[slide 1]
Cover Slide
Verimark Hospitality Group Inc. v. Ironclad Indemnity Corp. et al.
Case No. 2022-CA-031547 — Eleventh Judicial Circuit, Miami-Dade County
Mediation Before Hon. Richard Mendelson (Ret.) — Keystone Dispute Resolution Inc.
December 4–5, 2023
CONFIDENTIAL — PREPARED FOR MEDIATION PURPOSES ONLY
Prepared by Calderwood & Harkness LLP, Counsel for Verimark Hospitality Group Inc.
[slide 2]
Executive Summary
Verimark Hospitality Group Inc. (Nasdaq: VMRK) — publicly traded hospitality and real-estate company headquartered in Miami, FL
FY 2021 Revenue: $412M
Hurricane Callista (Category 4) made landfall September 18, 2022 — catastrophic damage to three flagship Florida resort properties
Total business-interruption losses: $60,000,000 across three properties
All four insurers denied or reserved rights on approximately $60M in BI coverage
VHG seeks recovery of its full policy tower: $60M in aggregate limits above $500K deductible
[slide 3]
The Insured Properties — Overview
Verimark Grand Key Resort — Mile Marker 48, Marathon, FL 33050: 312 rooms, luxury resort and marina; Pre-loss ADR $389, Occupancy 82%
Verimark Harborview Hotel & Conference Center — 1400 Estero Boulevard, Fort Myers Beach, FL 33931: 224 rooms + 40,000 sq. ft. conference facility; Pre-loss ADR $295, Occupancy 74%
Verimark Sunset Shores — 7200 Gulf Boulevard, St. Pete Beach, FL 33706: 186 rooms, boutique resort; Pre-loss ADR $342, Occupancy 79%
Combined: 722 rooms across three premier Florida resort destinations
[slide 4]
Hurricane Callista — Timeline of Events
September 12, 2022 — Hurricane Callista named by the National Hurricane Center
September 16, 2022 — Monroe County mandatory evacuation order issued (Grand Key Resort)
September 17, 2022 — Lee County evacuation order issued (Harborview)
September 18, 2022, ~1:30 PM EDT — Callista makes landfall as Category 4 (sustained winds 145 mph) near Big Pine Key, Lower Florida Keys
Storm surge: 8–14 feet in Monroe County; 6–10 feet in Lee County
All three VHG properties closed as of September 18, 2022
September 22, 2022 — VHG submits initial notice of loss to Ironclad Indemnity Corporation
[slide 5]
Property Damage — Grand Key Resort
312-room luxury resort and marina — Mile Marker 48, Marathon, FL
Catastrophic wind damage to structures; significant storm surge flooding (8–14 ft in Monroe County)
Complete closure: September 18, 2022 – March 15, 2023 (178 days)
Extensive structural repairs required; marina facilities destroyed
[PHOTOGRAPH PLACEHOLDER — Property damage images]
Forensic engineering analysis by Jeffrey Caldwell, PE (Caldwell Engineering Associates Inc.) confirms predominant wind causation
[slide 6]
Property Damage — Harborview Hotel & Conference Center
224-room hotel with 40,000 sq. ft. conference facility — Fort Myers Beach, FL
Severe wind damage to hotel structure and conference center; storm surge 6–10 ft in Lee County
Complete closure: September 18, 2022 – January 31, 2023 (135 days)
Conference center revenue loss significant — group bookings displaced for entire Q4 2022 and January 2023
[PHOTOGRAPH PLACEHOLDER — Property damage images]
[slide 7]
Property Damage — Sunset Shores
186-room boutique resort — St. Pete Beach, FL
Moderate-to-severe wind damage; partial structural compromise
Full closure: September 18 – November 30, 2022 (73 days)
Reduced capacity operations: December 2022 – February 2023
Full capacity restored: February 28, 2023
[PHOTOGRAPH PLACEHOLDER — Property damage images]
[slide 8]
Business-Interruption Loss Quantification — Summary
Total Claimed Business-Interruption Loss: $60,000,000
Grand Key Resort: $31,400,000 (178-day closure)
Harborview Hotel & Conference Center: $18,700,000 (135-day closure)
Sunset Shores: $9,900,000 (73-day full closure + partial closure period)
Expert analysis by Dr. Helen Vasquez, CPA, CFF — Meridian Forensic Economics LLC
Methodology: Historical financial performance, ADR, occupancy rates, ancillary revenue, conference revenue, saved expenses analysis
[slide 9]
Grand Key Resort — BI Loss Detail ($31.4M)
312 rooms × $389 ADR × 82% occupancy × 178 closure days = room revenue baseline
Ancillary revenue: marina operations, food & beverage, spa, water sports
Adjustments for seasonality (peak winter season captured in closure period)
Less: Saved variable expenses during closure
Total BI Loss: $31,400,000
[CHART PLACEHOLDER — Monthly revenue comparison: actual vs. projected]
[slide 10]
Harborview Hotel & Conference Center — BI Loss Detail ($18.7M)
224 rooms × $295 ADR × 74% occupancy × 135 closure days = room revenue baseline
Conference center: 40,000 sq. ft. — lost group bookings and event revenue for Q4 2022 and January 2023
Food & beverage and event catering revenue losses
Less: Saved variable expenses during closure
Total BI Loss: $18,700,000
[CHART PLACEHOLDER — Conference center booking comparison: actual vs. projected]
[slide 11]
Sunset Shores — BI Loss Detail ($9.9M)
186 rooms × $342 ADR × 79% occupancy × 73 full-closure days
Plus: Reduced capacity operations December 2022 – February 2023 (partial revenue loss)
Full capacity not restored until February 28, 2023
Less: Saved variable expenses; partial revenue earned during reduced operations
Total BI Loss: $9,900,000
[CHART PLACEHOLDER — Occupancy and revenue during reduced-capacity period]
[slide 12]
Insurance Tower Structure — $60M in Total Limits
Primary Layer: Ironclad Indemnity Corporation — $25M limit (Policy IIC-PRP-2022-07541), $500K deductible
1st Excess: Pinnacle Surplus Lines Inc. — $15M xs $25M (Policy PSL-XS1-2022-3390)
2nd Excess: Montclair Assurance Company — $10M xs $40M (Policy MAC-XS2-2022-09817)
3rd Excess: Sovereign Re Ltd. — $10M xs $50M (Policy SRL-XS3-2022-5102)
Total Tower: $60,000,000 above $500,000 deductible
All policies: July 1, 2022 – July 1, 2023
[CHART PLACEHOLDER — Tower diagram showing layers]
[slide 13]
The Insurers' Denial Positions
1. Windstorm Sub-Limit: Ironclad asserts a $15M named-windstorm sub-limit applies — VHG contends this was deleted at the July 2022 renewal per broker negotiations
2. Period of Restoration: Ironclad argues VHG unreasonably delayed restoration — VHG demonstrates closures were the minimum necessary for repairs
3. Concurrent Causation / Flood Exclusion: Ironclad claims storm-surge damage at Grand Key triggers the flood exclusion — VHG invokes Florida's efficient proximate cause doctrine (wind was the predominant cause)
4. Failure to Mitigate: Ironclad alleges VHG failed to take reasonable steps to reduce the interruption period — evidence demonstrates comprehensive mitigation efforts
[slide 14]
Windstorm Sub-Limit — VHG's Strongest Argument
Ironclad's position: Policy contains a $15M named-windstorm sub-limit for BI
VHG's position: Sub-limit was expressly deleted during July 2022 renewal negotiations
Key evidence: Broker correspondence from Franklin Orde (Tidewater Risk Advisors) confirming Ironclad's underwriter agreed to delete the sub-limit in exchange for increased premium
Deposition testimony of Franklin Orde (August 28, 2023): Confirmed deletion negotiations and Ironclad's agreement
Deposition testimony of Victor Haddon (July 10, 2023): Could not identify any underwriting documentation supporting retention of the sub-limit
VHG's motion for partial summary judgment filed November 1, 2023 — pending before Hon. Catherine Embry
Under Florida law, ambiguities in policy endorsements are construed against the insurer
[slide 15]
Concurrent Causation / Flood Exclusion — Florida Law Favors VHG
Ironclad argues storm surge at Grand Key Resort constitutes 'flood' — excluded peril
Florida's efficient proximate cause doctrine: When wind (covered) and flood (excluded) concurrently cause damage, coverage applies if wind is the efficient proximate cause
Forensic engineering analysis by Jeffrey Caldwell, PE (Caldwell Engineering Associates): Wind was the predominant cause of structural damage at Grand Key
Storm surge contributed to secondary damage but wind caused the structural failure
Anti-concurrent causation clause in the policy is unenforceable under Florida law as applied to these facts
[slide 16]
Period of Restoration — Closures Were Reasonable
Grand Key Resort: 178 days (closed Sept 18, 2022 – Mar 15, 2023) — extensive structural repairs, marina reconstruction
Harborview: 135 days (closed Sept 18, 2022 – Jan 31, 2023) — hotel and conference center repairs
Sunset Shores: 73 days full closure (Sept 18 – Nov 30, 2022); reduced capacity through Feb 28, 2023
Restoration timelines supported by contractor records and Dr. Vasquez's analysis
Defense expert Dr. Warren Birk (Graystone Consulting Group) could not identify specific unreasonable delays in deposition (October 23, 2023)
Post-hurricane contractor shortages and supply-chain disruptions in South Florida are well-documented
[slide 17]
Failure to Mitigate — VHG Took Comprehensive Steps
Immediate property securing and emergency stabilization post-storm
Engaged contractors for structural assessment and repair planning within days of access
Sunset Shores partially reopened November 30, 2022 — earliest feasible date
VHG redirected guests to non-affected properties where possible
Sandra Pellegrini coordinated mitigation efforts with Tidewater Risk Advisors and contractors
No credible evidence of failure to mitigate — defense has not identified specific deficiencies
[slide 18]
Key Deposition Testimony — Favorable Admissions
Victor Haddon (Ironclad SVP Claims, July 10): Could not locate underwriting file documentation supporting retention of windstorm sub-limit; acknowledged denial relied heavily on Arbor Claims' adjustment
Denise Whitford (Arbor Claims, July 24): Confirmed extensive property damage at all three locations; acknowledged she did not opine on the windstorm sub-limit issue
Franklin Orde (Tidewater, August 28): Testified that Ironclad's underwriter agreed to delete the windstorm sub-limit in exchange for a premium increase at the July 2022 renewal
Dr. Warren Birk (Graystone, October 23): Conceded he could not identify specific unreasonable delays in VHG's restoration timeline; his reduced BI estimate relied on the disputed windstorm sub-limit
[slide 19]
Expert Evidence — Dr. Helen Vasquez (Meridian Forensic Economics)
Dr. Helen Vasquez, CPA, CFF — retained by Calderwood & Harkness LLP
Expert report served September 15, 2023; deposed October 16, 2023
Methodology: Detailed property-level analysis of lost revenue using historical ADR, occupancy, ancillary revenue, and seasonal adjustments
Conclusion: VHG's total BI losses exceed $60M
Withstood defense cross-examination — methodology consistent with industry standards
Defense expert Dr. Birk's lower estimate ($37–42M range) relies on disputed windstorm sub-limit cap and shorter restoration period
[slide 20]
Pending Summary Judgment Motions
November 1, 2023: VHG filed motion for partial summary judgment on the windstorm sub-limit issue
Supported by declarations of Sandra Pellegrini, Franklin Orde, and Dr. Helen Vasquez
November 15, 2023: Defendants filed cross-motion for partial summary judgment
November 20, 2023: Hon. Catherine Embry ordered mediation before ruling on the motions
VHG is confident in prevailing on the sub-limit issue, which would expose the full $60M tower
A favorable ruling on the sub-limit issue would significantly increase trial exposure for all carriers
[slide 21]
Litigation Timeline — Key Milestones
Sept 22, 2022 — Notice of loss submitted
Oct 12, 2022 — Ironclad reservation of rights
Nov 15, 2022 — Sworn proof of loss ($60M)
Feb 3, 2023 — Ironclad formal denial; Feb 10 — Pinnacle follows
Mar 1, 2023 — Complaint filed (Case No. 2022-CA-031547)
Jun–Sept 2023 — Fact discovery (6 depositions completed)
Sept–Oct 2023 — Expert reports served; expert depositions
Nov 1, 2023 — VHG partial summary judgment motion filed
Dec 4–5, 2023 — Mediation
[CHART PLACEHOLDER — Visual timeline graphic]
[slide 22]
Claims Administration History
VHG provided prompt notice of loss (September 22, 2022 — 4 days after landfall)
Arbor Claims Services LLC (Denise Whitford) inspected properties October 5, 2022
VHG submitted sworn statement in proof of loss November 15, 2022 ($60M)
Ironclad delayed — reservation of rights issued October 12, 2022; formal denial not until February 3, 2023 (over 4 months after notice)
Pinnacle followed Ironclad's denial February 10, 2023
Montclair and Sovereign Re reserved rights but never formally denied
VHG fully cooperated throughout the claims process
[slide 23]
Settlement Demand and Exposure Analysis
VHG's total claim: $60,000,000 — full policy tower
Strong likelihood of prevailing on windstorm sub-limit issue — exposes full tower
Remaining defenses (concurrent causation, period of restoration, mitigation) are individually weak
Bad-faith exposure under Florida law adds potential extra-contractual damages for Ironclad
Litigation costs and uncertainty for all carriers if case proceeds to trial
VHG seeks a resolution that reflects the strength of its position and the full value of its losses
[slide 24]
Carrier-by-Carrier Exposure
Ironclad Indemnity Corp. (Primary): $25M limit less $500K deductible = $24.5M exposure + bad-faith risk
Pinnacle Surplus Lines Inc. (1st Excess): $15M follow-form — follows Ironclad on coverage; full layer at risk if sub-limit issue resolved in VHG's favor
Montclair Assurance Co. (2nd Excess): $10M layer attaches at $40M — exposed if losses exceed $40M (Dr. Vasquez confirms they do)
Sovereign Re Ltd. (3rd Excess): $10M layer attaches at $50M — exposed if losses exceed $50M (Dr. Vasquez confirms $60M+ in losses)
Defense counsel: Fendowell Rourke & Stanton LLP (Ironclad/Pinnacle); Delvecchio & Kraus LLP (Montclair/Sovereign Re)
[slide 25]
Conclusion — VHG Seeks Full and Fair Recovery
VHG's $60M business-interruption claim is well-documented and supported by expert analysis
The windstorm sub-limit was deleted at the 2022 renewal — the full tower is at risk
All four insurer defenses are factually and legally weak under Florida law
VHG acted in good faith throughout — prompt notice, full cooperation, reasonable mitigation
VHG is prepared to proceed to trial if a fair resolution cannot be reached
VHG respectfully requests the mediator's assistance in achieving a just result