1021-00003 · Verimark Hospitality Group · Pleadings & Court Filings

motion-partial-summary-judgment-windstorm.docx DOCUMENT Antitrust

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IN THE CIRCUIT COURT OF THE ELEVENTH JUDICIAL CIRCUIT IN AND FOR MIAMI-DADE COUNTY, FLORIDA

CIVIL DIVISION

Case No. 2022-CA-031547

VERIMARK HOSPITALITY GROUP INC., a Delaware corporation,

Plaintiff,

IRONCLAD INDEMNITY CORPORATION, a Connecticut stock insurance company; PINNACLE SURPLUS LINES INC., a Texas surplus-lines insurer; MONTCLAIR ASSURANCE COMPANY, a New York admitted carrier; and SOVEREIGN RE LTD., a Bermuda-domiciled excess carrier,

Defendants.

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PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON THE NAMED-WINDSTORM SUB-LIMIT ISSUE

Filed: November 1, 2023 Before: Hon. Catherine Embry

I. INTRODUCTION

Plaintiff Verimark Hospitality Group Inc. ("VHG") respectfully moves this Court, pursuant to Florida Rule of Civil Procedure 1.510, for partial summary judgment on a discrete but pivotal issue in this multi-defendant insurance coverage dispute: whether the $15,000,000 named-windstorm sub-limit that appeared in the prior-year policy was deleted from the Ironclad Indemnity Corporation ("Ironclad") primary property and business-interruption policy, Policy No. IIC-PRP-2022-07541, effective July 1, 2022 through July 1, 2023 (the "Policy"). This question — essentially one of contract formation and interpretation — is dispositive of the threshold defense raised by Ironclad in its formal coverage denial and subsequently adopted by Pinnacle Surplus Lines Inc. ("Pinnacle") in its follow-form denial. Resolution of this question will determine whether VHG's catastrophic business-interruption losses from Hurricane Callista are confined to a $15,000,000 sub-limit or, as VHG contends, are subject to the full $25,000,000 per-occurrence limit under the Ironclad primary policy and, in turn, trigger the attachment points of the three excess layers comprising VHG's $60,000,000 insurance tower.

VHG contends — and the undisputed record evidence overwhelmingly demonstrates — that the named-windstorm sub-limit was expressly deleted during the July 2022 renewal negotiations between VHG's broker of record, Tidewater Risk Advisors LLC ("Tidewater"), and Ironclad's underwriting department. VHG paid an increased premium of $140,000 — a 16.7% increase over the prior year's primary-layer premium — specifically in exchange for that deletion. The deletion was memorialized in the coverage binder issued by Tidewater on June 28, 2022, which states in unequivocal terms: "Named Windstorm Sub-Limit: Deleted per agreement." VHG bound coverage and paid the increased premium in reliance upon that agreement.

The undisputed record evidence — including the binder, broker correspondence produced in discovery, the deposition testimony of Tidewater's account executive Franklin Orde, the deposition testimony of VHG's Vice President of Risk Management Sandra Pellegrini, the deposition testimony of Ironclad's own Senior Vice President of Claims Victor Haddon, Ironclad's internal underwriting files produced pursuant to VHG's Second Request for Production, and the policy endorsement history — all point in a single, unrebutted direction: the $15,000,000 named-windstorm sub-limit does not apply to VHG's business-interruption claim arising from Hurricane Callista. No witness has testified that the sub-limit was intended to remain in effect for the 2022–2023 policy year. No document in the record supports Ironclad's position.

If the sub-limit is eliminated, VHG's $60,000,000 business-interruption claim is subject to the full $25,000,000 primary-layer limit (less the $500,000 deductible), which in turn triggers the attachment points of the three excess layers: Pinnacle Surplus Lines Inc., providing $15,000,000 excess of $25,000,000; Montclair Assurance Company ("Montclair"), providing $10,000,000 excess of $40,000,000; and Sovereign Re Ltd. ("Sovereign Re"), providing $10,000,000 excess of $50,000,000. The full $60,000,000 insurance tower is thus exposed to VHG's claim, subject to resolution of the remaining coverage disputes — period of restoration, concurrent causation and the flood exclusion, and the alleged failure to mitigate — none of which are the subject of this Motion.

Resolution of the sub-limit issue on summary judgment will streamline the remaining coverage disputes, narrow the issues for trial, facilitate informed settlement discussions among the parties, and conserve the Court's and the parties' resources. VHG respectfully submits that partial summary judgment is both warranted and efficient under the circumstances.

II. STATEMENT OF UNDISPUTED MATERIAL FACTS

Contemporaneously with this Motion, VHG has filed a separate Statement of Undisputed Material Facts with full record citations, as required by this Court's Uniform Administrative Order and in conformity with Florida Rule of Civil Procedure 1.510(c). The material facts are summarized below for the Court's convenience. All citations herein are to the record evidence supporting each fact.

A. The Parties and the Insurance Program

1. VHG is a Delaware corporation, publicly traded on the Nasdaq Stock Exchange under the ticker symbol "VMRK," and is headquartered at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG owns and operates luxury resort hotels and conference centers throughout the State of Florida. For fiscal year 2021, VHG reported revenue of approximately $412,000,000 and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $78,000,000. (Pellegrini Declaration, ¶ 2; VHG Form 10-K for FY 2021, at 4, 32.)

2. VHG's three insured properties at issue in this litigation are:

(a) Verimark Grand Key Resort, located at Mile Marker 48, Marathon, Monroe County, Florida 33050, consisting of 312 guest rooms, restaurants, spa and pool facilities, and marina;

(b) Verimark Harborview Hotel & Conference Center, located at 1400 Estero Boulevard, Fort Myers Beach, Lee County, Florida 33931, consisting of 224 guest rooms and a 40,000-square-foot conference and event facility; and

(c) Verimark Sunset Shores, located at 7200 Gulf Boulevard, St. Pete Beach, Pinellas County, Florida 33706, consisting of 186 guest rooms and associated amenities.

(Pellegrini Declaration, ¶¶ 2–3; Orde Declaration, ¶ 3.)

3. Defendant Ironclad Indemnity Corporation is a Connecticut-domiciled stock insurance company with its principal office at 55 Constitution Boulevard, Hartford, Connecticut 06103, NAIC Company Code No. 20537. Ironclad is the lead carrier on VHG's primary all-risks property and business-interruption insurance policy, Policy No. IIC-PRP-2022-07541, with a per-occurrence limit of $25,000,000 for business interruption and a deductible of $500,000. The policy period runs from July 1, 2022 through July 1, 2023. The Policy is an "all risks" policy covering direct physical loss or damage to covered property, including business interruption and extra expense. (Policy No. IIC-PRP-2022-07541, Declarations Page, at VHG-00001–VHG-00004; Pellegrini Declaration, ¶ 4.)

4. Defendant Pinnacle Surplus Lines Inc. is a Texas-domiciled surplus-lines insurer with its principal office in Austin, Texas. Pinnacle provides the first excess layer of VHG's property and business-interruption insurance program under Policy No. PSL-XS1-2022-3390, affording $15,000,000 in excess of the underlying $25,000,000 Ironclad primary limit, on a follow-form basis with the Ironclad primary policy. (Policy No. PSL-XS1-2022-3390, Declarations Page, at VHG-00312–VHG-00314; Orde Declaration, ¶ 4.)

5. Defendant Montclair Assurance Company is a New York-domiciled admitted carrier. Montclair provides the second excess layer under Policy No. MAC-XS2-2022-09817, affording $10,000,000 in excess of $40,000,000 (i.e., excess of the combined Ironclad primary and Pinnacle first excess limits). (Policy No. MAC-XS2-2022-09817, Declarations Page, at VHG-00487–VHG-00489; Orde Declaration, ¶ 4.)

6. Defendant Sovereign Re Ltd. is a Bermuda-domiciled excess carrier. Sovereign Re provides the third and final excess layer under Policy No. SRL-XS3-2022-5102, affording $10,000,000 in excess of $50,000,000 (i.e., excess of the combined limits of all underlying layers). (Policy No. SRL-XS3-2022-5102, Declarations Page, at VHG-00623–VHG-00625; Orde Declaration, ¶ 4.)

7. The total insurance tower for VHG's property and business-interruption program is $60,000,000 above the $500,000 deductible. The annual premium for the full tower for the 2022–2023 policy year was $1,840,000, allocated as follows: Ironclad primary, $980,000; Pinnacle first excess, $410,000; Montclair second excess, $265,000; Sovereign Re third excess, $185,000. (Pellegrini Declaration, ¶ 12, Ex. C (premium invoice); Orde Declaration, ¶ 8.)

B. The Prior-Year Policy and the Named-Windstorm Sub-Limit

8. The 2021–2022 Ironclad primary policy (the "predecessor policy"), Policy No. IIC-PRP-2021-06328, contained a Named Windstorm Endorsement (Endorsement No. 14 to the predecessor policy) that imposed a sub-limit of $15,000,000 for business-interruption losses arising from named windstorms as designated by the National Hurricane Center, the Central Pacific Hurricane Center, or any successor agency. The sub-limit operated to cap VHG's business-interruption recovery at $15,000,000 per occurrence for losses caused by named windstorms, notwithstanding the $25,000,000 per-occurrence limit otherwise available under the policy. (Predecessor Policy, Endorsement No. 14, at VHG-00198–VHG-00200; Pellegrini Declaration, ¶ 5.)

9. In March 2022, as VHG began preparations for the July 2022 renewal of its property and business-interruption insurance program, VHG's Vice President of Risk Management, Sandra Pellegrini, directed VHG's broker of record, Tidewater Risk Advisors LLC ("Tidewater"), through its account executive Franklin Orde (whose office is located at 2600 South Bayshore Drive, Suite 800, Miami, Florida 33133), to negotiate the removal of the $15,000,000 named-windstorm sub-limit from the Ironclad primary policy at the July 2022 renewal. Ms. Pellegrini's directive was motivated by VHG's expanding Florida coastal portfolio and its increased exposure to hurricane-related business-interruption losses. (Declaration of Sandra Pellegrini, ¶¶ 3–8, filed herewith; Deposition of Sandra Pellegrini (Aug. 14, 2023), at 34:12–36:5.)

10. Ms. Pellegrini testified at her deposition that VHG's management, including General Counsel Nathaniel Driscoll and Chief Financial Officer Diane Calder, had determined that the $15,000,000 sub-limit presented an unacceptable gap in VHG's insurance program given the company's concentration of assets in Florida's coastal hurricane zone, and that VHG was willing to pay additional premium to secure the deletion of the sub-limit. (Pellegrini Depo., at 35:1–36:5.)

C. The July 2022 Renewal Negotiations

11. Franklin Orde testified at his deposition that, in accordance with VHG's instructions, he communicated VHG's request to delete the $15,000,000 named-windstorm sub-limit to Ironclad's underwriting department during May and June 2022. Orde's communications were directed to Ironclad's lead underwriter for the VHG account, whose identity and role are confirmed in the underwriting correspondence produced by Ironclad in discovery. (Deposition of Franklin Orde (Aug. 28, 2023), at 22:8–25:19; Declaration of Franklin Orde, ¶¶ 5–6, filed herewith.)

12. On or about June 15, 2022, Orde received written confirmation from Ironclad's lead underwriter, transmitted via email, agreeing to delete the $15,000,000 named-windstorm sub-limit from the renewal policy in exchange for an increased premium on the primary layer. The email stated, in pertinent part, that Ironclad was "agreeable to the removal of the Named Windstorm Sub-Limit of $15M for Business Interruption, subject to a premium increase" to be reflected in the binding confirmation. (Declaration of Franklin Orde, ¶¶ 5–9, filed herewith; Orde Depo., at 27:3–29:14; IIC-UW-00047 (Ironclad underwriting correspondence, produced in response to VHG's Second Request for Production, served July 15, 2023).)

13. The increased premium for the 2022–2023 primary layer was $980,000, up from $840,000 in the prior policy year — an increase of $140,000, representing approximately a 16.7% increase over the prior-year premium. This premium increase was specifically negotiated as the consideration for the deletion of the named-windstorm sub-limit. (Orde Depo., at 31:1–32:8; Pellegrini Declaration, ¶ 12, Ex. C.)

14. Following receipt of Ironclad's agreement, Orde conveyed the underwriter's agreement to Sandra Pellegrini, who in turn relayed the information to VHG's General Counsel, Nathaniel Driscoll, and CFO, Diane Calder. VHG's management authorized the increased premium and directed Tidewater to bind coverage effective July 1, 2022, with the understanding that the named-windstorm sub-limit had been deleted. (Pellegrini Depo., at 38:10–39:22, 40:2–41:5; Pellegrini Declaration, ¶ 10.)

D. The Issued Policy and Endorsement Ambiguity

15. When Ironclad issued Policy No. IIC-PRP-2022-07541, the policy form included a "Named Windstorm Endorsement" (Endorsement No. 14) that contained boilerplate language referencing a sub-limit applicable to business-interruption losses arising from named windstorms. However, critically, the endorsement's schedule of sub-limits contained a blank entry in the "Business Interruption Sub-Limit" field — no dollar figure was inserted. The field where the prior-year "$15,000,000" figure had appeared was left empty. (Policy No. IIC-PRP-2022-07541, Endorsement No. 14, at VHG-00089–VHG-00091.)

16. Ironclad did not issue a separate endorsement expressly captioned "Deletion of Named-Windstorm Sub-Limit," nor did it issue any policy-change confirmation, policy-change request acknowledgment, or endorsement amendment reflecting the agreed-upon deletion of the sub-limit. (Orde Declaration, ¶ 9; Pellegrini Declaration, ¶ 11.)

17. The coverage binder issued by Tidewater on June 28, 2022, which was provided to VHG and a copy of which was transmitted to Ironclad's underwriting department, stated: "Named Windstorm Sub-Limit: Deleted per agreement" under the summary of coverage changes from the prior year. This language appeared in the section of the binder titled "Summary of Material Changes from Prior Policy Year." (Orde Declaration, ¶ 7, Ex. B (copy of binder); Pellegrini Declaration, ¶ 9.)

18. VHG's premium invoice for the 2022–2023 policy period, issued by Ironclad and reflecting the higher $980,000 primary-layer premium, was paid in full by VHG on or about July 8, 2022. Ironclad accepted and retained the full $980,000 premium without objection, protest, or any communication suggesting that the sub-limit had not been deleted or that the premium increase was attributable to any coverage change other than the sub-limit deletion. (Pellegrini Declaration, ¶ 12, Ex. C (premium invoice); Orde Depo., at 33:5–34:2.)

E. Hurricane Callista and the Business-Interruption Claim

19. Hurricane Callista was designated as a named tropical storm by the National Hurricane Center on September 12, 2022, and was subsequently upgraded to hurricane status. Hurricane Callista made landfall as a Category 4 hurricane on the Saffir-Veltason Hurricane Wind Scale (sustained winds of approximately 145 miles per hour) on September 18, 2022, at approximately 1:30 PM Eastern Daylight Time, near Big Pine Key in the Lower Florida Keys, Monroe County, Florida. (National Hurricane Center Advisory No. 24 (Sept. 18, 2022); Pellegrini Declaration, ¶ 13.)

20. Hurricane Callista produced storm surge of 8 to 14 feet above normal tide levels in Monroe County and 6 to 10 feet above normal tide levels in Lee County. Catastrophic wind damage, flooding, and debris impacts were reported throughout the affected areas. Monroe County issued a mandatory evacuation order on September 16, 2022. Lee County issued a mandatory evacuation order on September 17, 2022. (National Weather Service Post-Storm Report, Hurricane Callista (Oct. 2022); Monroe County Emergency Management Order No. 2022-EM-047; Lee County Emergency Management Order No. 2022-EM-103.)

21. All three VHG properties sustained catastrophic damage as a result of Hurricane Callista and were forced to close:

(a) Grand Key Resort (Marathon, Monroe County): Closed for a total of 178 days, from September 18, 2022 through March 15, 2023. The property sustained severe structural damage to guest-room buildings, complete destruction of the marina, flooding of ground-floor common areas, and loss of electrical, plumbing, and HVAC infrastructure.

(b) Harborview Hotel & Conference Center (Fort Myers Beach, Lee County): Closed for a total of 135 days, from September 18, 2022 through January 31, 2023. The conference facility sustained roof loss, water intrusion to all floors, destruction of audiovisual and communications systems, and extensive damage to the lobby, restaurant, and back-of-house areas.

(c) Sunset Shores (St. Pete Beach, Pinellas County): Full closure for 73 days, from September 18, 2022 through November 30, 2022, followed by a period of reduced capacity (approximately 40% occupancy limitation) through February 28, 2023, due to ongoing repairs to guest-room wings and pool facilities.

(Pellegrini Declaration, ¶¶ 14–16; Declaration of Dr. Helen Vasquez, ¶¶ 4–12, filed herewith.)

22. VHG submitted its notice of loss to Ironclad on September 22, 2022, within four days of the hurricane's landfall and well within the policy's notice requirements. VHG subsequently submitted a sworn statement in proof of loss on November 15, 2022, claiming total business-interruption losses of $60,000,000, broken down as follows: Grand Key Resort, $31,400,000; Harborview Hotel & Conference Center, $18,700,000; Sunset Shores, $9,900,000. (Pellegrini Declaration, ¶ 17, Exs. D–E (notice of loss and proof of loss); Orde Declaration, ¶ 11.)

F. Ironclad's Denial and the Sub-Limit Dispute

23. On October 12, 2022, Ironclad issued a reservation of rights letter addressed to VHG, citing as one of several grounds the purported existence of the $15,000,000 named-windstorm sub-limit under Endorsement No. 14 as a potential limitation on VHG's business-interruption recovery. The reservation of rights letter was signed by Victor Haddon, Ironclad's Senior Vice President of Claims. (IIC-CL-00023–IIC-CL-00029 (reservation of rights letter).)

24. On October 25, 2022, VHG, through its coverage counsel, Calderwood & Harkness LLP (Elaine Forsythe, Esq.), responded to Ironclad's reservation of rights letter, specifically disputing the applicability of any named-windstorm sub-limit and referencing the deletion negotiated during the July 2022 renewal. VHG's letter enclosed a copy of the Tidewater binder reflecting the deletion and demanded that Ironclad withdraw its reservation on the sub-limit ground. (VHG-00742–VHG-00749 (VHG response letter).)

25. On February 3, 2023, Ironclad issued a formal coverage denial letter, asserting four grounds for denial or limitation of VHG's business-interruption claim:

(1) The $15,000,000 named-windstorm sub-limit caps VHG's business-interruption recovery for Hurricane Callista losses;

(2) VHG's claimed period of restoration is unreasonably extended and includes losses not attributable to the covered peril;

(3) A portion of VHG's losses are attributable to flood and storm surge, which are excluded under the Policy's flood exclusion and concurrent-causation provisions; and

(4) VHG failed to take reasonable steps to mitigate its losses, including by failing to reopen properties on a timely basis.

The first ground — the named-windstorm sub-limit — is the subject of this Motion. The remaining grounds are not addressed herein. (IIC-CL-00055–IIC-CL-00068 (formal denial letter).)

26. On February 10, 2023, Pinnacle Surplus Lines Inc. issued its own denial letter, expressly following Ironclad's denial and adopting Ironclad's stated grounds, including the assertion that the $15,000,000 named-windstorm sub-limit applied. Pinnacle's denial rested on the follow-form nature of its excess policy. (PSL-CL-00012–PSL-CL-00015 (Pinnacle denial letter).)

27. Montclair Assurance Company and Sovereign Re Ltd. did not issue formal coverage denials. Both carriers reserved their rights and took the position that their respective excess layers would not be reached if the $15,000,000 named-windstorm sub-limit applied to the underlying Ironclad primary policy, as VHG's capped recovery would fall well below their attachment points ($40,000,000 and $50,000,000, respectively). (MAC-CL-00003–MAC-CL-00005 (Montclair reservation of rights letter, dated Feb. 17, 2023); SRL-CL-00002–SRL-CL-00004 (Sovereign Re reservation of rights letter, dated Feb. 21, 2023).)

28. At his deposition, Victor Haddon, Ironclad's Senior Vice President of Claims, acknowledged that he was not involved in the underwriting or renewal negotiations for VHG's 2022–2023 policy and that he relied on the policy form as issued — specifically, Endorsement No. 14 — in making the decision to assert the named-windstorm sub-limit as a basis for limiting VHG's claim. (Deposition of Victor Haddon (July 10, 2023), at 45:8–47:22.)

29. Critically, Haddon further testified that he did not consult with Ironclad's underwriting department about the sub-limit deletion negotiations before issuing the February 3, 2023 denial. When asked whether he had reviewed any correspondence between Ironclad's underwriter and Tidewater Risk Advisors concerning the deletion of the sub-limit, Haddon answered: "I did not." When asked whether he had spoken with anyone in Ironclad's underwriting department about whether the sub-limit had been deleted at the July 2022 renewal, Haddon answered: "No, I relied on the endorsement as it appeared in the policy." (Haddon Depo., at 52:3–54:11.)

30. Denise Whitford, the lead adjuster from Arbor Claims Services LLC retained by Ironclad to adjust VHG's claim, testified at her deposition that her adjustment report did not independently analyze whether the named-windstorm sub-limit had been deleted during the July 2022 renewal negotiations. Ms. Whitford testified that she was not asked by Ironclad to investigate the issue and that she applied the sub-limit in her report because it appeared in Endorsement No. 14 of the issued policy. (Deposition of Denise Whitford (July 24, 2023), at 61:14–63:7.)

III. LEGAL STANDARD

Under Florida Rule of Civil Procedure 1.510, as amended effective May 1, 2021, summary judgment is appropriate when "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fla. R. Civ. P. 1.510(a). The 2021 amendments to Rule 1.510 adopted the federal summary judgment standard articulated in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), and its progeny. In re Amendments to Florida Rule of Civil Procedure 1.510, 317 So. 3d 72 (Fla. 2021). Under this standard, the movant need not negate the nonmovant's case but must demonstrate the absence of a genuine dispute of material fact, at which point the burden shifts to the nonmovant to come forward with specific facts showing that a genuine issue exists for trial. See Celotex, 477 U.S. at 323–25.

A "genuine" issue of material fact exists only when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Chateau Brickell Condo. Ass'n v. Aspen Specialty Ins. Co., 346 So. 3d 671, 673 (Fla. 3d DCA 2022). The Court must view the evidence in the light most favorable to the nonmoving party, but the nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

Partial summary judgment may be granted on discrete issues to narrow the matters remaining for trial. Fla. R. Civ. P. 1.510(a) ("A party may move for summary judgment, identifying each claim or defense — or the part of each claim or defense — on which summary judgment is sought."). This is precisely the procedural vehicle contemplated here: VHG seeks resolution of a single, well-defined coverage issue — the applicability of the named-windstorm sub-limit — while reserving for subsequent proceedings the remaining disputed coverage questions.

In insurance coverage disputes under Florida law, the interpretation of an insurance policy is a question of law to be decided by the court. State Farm Fire & Cas. Co. v. Castillo, 356 So. 3d 260, 264 (Fla. 3d DCA 2023); Swire Pac. Holdings, Inc. v. Glenrock Assurance Ins. Co., 845 So. 2d 161, 165 (Fla. 2003). Where the policy language is ambiguous, the Court may consider extrinsic evidence to determine the intent of the parties, and any remaining ambiguity is construed against the insurer under the doctrine of contra proferentem. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000); Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So. 2d 938, 942 (Fla. 1979).

IV. ARGUMENT

A. Under Florida Law, the Named-Windstorm Sub-Limit Was Deleted at the July 2022 Renewal

The undisputed record evidence establishes, as a matter of law, that the $15,000,000 named-windstorm sub-limit was deleted from VHG's primary property and business-interruption policy during the July 2022 renewal negotiations. The deletion was agreed upon by Ironclad's underwriting department, memorialized in the coverage binder, and supported by the payment and acceptance of additional premium consideration. Ironclad cannot now repudiate its own underwriter's agreement simply because its claims department failed to consult with underwriting before issuing a coverage denial.

1. The Binder Controls Where the Policy Is Ambiguous. Under Florida law, a binder is a temporary contract of insurance that establishes the terms and conditions of coverage until the formal policy is issued. See Fla. Stat. § 627.420(1) ("A binder may be issued pending the issuance of a policy."); Essex Ins. Co. v. Zota, 466 So. 2d 1208, 1210 (Fla. 3d DCA 1985) (recognizing that a binder constitutes a valid, enforceable contract of insurance). Where a policy as issued conflicts with or is ambiguous in relation to the binder's terms, the binder's terms may control, particularly where the insured relied on the binder's representations and paid additional premium accordingly. See Highlands Ins. Co. v. Gerber Products Co., 702 So. 2d 622, 624 (Fla. 2d DCA 1997) (holding that where binder and policy conflicted, binder terms governed the parties' agreement); Boozer v. Stalley, 146 So. 2d 104, 107 (Fla. 3d DCA 1962) (binder establishes a contract of insurance that binds the insurer until the policy is delivered).

The binder in this case — the Tidewater coverage binder dated June 28, 2022 — is unambiguous. Under the heading "Summary of Material Changes from Prior Policy Year," the binder states in plain and unmistakable language: "Named Windstorm Sub-Limit: Deleted per agreement." (Orde Declaration, ¶ 7, Ex. B.) There is no qualifying language, no condition precedent, and no indication that the deletion was anything other than final and effective upon binding.

The issued policy, by contrast, is at best ambiguous on the sub-limit question. Endorsement No. 14 to Policy No. IIC-PRP-2022-07541 contains the same boilerplate Named Windstorm Endorsement language that appeared in the predecessor policy. However, the endorsement's schedule of sub-limits — the operative section where, in the prior-year policy, the figure "$15,000,000" appeared — contains a blank entry in the "Business Interruption Sub-Limit" field. No dollar figure was inserted. (Policy No. IIC-PRP-2022-07541, Endorsement No. 14, at VHG-00089–VHG-00091.) The blank field does not state "$15,000,000." It does not state "N/A" or "None." It is simply empty.

This blank creates, at minimum, a patent ambiguity in the endorsement. The endorsement references a sub-limit, but specifies no sub-limit amount. One cannot enforce a sub-limit of an unspecified dollar amount. The blank field is entirely consistent with — and, VHG submits, is best read as confirming — the deletion of the sub-limit negotiated between the parties.

Under Florida's well-established rule that ambiguities in insurance policies are construed against the insurer — the doctrine of contra proferentem — the blank sub-limit field must be read as consistent with the deletion negotiated between the parties and memorialized in the binder. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000) ("Where the terms of a policy of insurance are in doubt or are ambiguous, the policy should be construed liberally in favor of the insured and strictly against the insurer."); Deni Assocs. of Fla., Inc. v. State Farm Fire & Cas. Ins. Co., 711 So. 2d 1135, 1139 (Fla. 1998) (same). Ironclad, as the drafter of the policy, bore the obligation to issue clear, unambiguous policy documents. Its failure to do so cannot redound to the detriment of VHG.

Even if the Court were to find Endorsement No. 14 ambiguous rather than clearly reflective of the deletion, the result is the same. Where the binder and the policy conflict on the terms of coverage, and the insured relied upon the binder's terms in binding coverage and paying the premium, the binder's terms govern. Highlands Ins. Co., 702 So. 2d at 624. The binder states that the sub-limit was deleted. VHG relied on that representation. VHG paid an increased premium in exchange for the deletion. The binder controls.

2. The Extrinsic Evidence Unanimously Confirms Deletion. Even if the Court were to look beyond the four corners of the binder and the policy to consider the full scope of extrinsic evidence bearing on the parties' intent — as Florida law permits where a policy is ambiguous, see Excelsior Ins. Co., 369 So. 2d at 942 — the result is no different. The extrinsic evidence is unanimous, unrebutted, and points inexorably to a single conclusion: the named-windstorm sub-limit was deleted.

Franklin Orde's testimony and declaration. Orde, VHG's account executive at Tidewater Risk Advisors, testified at his deposition that he communicated VHG's request to delete the sub-limit to Ironclad's underwriting department in May and June 2022. He testified that on or about June 15, 2022, he received written confirmation from Ironclad's lead underwriter agreeing to the deletion in exchange for an increased premium. He memorialized the deletion in the June 28, 2022 binder. His testimony is uncontradicted; no witness for any Defendant has offered testimony challenging any aspect of Orde's account. (Orde Depo., at 22:8–25:19, 27:3–29:14; Orde Declaration, ¶¶ 5–9.)

Sandra Pellegrini's testimony and declaration. Pellegrini, VHG's Vice President of Risk Management, testified that she directed Tidewater to negotiate the deletion, that she was informed by Orde that Ironclad had agreed, that she communicated the agreement to VHG's General Counsel and CFO, and that VHG authorized the increased premium and bound coverage with the understanding that the sub-limit was gone. Her testimony is similarly uncontradicted. (Pellegrini Depo., at 34:12–36:5, 38:10–41:5; Pellegrini Declaration, ¶¶ 3–12.)

Ironclad's own underwriting correspondence. Ironclad's internal underwriting files, produced in discovery in response to VHG's Second Request for Production (served July 15, 2023), contain the email from Ironclad's lead underwriter to Orde, dated on or about June 15, 2022, confirming Ironclad's agreement to delete the named-windstorm sub-limit in exchange for the premium increase. (IIC-UW-00047.) This is Ironclad's own document, generated by Ironclad's own underwriting personnel, confirming the very deletion that Ironclad's claims department now denies ever occurred. The disconnect between Ironclad's underwriting and claims functions does not create a triable issue of fact; it merely demonstrates that the claims denial was issued without adequate internal investigation.

Victor Haddon's testimony. Ironclad's own Senior Vice President of Claims — the individual who authorized the coverage denial — admitted at deposition that he did not consult with Ironclad's underwriting department before asserting the sub-limit as a ground for denial. He did not review the underwriting correspondence. He did not speak with the lead underwriter. He relied solely on the endorsement as it appeared in the issued policy — the very endorsement that contains a blank sub-limit field. (Haddon Depo., at 45:8–47:22, 52:3–54:11.) Haddon's testimony does not contradict the deletion; it simply reveals that Ironclad denied coverage without bothering to determine whether the sub-limit had, in fact, been deleted.

Denise Whitford's testimony. The lead adjuster from Arbor Claims Services LLC, retained by Ironclad to adjust VHG's claim, likewise testified that she did not independently analyze whether the sub-limit had been deleted. She was not asked to do so. She applied the sub-limit in her adjustment report because it appeared in the endorsement. (Whitford Depo., at 61:14–63:7.) This testimony further confirms that no Ironclad agent or representative has offered any affirmative evidence that the sub-limit survived the renewal.

In sum, the entirety of the record evidence — testimony of the broker, testimony of the insured's risk management executive, Ironclad's own underwriting files, the binder, the premium records, and even the admissions of Ironclad's own claims personnel — all confirm the deletion. There is no contrary evidence. No witness has testified that the sub-limit was intended to remain in effect. No document in the record supports Ironclad's position. The extrinsic evidence is not merely preponderant; it is uncontested.

3. The Premium Increase Constitutes Bargained-For Consideration for the Deletion. The undisputed evidence further establishes that VHG's payment of the increased premium constitutes bargained-for consideration for the deletion of the named-windstorm sub-limit. The primary-layer premium increased from $840,000 in the 2021–2022 policy year to $980,000 in the 2022–2023 policy year — an increase of $140,000, representing approximately 16.7%. (Orde Depo., at 31:1–32:8; Pellegrini Declaration, ¶ 12, Ex. C.)

This premium increase was not incidental or attributable to general market conditions. Both Orde and Pellegrini testified that the increase was specifically negotiated as the price for the deletion of the named-windstorm sub-limit. Ironclad's own underwriting correspondence confirms that the deletion was "subject to a premium increase." (IIC-UW-00047.) VHG paid the increased premium, and Ironclad accepted it without objection, protest, or any communication suggesting that the sub-limit remained in effect.

Under Florida contract law, the payment and acceptance of additional consideration for a modification to a contract — including a modification to an insurance policy — is strong, compelling, evidence of the parties' mutual intent to effectuate the modification. See New Amsterdam Cas. Co. v. Addison, 169 So. 2d 877, 880 (Fla. 1st DCA 1964) (mutual assent and consideration are essential elements of an enforceable insurance contract modification); U.S. Fire Ins. Co. v. Morejon, 338 So. 2d 223, 225 (Fla. 3d DCA 1976) (where insurer accepted additional premium for broadened coverage, insurer was bound by the modified terms). Ironclad cannot accept the benefit of the bargain — the increased premium — while simultaneously repudiating its obligation under that same bargain — the deletion of the sub-limit.

B. Ironclad Cannot Rely on Its Own Failure to Issue a Clear Endorsement

Ironclad's principal defense to the sub-limit deletion issue, as articulated in its February 3, 2023 denial letter and as reflected in its discovery responses, is that the policy form "as issued" contains Endorsement No. 14, which references a named-windstorm sub-limit. Ironclad contends that because no separate endorsement expressly captioned "Deletion of Named-Windstorm Sub-Limit" was issued, the sub-limit remains in effect.

This argument fails as a matter of law for multiple independent reasons.

First, it was Ironclad — not VHG — that bore the responsibility for issuing clear, unambiguous policy documents conforming to the agreed-upon terms of coverage. See Deni Assocs., 711 So. 2d at 1139 (the insurer, as drafter of the policy, bears responsibility for ambiguity). Having agreed through its underwriting department to delete the sub-limit, having accepted the increased premium in consideration for the deletion, and having failed to issue a clean endorsement reflecting the deletion, Ironclad cannot now rely on its own administrative failure — its own internal processing error — to deny coverage. To permit such a result would allow Ironclad to profit from its own negligence and breach of its agreement with VHG.

Second, Florida law holds that an insurer's failure to issue policy documents conforming to the agreed-upon terms of the insurance contract does not relieve the insurer of its obligations under that agreement. Where the parties have reached an agreement on the terms of coverage, and the insurer fails to issue a policy or endorsement consistent with that agreement, the policy must be reformed to reflect the parties' actual agreement. See Highlands Ins. Co., 702 So. 2d at 624; Federal Ins. Co. v. Applestein, 377 So. 2d 229, 231 (Fla. 3d DCA 1979) (reformation appropriate where policy does not reflect terms agreed upon by the parties). VHG is entitled, at minimum, to reformation of the Policy to delete the named-windstorm sub-limit from Endorsement No. 14, consistent with the parties' actual agreement.

Third, the doctrine of equitable estoppel prevents Ironclad from asserting the sub-limit where VHG detrimentally relied on Ironclad's representations — communicated through Tidewater — that the sub-limit had been removed. VHG paid an additional $140,000 in premium based on that representation. VHG structured its risk management program around the understanding that the full $25,000,000 primary-layer limit was available for named-windstorm business-interruption losses. VHG's detrimental reliance is patent and undisputed. See State Farm Fire & Cas. Co. v. Palma, 629 So. 2d 830, 833 (Fla. 1993) (equitable estoppel may be applied against an insurer to prevent denial of coverage based on policy provisions that are inconsistent with the insurer's representations). Ironclad is equitably estopped from asserting a sub-limit that its own underwriter agreed to delete and for which Ironclad accepted additional premium.

C. Pinnacle's Follow-Form Denial Fails for the Same Reasons

Pinnacle Surplus Lines Inc. issued its coverage denial on February 10, 2023, expressly following Ironclad's denial and adopting Ironclad's stated grounds. (PSL-CL-00012–PSL-CL-00015.) Pinnacle's first excess policy, Policy No. PSL-XS1-2022-3390 ($15,000,000 excess of $25,000,000), follows form with the Ironclad primary policy with respect to all terms and conditions, including coverage grants, exclusions, and sub-limits, except where specifically modified by the Pinnacle policy's own terms. (Policy No. PSL-XS1-2022-3390, Section II ("Following Form Provisions"), at VHG-00318–VHG-00320.)

Pinnacle's denial was predicated entirely on its follow-form adoption of the named-windstorm sub-limit assertedly contained in the Ironclad primary policy. Because the named-windstorm sub-limit does not apply to the Ironclad primary policy — for all of the reasons set forth above — it likewise does not apply to Pinnacle's follow-form excess layer. Pinnacle cannot "follow" a sub-limit that does not exist. A follow-form excess policy incorporates the terms of the underlying policy as those terms actually exist, not as the underlying insurer might wish them to exist in hindsight.

Accordingly, if the Court rules that the named-windstorm sub-limit was deleted from the Ironclad primary policy, VHG's losses penetrate the full $25,000,000 primary layer and reach Pinnacle's first excess attachment point of $25,000,000. Pinnacle's follow-form denial on the sub-limit ground must fall as a matter of law.

D. Resolution of the Sub-Limit Issue Impacts the Excess Layers

The resolution of the named-windstorm sub-limit issue has direct and dispositive consequences for the remaining excess carriers in VHG's insurance tower.

Montclair Assurance Company, providing the second excess layer ($10,000,000 excess of $40,000,000, Policy No. MAC-XS2-2022-09817), and Sovereign Re Ltd., providing the third excess layer ($10,000,000 excess of $50,000,000, Policy No. SRL-XS3-2022-5102), have each taken the position that if the $15,000,000 named-windstorm sub-limit applies to the Ironclad primary policy, VHG's total business-interruption recovery would be capped at $15,000,000 — an amount far below the $40,000,000 attachment point of Montclair's second excess layer and the $50,000,000 attachment point of Sovereign Re's third excess layer. Under that scenario, neither Montclair nor Sovereign Re would have any coverage obligation whatsoever.

A ruling that the named-windstorm sub-limit was deleted removes this threshold defense and exposes the full $60,000,000 insurance tower to VHG's business-interruption claim. If the sub-limit is eliminated, VHG's $60,000,000 claim would first exhaust the $25,000,000 Ironclad primary layer (less the $500,000 deductible), then exhaust the $15,000,000 Pinnacle first excess layer, then exhaust the $10,000,000 Montclair second excess layer, and finally reach the $10,000,000 Sovereign Re third excess layer. The remaining coverage disputes (period of restoration, concurrent causation/flood exclusion, and failure to mitigate) would then govern the ultimate amount of recovery from each layer.

Both Montclair and Sovereign Re are represented by Delvecchio & Kraus LLP (Patricia Kraus, lead counsel, with senior associate Raymond Cho; principal office at 425 Park Avenue, 20th Floor, New York, New York 10022). VHG has served a copy of this Motion on counsel for Montclair and Sovereign Re, as reflected in the Certificate of Service appended hereto.

E. There Is No Genuine Issue of Material Fact

VHG has met its burden of demonstrating the absence of any genuine dispute of material fact on the named-windstorm sub-limit issue. The burden now shifts to Defendants to come forward with specific facts showing that a genuine issue exists for trial. See Celotex, 477 U.S. at 324. Defendants cannot carry this burden.

No Defendant can point to any evidence in the record that contradicts the deletion of the sub-limit. The record is devoid of any testimony — from any witness, whether affiliated with VHG, Tidewater, Ironclad, or any other party — that the sub-limit was intended to remain in effect for the 2022–2023 policy year. No Defendant has produced any document reflecting a decision to retain the sub-limit. No Defendant has identified any underwriting correspondence, binder notation, internal memorandum, or policy-issuance communication suggesting that the sub-limit survived the renewal.

Ironclad's sole basis for asserting the sub-limit is the ambiguous Endorsement No. 14 in the issued policy — an endorsement that, as demonstrated above, contains a blank sub-limit field with no dollar amount. This ambiguous endorsement cannot overcome the weight of the undisputed extrinsic evidence: the broker's deposition testimony and declaration, the broker's contemporaneous written correspondence, the binder expressly stating "Deleted per agreement," the premium invoice reflecting the increased premium paid for the deletion, Ironclad's own underwriting files confirming the agreement to delete, and the admissions of Ironclad's own claims personnel that they never even consulted with underwriting before denying coverage on this ground.

To the extent Defendants contend that the inclusion of boilerplate Named Windstorm Endorsement language in the issued policy creates a triable issue of fact, VHG respectfully submits that such a contention misapprehends the summary judgment standard. The presence of an ambiguous policy form, standing alone, does not create a genuine issue of material fact where the undisputed extrinsic evidence unanimously confirms the parties' intent. See Anderson, 477 U.S. at 249–50 ("If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted."). A blank field in a schedule of sub-limits is not evidence that a $15,000,000 sub-limit was intended to apply. It is, at best, evidence of an administrative oversight in the policy-issuance process — an oversight for which Ironclad, not VHG, bears responsibility.

No reasonable jury, viewing the evidence in the light most favorable to Defendants, could find that the $15,000,000 named-windstorm sub-limit survived the July 2022 renewal. Summary judgment is appropriate and warranted.

V. CONCLUSION AND RELIEF REQUESTED

For all of the foregoing reasons, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter partial summary judgment in VHG's favor, declaring as follows:

1. The $15,000,000 named-windstorm sub-limit was deleted from Ironclad Indemnity Corporation's primary property and business-interruption policy, Policy No. IIC-PRP-2022-07541, effective July 1, 2022, by agreement of the parties during the July 2022 renewal negotiations, and the deletion is reflected in the coverage binder, the premium paid and accepted, and Ironclad's own underwriting records.

2. VHG's business-interruption claim arising from Hurricane Callista is subject to the full $25,000,000 per-occurrence limit under the Ironclad primary policy (less the $500,000 deductible) and is not limited by any named-windstorm sub-limit.

3. Pinnacle Surplus Lines Inc.'s follow-form excess policy, Policy No. PSL-XS1-2022-3390, is likewise not subject to any named-windstorm sub-limit, and Pinnacle's coverage denial on that ground is without basis.

4. The named-windstorm sub-limit does not bar VHG's claim from reaching the attachment points of the second excess layer (Montclair Assurance Company, $10,000,000 excess of $40,000,000, Policy No. MAC-XS2-2022-09817) or the third excess layer (Sovereign Re Ltd., $10,000,000 excess of $50,000,000, Policy No. SRL-XS3-2022-5102).

VHG further respectfully requests such other and further relief as this Court deems just and appropriate under the circumstances.

VI. SUPPORTING MATERIALS REFERENCED

The following materials are filed concurrently with this Motion and are incorporated herein by reference:

1. Statement of Undisputed Material Facts in Support of Plaintiff's Motion for Partial Summary Judgment on the Named-Windstorm Sub-Limit Issue;

2. Memorandum of Law in Support of Plaintiff's Motion for Partial Summary Judgment on the Named-Windstorm Sub-Limit Issue;

3. Declaration of Sandra Pellegrini, with Exhibits A through E;

4. Declaration of Franklin Orde, with Exhibits A through D, including the June 28, 2022 Tidewater coverage binder (Exhibit B);

5. Declaration of Dr. Helen Vasquez, with Exhibits A through C;

6. Excerpts from the Deposition Transcript of Franklin Orde (taken August 28, 2023);

7. Excerpts from the Deposition Transcript of Sandra Pellegrini (taken August 14, 2023);

8. Excerpts from the Deposition Transcript of Victor Haddon (taken July 10, 2023);

9. Excerpts from the Deposition Transcript of Denise Whitford (taken July 24, 2023);

10. Certified copy of Policy No. IIC-PRP-2022-07541, including all endorsements (Endorsement No. 14 in particular);

11. Certified copy of Tidewater Risk Advisors coverage binder dated June 28, 2022; and

12. VHG premium invoice for the 2022–2023 policy period.

VII. CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on November 1, 2023, a true and correct copy of the foregoing Plaintiff's Motion for Partial Summary Judgment on the Named-Windstorm Sub-Limit Issue, together with all supporting materials referenced herein, was served via the Court's electronic filing system (E-Portal) and by electronic mail upon:

Gregory Stanton, Esq. Meredith Liang, Esq. Colin Ashford, Esq. Fendowell Rourke & Stanton LLP 280 Trumbull Street, Suite 2200 Hartford, CT 06103 and 101 E. Kennedy Boulevard, Suite 3900 Tampa, FL 33602 Counsel for Defendants Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.

Patricia Kraus, Esq. Raymond Cho, Esq. Delvecchio & Kraus LLP 425 Park Avenue, 20th Floor New York, NY 10022 Counsel for Defendants Montclair Assurance Company and Sovereign Re Ltd.

VIII. SIGNATURE BLOCK

Respectfully submitted,

CALDERWOOD & HARKNESS LLP 333 SE 2nd Avenue, Suite 4400 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201

By: ________

Elaine Forsythe, Esq. Florida Bar No. 0847239

Email: eforsythe@calderwoodharkness.com

Responsible Partner

Tiffany Rosenthal, Esq. Florida Bar No. 1024516

Email: trosenthal@calderwoodharkness.com

Lead Associate

Andrew Fitzpatrick, Esq. Florida Bar No. 1131078

Email: afitzpatrick@calderwoodharkness.com

Working Associate

Counsel for Plaintiff Verimark Hospitality Group Inc. Engagement No. 1021-00003

IN THE CIRCUIT COURT OF THE ELEVENTH JUDICIAL CIRCUIT IN AND FOR MIAMI-DADE COUNTY, FLORIDA
CIVIL DIVISION
Case No. 2022-CA-031547
VERIMARK HOSPITALITY GROUP INC., a Delaware corporation,
Plaintiff,
v.
IRONCLAD INDEMNITY CORPORATION, a Connecticut stock insurance company; PINNACLE SURPLUS LINES INC., a Texas surplus-lines insurer; MONTCLAIR ASSURANCE COMPANY, a New York admitted carrier; and SOVEREIGN RE LTD., a Bermuda-domiciled excess carrier,
Defendants.
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PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON THE NAMED-WINDSTORM SUB-LIMIT ISSUE
Filed: November 1, 2023 Before: Hon. Catherine Embry
I. INTRODUCTION
Plaintiff Verimark Hospitality Group Inc. ("VHG") respectfully moves this Court, pursuant to Florida Rule of Civil Procedure 1.510, for partial summary judgment on a discrete but pivotal issue in this multi-defendant insurance coverage dispute: whether the $15,000,000 named-windstorm sub-limit that appeared in the prior-year policy was deleted from the Ironclad Indemnity Corporation ("Ironclad") primary property and business-interruption policy, Policy No. IIC-PRP-2022-07541, effective July 1, 2022 through July 1, 2023 (the "Policy"). This question — essentially one of contract formation and interpretation — is dispositive of the threshold defense raised by Ironclad in its formal coverage denial and subsequently adopted by Pinnacle Surplus Lines Inc. ("Pinnacle") in its follow-form denial. Resolution of this question will determine whether VHG's catastrophic business-interruption losses from Hurricane Callista are confined to a $15,000,000 sub-limit or, as VHG contends, are subject to the full $25,000,000 per-occurrence limit under the Ironclad primary policy and, in turn, trigger the attachment points of the three excess layers comprising VHG's $60,000,000 insurance tower.
VHG contends — and the undisputed record evidence overwhelmingly demonstrates — that the named-windstorm sub-limit was expressly deleted during the July 2022 renewal negotiations between VHG's broker of record, Tidewater Risk Advisors LLC ("Tidewater"), and Ironclad's underwriting department. VHG paid an increased premium of $140,000 — a 16.7% increase over the prior year's primary-layer premium — specifically in exchange for that deletion. The deletion was memorialized in the coverage binder issued by Tidewater on June 28, 2022, which states in unequivocal terms: "Named Windstorm Sub-Limit: Deleted per agreement." VHG bound coverage and paid the increased premium in reliance upon that agreement.
The undisputed record evidence — including the binder, broker correspondence produced in discovery, the deposition testimony of Tidewater's account executive Franklin Orde, the deposition testimony of VHG's Vice President of Risk Management Sandra Pellegrini, the deposition testimony of Ironclad's own Senior Vice President of Claims Victor Haddon, Ironclad's internal underwriting files produced pursuant to VHG's Second Request for Production, and the policy endorsement history — all point in a single, unrebutted direction: the $15,000,000 named-windstorm sub-limit does not apply to VHG's business-interruption claim arising from Hurricane Callista. No witness has testified that the sub-limit was intended to remain in effect for the 2022–2023 policy year. No document in the record supports Ironclad's position.
If the sub-limit is eliminated, VHG's $60,000,000 business-interruption claim is subject to the full $25,000,000 primary-layer limit (less the $500,000 deductible), which in turn triggers the attachment points of the three excess layers: Pinnacle Surplus Lines Inc., providing $15,000,000 excess of $25,000,000; Montclair Assurance Company ("Montclair"), providing $10,000,000 excess of $40,000,000; and Sovereign Re Ltd. ("Sovereign Re"), providing $10,000,000 excess of $50,000,000. The full $60,000,000 insurance tower is thus exposed to VHG's claim, subject to resolution of the remaining coverage disputes — period of restoration, concurrent causation and the flood exclusion, and the alleged failure to mitigate — none of which are the subject of this Motion.
Resolution of the sub-limit issue on summary judgment will streamline the remaining coverage disputes, narrow the issues for trial, facilitate informed settlement discussions among the parties, and conserve the Court's and the parties' resources. VHG respectfully submits that partial summary judgment is both warranted and efficient under the circumstances.
II. STATEMENT OF UNDISPUTED MATERIAL FACTS
Contemporaneously with this Motion, VHG has filed a separate Statement of Undisputed Material Facts with full record citations, as required by this Court's Uniform Administrative Order and in conformity with Florida Rule of Civil Procedure 1.510(c). The material facts are summarized below for the Court's convenience. All citations herein are to the record evidence supporting each fact.
A. The Parties and the Insurance Program
1. VHG is a Delaware corporation, publicly traded on the Nasdaq Stock Exchange under the ticker symbol "VMRK," and is headquartered at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG owns and operates luxury resort hotels and conference centers throughout the State of Florida. For fiscal year 2021, VHG reported revenue of approximately $412,000,000 and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $78,000,000. (Pellegrini Declaration, ¶ 2; VHG Form 10-K for FY 2021, at 4, 32.)
2. VHG's three insured properties at issue in this litigation are:
(a) Verimark Grand Key Resort, located at Mile Marker 48, Marathon, Monroe County, Florida 33050, consisting of 312 guest rooms, restaurants, spa and pool facilities, and marina;
(b) Verimark Harborview Hotel & Conference Center, located at 1400 Estero Boulevard, Fort Myers Beach, Lee County, Florida 33931, consisting of 224 guest rooms and a 40,000-square-foot conference and event facility; and
(c) Verimark Sunset Shores, located at 7200 Gulf Boulevard, St. Pete Beach, Pinellas County, Florida 33706, consisting of 186 guest rooms and associated amenities.
(Pellegrini Declaration, ¶¶ 2–3; Orde Declaration, ¶ 3.)
3. Defendant Ironclad Indemnity Corporation is a Connecticut-domiciled stock insurance company with its principal office at 55 Constitution Boulevard, Hartford, Connecticut 06103, NAIC Company Code No. 20537. Ironclad is the lead carrier on VHG's primary all-risks property and business-interruption insurance policy, Policy No. IIC-PRP-2022-07541, with a per-occurrence limit of $25,000,000 for business interruption and a deductible of $500,000. The policy period runs from July 1, 2022 through July 1, 2023. The Policy is an "all risks" policy covering direct physical loss or damage to covered property, including business interruption and extra expense. (Policy No. IIC-PRP-2022-07541, Declarations Page, at VHG-00001–VHG-00004; Pellegrini Declaration, ¶ 4.)
4. Defendant Pinnacle Surplus Lines Inc. is a Texas-domiciled surplus-lines insurer with its principal office in Austin, Texas. Pinnacle provides the first excess layer of VHG's property and business-interruption insurance program under Policy No. PSL-XS1-2022-3390, affording $15,000,000 in excess of the underlying $25,000,000 Ironclad primary limit, on a follow-form basis with the Ironclad primary policy. (Policy No. PSL-XS1-2022-3390, Declarations Page, at VHG-00312–VHG-00314; Orde Declaration, ¶ 4.)
5. Defendant Montclair Assurance Company is a New York-domiciled admitted carrier. Montclair provides the second excess layer under Policy No. MAC-XS2-2022-09817, affording $10,000,000 in excess of $40,000,000 (i.e., excess of the combined Ironclad primary and Pinnacle first excess limits). (Policy No. MAC-XS2-2022-09817, Declarations Page, at VHG-00487–VHG-00489; Orde Declaration, ¶ 4.)
6. Defendant Sovereign Re Ltd. is a Bermuda-domiciled excess carrier. Sovereign Re provides the third and final excess layer under Policy No. SRL-XS3-2022-5102, affording $10,000,000 in excess of $50,000,000 (i.e., excess of the combined limits of all underlying layers). (Policy No. SRL-XS3-2022-5102, Declarations Page, at VHG-00623–VHG-00625; Orde Declaration, ¶ 4.)
7. The total insurance tower for VHG's property and business-interruption program is $60,000,000 above the $500,000 deductible. The annual premium for the full tower for the 2022–2023 policy year was $1,840,000, allocated as follows: Ironclad primary, $980,000; Pinnacle first excess, $410,000; Montclair second excess, $265,000; Sovereign Re third excess, $185,000. (Pellegrini Declaration, ¶ 12, Ex. C (premium invoice); Orde Declaration, ¶ 8.)
B. The Prior-Year Policy and the Named-Windstorm Sub-Limit
8. The 2021–2022 Ironclad primary policy (the "predecessor policy"), Policy No. IIC-PRP-2021-06328, contained a Named Windstorm Endorsement (Endorsement No. 14 to the predecessor policy) that imposed a sub-limit of $15,000,000 for business-interruption losses arising from named windstorms as designated by the National Hurricane Center, the Central Pacific Hurricane Center, or any successor agency. The sub-limit operated to cap VHG's business-interruption recovery at $15,000,000 per occurrence for losses caused by named windstorms, notwithstanding the $25,000,000 per-occurrence limit otherwise available under the policy. (Predecessor Policy, Endorsement No. 14, at VHG-00198–VHG-00200; Pellegrini Declaration, ¶ 5.)
9. In March 2022, as VHG began preparations for the July 2022 renewal of its property and business-interruption insurance program, VHG's Vice President of Risk Management, Sandra Pellegrini, directed VHG's broker of record, Tidewater Risk Advisors LLC ("Tidewater"), through its account executive Franklin Orde (whose office is located at 2600 South Bayshore Drive, Suite 800, Miami, Florida 33133), to negotiate the removal of the $15,000,000 named-windstorm sub-limit from the Ironclad primary policy at the July 2022 renewal. Ms. Pellegrini's directive was motivated by VHG's expanding Florida coastal portfolio and its increased exposure to hurricane-related business-interruption losses. (Declaration of Sandra Pellegrini, ¶¶ 3–8, filed herewith; Deposition of Sandra Pellegrini (Aug. 14, 2023), at 34:12–36:5.)
10. Ms. Pellegrini testified at her deposition that VHG's management, including General Counsel Nathaniel Driscoll and Chief Financial Officer Diane Calder, had determined that the $15,000,000 sub-limit presented an unacceptable gap in VHG's insurance program given the company's concentration of assets in Florida's coastal hurricane zone, and that VHG was willing to pay additional premium to secure the deletion of the sub-limit. (Pellegrini Depo., at 35:1–36:5.)
C. The July 2022 Renewal Negotiations
11. Franklin Orde testified at his deposition that, in accordance with VHG's instructions, he communicated VHG's request to delete the $15,000,000 named-windstorm sub-limit to Ironclad's underwriting department during May and June 2022. Orde's communications were directed to Ironclad's lead underwriter for the VHG account, whose identity and role are confirmed in the underwriting correspondence produced by Ironclad in discovery. (Deposition of Franklin Orde (Aug. 28, 2023), at 22:8–25:19; Declaration of Franklin Orde, ¶¶ 5–6, filed herewith.)
12. On or about June 15, 2022, Orde received written confirmation from Ironclad's lead underwriter, transmitted via email, agreeing to delete the $15,000,000 named-windstorm sub-limit from the renewal policy in exchange for an increased premium on the primary layer. The email stated, in pertinent part, that Ironclad was "agreeable to the removal of the Named Windstorm Sub-Limit of $15M for Business Interruption, subject to a premium increase" to be reflected in the binding confirmation. (Declaration of Franklin Orde, ¶¶ 5–9, filed herewith; Orde Depo., at 27:3–29:14; IIC-UW-00047 (Ironclad underwriting correspondence, produced in response to VHG's Second Request for Production, served July 15, 2023).)
13. The increased premium for the 2022–2023 primary layer was $980,000, up from $840,000 in the prior policy year — an increase of $140,000, representing approximately a 16.7% increase over the prior-year premium. This premium increase was specifically negotiated as the consideration for the deletion of the named-windstorm sub-limit. (Orde Depo., at 31:1–32:8; Pellegrini Declaration, ¶ 12, Ex. C.)
14. Following receipt of Ironclad's agreement, Orde conveyed the underwriter's agreement to Sandra Pellegrini, who in turn relayed the information to VHG's General Counsel, Nathaniel Driscoll, and CFO, Diane Calder. VHG's management authorized the increased premium and directed Tidewater to bind coverage effective July 1, 2022, with the understanding that the named-windstorm sub-limit had been deleted. (Pellegrini Depo., at 38:10–39:22, 40:2–41:5; Pellegrini Declaration, ¶ 10.)
D. The Issued Policy and Endorsement Ambiguity
15. When Ironclad issued Policy No. IIC-PRP-2022-07541, the policy form included a "Named Windstorm Endorsement" (Endorsement No. 14) that contained boilerplate language referencing a sub-limit applicable to business-interruption losses arising from named windstorms. However, critically, the endorsement's schedule of sub-limits contained a blank entry in the "Business Interruption Sub-Limit" field — no dollar figure was inserted. The field where the prior-year "$15,000,000" figure had appeared was left empty. (Policy No. IIC-PRP-2022-07541, Endorsement No. 14, at VHG-00089–VHG-00091.)
16. Ironclad did not issue a separate endorsement expressly captioned "Deletion of Named-Windstorm Sub-Limit," nor did it issue any policy-change confirmation, policy-change request acknowledgment, or endorsement amendment reflecting the agreed-upon deletion of the sub-limit. (Orde Declaration, ¶ 9; Pellegrini Declaration, ¶ 11.)
17. The coverage binder issued by Tidewater on June 28, 2022, which was provided to VHG and a copy of which was transmitted to Ironclad's underwriting department, stated: "Named Windstorm Sub-Limit: Deleted per agreement" under the summary of coverage changes from the prior year. This language appeared in the section of the binder titled "Summary of Material Changes from Prior Policy Year." (Orde Declaration, ¶ 7, Ex. B (copy of binder); Pellegrini Declaration, ¶ 9.)
18. VHG's premium invoice for the 2022–2023 policy period, issued by Ironclad and reflecting the higher $980,000 primary-layer premium, was paid in full by VHG on or about July 8, 2022. Ironclad accepted and retained the full $980,000 premium without objection, protest, or any communication suggesting that the sub-limit had not been deleted or that the premium increase was attributable to any coverage change other than the sub-limit deletion. (Pellegrini Declaration, ¶ 12, Ex. C (premium invoice); Orde Depo., at 33:5–34:2.)
E. Hurricane Callista and the Business-Interruption Claim
19. Hurricane Callista was designated as a named tropical storm by the National Hurricane Center on September 12, 2022, and was subsequently upgraded to hurricane status. Hurricane Callista made landfall as a Category 4 hurricane on the Saffir-Veltason Hurricane Wind Scale (sustained winds of approximately 145 miles per hour) on September 18, 2022, at approximately 1:30 PM Eastern Daylight Time, near Big Pine Key in the Lower Florida Keys, Monroe County, Florida. (National Hurricane Center Advisory No. 24 (Sept. 18, 2022); Pellegrini Declaration, ¶ 13.)
20. Hurricane Callista produced storm surge of 8 to 14 feet above normal tide levels in Monroe County and 6 to 10 feet above normal tide levels in Lee County. Catastrophic wind damage, flooding, and debris impacts were reported throughout the affected areas. Monroe County issued a mandatory evacuation order on September 16, 2022. Lee County issued a mandatory evacuation order on September 17, 2022. (National Weather Service Post-Storm Report, Hurricane Callista (Oct. 2022); Monroe County Emergency Management Order No. 2022-EM-047; Lee County Emergency Management Order No. 2022-EM-103.)
21. All three VHG properties sustained catastrophic damage as a result of Hurricane Callista and were forced to close:
(a) Grand Key Resort (Marathon, Monroe County): Closed for a total of 178 days, from September 18, 2022 through March 15, 2023. The property sustained severe structural damage to guest-room buildings, complete destruction of the marina, flooding of ground-floor common areas, and loss of electrical, plumbing, and HVAC infrastructure.
(b) Harborview Hotel & Conference Center (Fort Myers Beach, Lee County): Closed for a total of 135 days, from September 18, 2022 through January 31, 2023. The conference facility sustained roof loss, water intrusion to all floors, destruction of audiovisual and communications systems, and extensive damage to the lobby, restaurant, and back-of-house areas.
(c) Sunset Shores (St. Pete Beach, Pinellas County): Full closure for 73 days, from September 18, 2022 through November 30, 2022, followed by a period of reduced capacity (approximately 40% occupancy limitation) through February 28, 2023, due to ongoing repairs to guest-room wings and pool facilities.
(Pellegrini Declaration, ¶¶ 14–16; Declaration of Dr. Helen Vasquez, ¶¶ 4–12, filed herewith.)
22. VHG submitted its notice of loss to Ironclad on September 22, 2022, within four days of the hurricane's landfall and well within the policy's notice requirements. VHG subsequently submitted a sworn statement in proof of loss on November 15, 2022, claiming total business-interruption losses of $60,000,000, broken down as follows: Grand Key Resort, $31,400,000; Harborview Hotel & Conference Center, $18,700,000; Sunset Shores, $9,900,000. (Pellegrini Declaration, ¶ 17, Exs. D–E (notice of loss and proof of loss); Orde Declaration, ¶ 11.)
F. Ironclad's Denial and the Sub-Limit Dispute
23. On October 12, 2022, Ironclad issued a reservation of rights letter addressed to VHG, citing as one of several grounds the purported existence of the $15,000,000 named-windstorm sub-limit under Endorsement No. 14 as a potential limitation on VHG's business-interruption recovery. The reservation of rights letter was signed by Victor Haddon, Ironclad's Senior Vice President of Claims. (IIC-CL-00023–IIC-CL-00029 (reservation of rights letter).)
24. On October 25, 2022, VHG, through its coverage counsel, Calderwood & Harkness LLP (Elaine Forsythe, Esq.), responded to Ironclad's reservation of rights letter, specifically disputing the applicability of any named-windstorm sub-limit and referencing the deletion negotiated during the July 2022 renewal. VHG's letter enclosed a copy of the Tidewater binder reflecting the deletion and demanded that Ironclad withdraw its reservation on the sub-limit ground. (VHG-00742–VHG-00749 (VHG response letter).)
25. On February 3, 2023, Ironclad issued a formal coverage denial letter, asserting four grounds for denial or limitation of VHG's business-interruption claim:
(1) The $15,000,000 named-windstorm sub-limit caps VHG's business-interruption recovery for Hurricane Callista losses;
(2) VHG's claimed period of restoration is unreasonably extended and includes losses not attributable to the covered peril;
(3) A portion of VHG's losses are attributable to flood and storm surge, which are excluded under the Policy's flood exclusion and concurrent-causation provisions; and
(4) VHG failed to take reasonable steps to mitigate its losses, including by failing to reopen properties on a timely basis.
The first ground — the named-windstorm sub-limit — is the subject of this Motion. The remaining grounds are not addressed herein. (IIC-CL-00055–IIC-CL-00068 (formal denial letter).)
26. On February 10, 2023, Pinnacle Surplus Lines Inc. issued its own denial letter, expressly following Ironclad's denial and adopting Ironclad's stated grounds, including the assertion that the $15,000,000 named-windstorm sub-limit applied. Pinnacle's denial rested on the follow-form nature of its excess policy. (PSL-CL-00012–PSL-CL-00015 (Pinnacle denial letter).)
27. Montclair Assurance Company and Sovereign Re Ltd. did not issue formal coverage denials. Both carriers reserved their rights and took the position that their respective excess layers would not be reached if the $15,000,000 named-windstorm sub-limit applied to the underlying Ironclad primary policy, as VHG's capped recovery would fall well below their attachment points ($40,000,000 and $50,000,000, respectively). (MAC-CL-00003–MAC-CL-00005 (Montclair reservation of rights letter, dated Feb. 17, 2023); SRL-CL-00002–SRL-CL-00004 (Sovereign Re reservation of rights letter, dated Feb. 21, 2023).)
28. At his deposition, Victor Haddon, Ironclad's Senior Vice President of Claims, acknowledged that he was not involved in the underwriting or renewal negotiations for VHG's 2022–2023 policy and that he relied on the policy form as issued — specifically, Endorsement No. 14 — in making the decision to assert the named-windstorm sub-limit as a basis for limiting VHG's claim. (Deposition of Victor Haddon (July 10, 2023), at 45:8–47:22.)
29. Critically, Haddon further testified that he did not consult with Ironclad's underwriting department about the sub-limit deletion negotiations before issuing the February 3, 2023 denial. When asked whether he had reviewed any correspondence between Ironclad's underwriter and Tidewater Risk Advisors concerning the deletion of the sub-limit, Haddon answered: "I did not." When asked whether he had spoken with anyone in Ironclad's underwriting department about whether the sub-limit had been deleted at the July 2022 renewal, Haddon answered: "No, I relied on the endorsement as it appeared in the policy." (Haddon Depo., at 52:3–54:11.)
30. Denise Whitford, the lead adjuster from Arbor Claims Services LLC retained by Ironclad to adjust VHG's claim, testified at her deposition that her adjustment report did not independently analyze whether the named-windstorm sub-limit had been deleted during the July 2022 renewal negotiations. Ms. Whitford testified that she was not asked by Ironclad to investigate the issue and that she applied the sub-limit in her report because it appeared in Endorsement No. 14 of the issued policy. (Deposition of Denise Whitford (July 24, 2023), at 61:14–63:7.)
III. LEGAL STANDARD
Under Florida Rule of Civil Procedure 1.510, as amended effective May 1, 2021, summary judgment is appropriate when "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fla. R. Civ. P. 1.510(a). The 2021 amendments to Rule 1.510 adopted the federal summary judgment standard articulated in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), and its progeny. In re Amendments to Florida Rule of Civil Procedure 1.510, 317 So. 3d 72 (Fla. 2021). Under this standard, the movant need not negate the nonmovant's case but must demonstrate the absence of a genuine dispute of material fact, at which point the burden shifts to the nonmovant to come forward with specific facts showing that a genuine issue exists for trial. See Celotex, 477 U.S. at 323–25.
A "genuine" issue of material fact exists only when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Chateau Brickell Condo. Ass'n v. Aspen Specialty Ins. Co., 346 So. 3d 671, 673 (Fla. 3d DCA 2022). The Court must view the evidence in the light most favorable to the nonmoving party, but the nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
Partial summary judgment may be granted on discrete issues to narrow the matters remaining for trial. Fla. R. Civ. P. 1.510(a) ("A party may move for summary judgment, identifying each claim or defense — or the part of each claim or defense — on which summary judgment is sought."). This is precisely the procedural vehicle contemplated here: VHG seeks resolution of a single, well-defined coverage issue — the applicability of the named-windstorm sub-limit — while reserving for subsequent proceedings the remaining disputed coverage questions.
In insurance coverage disputes under Florida law, the interpretation of an insurance policy is a question of law to be decided by the court. State Farm Fire & Cas. Co. v. Castillo, 356 So. 3d 260, 264 (Fla. 3d DCA 2023); Swire Pac. Holdings, Inc. v. Glenrock Assurance Ins. Co., 845 So. 2d 161, 165 (Fla. 2003). Where the policy language is ambiguous, the Court may consider extrinsic evidence to determine the intent of the parties, and any remaining ambiguity is construed against the insurer under the doctrine of contra proferentem. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000); Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So. 2d 938, 942 (Fla. 1979).
IV. ARGUMENT
A. Under Florida Law, the Named-Windstorm Sub-Limit Was Deleted at the July 2022 Renewal
The undisputed record evidence establishes, as a matter of law, that the $15,000,000 named-windstorm sub-limit was deleted from VHG's primary property and business-interruption policy during the July 2022 renewal negotiations. The deletion was agreed upon by Ironclad's underwriting department, memorialized in the coverage binder, and supported by the payment and acceptance of additional premium consideration. Ironclad cannot now repudiate its own underwriter's agreement simply because its claims department failed to consult with underwriting before issuing a coverage denial.
1. The Binder Controls Where the Policy Is Ambiguous. Under Florida law, a binder is a temporary contract of insurance that establishes the terms and conditions of coverage until the formal policy is issued. See Fla. Stat. § 627.420(1) ("A binder may be issued pending the issuance of a policy."); Essex Ins. Co. v. Zota, 466 So. 2d 1208, 1210 (Fla. 3d DCA 1985) (recognizing that a binder constitutes a valid, enforceable contract of insurance). Where a policy as issued conflicts with or is ambiguous in relation to the binder's terms, the binder's terms may control, particularly where the insured relied on the binder's representations and paid additional premium accordingly. See Highlands Ins. Co. v. Gerber Products Co., 702 So. 2d 622, 624 (Fla. 2d DCA 1997) (holding that where binder and policy conflicted, binder terms governed the parties' agreement); Boozer v. Stalley, 146 So. 2d 104, 107 (Fla. 3d DCA 1962) (binder establishes a contract of insurance that binds the insurer until the policy is delivered).
The binder in this case — the Tidewater coverage binder dated June 28, 2022 — is unambiguous. Under the heading "Summary of Material Changes from Prior Policy Year," the binder states in plain and unmistakable language: "Named Windstorm Sub-Limit: Deleted per agreement." (Orde Declaration, ¶ 7, Ex. B.) There is no qualifying language, no condition precedent, and no indication that the deletion was anything other than final and effective upon binding.
The issued policy, by contrast, is at best ambiguous on the sub-limit question. Endorsement No. 14 to Policy No. IIC-PRP-2022-07541 contains the same boilerplate Named Windstorm Endorsement language that appeared in the predecessor policy. However, the endorsement's schedule of sub-limits — the operative section where, in the prior-year policy, the figure "$15,000,000" appeared — contains a blank entry in the "Business Interruption Sub-Limit" field. No dollar figure was inserted. (Policy No. IIC-PRP-2022-07541, Endorsement No. 14, at VHG-00089–VHG-00091.) The blank field does not state "$15,000,000." It does not state "N/A" or "None." It is simply empty.
This blank creates, at minimum, a patent ambiguity in the endorsement. The endorsement references a sub-limit, but specifies no sub-limit amount. One cannot enforce a sub-limit of an unspecified dollar amount. The blank field is entirely consistent with — and, VHG submits, is best read as confirming — the deletion of the sub-limit negotiated between the parties.
Under Florida's well-established rule that ambiguities in insurance policies are construed against the insurer — the doctrine of contra proferentem — the blank sub-limit field must be read as consistent with the deletion negotiated between the parties and memorialized in the binder. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000) ("Where the terms of a policy of insurance are in doubt or are ambiguous, the policy should be construed liberally in favor of the insured and strictly against the insurer."); Deni Assocs. of Fla., Inc. v. State Farm Fire & Cas. Ins. Co., 711 So. 2d 1135, 1139 (Fla. 1998) (same). Ironclad, as the drafter of the policy, bore the obligation to issue clear, unambiguous policy documents. Its failure to do so cannot redound to the detriment of VHG.
Even if the Court were to find Endorsement No. 14 ambiguous rather than clearly reflective of the deletion, the result is the same. Where the binder and the policy conflict on the terms of coverage, and the insured relied upon the binder's terms in binding coverage and paying the premium, the binder's terms govern. Highlands Ins. Co., 702 So. 2d at 624. The binder states that the sub-limit was deleted. VHG relied on that representation. VHG paid an increased premium in exchange for the deletion. The binder controls.
2. The Extrinsic Evidence Unanimously Confirms Deletion. Even if the Court were to look beyond the four corners of the binder and the policy to consider the full scope of extrinsic evidence bearing on the parties' intent — as Florida law permits where a policy is ambiguous, see Excelsior Ins. Co., 369 So. 2d at 942 — the result is no different. The extrinsic evidence is unanimous, unrebutted, and points inexorably to a single conclusion: the named-windstorm sub-limit was deleted.
Franklin Orde's testimony and declaration. Orde, VHG's account executive at Tidewater Risk Advisors, testified at his deposition that he communicated VHG's request to delete the sub-limit to Ironclad's underwriting department in May and June 2022. He testified that on or about June 15, 2022, he received written confirmation from Ironclad's lead underwriter agreeing to the deletion in exchange for an increased premium. He memorialized the deletion in the June 28, 2022 binder. His testimony is uncontradicted; no witness for any Defendant has offered testimony challenging any aspect of Orde's account. (Orde Depo., at 22:8–25:19, 27:3–29:14; Orde Declaration, ¶¶ 5–9.)
Sandra Pellegrini's testimony and declaration. Pellegrini, VHG's Vice President of Risk Management, testified that she directed Tidewater to negotiate the deletion, that she was informed by Orde that Ironclad had agreed, that she communicated the agreement to VHG's General Counsel and CFO, and that VHG authorized the increased premium and bound coverage with the understanding that the sub-limit was gone. Her testimony is similarly uncontradicted. (Pellegrini Depo., at 34:12–36:5, 38:10–41:5; Pellegrini Declaration, ¶¶ 3–12.)
Ironclad's own underwriting correspondence. Ironclad's internal underwriting files, produced in discovery in response to VHG's Second Request for Production (served July 15, 2023), contain the email from Ironclad's lead underwriter to Orde, dated on or about June 15, 2022, confirming Ironclad's agreement to delete the named-windstorm sub-limit in exchange for the premium increase. (IIC-UW-00047.) This is Ironclad's own document, generated by Ironclad's own underwriting personnel, confirming the very deletion that Ironclad's claims department now denies ever occurred. The disconnect between Ironclad's underwriting and claims functions does not create a triable issue of fact; it merely demonstrates that the claims denial was issued without adequate internal investigation.
Victor Haddon's testimony. Ironclad's own Senior Vice President of Claims — the individual who authorized the coverage denial — admitted at deposition that he did not consult with Ironclad's underwriting department before asserting the sub-limit as a ground for denial. He did not review the underwriting correspondence. He did not speak with the lead underwriter. He relied solely on the endorsement as it appeared in the issued policy — the very endorsement that contains a blank sub-limit field. (Haddon Depo., at 45:8–47:22, 52:3–54:11.) Haddon's testimony does not contradict the deletion; it simply reveals that Ironclad denied coverage without bothering to determine whether the sub-limit had, in fact, been deleted.
Denise Whitford's testimony. The lead adjuster from Arbor Claims Services LLC, retained by Ironclad to adjust VHG's claim, likewise testified that she did not independently analyze whether the sub-limit had been deleted. She was not asked to do so. She applied the sub-limit in her adjustment report because it appeared in the endorsement. (Whitford Depo., at 61:14–63:7.) This testimony further confirms that no Ironclad agent or representative has offered any affirmative evidence that the sub-limit survived the renewal.
In sum, the entirety of the record evidence — testimony of the broker, testimony of the insured's risk management executive, Ironclad's own underwriting files, the binder, the premium records, and even the admissions of Ironclad's own claims personnel — all confirm the deletion. There is no contrary evidence. No witness has testified that the sub-limit was intended to remain in effect. No document in the record supports Ironclad's position. The extrinsic evidence is not merely preponderant; it is uncontested.
3. The Premium Increase Constitutes Bargained-For Consideration for the Deletion. The undisputed evidence further establishes that VHG's payment of the increased premium constitutes bargained-for consideration for the deletion of the named-windstorm sub-limit. The primary-layer premium increased from $840,000 in the 2021–2022 policy year to $980,000 in the 2022–2023 policy year — an increase of $140,000, representing approximately 16.7%. (Orde Depo., at 31:1–32:8; Pellegrini Declaration, ¶ 12, Ex. C.)
This premium increase was not incidental or attributable to general market conditions. Both Orde and Pellegrini testified that the increase was specifically negotiated as the price for the deletion of the named-windstorm sub-limit. Ironclad's own underwriting correspondence confirms that the deletion was "subject to a premium increase." (IIC-UW-00047.) VHG paid the increased premium, and Ironclad accepted it without objection, protest, or any communication suggesting that the sub-limit remained in effect.
Under Florida contract law, the payment and acceptance of additional consideration for a modification to a contract — including a modification to an insurance policy — is strong, compelling, evidence of the parties' mutual intent to effectuate the modification. See New Amsterdam Cas. Co. v. Addison, 169 So. 2d 877, 880 (Fla. 1st DCA 1964) (mutual assent and consideration are essential elements of an enforceable insurance contract modification); U.S. Fire Ins. Co. v. Morejon, 338 So. 2d 223, 225 (Fla. 3d DCA 1976) (where insurer accepted additional premium for broadened coverage, insurer was bound by the modified terms). Ironclad cannot accept the benefit of the bargain — the increased premium — while simultaneously repudiating its obligation under that same bargain — the deletion of the sub-limit.
B. Ironclad Cannot Rely on Its Own Failure to Issue a Clear Endorsement
Ironclad's principal defense to the sub-limit deletion issue, as articulated in its February 3, 2023 denial letter and as reflected in its discovery responses, is that the policy form "as issued" contains Endorsement No. 14, which references a named-windstorm sub-limit. Ironclad contends that because no separate endorsement expressly captioned "Deletion of Named-Windstorm Sub-Limit" was issued, the sub-limit remains in effect.
This argument fails as a matter of law for multiple independent reasons.
First, it was Ironclad — not VHG — that bore the responsibility for issuing clear, unambiguous policy documents conforming to the agreed-upon terms of coverage. See Deni Assocs., 711 So. 2d at 1139 (the insurer, as drafter of the policy, bears responsibility for ambiguity). Having agreed through its underwriting department to delete the sub-limit, having accepted the increased premium in consideration for the deletion, and having failed to issue a clean endorsement reflecting the deletion, Ironclad cannot now rely on its own administrative failure — its own internal processing error — to deny coverage. To permit such a result would allow Ironclad to profit from its own negligence and breach of its agreement with VHG.
Second, Florida law holds that an insurer's failure to issue policy documents conforming to the agreed-upon terms of the insurance contract does not relieve the insurer of its obligations under that agreement. Where the parties have reached an agreement on the terms of coverage, and the insurer fails to issue a policy or endorsement consistent with that agreement, the policy must be reformed to reflect the parties' actual agreement. See Highlands Ins. Co., 702 So. 2d at 624; Federal Ins. Co. v. Applestein, 377 So. 2d 229, 231 (Fla. 3d DCA 1979) (reformation appropriate where policy does not reflect terms agreed upon by the parties). VHG is entitled, at minimum, to reformation of the Policy to delete the named-windstorm sub-limit from Endorsement No. 14, consistent with the parties' actual agreement.
Third, the doctrine of equitable estoppel prevents Ironclad from asserting the sub-limit where VHG detrimentally relied on Ironclad's representations — communicated through Tidewater — that the sub-limit had been removed. VHG paid an additional $140,000 in premium based on that representation. VHG structured its risk management program around the understanding that the full $25,000,000 primary-layer limit was available for named-windstorm business-interruption losses. VHG's detrimental reliance is patent and undisputed. See State Farm Fire & Cas. Co. v. Palma, 629 So. 2d 830, 833 (Fla. 1993) (equitable estoppel may be applied against an insurer to prevent denial of coverage based on policy provisions that are inconsistent with the insurer's representations). Ironclad is equitably estopped from asserting a sub-limit that its own underwriter agreed to delete and for which Ironclad accepted additional premium.
C. Pinnacle's Follow-Form Denial Fails for the Same Reasons
Pinnacle Surplus Lines Inc. issued its coverage denial on February 10, 2023, expressly following Ironclad's denial and adopting Ironclad's stated grounds. (PSL-CL-00012–PSL-CL-00015.) Pinnacle's first excess policy, Policy No. PSL-XS1-2022-3390 ($15,000,000 excess of $25,000,000), follows form with the Ironclad primary policy with respect to all terms and conditions, including coverage grants, exclusions, and sub-limits, except where specifically modified by the Pinnacle policy's own terms. (Policy No. PSL-XS1-2022-3390, Section II ("Following Form Provisions"), at VHG-00318–VHG-00320.)
Pinnacle's denial was predicated entirely on its follow-form adoption of the named-windstorm sub-limit assertedly contained in the Ironclad primary policy. Because the named-windstorm sub-limit does not apply to the Ironclad primary policy — for all of the reasons set forth above — it likewise does not apply to Pinnacle's follow-form excess layer. Pinnacle cannot "follow" a sub-limit that does not exist. A follow-form excess policy incorporates the terms of the underlying policy as those terms actually exist, not as the underlying insurer might wish them to exist in hindsight.
Accordingly, if the Court rules that the named-windstorm sub-limit was deleted from the Ironclad primary policy, VHG's losses penetrate the full $25,000,000 primary layer and reach Pinnacle's first excess attachment point of $25,000,000. Pinnacle's follow-form denial on the sub-limit ground must fall as a matter of law.
D. Resolution of the Sub-Limit Issue Impacts the Excess Layers
The resolution of the named-windstorm sub-limit issue has direct and dispositive consequences for the remaining excess carriers in VHG's insurance tower.
Montclair Assurance Company, providing the second excess layer ($10,000,000 excess of $40,000,000, Policy No. MAC-XS2-2022-09817), and Sovereign Re Ltd., providing the third excess layer ($10,000,000 excess of $50,000,000, Policy No. SRL-XS3-2022-5102), have each taken the position that if the $15,000,000 named-windstorm sub-limit applies to the Ironclad primary policy, VHG's total business-interruption recovery would be capped at $15,000,000 — an amount far below the $40,000,000 attachment point of Montclair's second excess layer and the $50,000,000 attachment point of Sovereign Re's third excess layer. Under that scenario, neither Montclair nor Sovereign Re would have any coverage obligation whatsoever.
A ruling that the named-windstorm sub-limit was deleted removes this threshold defense and exposes the full $60,000,000 insurance tower to VHG's business-interruption claim. If the sub-limit is eliminated, VHG's $60,000,000 claim would first exhaust the $25,000,000 Ironclad primary layer (less the $500,000 deductible), then exhaust the $15,000,000 Pinnacle first excess layer, then exhaust the $10,000,000 Montclair second excess layer, and finally reach the $10,000,000 Sovereign Re third excess layer. The remaining coverage disputes (period of restoration, concurrent causation/flood exclusion, and failure to mitigate) would then govern the ultimate amount of recovery from each layer.
Both Montclair and Sovereign Re are represented by Delvecchio & Kraus LLP (Patricia Kraus, lead counsel, with senior associate Raymond Cho; principal office at 425 Park Avenue, 20th Floor, New York, New York 10022). VHG has served a copy of this Motion on counsel for Montclair and Sovereign Re, as reflected in the Certificate of Service appended hereto.
E. There Is No Genuine Issue of Material Fact
VHG has met its burden of demonstrating the absence of any genuine dispute of material fact on the named-windstorm sub-limit issue. The burden now shifts to Defendants to come forward with specific facts showing that a genuine issue exists for trial. See Celotex, 477 U.S. at 324. Defendants cannot carry this burden.
No Defendant can point to any evidence in the record that contradicts the deletion of the sub-limit. The record is devoid of any testimony — from any witness, whether affiliated with VHG, Tidewater, Ironclad, or any other party — that the sub-limit was intended to remain in effect for the 2022–2023 policy year. No Defendant has produced any document reflecting a decision to retain the sub-limit. No Defendant has identified any underwriting correspondence, binder notation, internal memorandum, or policy-issuance communication suggesting that the sub-limit survived the renewal.
Ironclad's sole basis for asserting the sub-limit is the ambiguous Endorsement No. 14 in the issued policy — an endorsement that, as demonstrated above, contains a blank sub-limit field with no dollar amount. This ambiguous endorsement cannot overcome the weight of the undisputed extrinsic evidence: the broker's deposition testimony and declaration, the broker's contemporaneous written correspondence, the binder expressly stating "Deleted per agreement," the premium invoice reflecting the increased premium paid for the deletion, Ironclad's own underwriting files confirming the agreement to delete, and the admissions of Ironclad's own claims personnel that they never even consulted with underwriting before denying coverage on this ground.
To the extent Defendants contend that the inclusion of boilerplate Named Windstorm Endorsement language in the issued policy creates a triable issue of fact, VHG respectfully submits that such a contention misapprehends the summary judgment standard. The presence of an ambiguous policy form, standing alone, does not create a genuine issue of material fact where the undisputed extrinsic evidence unanimously confirms the parties' intent. See Anderson, 477 U.S. at 249–50 ("If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted."). A blank field in a schedule of sub-limits is not evidence that a $15,000,000 sub-limit was intended to apply. It is, at best, evidence of an administrative oversight in the policy-issuance process — an oversight for which Ironclad, not VHG, bears responsibility.
No reasonable jury, viewing the evidence in the light most favorable to Defendants, could find that the $15,000,000 named-windstorm sub-limit survived the July 2022 renewal. Summary judgment is appropriate and warranted.
V. CONCLUSION AND RELIEF REQUESTED
For all of the foregoing reasons, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter partial summary judgment in VHG's favor, declaring as follows:
1. The $15,000,000 named-windstorm sub-limit was deleted from Ironclad Indemnity Corporation's primary property and business-interruption policy, Policy No. IIC-PRP-2022-07541, effective July 1, 2022, by agreement of the parties during the July 2022 renewal negotiations, and the deletion is reflected in the coverage binder, the premium paid and accepted, and Ironclad's own underwriting records.
2. VHG's business-interruption claim arising from Hurricane Callista is subject to the full $25,000,000 per-occurrence limit under the Ironclad primary policy (less the $500,000 deductible) and is not limited by any named-windstorm sub-limit.
3. Pinnacle Surplus Lines Inc.'s follow-form excess policy, Policy No. PSL-XS1-2022-3390, is likewise not subject to any named-windstorm sub-limit, and Pinnacle's coverage denial on that ground is without basis.
4. The named-windstorm sub-limit does not bar VHG's claim from reaching the attachment points of the second excess layer (Montclair Assurance Company, $10,000,000 excess of $40,000,000, Policy No. MAC-XS2-2022-09817) or the third excess layer (Sovereign Re Ltd., $10,000,000 excess of $50,000,000, Policy No. SRL-XS3-2022-5102).
VHG further respectfully requests such other and further relief as this Court deems just and appropriate under the circumstances.
VI. SUPPORTING MATERIALS REFERENCED
The following materials are filed concurrently with this Motion and are incorporated herein by reference:
1. Statement of Undisputed Material Facts in Support of Plaintiff's Motion for Partial Summary Judgment on the Named-Windstorm Sub-Limit Issue;
2. Memorandum of Law in Support of Plaintiff's Motion for Partial Summary Judgment on the Named-Windstorm Sub-Limit Issue;
3. Declaration of Sandra Pellegrini, with Exhibits A through E;
4. Declaration of Franklin Orde, with Exhibits A through D, including the June 28, 2022 Tidewater coverage binder (Exhibit B);
5. Declaration of Dr. Helen Vasquez, with Exhibits A through C;
6. Excerpts from the Deposition Transcript of Franklin Orde (taken August 28, 2023);
7. Excerpts from the Deposition Transcript of Sandra Pellegrini (taken August 14, 2023);
8. Excerpts from the Deposition Transcript of Victor Haddon (taken July 10, 2023);
9. Excerpts from the Deposition Transcript of Denise Whitford (taken July 24, 2023);
10. Certified copy of Policy No. IIC-PRP-2022-07541, including all endorsements (Endorsement No. 14 in particular);
11. Certified copy of Tidewater Risk Advisors coverage binder dated June 28, 2022; and
12. VHG premium invoice for the 2022–2023 policy period.
VII. CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on November 1, 2023, a true and correct copy of the foregoing Plaintiff's Motion for Partial Summary Judgment on the Named-Windstorm Sub-Limit Issue, together with all supporting materials referenced herein, was served via the Court's electronic filing system (E-Portal) and by electronic mail upon:
Gregory Stanton, Esq. Meredith Liang, Esq. Colin Ashford, Esq. Fendowell Rourke & Stanton LLP 280 Trumbull Street, Suite 2200 Hartford, CT 06103 and 101 E. Kennedy Boulevard, Suite 3900 Tampa, FL 33602 Counsel for Defendants Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.
Patricia Kraus, Esq. Raymond Cho, Esq. Delvecchio & Kraus LLP 425 Park Avenue, 20th Floor New York, NY 10022 Counsel for Defendants Montclair Assurance Company and Sovereign Re Ltd.
VIII. SIGNATURE BLOCK
Respectfully submitted,
CALDERWOOD & HARKNESS LLP 333 SE 2nd Avenue, Suite 4400 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201
By: ________
Elaine Forsythe, Esq. Florida Bar No. 0847239
Email: eforsythe@calderwoodharkness.com
Responsible Partner
Tiffany Rosenthal, Esq. Florida Bar No. 1024516
Email: trosenthal@calderwoodharkness.com
Lead Associate
Andrew Fitzpatrick, Esq. Florida Bar No. 1131078
Email: afitzpatrick@calderwoodharkness.com
Working Associate
Counsel for Plaintiff Verimark Hospitality Group Inc. Engagement No. 1021-00003