale as it approached the Florida Straits. Hurricane Callista made landfall near Big Pine Key in the Lower Florida Keys at approximately 1:30 PM EDT on September 18, 2022, with maximum sustained winds of approximately 145 miles per hour. The storm maintained Category 4 intensity at landfall, making it one of the most powerful hurricanes to strike the Florida Keys in recent decades.

The storm generated significant storm surge along the Gulf Coast of Florida. Mr. Caldwell's report documents storm surge levels of 8 to 14 feet in Monroe County and 6 to 10 feet in Lee County, based on USGS high-water mark surveys and NOAA tide-gauge data collected during and after the storm. Pinellas County experienced somewhat lower storm surge levels, though still significant. These surge levels are critical to the damage analysis because the magnitude of storm surge at each property location directly affects the extent to which ground-level and below-grade building systems were inundated.

Mr. Caldwell notes that Monroe County issued a mandatory evacuation order on September 16, 2022, two days before landfall, and that Lee County followed with its own mandatory evacuation order on September 17, 2022. These evacuation orders are relevant both to the timeline of VHG's pre-storm protective measures and to the reasonableness of VHG's post-storm restoration efforts, as personnel were unable to return to the properties until evacuation orders were lifted.

In preparing his cause-of-loss analysis, Mr. Caldwell relied upon NHC advisories, NOAA tide-gauge data from stations in the Florida Keys and along the Gulf Coast, USGS high-water marks documented at numerous locations in the affected area, and local weather station data from stations near each of the three properties. Additionally, Mr. Caldwell employed wind-field modeling to estimate the sustained and peak-gust wind speeds experienced at each specific property location during the storm's passage. This modeling accounts for the storm's forward speed, the property's position relative to the eyewall, and local terrain and exposure factors that can affect wind speeds at any given location. The wind-field analysis is a particularly valuable component of the report because it provides property-specific wind speed estimates rather than relying solely on regional data.

IV. Property-by-Property Analysis of Draft Report Conclusions

A. Verimark Grand Key Resort — Mile Marker 48, Marathon, FL 33050

Grand Key Resort is a 312-room luxury resort and marina facility located at Mile Marker 48 in Marathon, Florida. The property consists of a main hotel building, four ancillary guest accommodation structures, a full-service marina, pool and recreation areas, and various support structures. The property was closed from September 18, 2022, through March 15, 2023 — a total of 178 days. Grand Key Resort is the largest and most revenue-intensive of the three VHG properties at issue, and it sustained the most severe damage of the three.

This property is the most critical for the concurrent causation and flood exclusion dispute at the heart of this litigation because it experienced both significant wind damage to its upper structures and significant storm surge flooding at ground level. The defense will focus its efforts on Grand Key Resort, and the strength of Mr. Caldwell's cause-of-loss differentiation at this property will likely be determinative of the court's treatment of the concurrent causation issue.

Wind Damage Findings. Mr. Caldwell identifies extensive wind damage at Grand Key Resort attributable to the sustained Category 4 winds experienced at this location. The primary wind damage findings include the following:

• Roof system failures: The roof systems on the main hotel building and all four ancillary guest accommodation structures experienced significant wind damage, including uplift of roofing membrane, loss of roof sheathing panels, and in some areas, structural damage to roof trusses. Mr. Caldwell attributes these failures to sustained wind speeds exceeding the design wind loads for the existing roof systems. He notes that the directionality of roof damage is consistent with the wind direction at the time of the storm's passage.

• Building envelope breaches: Multiple window failures and exterior cladding losses on the upper floors of the hotel building created openings in the building envelope. These breaches allowed wind-driven rain to penetrate interior spaces, causing extensive water damage to guest rooms, corridors, and common areas on the upper floors. Mr. Caldwell differentiates this wind-driven rain intrusion from storm surge flooding by reference to the elevation of the affected areas, the staining patterns left by the water, and the presence of debris consistent with wind-borne projectiles at the point of envelope breach.

• Marina facility structural damage: The marina facility sustained structural damage from wind loading, including partial collapse of the covered boat slip structure and damage to the marina office building's roof and walls. Mr. Caldwell notes that while the marina also experienced surge and wave action, the structural failure mode observed — racking and uplift — is characteristic of wind loading rather than hydrostatic pressure from flooding.

• Projectile impact damage: The pool deck structures, exterior facades, and landscaping infrastructure sustained widespread damage from projectile impact by wind-borne debris. Mr. Caldwell documents the trajectories of debris strikes based on the pattern and directionality of impact marks, confirming that these are consistent with wind-driven rather than surge-driven forces.

Storm Surge Findings. Mr. Caldwell also documents storm surge damage at Grand Key Resort. The estimated storm surge at this location was 10 to 12 feet above mean sea level, which is consistent with the USGS high-water mark data for the Marathon area.

• Ground-floor and basement-level flooding: The storm surge inundated ground-floor and basement-level areas of the main hotel building, including the lobby, ground-floor meeting rooms, storage areas, and back-of-house spaces. Mr. Caldwell identifies visible water lines and sediment deposits at these lower elevations that are characteristic of surge inundation rather than wind-driven rain.

• Mechanical and electrical systems: The surge caused significant damage to mechanical systems, electrical switchgear, and elevator equipment housed in below-grade and ground-floor mechanical rooms. These systems required complete replacement. Mr. Caldwell attributes this damage to the surge based on the location of these systems at or below the surge inundation line, the nature of the damage (saltwater corrosion and hydrostatic pressure effects), and the absence of evidence suggesting that wind forces contributed to the failure of these below-grade systems.

• Marina dock and seawall damage: A portion of the damage to the marina docks and the property's seawall is attributable to storm surge and wave action. Mr. Caldwell notes that the dock damage reflects a combination of wind and surge forces, but he allocates the seawall damage predominantly to surge-induced hydrostatic loads.

Differentiation Conclusion. Mr. Caldwell concludes that approximately 72% of the total physical damage at Grand Key Resort (measured by estimated repair cost) is attributable to wind and wind-driven rain, and approximately 28% is attributable to storm surge and flooding. Critically, Mr. Caldwell opines that these two categories of damage operated independently on different building systems: wind damaged the roof, building envelope, and upper-story interiors, while surge damaged ground-floor and below-grade mechanical and electrical systems. Mr. Caldwell states that the wind damage and the surge damage "affected distinct building components at distinct elevations within the structures, and can be differentiated through standard forensic engineering analysis of failure modes, damage patterns, water intrusion pathways, and elevation-based inundation evidence."

Opinion on Separability. This separability opinion is perhaps the single most important conclusion in Mr. Caldwell's report. It directly supports VHG's argument under the efficient proximate cause doctrine, as analyzed in the anti-concurrent causation memorandum prepared by this office and dated November 1, 2022. If the court accepts Mr. Caldwell's opinion that the wind damage and surge damage are separable and independently quantifiable, then the flood exclusion should apply only to the flood-caused portion of the loss (the 28% attributable to storm surge), not to the entire loss. This would preserve VHG's right to recover for the 72% of Grand Key damage attributable to wind — the predominant and efficient proximate cause of the overall loss.

Period of Restoration Opinion. Mr. Caldwell opines that the 178-day closure of Grand Key Resort (September 18, 2022 through March 15, 2023) was reasonable given the scope of wind damage to the roof system, the need for complete re-roofing of the main hotel building and ancillary structures, the extensive interior remediation of water damage caused by wind-driven rain on upper floors, and the sequential nature of the required repairs. Mr. Caldwell explains that the building envelope — particularly the roof — must be fully sealed before interior remediation and buildout can commence, as ongoing exposure to the elements would render interior work futile. He also notes the well-documented contractor availability constraints and material supply-chain disruptions in the post-hurricane environment in the Florida Keys, which contributed to delays in the commencement and pace of restoration work.

B. Verimark Harborview Hotel & Conference Center — 1400 Estero Boulevard, Fort Myers Beach, FL 33931

The Harborview Hotel & Conference Center is a 224-room hotel with a 40,000-square-foot conference facility located on Fort Myers Beach in Lee County, Florida. The property consists of a multi-story hotel tower, the attached conference center building, a porte-cochère and covered walkway system, and various guest amenity and support structures. The property was closed from September 18, 2022, through January 31, 2023 — a total of 135 days.

Located in Lee County, the Harborview property experienced somewhat lower storm surge levels than Grand Key Resort, with estimated surge of 6 to 10 feet in the Fort Myers Beach area. However, the property's exposure to sustained high winds during the storm was significant, and the conference center's large flat roof proved particularly vulnerable to wind damage.

Wind Damage Findings. Mr. Caldwell identifies the following primary wind damage at the Harborview property:

• Conference center roof failure: The conference center's flat roof membrane experienced catastrophic failure under sustained wind loads. The membrane was peeled back across large sections of the roof, exposing the underlying roof deck and allowing wind-driven rain to inundate the conference center's interior. Mr. Caldwell attributes this failure to the membrane's vulnerability to uplift forces on the large, flat roof surface area. The damage pattern — progressive peeling from the windward edge — is a hallmark of wind-induced roof membrane failure.

• Hotel tower window failures: Multiple windows on the upper floors of the hotel tower failed due to a combination of wind pressure exceeding the design capacity of the window assemblies and impact from wind-borne debris. These window failures resulted in interior water intrusion and damage to guest rooms on the affected floors.

• Exterior cladding damage: Sections of the hotel tower's exterior cladding were dislodged by wind forces, exposing the underlying building envelope and creating additional pathways for water intrusion.

• Porte-cochère and walkway structural damage: The porte-cochère at the hotel entrance and the covered walkways connecting the hotel tower to the conference center sustained structural damage from wind loading, including partial collapse of roof sections and displacement of support columns.

Storm Surge Findings. Storm surge impacts at the Harborview property were more limited in scope compared to Grand Key Resort, reflecting the somewhat lower surge levels experienced in the Fort Myers Beach area and the property's specific topography and elevation.

• Limited ground-floor flooding: Mr. Caldwell estimates that approximately 3 to 4 feet of storm surge flooding affected the lobby and ground-level meeting rooms. The water line evidence and sediment deposits are consistent with surge inundation at these lower elevations.

• HVAC equipment damage: The property's HVAC equipment, which was located at grade level behind the main building, was damaged by storm surge. The equipment required replacement due to saltwater exposure and corrosion.

Differentiation Conclusion. Mr. Caldwell concludes that approximately 85% of the total physical damage at the Harborview property is attributable to wind and wind-driven rain, and approximately 15% is attributable to storm surge and flooding. As with Grand Key Resort, Mr. Caldwell opines that the wind damage and surge damage at Harborview are separable by building component and elevation. The wind damage was concentrated in the conference center roof, the hotel tower's upper-floor windows and cladding, and the exterior walkway structures, while the surge damage was confined to ground-floor interior spaces and grade-level mechanical equipment.

Period of Restoration Opinion. Mr. Caldwell opines that the 135-day closure was reasonable. The conference center required a full roof replacement — a major construction project given the 40,000-square-foot roof surface area — as well as complete interior buildout of the conference facility following the extensive water intrusion through the failed roof. The hotel tower required window replacement on multiple floors and interior remediation of water-damaged guest rooms. Mr. Caldwell notes that the conference center and hotel tower repairs proceeded concurrently where possible, and that the 135-day timeline reflects efficient project management given the scope of the work required.

C. Verimark Sunset Shores — 7200 Gulf Boulevard, St. Pete Beach, FL 33706

Sunset Shores is a 186-room boutique resort located in St. Pete Beach, Pinellas County, Florida. The property consists of multiple low-rise guest accommodation buildings, a pool and recreation area, and supporting structures. Unlike the other two properties, Sunset Shores experienced a partial closure followed by a phased reopening: the property was fully closed from September 18 through November 30, 2022 (73 full-closure days), then operated at reduced capacity through February 2023, reaching full capacity on February 28, 2023.

Sunset Shores' location in Pinellas County, farther from the storm's landfall point and along a portion of the coastline with less severe storm surge exposure, resulted in less intense storm surge impacts compared to Grand Key Resort or Harborview. However, the property still experienced significant wind damage during the storm.

Wind Damage Findings. Mr. Caldwell documents the following wind damage at Sunset Shores:

• Roof damage: Multiple guest accommodation buildings sustained roof damage, including shingle loss, membrane failure, and localized structural damage to roof framing. The damage patterns are consistent with the sustained wind speeds estimated at this location during the storm.

• Window failures: Numerous window assemblies failed across the property due to wind pressure and debris impact, resulting in interior water intrusion in affected guest rooms and common areas.

• Exterior façade damage: The exterior facades of several buildings sustained damage from wind forces and debris impact, including dislodged stucco, damaged trim elements, and compromised weather barriers.

• Pool area destruction: The pool deck, cabana structures, and surrounding recreational infrastructure were extensively damaged by wind-borne debris. Mr. Caldwell notes that the debris field in and around the pool area is consistent with wind-driven forces rather than surge action.

Storm Surge Findings. Storm surge impacts at Sunset Shores were minimal relative to the other two properties. Mr. Caldwell estimates that approximately 2 to 3 feet of storm surge and tidal action affected the property, primarily causing damage to ground-floor landscaping, exterior hardscape elements, and some minor ground-level structural components. No significant interior flooding from storm surge was documented at this property.

Differentiation Conclusion. Mr. Caldwell concludes that approximately 92% of the total physical damage at Sunset Shores is attributable to wind and wind-driven rain, with approximately 8% attributable to storm surge and tidal effects. The overwhelming predominance of wind damage at this property makes the cause-of-loss differentiation relatively straightforward compared to Grand Key Resort.

Period of Restoration Opinion. Mr. Caldwell opines that the 73-day full closure (September 18 through November 30, 2022) and the subsequent reduced-capacity period through February 28, 2023, were reasonable given the scope of roof and window repairs required across the property's multiple buildings. Mr. Caldwell notes that the phased reopening approach — bringing repaired buildings online incrementally while continuing work on other structures — was appropriate engineering practice and reflected sound project management that actually accelerated the property's return to full revenue-generating capacity compared to maintaining full closure until all work was complete.

V. Assessment of Strengths of Draft Report

Mr. Caldwell's draft report exhibits several significant strengths that I believe will be effective both in motion practice and at trial.

Methodology. Mr. Caldwell's methodology is sound and well-documented. The report reflects a comprehensive approach combining on-site inspections and physical evidence examination, engineering analysis of failure modes at each damaged building component, comparison of estimated wind speed data (from wind-field modeling) to the structural capacities of the relevant building systems (based on original construction documents and applicable building codes), and detailed physical evidence analysis of damage patterns. Particularly effective is Mr. Caldwell's use of damage pattern directionality — the direction of debris impact marks, the pattern of roof membrane peeling, and the orientation of structural failures relative to the wind direction during the storm's passage — to confirm wind as the causative force for specific damage areas. Similarly, his use of water staining patterns to distinguish between wind-driven rain (which enters through envelope breaches at upper elevations and flows downward) and storm surge (which enters at ground level and leaves tide-line marks and sediment deposits) is a well-established forensic engineering technique that should withstand scrutiny on cross-examination and in Daubert challenge proceedings.

Clear Separability Analysis. The clear, separable quantification of wind damage versus surge damage at each property is the single most important feature of the report. By establishing that wind damage and surge damage affected different building components at different elevations, and by quantifying the percentage of total damage attributable to each cause, Mr. Caldwell directly undermines Ironclad's concurrent causation and flood exclusion defense. If the damage is separable, the anti-concurrent causation clause in the Ironclad policy should not operate to exclude the wind-caused portion of the loss, regardless of whether the flood exclusion applies to the surge-caused portion.

Favorable Wind-Damage Percentages. The wind-damage percentages at the three properties — 72% at Grand Key, 85% at Harborview, and 92% at Sunset Shores — are strongly favorable to VHG's position. These percentages establish that wind was the predominant and efficient proximate cause of the losses at all three properties. Even at Grand Key Resort, where the storm surge impact was most severe, wind damage accounts for nearly three-quarters of the total loss. These percentages provide a compelling evidentiary basis for VHG's argument that the windstorm — a covered peril — was the primary driver of the property damage and resulting business interruption losses.

Restoration Period Validation. Mr. Caldwell's opinions on the reasonableness of VHG's closure durations at each property directly rebut Ironclad's affirmative defense that VHG unreasonably delayed restoration. His property-specific analysis, which accounts for the scope and nature of the damage, the sequential requirements of construction, and external constraints such as contractor availability and material shortages, provides engineering-based support for the closure periods that VHG has claimed in its business interruption loss calculation. The closure durations validated by Mr. Caldwell — 178 days at Grand Key, 135 days at Harborview, and 73 days of full closure (plus the partial-capacity period) at Sunset Shores — are consistent with and supportive of VHG's claimed periods of restoration.

Expert Credentials. Mr. Caldwell is a Florida-licensed Professional Engineer with more than twenty years of experience in forensic engineering, including extensive experience in hurricane damage assessment and cause-of-loss analysis. His curriculum vitae, attached to the report, reflects his participation in post-hurricane damage assessments following multiple major Florida hurricanes, his peer-reviewed publications on wind damage engineering, and his prior expert testimony experience in Florida courts. These credentials should be well-received by the court and will make him a credible witness at trial and in deposition.

Evidentiary Support. The appendices to Mr. Caldwell's report are extensive and provide strong evidentiary support for his conclusions. The annotated photographs clearly illustrate the damage at each property and the physical evidence on which Mr. Caldwell relies to distinguish between wind and surge damage. The engineering drawings and damage maps provide visual representations of the spatial distribution of damage by cause, which will be effective demonstrative aids at trial. The meteorological data compilations and wind-field model outputs document the environmental conditions during the storm's passage and support Mr. Caldwell's estimates of the wind speeds and surge levels experienced at each property.

Coordination with Vasquez Report. The Caldwell report dovetails effectively with the forensic economics analysis being prepared by Dr. Isabella Vasquez of Meridian Forensic Economics. Mr. Caldwell establishes the physical basis for the damage and validates the reasonable restoration timeframes at each property, which Dr. Vasquez then uses as inputs for her quantification of VHG's $60 million in business-interruption losses. The two reports, read together, provide a comprehensive and internally consistent expert framework supporting VHG's claim. Mr. Caldwell's engineering analysis provides the factual and technical predicate that gives Dr. Vasquez's economic calculations their evidentiary foundation.

VI. Identified Weaknesses and Recommended Revisions

While the draft report is strong overall, I have identified several areas where revisions or additions would strengthen the report and reduce its vulnerability to anticipated defense attacks. Each area is discussed below with specific recommendations.

A. Grand Key Storm Surge Analysis — Potential Vulnerability

The 28% storm surge allocation at Grand Key Resort is the area of the report most susceptible to challenge by the defense. I anticipate that Dr. Warren Birk of Graystone Consulting Group LLC, whom the defense has retained as its damages and coverage expert, will argue that the storm surge percentage at Grand Key is understated. Given the 10-to-12-foot storm surge documented at this location, the defense will likely contend that surge damage to ground-floor and below-grade systems was more extensive than Mr. Caldwell acknowledges, and that some of the ground-floor water damage Mr. Caldwell attributes to wind-driven rain was in fact caused by storm surge inundation.

I have the following specific recommendations to strengthen this section of the report:

First, I recommend that Mr. Caldwell provide additional detail on the methodology he employed to distinguish ground-floor water damage caused by storm surge from water damage caused by wind-driven rain that accumulated at ground level after flowing downward through envelope breaches in the upper stories. This is a genuinely challenging forensic question, and the defense will exploit any ambiguity. Mr. Caldwell should describe the specific physical evidence he used to make this determination — including differences in sediment deposits, staining characteristics, the presence or absence of saltwater mineral residue versus freshwater patterns, and the spatial distribution of water damage relative to known envelope breach points versus known surge ingress pathways. A more detailed treatment of this methodology will make the 72%/28% allocation more difficult to challenge.

Second, I recommend that Mr. Caldwell add a section explicitly addressing the independent-cause analysis. Specifically, Mr. Caldwell should explain that even assuming the defense's position that storm surge was responsible for a somewhat larger percentage of ground-floor damage, the wind damage to the roof, upper floors, and building envelope would independently have required the same closure period and generated the same business interruption losses. In other words, even if the surge-damaged mechanical systems had not been damaged, the property would still have been unable to operate during the period required to repair the extensive wind damage to the building envelope and upper-story interiors. This independent-cause argument is significant because it means that even if the court allocates a larger share of physical damage to storm surge, the business interruption losses are entirely attributable to wind damage — the wind damage alone, independently of the surge damage, necessitated the full 178-day closure.

Third, I recommend that Mr. Caldwell insert specific references to the USGS high-water marks and NOAA tide-gauge data at or near Mile Marker 48 in Marathon, including the precise elevation measurements documented by these agencies. While Mr. Caldwell references this data generally in his meteorological overview section, anchoring the Grand Key surge analysis to specific, verifiable elevation data points will strengthen the evidentiary basis for his 10-to-12-foot surge estimate and the corresponding 28% allocation.

B. Period of Restoration — Additional Support Needed

Ironclad has specifically argued in its third affirmative defense that VHG failed to proceed with "reasonable speed" in restoring operations at the three properties. While Mr. Caldwell's restoration-period opinions are reasonable and well-supported in the current draft, they would benefit from additional supporting detail. I recommend the following additions:

First, Mr. Caldwell should include references to the well-documented post-hurricane contractor and material shortages in the Florida Keys region and along the Southwest Florida coast following Hurricane Callista. Contractor availability in the weeks and months following a major hurricane is severely constrained, as the limited pool of qualified contractors is overwhelmed by demand. Similarly, roofing materials, window assemblies, structural lumber, and other building materials experienced significant supply-chain disruptions and extended lead times during this period. These supply-chain constraints are a matter of public record and industry documentation. Mr. Caldwell should cite specific sources — such as industry reports, contractor correspondence, or building department records — to substantiate the impact of these constraints on VHG's restoration timelines.

Second, Mr. Caldwell should address the permitting delays experienced with the Monroe County Building Department (for Grand Key Resort) and the Lee County Building Department (for Harborview) in the post-hurricane period. Both building departments experienced a massive surge in permit applications following the hurricane, and processing times were significantly extended. Permits for structural repairs, re-roofing, and other major restoration work had to be obtained before construction could proceed. Mr. Caldwell should document how these permitting delays affected the restoration timelines at Grand Key and Harborview.

Third, Mr. Caldwell should more explicitly describe the sequential nature of construction that requires the building envelope to be sealed before interior remediation can commence. While this concept is mentioned in the current draft, it deserves greater emphasis because it explains why the restoration periods could not be shortened simply by adding additional crews or working extended hours. Until the roof is replaced and the exterior envelope is sealed, interior water damage remediation — including mold abatement, drywall replacement, flooring installation, and finish work — cannot begin, as the interior spaces would remain exposed to the elements.

Fourth, and perhaps most significantly, I recommend that Mr. Caldwell add a comparative analysis section in which he presents typical restoration timelines for comparable resort properties following Category 4 hurricanes in Florida. To the extent that publicly available data or industry literature documents the restoration timelines for similar hotel and resort properties after prior major hurricanes (such as Hurricane Irma in 2017 or Hurricane Michael in 2018), Mr. Caldwell should compile this information to establish a benchmark demonstrating that VHG's restoration timelines were within or below industry norms. This comparative analysis would be a powerful tool in rebutting Ironclad's argument that VHG delayed unreasonably.

C. Failure to Mitigate — Proactive Rebuttal

Ironclad's fourth affirmative defense alleges that VHG failed to take reasonable steps to mitigate its damages. While the failure-to-mitigate defense is primarily a legal argument, Mr. Caldwell's report would benefit from an engineering-based rebuttal of this contention. Mr. Caldwell reviewed the repair records, contractor invoices, and correspondence documenting VHG's post-hurricane activities at each property, and he is therefore in a position to address VHG's mitigation efforts from an engineering perspective.

I recommend that Mr. Caldwell add a section to his report confirming that VHG took reasonable protective and mitigation measures at each property, based on his review of the available documentation. Specifically, Mr. Caldwell should address the following:

• VHG's pre-storm preparations, including boarding up windows and doors, securing loose exterior elements, and shutting down and protecting sensitive mechanical and electrical systems in advance of the hurricane;

• VHG's deployment of temporary protective measures immediately following the storm, including emergency tarping of damaged roof areas to prevent further water intrusion, deployment of emergency generators to maintain power for critical systems (such as sump pumps and dehumidifiers), and engagement of licensed restoration contractors to commence debris removal and emergency stabilization;

• VHG's prompt engagement of contractors to begin permanent restoration work as soon as conditions and permitting allowed; and

• The reasonableness of VHG's overall approach to restoration, including the phased reopening strategy at Sunset Shores, which prioritized returning to partial revenue-generating capacity while continuing repairs on the remaining portions of the property.

This section of the report will provide engineering-based support for the broader rebuttal of the mitigation defense and will complement the legal arguments that VHG acted reasonably under the circumstances.

D. Drafting and Presentation Issues

In addition to the substantive recommendations described above, I have identified several drafting and presentation issues that should be addressed before the report is finalized.

Technical terminology: Several sections of the report use overly technical engineering terminology without providing lay explanations. While this level of technical detail is appropriate for an engineering audience, the report will be read by judges, jurors, and opposing counsel who may not have engineering backgrounds. I recommend that Mr. Caldwell add plain-language summaries at the conclusion of each major section, restating the key findings and conclusions in accessible language. This will also be useful for direct examination at trial, where clear and understandable testimony is essential.

Photograph cross-references: The photographs in the appendices are extensive and provide strong visual support for the report's conclusions. However, the cross-references between the body of the report and the specific photographs in the appendices are not always clear. In several instances, the text refers to "damage observed" at a particular location without directing the reader to the specific photograph or photographs documenting that observation. I recommend that Mr. Caldwell add specific photograph reference numbers (e.g., "See Appendix B, Photograph B-17") to each damage observation discussed in the body text, so that the reader can easily locate the supporting visual evidence.

Numbered opinions: For ease of reference in depositions, motion practice, and at trial, I recommend that Mr. Caldwell number all of his final opinions explicitly (e.g., Opinion No. 1, Opinion No. 2, etc.) and present them in a consolidated summary section at the conclusion of the report. This format allows counsel to reference specific opinions efficiently during examination (e.g., "Mr. Caldwell, please turn to your Opinion No. 3") and makes it easier for the court to identify and discuss individual opinions in its rulings.

Harborview square footage discrepancy: I have identified an internal inconsistency in the Harborview Hotel & Conference Center section of the report. One paragraph references a "38,000 sq. ft." conference facility, while VHG's own records, the property management agreements, and the complaint in this action all describe the conference facility as 40,000 square feet. This discrepancy should be corrected to reflect the accurate 40,000-square-foot figure. While this is a minor point, any internal inconsistency in an expert report — however small — can be exploited by opposing counsel during cross-examination to suggest carelessness or unreliability. This correction should be made throughout the report to ensure consistency.

VII. Coordination with Dr. Vasquez's Expert Report (Meridian Forensic Economics)

As noted above, Dr. Isabella Vasquez of Meridian Forensic Economics has prepared a separate draft expert report quantifying VHG's business-interruption losses at the three properties. The review of Dr. Vasquez's draft report is being conducted separately by David Rosenthal, and a memorandum analyzing that report was prepared and circulated on September 8, 2023. The present memorandum does not duplicate that analysis but addresses the key interdependencies between the two expert reports.

The critical interdependency between the Caldwell report and the Vasquez report is that Dr. Vasquez's business-interruption loss quantification for each property relies upon the closure periods and restoration timelines validated by Mr. Caldwell's engineering analysis. Specifically:

• Grand Key Resort: 178 days of closure → $31.4 million in business-interruption losses

• Harborview Hotel & Conference Center: 135 days of closure → $18.7 million in business-interruption losses

• Sunset Shores: 73 days of full closure plus partial-capacity period through February 28, 2023 → $9.9 million in business-interruption losses

• Total: $60.0 million in aggregate business-interruption losses

If the closure periods or restoration timelines set forth in Mr. Caldwell's report are inconsistent with those used by Dr. Vasquez, the defense will be quick to exploit the discrepancy. Accordingly, it is essential that the two reports be cross-reviewed for consistency before they are finalized and served.

Additionally, Mr. Caldwell's wind-versus-surge differentiation percentages may become relevant to Dr. Vasquez's analysis in a specific contingency. If the court determines that the flood exclusion applies to some portion of the loss — that is, if the court rejects VHG's position that the anti-concurrent causation clause is unenforceable and instead holds that surge-caused damage is excluded — then Dr. Vasquez would need to apportion business-interruption losses between wind-caused and surge-caused closure periods. In that scenario, the question becomes whether the wind damage alone, independent of the surge damage, would have required the same closure period at each property. This is another reason why the independent-cause analysis recommended in Section VI.A above is important: if Mr. Caldwell can establish that the wind damage independently necessitated the full closure at each property, then the business-interruption losses remain fully recoverable even if some physical damage is excluded as flood-related.

I recommend that Mr. Caldwell and Dr. Vasquez be asked to cross-review each other's reports to ensure consistency in closure dates, restoration timelines, and property descriptions before the September 15 service deadline. David Rosenthal is leading the coordination of the Vasquez report and should be the point of contact for scheduling this cross-review.

VIII. Anticipated Defense Expert Rebuttal

The defense has retained Dr. Warren Birk of Graystone Consulting Group LLC (150 N. Michigan Avenue, Suite 2600, Chicago, IL 60601) as its damages and coverage expert. Dr. Birk's engagement was disclosed in the defense's expert witness designation filed on August 15, 2023. As of the date of this memorandum, the defense has not yet identified its forensic engineering expert, though the expert designation deadline for rebuttal experts is October 2, 2023. We should expect the defense to retain a forensic engineer to challenge Mr. Caldwell's cause-of-loss differentiation, and we should prepare Mr. Caldwell for the lines of attack that a defense forensic engineer is likely to pursue.

Based on my review of Ironclad's answer, affirmative defenses, and discovery responses, as well as the arguments advanced by defense counsel during the course of this litigation, I anticipate the following lines of attack against Mr. Caldwell's report:

First, the defense is likely to argue that storm surge was a more significant contributor to the damage at Grand Key Resort than the 28% estimate in Mr. Caldwell's report. The defense will likely contend that the 10-to-12-foot storm surge at Grand Key caused more extensive damage to ground-floor and below-grade systems than Mr. Caldwell acknowledges, and that some damage Mr. Caldwell attributes to wind-driven rain at lower elevations was actually caused by surge inundation. The recommendations in Section VI.A above are designed to preemptively address this line of attack.

Second, the defense will challenge the separability of wind and surge damage, arguing that the two causes operated concurrently and that the resulting damage cannot be meaningfully separated. The defense's position is that concurrent causation renders all damage subject to the flood exclusion under the anti-concurrent causation clause in the Ironclad policy. To advance this argument, the defense's forensic engineer will likely focus on areas of the properties where wind and surge damage overlapped — for example, ground-floor areas at Grand Key Resort that experienced both wind-driven rain from envelope breaches above and storm surge from below. Mr. Caldwell should be prepared to defend his separability analysis with reference to the specific physical evidence at each area of overlap and to explain the engineering basis for distinguishing between the two causes even in areas where both were present.

Third, the defense is likely to assert that the reasonable restoration periods at all three properties were shorter than those claimed by VHG and validated by Mr. Caldwell. Ironclad has already taken this position in its third affirmative defense, and a defense expert opinion supporting shorter restoration periods would lend evidentiary support to that contention. The comparative timeline analysis recommended in Section VI.B above would provide Mr. Caldwell with data to rebut any such opinion.

Fourth, the defense may challenge Mr. Caldwell's methodology for allocating damage percentages between wind and surge. The percentage allocations (72%/28%, 85%/15%, 92%/8%) are based on Mr. Caldwell's estimation of the repair costs associated with wind-damaged versus surge-damaged building components. The defense may argue that this methodology is imprecise, that the repair cost estimates are unreliable, or that alternative allocation methods would yield different results. Mr. Caldwell should be prepared to defend the reliability of his allocation methodology and the basis for his repair cost estimates.

Rebuttal expert reports are due October 2, 2023. Once the defense's rebuttal reports are received, we should promptly provide them to Mr. Caldwell for review and begin preparing him for deposition. Mr. Caldwell's deposition may be requested by either or both of the defense counsel of record: Gregory Stanton of Fendowell Rourke & Stanton LLP, who represents Ironclad Indemnity Corporation, or Patricia Kraus of Delvecchio & Kraus LLP, who represents the co-defendant excess carrier. We should anticipate deposition preparation sessions in late October or early November 2023, depending on the scheduling of depositions.

IX. Recommended Next Steps and Timeline

Based on my review of the draft report and the analysis set forth in this memorandum, I recommend the following next steps and timeline:

1. September 11, 2023: Transmit this memorandum's recommended revisions to Mr. Caldwell, with an accompanying cover letter summarizing the requested changes and the rationale for each. Allow Mr. Caldwell sufficient time to review and incorporate the revisions before the September 15 service deadline.

2. September 12, 2023: Schedule and conduct a conference call between the undersigned, David Rosenthal, and Mr. Caldwell to discuss the recommended revisions in detail, address any questions Mr. Caldwell may have regarding the requested changes, and confirm the timeline for delivery of the revised report.

3. September 12–13, 2023: Mr. Caldwell to correct the Harborview conference center square footage discrepancy, changing the erroneous "38,000 sq. ft." reference to "40,000 sq. ft." throughout the report, and to address any other internal inconsistencies identified during the revision process.

4. September 12–14, 2023: Mr. Caldwell to add the failure-to-mitigate rebuttal section and the comparative restoration-timeline analysis recommended in Sections VI.B and VI.C of this memorandum.

5. September 13–14, 2023: Coordinate the cross-review between the Caldwell report and the Vasquez report to ensure consistency in closure dates, restoration timelines, and property descriptions. David Rosenthal, who is leading the review of Dr. Vasquez's report, should facilitate this cross-review and resolve any inconsistencies before both reports are finalized.

6. September 14, 2023: Delivery of the revised Caldwell report to Calderwood & Harkness for final review by Elaine Forsythe before service.

7. September 15, 2023: Service of the final Caldwell report and the final Vasquez report on defense counsel in compliance with the expert report service deadline.

8. Post-September 15, 2023: After service, prepare for potential defense rebuttal reports (due October 2, 2023). Upon receipt of defense rebuttal reports, provide them to Mr. Caldwell for review and commence deposition preparation for Mr. Caldwell.

X. Conclusion

Mr. Caldwell's draft forensic engineering report provides a strong foundation for VHG's causation position in this litigation. The report directly supports VHG's claim that wind — a covered peril under the Ironclad all-risk commercial property policy — was the predominant cause of physical damage at all three of VHG's resort properties. The wind-damage percentages at each property (72% at Grand Key, 85% at Harborview, and 92% at Sunset Shores) are favorable and well-supported by the physical evidence and engineering analysis presented in the report.

The separability analysis is particularly critical to the overall litigation strategy. If the court accepts Mr. Caldwell's opinion that the wind damage and storm surge damage at each property can be independently identified and quantified — that they affected different building components at different elevations and can be differentiated through forensic engineering analysis — it significantly undermines Ironclad's concurrent causation and flood exclusion defense. A finding of separability would mean that, even if the flood exclusion bars recovery for surge-caused damage, VHG can recover for the substantial majority of its losses that are attributable to wind — a covered peril.

With the incorporation of the recommended revisions set forth in Section VI of this memorandum, the report should serve as an effective tool across multiple phases of this litigation: in connection with VHG's anticipated motion for partial summary judgment on the concurrent causation issue (currently planned for filing in November 2023), at any court-ordered mediation, and at trial. The revisions recommended herein are designed to strengthen the report's most vulnerable areas — the Grand Key storm surge allocation, the restoration-period justification, and the failure-to-mitigate rebuttal — without altering Mr. Caldwell's fundamental conclusions or methodology.

The Caldwell report, in combination with Dr. Vasquez's forensic economics analysis quantifying $60 million in business-interruption losses across the three properties, provides a comprehensive expert framework supporting VHG's claim for full recovery under its commercial property insurance policy. The two reports are complementary: Mr. Caldwell establishes the engineering basis for the cause and extent of covered damage and validates the reasonableness of VHG's restoration timelines, while Dr. Vasquez uses those engineering-validated parameters to calculate the resulting economic losses. Together, they present a coherent and well-supported expert narrative that should be persuasive to the court.

I am available to discuss this memorandum and its recommendations at your convenience.

DISTRIBUTION: Elaine Forsythe (only); copy maintained in matter file 1021-00003.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT. This memorandum was prepared by Andrew Fitzpatrick at the direction of Elaine Forsythe in anticipation of litigation and in connection with the provision of legal advice to Verimark Hospitality Group Inc. This memorandum contains the mental impressions, conclusions, opinions, and legal theories of attorneys at Calderwood & Harkness LLP and is protected from disclosure by the attorney work product doctrine. Do not copy, distribute, or disclose this memorandum or its contents to any person outside the engagement team without the prior written authorization of the Responsible Partner.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
INTERNAL MEMORANDUM
September 10, 2023
TO: Elaine Forsythe, Responsible Partner, Calderwood & Harkness LLP
FROM: Andrew Fitzpatrick, Working Associate, Calderwood & Harkness LLP
RE: Review and Analysis of Draft Forensic Engineering Report of Jeffrey Caldwell, PE — Caldwell Engineering Associates Inc.
MATTER: 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
EXPERT REPORT SERVICE DEADLINE: September 15, 2023
I. Executive Summary
This memorandum presents my review and assessment of the draft forensic engineering report prepared by Jeffrey Caldwell, PE, of Caldwell Engineering Associates Inc. (7900 NW 25th Street, Suite 210, Doral, FL 33122). Mr. Caldwell was retained by Calderwood & Harkness on behalf of our client, Verimark Hospitality Group Inc. ("VHG"), pursuant to an expert retention letter dated April 22, 2023. The purpose of this review is to evaluate the report's substantive findings, identify its strengths and any potential vulnerabilities, and recommend revisions before the report is finalized and served on opposing counsel in advance of the September 15, 2023 expert report service deadline.
Mr. Caldwell's report addresses the cause-of-loss analysis and differentiation between wind damage and storm surge/flood damage at VHG's three resort properties, each of which sustained significant physical damage during Hurricane Callista, a Category 4 hurricane that made landfall in the Lower Florida Keys on September 18, 2022. The three properties at issue are: (1) Verimark Grand Key Resort in Marathon, Florida; (2) Verimark Harborview Hotel & Conference Center in Fort Myers Beach, Florida; and (3) Verimark Sunset Shores in St. Pete Beach, Florida.
My overall assessment is that the draft report is strong, methodologically sound, and well-supported by the physical evidence, meteorological data, and engineering analysis presented therein. Mr. Caldwell's conclusions are favorable to VHG's position in this litigation. Specifically, the report concludes that wind — a covered peril under the Ironclad all-risk commercial property policy — was the predominant cause of physical damage at all three properties, with wind-attributable damage percentages ranging from 72% at Grand Key Resort to 92% at Sunset Shores. Additionally, Mr. Caldwell concludes that the wind damage and storm surge damage at each property are separable and independently quantifiable, which directly undermines Ironclad Indemnity Corporation's concurrent causation and flood exclusion defense.
The critical importance of this report cannot be overstated. It directly addresses the central coverage dispute in this matter: Ironclad's contention that storm surge damage at Grand Key Resort triggers the flood exclusion in the policy, and that, by operation of the anti-concurrent causation clause, the flood exclusion bars recovery for all related damage — including damage otherwise attributable to covered wind perils. Mr. Caldwell's separability analysis, if credited by the court, would permit VHG to recover for the wind-damaged portions of each property even if the flood exclusion applies to the surge-damaged portions.
The report also provides important support for VHG's position on the reasonableness of the restoration period at each property, which is relevant to the period-of-restoration dispute raised by Ironclad in its third affirmative defense. Mr. Caldwell validates the closure durations at each property as reasonable from an engineering and construction-management perspective.
While the report is strong as drafted, I have identified several areas where refinements and clarifications would strengthen the report and reduce its vulnerability to anticipated defense attacks. These recommendations are detailed in Section VI of this memorandum. I recommend that we transmit these suggested revisions to Mr. Caldwell no later than September 11, 2023, to allow adequate time for him to incorporate the changes before the September 15 service deadline.
II. Scope of Caldwell's Engagement
Mr. Caldwell was retained by Calderwood & Harkness on behalf of VHG pursuant to an expert retention letter dated April 22, 2023. A detailed scope memorandum was transmitted from the undersigned to Mr. Caldwell on May 1, 2023, further delineating the parameters of the engagement and the specific issues upon which opinions were requested.
Under the terms of his retention, Mr. Caldwell was tasked with the following:
(1) Conducting comprehensive on-site inspections of all three VHG properties damaged by Hurricane Callista — Grand Key Resort, Harborview Hotel & Conference Center, and Sunset Shores — to assess the nature, extent, and cause of physical damage at each location;
(2) Determining the cause or causes of physical damage observed at each property, with particular attention to distinguishing between damage attributable to different meteorological forces associated with Hurricane Callista;
(3) Differentiating between damage caused by wind and wind-driven rain (covered perils under the Ironclad policy) and damage caused by storm surge, tidal action, and flooding (perils that Ironclad contends are excluded under the policy's flood exclusion);
(4) Assessing structural damage timelines and reasonable restoration periods for each property, taking into account the scope and nature of the damage, the sequential requirements of construction and remediation, and any external constraints on the restoration process; and
(5) Providing expert engineering opinions on whether the damage at each property was predominantly caused by a covered peril (windstorm) versus an excluded peril (flood/storm surge), and whether the damage attributable to each cause is separable and independently quantifiable.
Mr. Caldwell conducted on-site inspections at each of the three properties over the course of May and June 2023. His inspection of Grand Key Resort took place on May 8–10, 2023; his inspection of Harborview Hotel & Conference Center took place on May 22–23, 2023; and his inspection of Sunset Shores took place on June 5–6, 2023. In addition to the on-site inspections, Mr. Caldwell reviewed an extensive body of documentary evidence, including meteorological data from the National Hurricane Center and the National Oceanic and Atmospheric Administration, original building plans and construction documents for each property, pre- and post-hurricane repair records, damage photographs taken by VHG personnel and third-party contractors in the days immediately following the storm, insurance inspection reports, and engineering assessments prepared by VHG's retained contractors during the restoration process.
The draft report, which was delivered to the undersigned on September 1, 2023, is approximately 87 pages in length, exclusive of appendices. The appendices themselves are voluminous, consisting of annotated photographs of damage at each property, engineering drawings illustrating failure modes and damage patterns, meteorological data compilations, wind-field models, tide-gauge readings, and detailed damage matrices that catalog each identified area of damage by building component, cause, and estimated repair cost.
III. Summary of Hurricane Callista Meteorological Data Used by Caldwell
Mr. Caldwell's report devotes substantial attention to the meteorological characteristics of Hurricane Callista, which forms the factual foundation for his cause-of-loss analysis. The key meteorological data points set forth in the report are summarized below.
Hurricane Callista was first named by the National Hurricane Center ("NHC") on September 12, 2022, when it was designated a tropical storm in the central Caribbean Sea. The storm intensified rapidly over the subsequent days, reaching Category 4 strength on the Saffir-Veltason Hurricane Wind Scale as it approached the Florida Straits. Hurricane Callista made landfall near Big Pine Key in the Lower Florida Keys at approximately 1:30 PM EDT on September 18, 2022, with maximum sustained winds of approximately 145 miles per hour. The storm maintained Category 4 intensity at landfall, making it one of the most powerful hurricanes to strike the Florida Keys in recent decades.
The storm generated significant storm surge along the Gulf Coast of Florida. Mr. Caldwell's report documents storm surge levels of 8 to 14 feet in Monroe County and 6 to 10 feet in Lee County, based on USGS high-water mark surveys and NOAA tide-gauge data collected during and after the storm. Pinellas County experienced somewhat lower storm surge levels, though still significant. These surge levels are critical to the damage analysis because the magnitude of storm surge at each property location directly affects the extent to which ground-level and below-grade building systems were inundated.
Mr. Caldwell notes that Monroe County issued a mandatory evacuation order on September 16, 2022, two days before landfall, and that Lee County followed with its own mandatory evacuation order on September 17, 2022. These evacuation orders are relevant both to the timeline of VHG's pre-storm protective measures and to the reasonableness of VHG's post-storm restoration efforts, as personnel were unable to return to the properties until evacuation orders were lifted.
In preparing his cause-of-loss analysis, Mr. Caldwell relied upon NHC advisories, NOAA tide-gauge data from stations in the Florida Keys and along the Gulf Coast, USGS high-water marks documented at numerous locations in the affected area, and local weather station data from stations near each of the three properties. Additionally, Mr. Caldwell employed wind-field modeling to estimate the sustained and peak-gust wind speeds experienced at each specific property location during the storm's passage. This modeling accounts for the storm's forward speed, the property's position relative to the eyewall, and local terrain and exposure factors that can affect wind speeds at any given location. The wind-field analysis is a particularly valuable component of the report because it provides property-specific wind speed estimates rather than relying solely on regional data.
IV. Property-by-Property Analysis of Draft Report Conclusions
A. Verimark Grand Key Resort — Mile Marker 48, Marathon, FL 33050
Grand Key Resort is a 312-room luxury resort and marina facility located at Mile Marker 48 in Marathon, Florida. The property consists of a main hotel building, four ancillary guest accommodation structures, a full-service marina, pool and recreation areas, and various support structures. The property was closed from September 18, 2022, through March 15, 2023 — a total of 178 days. Grand Key Resort is the largest and most revenue-intensive of the three VHG properties at issue, and it sustained the most severe damage of the three.
This property is the most critical for the concurrent causation and flood exclusion dispute at the heart of this litigation because it experienced both significant wind damage to its upper structures and significant storm surge flooding at ground level. The defense will focus its efforts on Grand Key Resort, and the strength of Mr. Caldwell's cause-of-loss differentiation at this property will likely be determinative of the court's treatment of the concurrent causation issue.
Wind Damage Findings. Mr. Caldwell identifies extensive wind damage at Grand Key Resort attributable to the sustained Category 4 winds experienced at this location. The primary wind damage findings include the following:
• Roof system failures: The roof systems on the main hotel building and all four ancillary guest accommodation structures experienced significant wind damage, including uplift of roofing membrane, loss of roof sheathing panels, and in some areas, structural damage to roof trusses. Mr. Caldwell attributes these failures to sustained wind speeds exceeding the design wind loads for the existing roof systems. He notes that the directionality of roof damage is consistent with the wind direction at the time of the storm's passage.
• Building envelope breaches: Multiple window failures and exterior cladding losses on the upper floors of the hotel building created openings in the building envelope. These breaches allowed wind-driven rain to penetrate interior spaces, causing extensive water damage to guest rooms, corridors, and common areas on the upper floors. Mr. Caldwell differentiates this wind-driven rain intrusion from storm surge flooding by reference to the elevation of the affected areas, the staining patterns left by the water, and the presence of debris consistent with wind-borne projectiles at the point of envelope breach.
• Marina facility structural damage: The marina facility sustained structural damage from wind loading, including partial collapse of the covered boat slip structure and damage to the marina office building's roof and walls. Mr. Caldwell notes that while the marina also experienced surge and wave action, the structural failure mode observed — racking and uplift — is characteristic of wind loading rather than hydrostatic pressure from flooding.
• Projectile impact damage: The pool deck structures, exterior facades, and landscaping infrastructure sustained widespread damage from projectile impact by wind-borne debris. Mr. Caldwell documents the trajectories of debris strikes based on the pattern and directionality of impact marks, confirming that these are consistent with wind-driven rather than surge-driven forces.
Storm Surge Findings. Mr. Caldwell also documents storm surge damage at Grand Key Resort. The estimated storm surge at this location was 10 to 12 feet above mean sea level, which is consistent with the USGS high-water mark data for the Marathon area.
• Ground-floor and basement-level flooding: The storm surge inundated ground-floor and basement-level areas of the main hotel building, including the lobby, ground-floor meeting rooms, storage areas, and back-of-house spaces. Mr. Caldwell identifies visible water lines and sediment deposits at these lower elevations that are characteristic of surge inundation rather than wind-driven rain.
• Mechanical and electrical systems: The surge caused significant damage to mechanical systems, electrical switchgear, and elevator equipment housed in below-grade and ground-floor mechanical rooms. These systems required complete replacement. Mr. Caldwell attributes this damage to the surge based on the location of these systems at or below the surge inundation line, the nature of the damage (saltwater corrosion and hydrostatic pressure effects), and the absence of evidence suggesting that wind forces contributed to the failure of these below-grade systems.
• Marina dock and seawall damage: A portion of the damage to the marina docks and the property's seawall is attributable to storm surge and wave action. Mr. Caldwell notes that the dock damage reflects a combination of wind and surge forces, but he allocates the seawall damage predominantly to surge-induced hydrostatic loads.
Differentiation Conclusion. Mr. Caldwell concludes that approximately 72% of the total physical damage at Grand Key Resort (measured by estimated repair cost) is attributable to wind and wind-driven rain, and approximately 28% is attributable to storm surge and flooding. Critically, Mr. Caldwell opines that these two categories of damage operated independently on different building systems: wind damaged the roof, building envelope, and upper-story interiors, while surge damaged ground-floor and below-grade mechanical and electrical systems. Mr. Caldwell states that the wind damage and the surge damage "affected distinct building components at distinct elevations within the structures, and can be differentiated through standard forensic engineering analysis of failure modes, damage patterns, water intrusion pathways, and elevation-based inundation evidence."
Opinion on Separability. This separability opinion is perhaps the single most important conclusion in Mr. Caldwell's report. It directly supports VHG's argument under the efficient proximate cause doctrine, as analyzed in the anti-concurrent causation memorandum prepared by this office and dated November 1, 2022. If the court accepts Mr. Caldwell's opinion that the wind damage and surge damage are separable and independently quantifiable, then the flood exclusion should apply only to the flood-caused portion of the loss (the 28% attributable to storm surge), not to the entire loss. This would preserve VHG's right to recover for the 72% of Grand Key damage attributable to wind — the predominant and efficient proximate cause of the overall loss.
Period of Restoration Opinion. Mr. Caldwell opines that the 178-day closure of Grand Key Resort (September 18, 2022 through March 15, 2023) was reasonable given the scope of wind damage to the roof system, the need for complete re-roofing of the main hotel building and ancillary structures, the extensive interior remediation of water damage caused by wind-driven rain on upper floors, and the sequential nature of the required repairs. Mr. Caldwell explains that the building envelope — particularly the roof — must be fully sealed before interior remediation and buildout can commence, as ongoing exposure to the elements would render interior work futile. He also notes the well-documented contractor availability constraints and material supply-chain disruptions in the post-hurricane environment in the Florida Keys, which contributed to delays in the commencement and pace of restoration work.
B. Verimark Harborview Hotel & Conference Center — 1400 Estero Boulevard, Fort Myers Beach, FL 33931
The Harborview Hotel & Conference Center is a 224-room hotel with a 40,000-square-foot conference facility located on Fort Myers Beach in Lee County, Florida. The property consists of a multi-story hotel tower, the attached conference center building, a porte-cochère and covered walkway system, and various guest amenity and support structures. The property was closed from September 18, 2022, through January 31, 2023 — a total of 135 days.
Located in Lee County, the Harborview property experienced somewhat lower storm surge levels than Grand Key Resort, with estimated surge of 6 to 10 feet in the Fort Myers Beach area. However, the property's exposure to sustained high winds during the storm was significant, and the conference center's large flat roof proved particularly vulnerable to wind damage.
Wind Damage Findings. Mr. Caldwell identifies the following primary wind damage at the Harborview property:
• Conference center roof failure: The conference center's flat roof membrane experienced catastrophic failure under sustained wind loads. The membrane was peeled back across large sections of the roof, exposing the underlying roof deck and allowing wind-driven rain to inundate the conference center's interior. Mr. Caldwell attributes this failure to the membrane's vulnerability to uplift forces on the large, flat roof surface area. The damage pattern — progressive peeling from the windward edge — is a hallmark of wind-induced roof membrane failure.
• Hotel tower window failures: Multiple windows on the upper floors of the hotel tower failed due to a combination of wind pressure exceeding the design capacity of the window assemblies and impact from wind-borne debris. These window failures resulted in interior water intrusion and damage to guest rooms on the affected floors.
• Exterior cladding damage: Sections of the hotel tower's exterior cladding were dislodged by wind forces, exposing the underlying building envelope and creating additional pathways for water intrusion.
• Porte-cochère and walkway structural damage: The porte-cochère at the hotel entrance and the covered walkways connecting the hotel tower to the conference center sustained structural damage from wind loading, including partial collapse of roof sections and displacement of support columns.
Storm Surge Findings. Storm surge impacts at the Harborview property were more limited in scope compared to Grand Key Resort, reflecting the somewhat lower surge levels experienced in the Fort Myers Beach area and the property's specific topography and elevation.
• Limited ground-floor flooding: Mr. Caldwell estimates that approximately 3 to 4 feet of storm surge flooding affected the lobby and ground-level meeting rooms. The water line evidence and sediment deposits are consistent with surge inundation at these lower elevations.
• HVAC equipment damage: The property's HVAC equipment, which was located at grade level behind the main building, was damaged by storm surge. The equipment required replacement due to saltwater exposure and corrosion.
Differentiation Conclusion. Mr. Caldwell concludes that approximately 85% of the total physical damage at the Harborview property is attributable to wind and wind-driven rain, and approximately 15% is attributable to storm surge and flooding. As with Grand Key Resort, Mr. Caldwell opines that the wind damage and surge damage at Harborview are separable by building component and elevation. The wind damage was concentrated in the conference center roof, the hotel tower's upper-floor windows and cladding, and the exterior walkway structures, while the surge damage was confined to ground-floor interior spaces and grade-level mechanical equipment.
Period of Restoration Opinion. Mr. Caldwell opines that the 135-day closure was reasonable. The conference center required a full roof replacement — a major construction project given the 40,000-square-foot roof surface area — as well as complete interior buildout of the conference facility following the extensive water intrusion through the failed roof. The hotel tower required window replacement on multiple floors and interior remediation of water-damaged guest rooms. Mr. Caldwell notes that the conference center and hotel tower repairs proceeded concurrently where possible, and that the 135-day timeline reflects efficient project management given the scope of the work required.
C. Verimark Sunset Shores — 7200 Gulf Boulevard, St. Pete Beach, FL 33706
Sunset Shores is a 186-room boutique resort located in St. Pete Beach, Pinellas County, Florida. The property consists of multiple low-rise guest accommodation buildings, a pool and recreation area, and supporting structures. Unlike the other two properties, Sunset Shores experienced a partial closure followed by a phased reopening: the property was fully closed from September 18 through November 30, 2022 (73 full-closure days), then operated at reduced capacity through February 2023, reaching full capacity on February 28, 2023.
Sunset Shores' location in Pinellas County, farther from the storm's landfall point and along a portion of the coastline with less severe storm surge exposure, resulted in less intense storm surge impacts compared to Grand Key Resort or Harborview. However, the property still experienced significant wind damage during the storm.
Wind Damage Findings. Mr. Caldwell documents the following wind damage at Sunset Shores:
• Roof damage: Multiple guest accommodation buildings sustained roof damage, including shingle loss, membrane failure, and localized structural damage to roof framing. The damage patterns are consistent with the sustained wind speeds estimated at this location during the storm.
• Window failures: Numerous window assemblies failed across the property due to wind pressure and debris impact, resulting in interior water intrusion in affected guest rooms and common areas.
• Exterior façade damage: The exterior facades of several buildings sustained damage from wind forces and debris impact, including dislodged stucco, damaged trim elements, and compromised weather barriers.
• Pool area destruction: The pool deck, cabana structures, and surrounding recreational infrastructure were extensively damaged by wind-borne debris. Mr. Caldwell notes that the debris field in and around the pool area is consistent with wind-driven forces rather than surge action.
Storm Surge Findings. Storm surge impacts at Sunset Shores were minimal relative to the other two properties. Mr. Caldwell estimates that approximately 2 to 3 feet of storm surge and tidal action affected the property, primarily causing damage to ground-floor landscaping, exterior hardscape elements, and some minor ground-level structural components. No significant interior flooding from storm surge was documented at this property.
Differentiation Conclusion. Mr. Caldwell concludes that approximately 92% of the total physical damage at Sunset Shores is attributable to wind and wind-driven rain, with approximately 8% attributable to storm surge and tidal effects. The overwhelming predominance of wind damage at this property makes the cause-of-loss differentiation relatively straightforward compared to Grand Key Resort.
Period of Restoration Opinion. Mr. Caldwell opines that the 73-day full closure (September 18 through November 30, 2022) and the subsequent reduced-capacity period through February 28, 2023, were reasonable given the scope of roof and window repairs required across the property's multiple buildings. Mr. Caldwell notes that the phased reopening approach — bringing repaired buildings online incrementally while continuing work on other structures — was appropriate engineering practice and reflected sound project management that actually accelerated the property's return to full revenue-generating capacity compared to maintaining full closure until all work was complete.
V. Assessment of Strengths of Draft Report
Mr. Caldwell's draft report exhibits several significant strengths that I believe will be effective both in motion practice and at trial.
Methodology. Mr. Caldwell's methodology is sound and well-documented. The report reflects a comprehensive approach combining on-site inspections and physical evidence examination, engineering analysis of failure modes at each damaged building component, comparison of estimated wind speed data (from wind-field modeling) to the structural capacities of the relevant building systems (based on original construction documents and applicable building codes), and detailed physical evidence analysis of damage patterns. Particularly effective is Mr. Caldwell's use of damage pattern directionality — the direction of debris impact marks, the pattern of roof membrane peeling, and the orientation of structural failures relative to the wind direction during the storm's passage — to confirm wind as the causative force for specific damage areas. Similarly, his use of water staining patterns to distinguish between wind-driven rain (which enters through envelope breaches at upper elevations and flows downward) and storm surge (which enters at ground level and leaves tide-line marks and sediment deposits) is a well-established forensic engineering technique that should withstand scrutiny on cross-examination and in Daubert challenge proceedings.
Clear Separability Analysis. The clear, separable quantification of wind damage versus surge damage at each property is the single most important feature of the report. By establishing that wind damage and surge damage affected different building components at different elevations, and by quantifying the percentage of total damage attributable to each cause, Mr. Caldwell directly undermines Ironclad's concurrent causation and flood exclusion defense. If the damage is separable, the anti-concurrent causation clause in the Ironclad policy should not operate to exclude the wind-caused portion of the loss, regardless of whether the flood exclusion applies to the surge-caused portion.
Favorable Wind-Damage Percentages. The wind-damage percentages at the three properties — 72% at Grand Key, 85% at Harborview, and 92% at Sunset Shores — are strongly favorable to VHG's position. These percentages establish that wind was the predominant and efficient proximate cause of the losses at all three properties. Even at Grand Key Resort, where the storm surge impact was most severe, wind damage accounts for nearly three-quarters of the total loss. These percentages provide a compelling evidentiary basis for VHG's argument that the windstorm — a covered peril — was the primary driver of the property damage and resulting business interruption losses.
Restoration Period Validation. Mr. Caldwell's opinions on the reasonableness of VHG's closure durations at each property directly rebut Ironclad's affirmative defense that VHG unreasonably delayed restoration. His property-specific analysis, which accounts for the scope and nature of the damage, the sequential requirements of construction, and external constraints such as contractor availability and material shortages, provides engineering-based support for the closure periods that VHG has claimed in its business interruption loss calculation. The closure durations validated by Mr. Caldwell — 178 days at Grand Key, 135 days at Harborview, and 73 days of full closure (plus the partial-capacity period) at Sunset Shores — are consistent with and supportive of VHG's claimed periods of restoration.
Expert Credentials. Mr. Caldwell is a Florida-licensed Professional Engineer with more than twenty years of experience in forensic engineering, including extensive experience in hurricane damage assessment and cause-of-loss analysis. His curriculum vitae, attached to the report, reflects his participation in post-hurricane damage assessments following multiple major Florida hurricanes, his peer-reviewed publications on wind damage engineering, and his prior expert testimony experience in Florida courts. These credentials should be well-received by the court and will make him a credible witness at trial and in deposition.
Evidentiary Support. The appendices to Mr. Caldwell's report are extensive and provide strong evidentiary support for his conclusions. The annotated photographs clearly illustrate the damage at each property and the physical evidence on which Mr. Caldwell relies to distinguish between wind and surge damage. The engineering drawings and damage maps provide visual representations of the spatial distribution of damage by cause, which will be effective demonstrative aids at trial. The meteorological data compilations and wind-field model outputs document the environmental conditions during the storm's passage and support Mr. Caldwell's estimates of the wind speeds and surge levels experienced at each property.
Coordination with Vasquez Report. The Caldwell report dovetails effectively with the forensic economics analysis being prepared by Dr. Isabella Vasquez of Meridian Forensic Economics. Mr. Caldwell establishes the physical basis for the damage and validates the reasonable restoration timeframes at each property, which Dr. Vasquez then uses as inputs for her quantification of VHG's $60 million in business-interruption losses. The two reports, read together, provide a comprehensive and internally consistent expert framework supporting VHG's claim. Mr. Caldwell's engineering analysis provides the factual and technical predicate that gives Dr. Vasquez's economic calculations their evidentiary foundation.
VI. Identified Weaknesses and Recommended Revisions
While the draft report is strong overall, I have identified several areas where revisions or additions would strengthen the report and reduce its vulnerability to anticipated defense attacks. Each area is discussed below with specific recommendations.
A. Grand Key Storm Surge Analysis — Potential Vulnerability
The 28% storm surge allocation at Grand Key Resort is the area of the report most susceptible to challenge by the defense. I anticipate that Dr. Warren Birk of Graystone Consulting Group LLC, whom the defense has retained as its damages and coverage expert, will argue that the storm surge percentage at Grand Key is understated. Given the 10-to-12-foot storm surge documented at this location, the defense will likely contend that surge damage to ground-floor and below-grade systems was more extensive than Mr. Caldwell acknowledges, and that some of the ground-floor water damage Mr. Caldwell attributes to wind-driven rain was in fact caused by storm surge inundation.
I have the following specific recommendations to strengthen this section of the report:
First, I recommend that Mr. Caldwell provide additional detail on the methodology he employed to distinguish ground-floor water damage caused by storm surge from water damage caused by wind-driven rain that accumulated at ground level after flowing downward through envelope breaches in the upper stories. This is a genuinely challenging forensic question, and the defense will exploit any ambiguity. Mr. Caldwell should describe the specific physical evidence he used to make this determination — including differences in sediment deposits, staining characteristics, the presence or absence of saltwater mineral residue versus freshwater patterns, and the spatial distribution of water damage relative to known envelope breach points versus known surge ingress pathways. A more detailed treatment of this methodology will make the 72%/28% allocation more difficult to challenge.
Second, I recommend that Mr. Caldwell add a section explicitly addressing the independent-cause analysis. Specifically, Mr. Caldwell should explain that even assuming the defense's position that storm surge was responsible for a somewhat larger percentage of ground-floor damage, the wind damage to the roof, upper floors, and building envelope would independently have required the same closure period and generated the same business interruption losses. In other words, even if the surge-damaged mechanical systems had not been damaged, the property would still have been unable to operate during the period required to repair the extensive wind damage to the building envelope and upper-story interiors. This independent-cause argument is significant because it means that even if the court allocates a larger share of physical damage to storm surge, the business interruption losses are entirely attributable to wind damage — the wind damage alone, independently of the surge damage, necessitated the full 178-day closure.
Third, I recommend that Mr. Caldwell insert specific references to the USGS high-water marks and NOAA tide-gauge data at or near Mile Marker 48 in Marathon, including the precise elevation measurements documented by these agencies. While Mr. Caldwell references this data generally in his meteorological overview section, anchoring the Grand Key surge analysis to specific, verifiable elevation data points will strengthen the evidentiary basis for his 10-to-12-foot surge estimate and the corresponding 28% allocation.
B. Period of Restoration — Additional Support Needed
Ironclad has specifically argued in its third affirmative defense that VHG failed to proceed with "reasonable speed" in restoring operations at the three properties. While Mr. Caldwell's restoration-period opinions are reasonable and well-supported in the current draft, they would benefit from additional supporting detail. I recommend the following additions:
First, Mr. Caldwell should include references to the well-documented post-hurricane contractor and material shortages in the Florida Keys region and along the Southwest Florida coast following Hurricane Callista. Contractor availability in the weeks and months following a major hurricane is severely constrained, as the limited pool of qualified contractors is overwhelmed by demand. Similarly, roofing materials, window assemblies, structural lumber, and other building materials experienced significant supply-chain disruptions and extended lead times during this period. These supply-chain constraints are a matter of public record and industry documentation. Mr. Caldwell should cite specific sources — such as industry reports, contractor correspondence, or building department records — to substantiate the impact of these constraints on VHG's restoration timelines.
Second, Mr. Caldwell should address the permitting delays experienced with the Monroe County Building Department (for Grand Key Resort) and the Lee County Building Department (for Harborview) in the post-hurricane period. Both building departments experienced a massive surge in permit applications following the hurricane, and processing times were significantly extended. Permits for structural repairs, re-roofing, and other major restoration work had to be obtained before construction could proceed. Mr. Caldwell should document how these permitting delays affected the restoration timelines at Grand Key and Harborview.
Third, Mr. Caldwell should more explicitly describe the sequential nature of construction that requires the building envelope to be sealed before interior remediation can commence. While this concept is mentioned in the current draft, it deserves greater emphasis because it explains why the restoration periods could not be shortened simply by adding additional crews or working extended hours. Until the roof is replaced and the exterior envelope is sealed, interior water damage remediation — including mold abatement, drywall replacement, flooring installation, and finish work — cannot begin, as the interior spaces would remain exposed to the elements.
Fourth, and perhaps most significantly, I recommend that Mr. Caldwell add a comparative analysis section in which he presents typical restoration timelines for comparable resort properties following Category 4 hurricanes in Florida. To the extent that publicly available data or industry literature documents the restoration timelines for similar hotel and resort properties after prior major hurricanes (such as Hurricane Irma in 2017 or Hurricane Michael in 2018), Mr. Caldwell should compile this information to establish a benchmark demonstrating that VHG's restoration timelines were within or below industry norms. This comparative analysis would be a powerful tool in rebutting Ironclad's argument that VHG delayed unreasonably.
C. Failure to Mitigate — Proactive Rebuttal
Ironclad's fourth affirmative defense alleges that VHG failed to take reasonable steps to mitigate its damages. While the failure-to-mitigate defense is primarily a legal argument, Mr. Caldwell's report would benefit from an engineering-based rebuttal of this contention. Mr. Caldwell reviewed the repair records, contractor invoices, and correspondence documenting VHG's post-hurricane activities at each property, and he is therefore in a position to address VHG's mitigation efforts from an engineering perspective.
I recommend that Mr. Caldwell add a section to his report confirming that VHG took reasonable protective and mitigation measures at each property, based on his review of the available documentation. Specifically, Mr. Caldwell should address the following:
• VHG's pre-storm preparations, including boarding up windows and doors, securing loose exterior elements, and shutting down and protecting sensitive mechanical and electrical systems in advance of the hurricane;
• VHG's deployment of temporary protective measures immediately following the storm, including emergency tarping of damaged roof areas to prevent further water intrusion, deployment of emergency generators to maintain power for critical systems (such as sump pumps and dehumidifiers), and engagement of licensed restoration contractors to commence debris removal and emergency stabilization;
• VHG's prompt engagement of contractors to begin permanent restoration work as soon as conditions and permitting allowed; and
• The reasonableness of VHG's overall approach to restoration, including the phased reopening strategy at Sunset Shores, which prioritized returning to partial revenue-generating capacity while continuing repairs on the remaining portions of the property.
This section of the report will provide engineering-based support for the broader rebuttal of the mitigation defense and will complement the legal arguments that VHG acted reasonably under the circumstances.
D. Drafting and Presentation Issues
In addition to the substantive recommendations described above, I have identified several drafting and presentation issues that should be addressed before the report is finalized.
Technical terminology: Several sections of the report use overly technical engineering terminology without providing lay explanations. While this level of technical detail is appropriate for an engineering audience, the report will be read by judges, jurors, and opposing counsel who may not have engineering backgrounds. I recommend that Mr. Caldwell add plain-language summaries at the conclusion of each major section, restating the key findings and conclusions in accessible language. This will also be useful for direct examination at trial, where clear and understandable testimony is essential.
Photograph cross-references: The photographs in the appendices are extensive and provide strong visual support for the report's conclusions. However, the cross-references between the body of the report and the specific photographs in the appendices are not always clear. In several instances, the text refers to "damage observed" at a particular location without directing the reader to the specific photograph or photographs documenting that observation. I recommend that Mr. Caldwell add specific photograph reference numbers (e.g., "See Appendix B, Photograph B-17") to each damage observation discussed in the body text, so that the reader can easily locate the supporting visual evidence.
Numbered opinions: For ease of reference in depositions, motion practice, and at trial, I recommend that Mr. Caldwell number all of his final opinions explicitly (e.g., Opinion No. 1, Opinion No. 2, etc.) and present them in a consolidated summary section at the conclusion of the report. This format allows counsel to reference specific opinions efficiently during examination (e.g., "Mr. Caldwell, please turn to your Opinion No. 3") and makes it easier for the court to identify and discuss individual opinions in its rulings.
Harborview square footage discrepancy: I have identified an internal inconsistency in the Harborview Hotel & Conference Center section of the report. One paragraph references a "38,000 sq. ft." conference facility, while VHG's own records, the property management agreements, and the complaint in this action all describe the conference facility as 40,000 square feet. This discrepancy should be corrected to reflect the accurate 40,000-square-foot figure. While this is a minor point, any internal inconsistency in an expert report — however small — can be exploited by opposing counsel during cross-examination to suggest carelessness or unreliability. This correction should be made throughout the report to ensure consistency.
VII. Coordination with Dr. Vasquez's Expert Report (Meridian Forensic Economics)
As noted above, Dr. Isabella Vasquez of Meridian Forensic Economics has prepared a separate draft expert report quantifying VHG's business-interruption losses at the three properties. The review of Dr. Vasquez's draft report is being conducted separately by David Rosenthal, and a memorandum analyzing that report was prepared and circulated on September 8, 2023. The present memorandum does not duplicate that analysis but addresses the key interdependencies between the two expert reports.
The critical interdependency between the Caldwell report and the Vasquez report is that Dr. Vasquez's business-interruption loss quantification for each property relies upon the closure periods and restoration timelines validated by Mr. Caldwell's engineering analysis. Specifically:
• Grand Key Resort: 178 days of closure → $31.4 million in business-interruption losses
• Harborview Hotel & Conference Center: 135 days of closure → $18.7 million in business-interruption losses
• Sunset Shores: 73 days of full closure plus partial-capacity period through February 28, 2023 → $9.9 million in business-interruption losses
• Total: $60.0 million in aggregate business-interruption losses
If the closure periods or restoration timelines set forth in Mr. Caldwell's report are inconsistent with those used by Dr. Vasquez, the defense will be quick to exploit the discrepancy. Accordingly, it is essential that the two reports be cross-reviewed for consistency before they are finalized and served.
Additionally, Mr. Caldwell's wind-versus-surge differentiation percentages may become relevant to Dr. Vasquez's analysis in a specific contingency. If the court determines that the flood exclusion applies to some portion of the loss — that is, if the court rejects VHG's position that the anti-concurrent causation clause is unenforceable and instead holds that surge-caused damage is excluded — then Dr. Vasquez would need to apportion business-interruption losses between wind-caused and surge-caused closure periods. In that scenario, the question becomes whether the wind damage alone, independent of the surge damage, would have required the same closure period at each property. This is another reason why the independent-cause analysis recommended in Section VI.A above is important: if Mr. Caldwell can establish that the wind damage independently necessitated the full closure at each property, then the business-interruption losses remain fully recoverable even if some physical damage is excluded as flood-related.
I recommend that Mr. Caldwell and Dr. Vasquez be asked to cross-review each other's reports to ensure consistency in closure dates, restoration timelines, and property descriptions before the September 15 service deadline. David Rosenthal is leading the coordination of the Vasquez report and should be the point of contact for scheduling this cross-review.
VIII. Anticipated Defense Expert Rebuttal
The defense has retained Dr. Warren Birk of Graystone Consulting Group LLC (150 N. Michigan Avenue, Suite 2600, Chicago, IL 60601) as its damages and coverage expert. Dr. Birk's engagement was disclosed in the defense's expert witness designation filed on August 15, 2023. As of the date of this memorandum, the defense has not yet identified its forensic engineering expert, though the expert designation deadline for rebuttal experts is October 2, 2023. We should expect the defense to retain a forensic engineer to challenge Mr. Caldwell's cause-of-loss differentiation, and we should prepare Mr. Caldwell for the lines of attack that a defense forensic engineer is likely to pursue.
Based on my review of Ironclad's answer, affirmative defenses, and discovery responses, as well as the arguments advanced by defense counsel during the course of this litigation, I anticipate the following lines of attack against Mr. Caldwell's report:
First, the defense is likely to argue that storm surge was a more significant contributor to the damage at Grand Key Resort than the 28% estimate in Mr. Caldwell's report. The defense will likely contend that the 10-to-12-foot storm surge at Grand Key caused more extensive damage to ground-floor and below-grade systems than Mr. Caldwell acknowledges, and that some damage Mr. Caldwell attributes to wind-driven rain at lower elevations was actually caused by surge inundation. The recommendations in Section VI.A above are designed to preemptively address this line of attack.
Second, the defense will challenge the separability of wind and surge damage, arguing that the two causes operated concurrently and that the resulting damage cannot be meaningfully separated. The defense's position is that concurrent causation renders all damage subject to the flood exclusion under the anti-concurrent causation clause in the Ironclad policy. To advance this argument, the defense's forensic engineer will likely focus on areas of the properties where wind and surge damage overlapped — for example, ground-floor areas at Grand Key Resort that experienced both wind-driven rain from envelope breaches above and storm surge from below. Mr. Caldwell should be prepared to defend his separability analysis with reference to the specific physical evidence at each area of overlap and to explain the engineering basis for distinguishing between the two causes even in areas where both were present.
Third, the defense is likely to assert that the reasonable restoration periods at all three properties were shorter than those claimed by VHG and validated by Mr. Caldwell. Ironclad has already taken this position in its third affirmative defense, and a defense expert opinion supporting shorter restoration periods would lend evidentiary support to that contention. The comparative timeline analysis recommended in Section VI.B above would provide Mr. Caldwell with data to rebut any such opinion.
Fourth, the defense may challenge Mr. Caldwell's methodology for allocating damage percentages between wind and surge. The percentage allocations (72%/28%, 85%/15%, 92%/8%) are based on Mr. Caldwell's estimation of the repair costs associated with wind-damaged versus surge-damaged building components. The defense may argue that this methodology is imprecise, that the repair cost estimates are unreliable, or that alternative allocation methods would yield different results. Mr. Caldwell should be prepared to defend the reliability of his allocation methodology and the basis for his repair cost estimates.
Rebuttal expert reports are due October 2, 2023. Once the defense's rebuttal reports are received, we should promptly provide them to Mr. Caldwell for review and begin preparing him for deposition. Mr. Caldwell's deposition may be requested by either or both of the defense counsel of record: Gregory Stanton of Fendowell Rourke & Stanton LLP, who represents Ironclad Indemnity Corporation, or Patricia Kraus of Delvecchio & Kraus LLP, who represents the co-defendant excess carrier. We should anticipate deposition preparation sessions in late October or early November 2023, depending on the scheduling of depositions.
IX. Recommended Next Steps and Timeline
Based on my review of the draft report and the analysis set forth in this memorandum, I recommend the following next steps and timeline:
1. September 11, 2023: Transmit this memorandum's recommended revisions to Mr. Caldwell, with an accompanying cover letter summarizing the requested changes and the rationale for each. Allow Mr. Caldwell sufficient time to review and incorporate the revisions before the September 15 service deadline.
2. September 12, 2023: Schedule and conduct a conference call between the undersigned, David Rosenthal, and Mr. Caldwell to discuss the recommended revisions in detail, address any questions Mr. Caldwell may have regarding the requested changes, and confirm the timeline for delivery of the revised report.
3. September 12–13, 2023: Mr. Caldwell to correct the Harborview conference center square footage discrepancy, changing the erroneous "38,000 sq. ft." reference to "40,000 sq. ft." throughout the report, and to address any other internal inconsistencies identified during the revision process.
4. September 12–14, 2023: Mr. Caldwell to add the failure-to-mitigate rebuttal section and the comparative restoration-timeline analysis recommended in Sections VI.B and VI.C of this memorandum.
5. September 13–14, 2023: Coordinate the cross-review between the Caldwell report and the Vasquez report to ensure consistency in closure dates, restoration timelines, and property descriptions. David Rosenthal, who is leading the review of Dr. Vasquez's report, should facilitate this cross-review and resolve any inconsistencies before both reports are finalized.
6. September 14, 2023: Delivery of the revised Caldwell report to Calderwood & Harkness for final review by Elaine Forsythe before service.
7. September 15, 2023: Service of the final Caldwell report and the final Vasquez report on defense counsel in compliance with the expert report service deadline.
8. Post-September 15, 2023: After service, prepare for potential defense rebuttal reports (due October 2, 2023). Upon receipt of defense rebuttal reports, provide them to Mr. Caldwell for review and commence deposition preparation for Mr. Caldwell.
X. Conclusion
Mr. Caldwell's draft forensic engineering report provides a strong foundation for VHG's causation position in this litigation. The report directly supports VHG's claim that wind — a covered peril under the Ironclad all-risk commercial property policy — was the predominant cause of physical damage at all three of VHG's resort properties. The wind-damage percentages at each property (72% at Grand Key, 85% at Harborview, and 92% at Sunset Shores) are favorable and well-supported by the physical evidence and engineering analysis presented in the report.
The separability analysis is particularly critical to the overall litigation strategy. If the court accepts Mr. Caldwell's opinion that the wind damage and storm surge damage at each property can be independently identified and quantified — that they affected different building components at different elevations and can be differentiated through forensic engineering analysis — it significantly undermines Ironclad's concurrent causation and flood exclusion defense. A finding of separability would mean that, even if the flood exclusion bars recovery for surge-caused damage, VHG can recover for the substantial majority of its losses that are attributable to wind — a covered peril.
With the incorporation of the recommended revisions set forth in Section VI of this memorandum, the report should serve as an effective tool across multiple phases of this litigation: in connection with VHG's anticipated motion for partial summary judgment on the concurrent causation issue (currently planned for filing in November 2023), at any court-ordered mediation, and at trial. The revisions recommended herein are designed to strengthen the report's most vulnerable areas — the Grand Key storm surge allocation, the restoration-period justification, and the failure-to-mitigate rebuttal — without altering Mr. Caldwell's fundamental conclusions or methodology.
The Caldwell report, in combination with Dr. Vasquez's forensic economics analysis quantifying $60 million in business-interruption losses across the three properties, provides a comprehensive expert framework supporting VHG's claim for full recovery under its commercial property insurance policy. The two reports are complementary: Mr. Caldwell establishes the engineering basis for the cause and extent of covered damage and validates the reasonableness of VHG's restoration timelines, while Dr. Vasquez uses those engineering-validated parameters to calculate the resulting economic losses. Together, they present a coherent and well-supported expert narrative that should be persuasive to the court.
I am available to discuss this memorandum and its recommendations at your convenience.
DISTRIBUTION: Elaine Forsythe (only); copy maintained in matter file 1021-00003.
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT. This memorandum was prepared by Andrew Fitzpatrick at the direction of Elaine Forsythe in anticipation of litigation and in connection with the provision of legal advice to Verimark Hospitality Group Inc. This memorandum contains the mental impressions, conclusions, opinions, and legal theories of attorneys at Calderwood & Harkness LLP and is protected from disclosure by the attorney work product doctrine. Do not copy, distribute, or disclose this memorandum or its contents to any person outside the engagement team without the prior written authorization of the Responsible Partner.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

INTERNAL MEMORANDUM

ENGAGEMENT NO.: 1021-00003

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