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

opposition-to-defendants-cross-motion-psj.docx DOCUMENT Antitrust

58 / 75 ← → ✕

Contract analysis Extract to table

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

CASE NO.: 2022-CA-031547

VERIMARK HOSPITALITY GROUP INC.,

Plaintiff,

IRONCLAD INDEMNITY CORPORATION; PINNACLE SURPLUS LINES INC.; MONTCLAIR ASSURANCE COMPANY; and SOVEREIGN RE LTD.,

Defendants.

PLAINTIFF'S OPPOSITION TO DEFENDANTS IRONCLAD INDEMNITY CORPORATION AND PINNACLE SURPLUS LINES INC.'S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT

Filed: November 29, 2023

I. INTRODUCTION

Plaintiff Verimark Hospitality Group Inc. ("VHG"), a Delaware corporation publicly traded on the Nasdaq (ticker: VMRK) and headquartered at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129, respectfully submits this memorandum of law in opposition to the Cross-Motion for Partial Summary Judgment filed on November 15, 2023, by Defendants Ironclad Indemnity Corporation ("Ironclad") and Pinnacle Surplus Lines Inc. ("Pinnacle") (collectively, the "Moving Defendants"). VHG opposes the cross-motion in its entirety and urges this Court to deny the relief sought therein.

The Moving Defendants' cross-motion asks this Court to rule, as a matter of law, that a $15 million named-windstorm sub-limit contained in the prior policy year (July 1, 2021 – July 1, 2022) survived, unamended, into the current policy period (July 1, 2022 – July 1, 2023) under Ironclad's primary policy, Policy No. IIC-PRP-2022-07541, and that, by follow-form operation, the same sub-limit applies under Pinnacle's first excess policy, Policy No. PSL-XS1-2022-3390. If granted, the cross-motion would cap VHG's recovery for business-interruption losses attributable to named windstorm events at $15 million — a fraction of VHG's total claimed losses of $60 million arising from Hurricane Callista, a catastrophic Category 4 storm that devastated VHG's three luxury resort properties in September 2022.

The cross-motion should be denied for multiple, independently sufficient reasons. First, genuine issues of material fact permeate the central question of whether the $15 million named-windstorm sub-limit was deleted at the July 2022 renewal. The sworn deposition testimony of VHG's insurance broker, Franklin Orde of Tidewater Risk Advisors LLC, directly establishes that Ironclad's own underwriting department agreed to delete the sub-limit as part of the renewal transaction — and that VHG paid an increased premium specifically to secure that broader coverage. The sworn declarations of Mr. Orde and of Sandra Pellegrini, VHG's Vice President of Risk Management, corroborate this account. The Moving Defendants cannot obtain summary judgment by simply ignoring this testimony and pointing to ambiguous endorsement language that is susceptible to more than one reasonable interpretation.

Second, even on the undisputed facts, the Moving Defendants' interpretation of the policy contravenes well-established principles of Florida insurance law. Under Florida's pro-coverage construction rules, ambiguities in insurance policies are construed in favor of coverage and against the insurer. The reasonable expectations doctrine further supports VHG's position that the sub-limit was removed. These bedrock principles of Florida jurisprudence preclude the entry of summary judgment in Defendants' favor on this issue.

Third, even if the sub-limit issue were resolved in the Moving Defendants' favor — which VHG vigorously disputes — it would not be dispositive of VHG's overall $60 million claim, because portions of VHG's losses arise from non-windstorm perils and extended periods of restoration that are not subject to the named-windstorm sub-limit under any reading of the policy. Partial summary judgment on a single sub-issue that cannot resolve the case would serve no legitimate purpose and would only complicate rather than streamline the trial of this matter.

For all of these reasons, and for the additional reasons set forth below, this Court should deny the Moving Defendants' cross-motion in its entirety. Moreover, for the reasons previously briefed in VHG's own Motion for Partial Summary Judgment, filed on November 1, 2023, the Court should grant judgment in VHG's favor on the windstorm sub-limit issue, declaring that the $15 million named-windstorm sub-limit does not apply to the 2022–2023 policy period.

II. STATEMENT OF RELEVANT FACTS

The following statement of facts is drawn from the record evidence, including deposition transcripts, sworn declarations, policy documents, broker correspondence, and expert reports. All facts are presented, as required at the summary judgment stage, in the light most favorable to VHG, the non-moving party. See Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Moore v. Morris, 475 So. 2d 666, 668 (Fla. 1985).

A. The Parties and the Insurance Program

VHG is a hospitality and real-estate company that develops, owns, and operates luxury resort properties throughout the State of Florida. VHG is incorporated in Delaware and maintains its principal place of business at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG's common stock is publicly traded on the Nasdaq under the ticker symbol VMRK. For fiscal year 2021, VHG reported total revenue of approximately $412 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $78 million. (Pellegrini Decl. ¶¶ 3–5, Nov. 1, 2023.) VHG's resort portfolio represents a significant concentration of insurable property values in hurricane-exposed coastal areas of Florida, a fact that has historically made the procurement of adequate property and business-interruption insurance coverage a critical component of VHG's risk management strategy. (Id. ¶ 6.)

VHG's insurance broker of record is Tidewater Risk Advisors LLC ("Tidewater"), a specialty insurance brokerage firm headquartered in Miami, Florida. Franklin Orde has served as VHG's primary account executive at Tidewater since 2018 and was responsible for negotiating the placement and renewal of VHG's property and business-interruption insurance program for the policy year at issue. (Orde Dep. at 14:8–15:3, Aug. 28, 2023; Orde Decl. ¶ 2, Nov. 1, 2023.)

For the July 1, 2022 – July 1, 2023 policy year, VHG maintained a property and business-interruption insurance program structured as a four-layer tower, providing a total of $60 million in available limits above a $500,000 per-occurrence deductible. The tower was composed of the following layers:

Primary Layer: Ironclad Indemnity Corporation — $25,000,000 limit per occurrence; Policy No. IIC-PRP-2022-07541; annual premium of $980,000.

First Excess Layer: Pinnacle Surplus Lines Inc. — $15,000,000 excess of $25,000,000 ($15M xs $25M); Policy No. PSL-XS1-2022-3390; annual premium of $410,000; follows form to the Ironclad primary policy.

Second Excess Layer: Montclair Assurance Company — $10,000,000 excess of $40,000,000 ($10M xs $40M); Policy No. MAC-XS2-2022-09817; annual premium of $265,000.

Third Excess Layer: Sovereign Re Ltd. — $10,000,000 excess of $50,000,000 ($10M xs $50M); Policy No. SRL-XS3-2022-5102; annual premium of $185,000.

The total annual premium across all four layers of the insurance tower was $1,840,000. (Pellegrini Decl. ¶¶ 8–12; Orde Decl. ¶¶ 4–7.) This premium represented a significant increase over the prior policy year, a point directly relevant to the windstorm sub-limit dispute at the heart of this motion. As discussed in detail below, a substantial portion of that increase was attributable to VHG's negotiated deletion of the $15 million named-windstorm sub-limit from the Ironclad primary policy.

B. Hurricane Callista and VHG's Losses

Hurricane Callista was designated a named tropical storm by the National Hurricane Center on September 12, 2022, and rapidly intensified over the warm waters of the Gulf of Mexico in the days that followed. On September 18, 2022, at approximately 1:30 PM EDT, Hurricane Callista made landfall near Big Pine Key in the Lower Florida Keys as a powerful Category 4 hurricane, with maximum sustained winds of 145 miles per hour. (Decl. of Dr. Helen Vasquez ¶ 8, Nov. 1, 2023.) The storm produced catastrophic storm surge ranging from 8 to 14 feet in Monroe County and 6 to 10 feet in Lee County, as well as extreme rainfall, debris impact, and prolonged power outages across a wide swath of southwest and central Florida. (Id. ¶¶ 9–11.)

In advance of the storm's arrival, Monroe County issued a mandatory evacuation order on September 16, 2022, followed by Lee County on September 17, 2022. (Pellegrini Decl. ¶ 18.) VHG evacuated all guests and non-essential staff from its three affected resort properties in compliance with these orders. (Id. ¶ 19.)

VHG's three resort properties sustained catastrophic physical damage from Hurricane Callista, resulting in prolonged closures and devastating business-interruption losses:

Verimark Grand Key Resort (Mile Marker 48, Marathon, Florida 33050). This is VHG's flagship property — a 312-room luxury resort and full-service marina situated directly on the Gulf of Mexico. Prior to the storm, the Grand Key Resort operated at a pre-loss average daily rate ("ADR") of $389 and an average occupancy rate of 82%. The property sustained severe structural damage from both wind and storm surge, including destruction of the marina, damage to multiple guest-room buildings, flooding of the ground-floor conference and restaurant facilities, and destruction of landscaping and infrastructure. The Grand Key Resort was forced to close on September 18, 2022, and did not reopen until March 15, 2023 — a total closure period of 178 days. VHG's estimated business-interruption loss for this property is $31.4 million. (Pellegrini Decl. ¶¶ 20–25; Vasquez Report at 18–27.)

Verimark Harborview Hotel & Conference Center (1400 Estero Boulevard, Fort Myers Beach, Florida 33931). This 224-room hotel features a 40,000-square-foot conference facility and is one of the premier meeting and event destinations on Florida's Gulf Coast. The Harborview operated at a pre-loss ADR of $295 and an average occupancy rate of 74%. Hurricane Callista caused extensive damage to the property, including roof loss on two guest-room wings, flooding of the conference center, destruction of the pool and recreation areas, and damage to the property's electrical and mechanical systems. The hotel was closed from September 18, 2022, through January 31, 2023 — a total closure period of 135 days. VHG's estimated business-interruption loss for this property is $18.7 million. (Pellegrini Decl. ¶¶ 26–30; Vasquez Report at 28–35.)

Verimark Sunset Shores (7200 Gulf Boulevard, St. Pete Beach, Florida 33706). This 186-room boutique resort sustained significant but somewhat less severe damage than the Marathon and Fort Myers Beach properties. The Sunset Shores operated at a pre-loss ADR of $342 and an average occupancy rate of 79%. The property experienced a full closure from September 18 through November 30, 2022 (73 days), followed by a period of reduced capacity operations through February 2023, with full operational capacity not restored until February 28, 2023. VHG's estimated business-interruption loss for this property is $9.9 million. (Pellegrini Decl. ¶¶ 31–35; Vasquez Report at 36–42.)

In total, VHG's claimed business-interruption loss across all three properties is $60 million ($31.4 million + $18.7 million + $9.9 million), which equals the full tower limit of VHG's insurance program. (Pellegrini Decl. ¶ 36; Vasquez Decl. ¶ 12.)

C. The July 2022 Renewal and the Windstorm Sub-Limit Deletion

The windstorm sub-limit issue — which lies at the center of the Moving Defendants' cross-motion — arises from the circumstances surrounding the July 2022 renewal of VHG's property and business-interruption insurance program.

During the prior policy year (July 1, 2021 – July 1, 2022), the Ironclad primary policy contained a $15 million named-windstorm sub-limit applicable to business-interruption coverage. That sub-limit capped VHG's recovery for business-interruption losses arising from named windstorm events at $15 million — well below the policy's $25 million overall per-occurrence limit. VHG was aware of this sub-limit and considered it to be an unacceptable gap in its coverage, particularly given the hurricane exposure of VHG's Florida coastal properties. (Pellegrini Decl. ¶¶ 38–39; Orde Decl. ¶ 8.)

During the July 2022 renewal negotiations, VHG, acting through its broker of record Tidewater Risk Advisors and specifically through account executive Franklin Orde, negotiated with Ironclad's underwriting department to delete the $15 million named-windstorm sub-limit in exchange for an increased premium. The deletion of the sub-limit was a critical objective for VHG in the renewal negotiations, and VHG was willing to pay a meaningful premium increase to achieve it. (Orde Decl. ¶¶ 9–11; Pellegrini Decl. ¶ 40.)

Franklin Orde testified under oath at his deposition on August 28, 2023, that Ironclad's underwriter expressly agreed to delete the $15 million named-windstorm sub-limit as part of the 2022 renewal, and that VHG paid an increased premium to secure that deletion. (Orde Dep. at 47:12–49:8, 52:3–53:19, 67:14–68:22, Aug. 28, 2023.) Specifically, Mr. Orde testified that he had multiple telephone conversations and exchanged written correspondence with Ironclad's underwriting department during June and July 2022, in which the deletion of the windstorm sub-limit was discussed, negotiated, and ultimately agreed upon. (Id. at 47:12–49:8.) Mr. Orde further testified that the renewal binder issued by Ironclad reflected the deletion of the sub-limit, and that neither the binder nor the contemporaneous correspondence indicated that the sub-limit would be retained. (Id. at 52:3–53:19.)

In his sworn declaration filed on November 1, 2023, in support of VHG's own Motion for Partial Summary Judgment, Mr. Orde attests that the renewal binder and correspondence confirm the deletion agreement, and that at no point during the renewal process did Ironclad's underwriting department indicate that the sub-limit would remain in effect. (Orde Decl. ¶¶ 12–16.) Mr. Orde further attests that the premium increase VHG accepted was specifically tied, in part, to the removal of the named-windstorm sub-limit. (Id. ¶ 14.)

Sandra Pellegrini, VHG's Vice President of Risk Management, similarly testified at her deposition on August 14, 2023, and attested in her sworn declaration filed on November 1, 2023, that VHG's understanding — based on the representations made by Tidewater, the premium negotiation, and the renewal binder — was that the windstorm sub-limit had been removed for the 2022–2023 policy year. (Pellegrini Dep. at 88:4–90:16, Aug. 14, 2023; Pellegrini Decl. ¶¶ 41–44.) Ms. Pellegrini testified that VHG would not have agreed to the premium increase had VHG understood that the sub-limit would remain in place. (Pellegrini Dep. at 91:2–92:7.)

Despite this clear and consistent testimony, the renewed Ironclad primary policy, as ultimately issued in written form, contains endorsement language that the Moving Defendants now contend preserved the $15 million named-windstorm sub-limit. The endorsement at issue — Endorsement No. 14 to Policy No. IIC-PRP-2022-07541 — uses language that is ambiguous on its face and that is reasonably susceptible to VHG's interpretation that the sub-limit was deleted. The precise language and interpretation of this endorsement is addressed in detail in the Argument section below.

Critically, even Ironclad's own witnesses have provided testimony that undermines the Moving Defendants' position. Victor Haddon, Ironclad's Senior Vice President of Claims, testified at his deposition on July 10, 2023, regarding the windstorm sub-limit. As reflected in VHG's post-deposition summary prepared on September 5, 2023, certain of Mr. Haddon's testimony contains admissions favorable to VHG's interpretation — including testimony suggesting that Ironclad's claims department itself was uncertain whether the sub-limit had been deleted at the 2022 renewal. (Haddon Dep. at 112:6–114:22, 127:3–129:15, July 10, 2023.) At minimum, this testimony raises genuine factual questions about Ironclad's own internal understanding of the policy terms.

D. Ironclad's Denial and Litigation

The procedural history of VHG's claim is as follows:

VHG submitted its initial notice of loss to Ironclad on September 22, 2022 — four days after Hurricane Callista's landfall. (Pellegrini Decl. ¶ 48.) Ironclad retained Arbor Claims Services LLC as an independent adjuster, and Arbor's adjuster, Denise Whitford, conducted physical inspections of all three VHG properties on October 5, 2022. (Id. ¶ 49.) On October 12, 2022, Ironclad issued a reservation of rights letter, broadly reserving its rights under the policy without specifying particular coverage defenses. (Id. ¶ 50.)

VHG submitted a sworn statement in proof of loss in the amount of $60 million on November 15, 2022, supported by preliminary documentation of VHG's business-interruption losses. (Pellegrini Decl. ¶ 51.)

On February 3, 2023, Ironclad issued a formal coverage denial, refusing to pay VHG's claim. The denial letter asserted four bases for denial: (1) the application of the $15 million named-windstorm sub-limit, which Ironclad contended capped VHG's business-interruption recovery for losses arising from Hurricane Callista; (2) disputes regarding the applicable period of restoration under the policy; (3) the concurrent causation doctrine and the policy's flood exclusion, which Ironclad asserted barred coverage for losses attributable in whole or in part to storm surge and flooding; and (4) VHG's alleged failure to mitigate its losses. (Id. ¶ 52.)

On February 10, 2023, Pinnacle, whose first excess policy follows form to the Ironclad primary, issued its own denial of VHG's claim, adopting and incorporating by reference each of the four grounds asserted in Ironclad's denial letter. (Id. ¶ 53.)

VHG commenced this action by filing its Complaint on March 1, 2023, under Case No. 2022-CA-031547. The Complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory relief, and bad faith against all four Defendants.

Following extensive discovery, VHG filed its Motion for Partial Summary Judgment on the windstorm sub-limit issue on November 1, 2023, supported by the declarations of Franklin Orde, Sandra Pellegrini, and Dr. Helen Vasquez, as well as deposition transcripts and documentary exhibits. On November 15, 2023, the Moving Defendants filed the Cross-Motion for Partial Summary Judgment now before this Court.

III. LEGAL STANDARD

Under Florida Rule of Civil Procedure 1.510, as amended effective May 1, 2021, summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fla. R. Civ. P. 1.510(a). The 2021 amendment aligned Florida's summary judgment standard with the federal standard articulated in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986). See In re Amendments to Fla. R. Civ. P. 1.510, 317 So. 3d 72 (Fla. 2021).

The burden of establishing the absence of a genuine issue of material fact rests squarely on the moving party — here, Ironclad and Pinnacle. See Celotex, 477 U.S. at 322–23; Harvey Bldg., Inc. v. Haley, 175 So. 2d 780, 782 (Fla. 1965). A "genuine" issue of material fact exists where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248.

In evaluating a motion for summary judgment, the Court must construe all facts, draw all reasonable inferences, and resolve all doubts in the light most favorable to the non-moving party. Id. at 255; Moore v. Morris, 475 So. 2d 666, 668 (Fla. 1985). The Court's function at the summary judgment stage is not to weigh the evidence, assess credibility, or determine the truth of the matter, but rather to determine whether there exists a genuine issue for trial. Anderson, 477 U.S. at 249. Where the record contains conflicting evidence — including deposition testimony, documentary evidence, and competing interpretations of contractual language — summary judgment must be denied. See id.; Holl v. Talcott, 191 So. 2d 40, 43 (Fla. 1966).

These principles apply with particular force in insurance coverage disputes. Under Florida law, the interpretation of an insurance policy is generally a question of law for the court. See Swire Pac. Holdings, Inc. v. Glenrock Assurance Ins. Co., 845 So. 2d 161, 165 (Fla. 2003). However, when an insurance policy is ambiguous — that is, when its language is susceptible to more than one reasonable interpretation — the ambiguity must be resolved in favor of the insured and against the insurer, which drafted the policy. 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). Moreover, when the resolution of an ambiguity requires consideration of extrinsic evidence — such as the parties' course of dealing, negotiations, or other surrounding circumstances — the question becomes one of fact, inappropriate for summary judgment. See Friedman v. Va. Metal Prods. Corp., 56 So. 2d 515, 517 (Fla. 1952).

IV. ARGUMENT

A. Genuine Issues of Material Fact Preclude Summary Judgment on the Windstorm Sub-Limit Issue

The Moving Defendants' cross-motion rests on a single proposition: that the language of Endorsement No. 14 to the 2022–2023 Ironclad primary policy unambiguously preserved the $15 million named-windstorm sub-limit from the prior policy year. This proposition is wrong. The endorsement language is ambiguous, the extrinsic evidence overwhelmingly supports VHG's interpretation that the sub-limit was deleted, and the Moving Defendants cannot carry their burden of demonstrating the absence of any genuine issue of material fact.

1. The Broker Testimony Creates a Triable Factual Dispute. The testimony of Franklin Orde — VHG's insurance broker and the individual who personally conducted the renewal negotiations with Ironclad — directly and unequivocally establishes that the $15 million named-windstorm sub-limit was deleted at the July 2022 renewal.

At his deposition on August 28, 2023, Mr. Orde testified under oath that during the renewal negotiations in June and July 2022, he had multiple conversations with Ironclad's underwriting department regarding the named-windstorm sub-limit. (Orde Dep. at 47:12–49:8.) Mr. Orde testified that he specifically requested that the sub-limit be deleted from the renewed policy, that Ironclad's underwriter agreed to the deletion in exchange for an increased premium, and that VHG accepted the premium increase for the express purpose of securing the broader coverage. (Id. at 52:3–53:19.) Mr. Orde further testified about specific written correspondence with Ironclad's underwriting department that memorialized the agreement to delete the sub-limit. (Id. at 67:14–68:22.)

In his sworn declaration filed on November 1, 2023, Mr. Orde provides additional detail, attesting that the renewal binder issued by Ironclad did not contain the named-windstorm sub-limit, and that the contemporaneous correspondence between Tidewater and Ironclad confirms the parties' agreement that the sub-limit would be removed. (Orde Decl. ¶¶ 12–16.) Mr. Orde states unequivocally that "at no point during the July 2022 renewal process did any representative of Ironclad Indemnity Corporation indicate that the $15 million named-windstorm sub-limit would be retained in the renewed policy." (Id. ¶ 15.)

This testimony alone is sufficient to create a genuine issue of material fact that precludes summary judgment. At the summary judgment stage, the Court is required to credit Mr. Orde's testimony and draw all reasonable inferences in VHG's favor. See Anderson, 477 U.S. at 255. If Mr. Orde's testimony is credited — as it must be — then a reasonable factfinder could conclude that Ironclad agreed to delete the sub-limit, that the renewal binder reflected that deletion, and that the subsequently issued policy was intended to be free of the named-windstorm sub-limit.

The Moving Defendants cannot meet their burden by simply pointing to the language of Endorsement No. 14 and asking this Court to ignore the sworn testimony of the individual who negotiated the renewal on VHG's behalf. Under Florida law, where an insurance policy contains ambiguous language, extrinsic evidence — including testimony regarding the parties' negotiations and intent — is admissible to resolve the ambiguity. See Friedman, 56 So. 2d at 517; Deni Assocs. of Fla., Inc. v. State Farm Fire & Cas. Ins. Co., 711 So. 2d 1135, 1139 (Fla. 1998). The existence of such conflicting evidence — the ambiguous endorsement language on the one hand and the broker's unequivocal testimony on the other — is the very paradigm of a genuine factual dispute that cannot be resolved on summary judgment.

2. Sandra Pellegrini's Testimony Corroborates the Deletion. The testimony of Sandra Pellegrini, VHG's Vice President of Risk Management, provides independent corroboration of Mr. Orde's account of the sub-limit deletion.

Ms. Pellegrini testified at her deposition on August 14, 2023, that VHG's understanding, based on the representations it received from Tidewater and the terms of the premium negotiation, was that the named-windstorm sub-limit had been removed for the 2022–2023 policy year. (Pellegrini Dep. at 88:4–90:16.) Ms. Pellegrini further testified that VHG would not have agreed to the premium increase reflected in the 2022–2023 policy had VHG understood that the sub-limit would remain in place. (Id. at 91:2–92:7.) In her sworn declaration filed November 1, 2023, Ms. Pellegrini attests to the same facts and further states that the deletion of the windstorm sub-limit was VHG's "primary objective" in the 2022 renewal negotiations. (Pellegrini Decl. ¶ 40.)

Ms. Pellegrini's testimony is significant not only as corroboration of Mr. Orde's account but also because it speaks directly to the reasonable expectations of the insured — a doctrine recognized and applied by Florida courts in insurance coverage disputes. See, e.g., Berkshire Life Ins. Co. v. Adelberg, 698 So. 2d 828, 830 (Fla. 4th DCA 1997); Deni Assocs., 711 So. 2d at 1140. VHG reasonably expected, based on the totality of the information it received from its broker and from the premium terms of the renewal, that the windstorm sub-limit had been deleted. This reasonable expectation is a fact that a jury is entitled to consider in determining the scope of coverage under the policy.

3. Victor Haddon's Testimony Contains Admissions Favorable to VHG. Even Ironclad's own witnesses have provided testimony that undermines the Moving Defendants' position. Victor Haddon, Ironclad's Senior Vice President of Claims, testified at his deposition on July 10, 2023, regarding the windstorm sub-limit. As reflected in VHG's post-deposition summary dated September 5, 2023, Mr. Haddon's testimony included a number of admissions favorable to VHG's interpretation of the policy.

Specifically, Mr. Haddon's testimony raises questions about whether Ironclad's claims department itself was uncertain about the status of the windstorm sub-limit under the 2022–2023 policy. (Haddon Dep. at 112:6–114:22.) Mr. Haddon also testified regarding internal communications within Ironclad that suggest the underwriting department's intent may have differed from the claims department's subsequent interpretation. (Id. at 127:3–129:15.) At minimum, this testimony demonstrates that Ironclad's own internal understanding of whether the sub-limit survived the 2022 renewal is far from clear-cut — a fact that further underscores the existence of genuine factual disputes precluding summary judgment.

If Ironclad's own Senior Vice President of Claims cannot confirm with certainty that the sub-limit was retained, this Court cannot find, as a matter of law, that no reasonable factfinder could conclude the sub-limit was deleted. The Moving Defendants' cross-motion asks this Court to resolve factual ambiguities that even Ironclad's own personnel have been unable to resolve — precisely the type of disputed issue that must be left for trial.

4. The Policy Endorsement Language Is Ambiguous. The Moving Defendants' cross-motion hinges entirely on their assertion that Endorsement No. 14 to the 2022–2023 Ironclad primary policy unambiguously preserved the $15 million named-windstorm sub-limit. That assertion is incorrect. The endorsement language is, at a minimum, ambiguous — and that ambiguity alone is fatal to the Moving Defendants' motion.

Under Florida law, a policy provision is ambiguous if it is "susceptible to more than one reasonable interpretation." Auto-Owners Ins. Co., 756 So. 2d at 34. A policy need not be "utterly unintelligible" to be ambiguous; it is sufficient that reasonable minds could differ as to its meaning. See Swire Pac. Holdings, 845 So. 2d at 165. The test is objective: whether a reasonable insured reading the policy would understand its terms to have a single, definite meaning, or whether the language permits competing interpretations. See State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 1076 (Fla. 1998).

Here, the endorsement language is susceptible to more than one reasonable interpretation regarding whether the $15 million windstorm sub-limit was retained or deleted. VHG's interpretation — that the endorsement, read in context and in light of the renewal negotiations and binder, reflects the deletion of the sub-limit — is at least as reasonable as the Moving Defendants' interpretation. The endorsement does not contain clear, unequivocal language expressly stating that the $15 million named-windstorm sub-limit applies to the 2022–2023 policy period. Rather, the endorsement uses cross-references and conditional language that can reasonably be read either to preserve or to eliminate the sub-limit.

Where policy language is ambiguous, Florida law requires that the ambiguity be construed in favor of coverage and against the insurer. Auto-Owners Ins. Co., 756 So. 2d at 34; Excelsior Ins. Co., 369 So. 2d at 942. This rule of construction is particularly potent where, as here, the ambiguous language relates to a limitation on coverage — a sub-limit — rather than to a coverage grant. See Brightmoor Indemnity Co. v. Menendez, 70 So. 3d 566, 569–70 (Fla. 2011). The insurer bears the burden of establishing that a limitation on coverage applies, and any doubt must be resolved against the insurer. Id.

Moreover, the existence of ambiguity in the endorsement language is itself a reason to deny summary judgment, because the factual context surrounding the renewal — including the renewal negotiations, the broker's correspondence with Ironclad's underwriting department, the premium calculations, and the renewal binder — is necessary to resolve the meaning of the endorsement. See Friedman, 56 So. 2d at 517. When extrinsic evidence is required to interpret an ambiguous contract provision, the interpretation becomes a question of fact, not a question of law, and must be submitted to the finder of fact. See id.; Langford v. Paravant, Inc., 912 So. 2d 359, 361 (Fla. 5th DCA 2005).

For all of these reasons, the ambiguity of the endorsement language precludes summary judgment in the Moving Defendants' favor.

B. Defendants' Interpretation of the Policy Contravenes Florida Insurance Law

Even setting aside the genuine factual disputes discussed above, the Moving Defendants' interpretation of the policy is contrary to well-established principles of Florida insurance law. For this independent reason, the cross-motion should be denied.

1. Florida's Pro-Coverage Construction Rules. Florida courts have long adhered to the principle that insurance policies are to be "construed liberally in favor of the insured and strictly against the insurer." Berkshire Life Ins. Co., 698 So. 2d at 830; see also Auto-Owners Ins. Co., 756 So. 2d at 34. This rule of construction reflects the reality that insurance policies are contracts of adhesion, drafted by the insurer, and that the insured typically has no meaningful ability to negotiate or modify the policy language. See Deni Assocs., 711 So. 2d at 1138.

The pro-coverage construction rule applies with particular force to exclusions, limitations, and sub-limits — provisions that restrict the scope of coverage that the insured has purchased. See Menendez, 70 So. 3d at 569–70; Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528, 532 (Fla. 2005). A named-windstorm sub-limit is precisely such a provision: it limits the amount of coverage available for a particular category of loss, and thus operates as a restriction on the insured's right to recover under the policy. The insurer bears the burden of establishing that such a limitation applies. See Menendez, 70 So. 3d at 570; LaFarge Corp. v. Kestrel Indemnity Co. Indem. Co., 118 F.3d 1511, 1516 (11th Cir. 1997) (applying Florida law).

Ironclad, as the drafter of the policy, cannot rely on ambiguous endorsement language to impose a sub-limit that its own underwriting department agreed to remove. The Moving Defendants ask this Court to read Endorsement No. 14 as preserving the sub-limit, notwithstanding: (a) the broker's testimony that the sub-limit was deleted; (b) the increased premium VHG paid in exchange for the deletion; (c) the renewal binder that reflected the deletion; and (d) the admissions of Ironclad's own claims executive regarding uncertainty about the sub-limit's status. Under Florida's pro-coverage construction rules, this Court should not adopt an interpretation of ambiguous policy language that restricts coverage when a reasonable alternative interpretation — supported by substantial extrinsic evidence — would provide coverage.

2. The Reasonable Expectations Doctrine. Florida courts apply the reasonable expectations doctrine to insurance coverage disputes, holding that ambiguous policy provisions should be interpreted in accordance with the reasonable expectations of the insured. See Berkshire Life Ins. Co., 698 So. 2d at 830; Deni Assocs., 711 So. 2d at 1140; see also National Union Fire Ins. Co. v. Hudson Excess Ins. Co., 891 So. 2d 1088, 1093 (Fla. 4th DCA 2004). The doctrine recognizes that an insured is entitled to expect coverage consistent with the terms that were communicated to it during the placement and renewal process, and that an insurer cannot use ambiguous policy language to defeat those expectations.

VHG had a reasonable expectation that the $15 million named-windstorm sub-limit was deleted at the 2022 renewal. That expectation was based on multiple, mutually reinforcing sources of information:

(a) The express confirmation from VHG's insurance broker, Franklin Orde, that Ironclad's underwriting department had agreed to delete the sub-limit;

(b) The increased premium that VHG paid, which was calculated in part based on the removal of the sub-limit and the consequent expansion of coverage;

(c) The renewal binder issued by Ironclad, which, according to Mr. Orde's testimony, did not contain the named-windstorm sub-limit; and

(d) The absence of any communication from Ironclad, at any time during or after the renewal process, indicating that the sub-limit would remain in effect.

The Moving Defendants' cross-motion asks this Court to disregard VHG's reasonable expectations in favor of a cramped and technical reading of ambiguous endorsement language — a result that would be fundamentally inconsistent with the reasonable expectations doctrine as applied by Florida courts. This Court should decline the invitation.

3. The Parol Evidence Rule Does Not Bar Consideration of Renewal Negotiations. The Moving Defendants may argue — as they have suggested in their cross-motion briefing — that the parol evidence rule bars this Court from considering the renewal negotiations, broker correspondence, and other extrinsic evidence offered by VHG in support of its interpretation of the policy. This argument fails under well-settled Florida law.

The parol evidence rule provides that, where a written agreement is complete and unambiguous on its face, extrinsic evidence of prior or contemporaneous negotiations may not be used to vary or contradict the terms of the written agreement. See Friedman, 56 So. 2d at 517. However, this rule has a critical and well-established exception: extrinsic evidence is admissible to resolve ambiguities in written contracts, including insurance contracts. See id.; Langford, 912 So. 2d at 361; Deni Assocs., 711 So. 2d at 1139.

As demonstrated above, the endorsement language at issue in this case is ambiguous — it is susceptible to more than one reasonable interpretation regarding whether the named-windstorm sub-limit was retained or deleted. Because the language is ambiguous, extrinsic evidence is admissible to resolve the ambiguity. The renewal correspondence between Tidewater and Ironclad's underwriting department, Mr. Orde's testimony regarding the negotiations, the premium calculations, and the renewal binder are all relevant and admissible evidence that this Court may — and should — consider.

Moreover, even if the parol evidence rule were otherwise applicable, it would not bar consideration of the renewal binder, which is itself a written document forming part of the contractual relationship between the parties. Under Florida law, a binder constitutes a temporary insurance contract and is admissible evidence of the terms agreed upon by the parties. See Ranger Ins. Co. v. Bal Harbour Club, Inc., 549 So. 2d 1005, 1009 (Fla. 1989). If the renewal binder does not contain the named-windstorm sub-limit — as Mr. Orde has testified — then the binder is powerful evidence that the parties agreed to delete the sub-limit, and the subsequently issued policy should be interpreted consistently with the binder.

For these reasons, the parol evidence rule does not bar consideration of the extrinsic evidence that supports VHG's position, and the Moving Defendants' reliance on that rule is misplaced.

C. The Follow-Form Issue as to Pinnacle

Pinnacle's first excess policy, Policy No. PSL-XS1-2022-3390, is a follow-form policy that incorporates the terms, conditions, and coverage provisions of the Ironclad primary policy. By its express terms, the Pinnacle policy provides that coverage under the excess layer "shall follow the form and be subject to the same terms, conditions, exclusions, and limitations as the Underlying Policy" — i.e., the Ironclad primary.

The follow-form nature of Pinnacle's policy means that the scope of coverage available under the excess layer is determined by reference to the terms of the Ironclad primary. If the $15 million named-windstorm sub-limit was deleted from the Ironclad primary policy at the July 2022 renewal — as VHG contends and as the record evidence supports — then Pinnacle's follow-form policy likewise contains no such sub-limit. Pinnacle cannot independently impose a coverage limitation that does not exist in the underlying primary policy to which it follows form. See Lexington Ins. Co. v. W. Pa. Hosp., 423 F.3d 318, 326–27 (3d Cir. 2005) (follow-form excess policy adopts the terms of the underlying policy, including any modifications thereto); see also Zeig v. Mass. Bonding & Ins. Co., 23 F.2d 665, 666 (2d Cir. 1928) (L. Hand, J.).

Pinnacle's cross-motion therefore rises and falls with Ironclad's. Because genuine issues of material fact preclude summary judgment on the question of whether the named-windstorm sub-limit was deleted from the Ironclad primary, the same factual disputes necessarily preclude summary judgment on the parallel question of whether Pinnacle's follow-form excess policy contains a sub-limit. Pinnacle's cross-motion should be denied for the same reasons that Ironclad's cross-motion should be denied.

D. Even If the Sub-Limit Applied, It Would Not Resolve the Full $60 Million Claim

The Moving Defendants' cross-motion focuses narrowly on the windstorm sub-limit issue, but even if the Court were to find — contrary to the weight of the evidence — that the $15 million named-windstorm sub-limit survived into the 2022–2023 policy, that finding would not be dispositive of VHG's overall $60 million claim.

VHG's total claimed business-interruption losses of $60 million encompass a range of loss categories, not all of which are attributable solely to named-windstorm perils. Significant portions of VHG's losses arise from consequential damage, extended periods of restoration beyond the immediate storm event, infrastructure failures, supply chain disruption, and other non-windstorm perils that are independently covered under the Ironclad primary policy and the excess tower. Even under the Moving Defendants' interpretation of the sub-limit, VHG would be entitled to recover for business-interruption losses that are not subject to the named-windstorm sub-limit — which, depending on the allocation of losses between wind and non-wind perils, could amount to tens of millions of dollars.

Dr. Helen Vasquez of Meridian Forensic Economics LLC — VHG's designated expert on business-interruption loss quantification — has opined in her expert report dated September 15, 2023, that VHG's total business-interruption losses across all three properties exceed $60 million, regardless of whether the windstorm sub-limit applies. (Vasquez Report at 45–48; Vasquez Decl. ¶¶ 12–14, Nov. 1, 2023.) Dr. Vasquez's analysis identifies categories of loss — including extended period of restoration losses arising from infrastructure damage, supply chain disruption, and reduced market demand in the affected areas — that are not attributable to the named windstorm itself and that would not be subject to a windstorm sub-limit under any reasonable reading of the policy. (Id.)

The sub-limit issue, even if resolved entirely in the Moving Defendants' favor, would therefore not be dispositive of VHG's claim. Partial summary judgment is appropriate only when it will "genuinely simplify the trial" by resolving a discrete legal or factual issue. Here, a ruling on the sub-limit issue alone would not resolve VHG's claim, would not eliminate the need for trial on the remaining coverage issues, and would likely complicate rather than streamline the proceedings by requiring the Court and the parties to engage in a complex allocation analysis at trial. Under these circumstances, partial summary judgment would serve no legitimate purpose and should be denied.

E. Defendants' Remaining Defenses Further Demonstrate the Existence of Disputed Facts

The interrelationship between the windstorm sub-limit issue and the Moving Defendants' remaining coverage defenses further underscores the existence of material factual disputes that cannot be resolved on summary judgment.

As noted above, Ironclad's February 3, 2023 coverage denial rested on four grounds: (1) the $15 million named-windstorm sub-limit; (2) disputes regarding the applicable period of restoration; (3) the concurrent causation doctrine and the policy's flood exclusion; and (4) VHG's alleged failure to mitigate. These four defenses are interrelated and, in many respects, overlapping. The resolution of the windstorm sub-limit issue does not occur in a vacuum; rather, it is inextricably connected to the factual questions underlying the other defenses.

For example, if the Court were to rule that the windstorm sub-limit survived into the 2022–2023 policy year, VHG would still be entitled to pursue coverage for business-interruption losses attributable to non-windstorm perils — including losses arising from sustained closures due to infrastructure damage, supply chain disruption, and extended restoration periods that are not causally related to the named windstorm. This allocation analysis — determining which losses are attributable to wind versus non-wind perils — is a fact-intensive inquiry that requires expert testimony and is fundamentally unsuitable for summary judgment.

The existence of competing expert opinions on this very issue further demonstrates the presence of triable factual disputes. Jeffrey Caldwell, P.E., of Caldwell Engineering Associates Inc., VHG's designated forensic engineer, has opined on the allocation of physical damage between wind and storm surge at each of VHG's three properties. His analysis concludes that a significant portion of the damage and resulting closures were attributable to factors other than named-windstorm forces. Conversely, Dr. Warren Birk of Graystone Consulting Group LLC, the Moving Defendants' retained expert, has offered a competing analysis that attributes a larger share of the damage to wind forces. The existence of these diametrically opposed expert opinions is, standing alone, sufficient to establish a genuine issue of material fact on the allocation question — a question that is inextricably linked to the windstorm sub-limit issue.

The Moving Defendants cannot isolate the sub-limit issue from the broader factual context in which it arises. The windstorm sub-limit does not apply in a factual vacuum; its application depends on the resolution of disputed questions regarding the cause and allocation of VHG's losses, the applicable period of restoration, and other factual issues that remain hotly contested. Partial summary judgment on the sub-limit issue alone, without resolving these related factual disputes, would be premature and inappropriate.

V. CONCLUSION

For all of the foregoing reasons, the Court should deny the Cross-Motion for Partial Summary Judgment filed by Defendants Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.

The record evidence, viewed in the light most favorable to VHG as the non-moving party, demonstrates that genuine issues of material fact exist regarding whether the $15 million named-windstorm sub-limit was deleted at the July 2022 policy renewal. The sworn testimony of Franklin Orde, the corroborating testimony of Sandra Pellegrini, and the admissions of Ironclad's own Senior Vice President of Claims, Victor Haddon, all support VHG's position that the sub-limit was removed. The Moving Defendants cannot carry their burden of establishing the absence of any genuine factual dispute in the face of this evidence.

Moreover, the Moving Defendants' interpretation of the policy is contrary to Florida's well-established pro-coverage construction rules, the reasonable expectations doctrine, and the admissibility of extrinsic evidence to resolve ambiguous insurance policy provisions. Under any of these independently sufficient legal principles, the endorsement language at issue cannot be read to impose a sub-limit that the insurer's own underwriting department agreed to delete.

VHG respectfully requests that this Court:

1. DENY the Cross-Motion for Partial Summary Judgment filed by Defendants Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.; and

2. GRANT VHG's own Motion for Partial Summary Judgment filed on November 1, 2023, declaring that the $15 million named-windstorm sub-limit does not apply to Policy No. IIC-PRP-2022-07541 or, by follow-form operation, to Policy No. PSL-XS1-2022-3390 for the July 1, 2022 – July 1, 2023 policy period.

VI. SIGNATURE BLOCK AND CERTIFICATE OF SERVICE

Respectfully submitted,

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

By: ________

Elaine Forsythe (Fla. Bar No. 987452) Responsible Partner

Email: eforsythe@calderwoodharkness.com

Telephone: (305) 555-7800

Tiffany Rosenthal (Fla. Bar No. 103219) Lead Associate

Email: trosenthal@calderwoodharkness.com

Telephone: (305) 555-7815

Andrew Fitzpatrick (Fla. Bar No. 118764) Associate

Email: afitzpatrick@calderwoodharkness.com

Telephone: (305) 555-7822

Attorneys for Plaintiff Verimark Hospitality Group Inc.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on November 29, 2023, a true and correct copy of the foregoing Plaintiff's Opposition to Defendants Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.'s Cross-Motion for Partial Summary Judgment was served upon the following counsel of record via the Florida Courts E-Filing Portal and by electronic mail:

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.

By: ________

Elaine Forsythe (Fla. Bar No. 987452)

IN THE CIRCUIT COURT OF THE ELEVENTH JUDICIAL CIRCUIT IN AND FOR MIAMI-DADE COUNTY, FLORIDA
CASE NO.: 2022-CA-031547
VERIMARK HOSPITALITY GROUP INC.,
Plaintiff,
v.
IRONCLAD INDEMNITY CORPORATION; PINNACLE SURPLUS LINES INC.; MONTCLAIR ASSURANCE COMPANY; and SOVEREIGN RE LTD.,
Defendants.
PLAINTIFF'S OPPOSITION TO DEFENDANTS IRONCLAD INDEMNITY CORPORATION AND PINNACLE SURPLUS LINES INC.'S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT
Filed: November 29, 2023
I. INTRODUCTION
Plaintiff Verimark Hospitality Group Inc. ("VHG"), a Delaware corporation publicly traded on the Nasdaq (ticker: VMRK) and headquartered at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129, respectfully submits this memorandum of law in opposition to the Cross-Motion for Partial Summary Judgment filed on November 15, 2023, by Defendants Ironclad Indemnity Corporation ("Ironclad") and Pinnacle Surplus Lines Inc. ("Pinnacle") (collectively, the "Moving Defendants"). VHG opposes the cross-motion in its entirety and urges this Court to deny the relief sought therein.
The Moving Defendants' cross-motion asks this Court to rule, as a matter of law, that a $15 million named-windstorm sub-limit contained in the prior policy year (July 1, 2021 – July 1, 2022) survived, unamended, into the current policy period (July 1, 2022 – July 1, 2023) under Ironclad's primary policy, Policy No. IIC-PRP-2022-07541, and that, by follow-form operation, the same sub-limit applies under Pinnacle's first excess policy, Policy No. PSL-XS1-2022-3390. If granted, the cross-motion would cap VHG's recovery for business-interruption losses attributable to named windstorm events at $15 million — a fraction of VHG's total claimed losses of $60 million arising from Hurricane Callista, a catastrophic Category 4 storm that devastated VHG's three luxury resort properties in September 2022.
The cross-motion should be denied for multiple, independently sufficient reasons. First, genuine issues of material fact permeate the central question of whether the $15 million named-windstorm sub-limit was deleted at the July 2022 renewal. The sworn deposition testimony of VHG's insurance broker, Franklin Orde of Tidewater Risk Advisors LLC, directly establishes that Ironclad's own underwriting department agreed to delete the sub-limit as part of the renewal transaction — and that VHG paid an increased premium specifically to secure that broader coverage. The sworn declarations of Mr. Orde and of Sandra Pellegrini, VHG's Vice President of Risk Management, corroborate this account. The Moving Defendants cannot obtain summary judgment by simply ignoring this testimony and pointing to ambiguous endorsement language that is susceptible to more than one reasonable interpretation.
Second, even on the undisputed facts, the Moving Defendants' interpretation of the policy contravenes well-established principles of Florida insurance law. Under Florida's pro-coverage construction rules, ambiguities in insurance policies are construed in favor of coverage and against the insurer. The reasonable expectations doctrine further supports VHG's position that the sub-limit was removed. These bedrock principles of Florida jurisprudence preclude the entry of summary judgment in Defendants' favor on this issue.
Third, even if the sub-limit issue were resolved in the Moving Defendants' favor — which VHG vigorously disputes — it would not be dispositive of VHG's overall $60 million claim, because portions of VHG's losses arise from non-windstorm perils and extended periods of restoration that are not subject to the named-windstorm sub-limit under any reading of the policy. Partial summary judgment on a single sub-issue that cannot resolve the case would serve no legitimate purpose and would only complicate rather than streamline the trial of this matter.
For all of these reasons, and for the additional reasons set forth below, this Court should deny the Moving Defendants' cross-motion in its entirety. Moreover, for the reasons previously briefed in VHG's own Motion for Partial Summary Judgment, filed on November 1, 2023, the Court should grant judgment in VHG's favor on the windstorm sub-limit issue, declaring that the $15 million named-windstorm sub-limit does not apply to the 2022–2023 policy period.
II. STATEMENT OF RELEVANT FACTS
The following statement of facts is drawn from the record evidence, including deposition transcripts, sworn declarations, policy documents, broker correspondence, and expert reports. All facts are presented, as required at the summary judgment stage, in the light most favorable to VHG, the non-moving party. See Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Moore v. Morris, 475 So. 2d 666, 668 (Fla. 1985).
A. The Parties and the Insurance Program
VHG is a hospitality and real-estate company that develops, owns, and operates luxury resort properties throughout the State of Florida. VHG is incorporated in Delaware and maintains its principal place of business at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG's common stock is publicly traded on the Nasdaq under the ticker symbol VMRK. For fiscal year 2021, VHG reported total revenue of approximately $412 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $78 million. (Pellegrini Decl. ¶¶ 3–5, Nov. 1, 2023.) VHG's resort portfolio represents a significant concentration of insurable property values in hurricane-exposed coastal areas of Florida, a fact that has historically made the procurement of adequate property and business-interruption insurance coverage a critical component of VHG's risk management strategy. (Id. ¶ 6.)
VHG's insurance broker of record is Tidewater Risk Advisors LLC ("Tidewater"), a specialty insurance brokerage firm headquartered in Miami, Florida. Franklin Orde has served as VHG's primary account executive at Tidewater since 2018 and was responsible for negotiating the placement and renewal of VHG's property and business-interruption insurance program for the policy year at issue. (Orde Dep. at 14:8–15:3, Aug. 28, 2023; Orde Decl. ¶ 2, Nov. 1, 2023.)
For the July 1, 2022 – July 1, 2023 policy year, VHG maintained a property and business-interruption insurance program structured as a four-layer tower, providing a total of $60 million in available limits above a $500,000 per-occurrence deductible. The tower was composed of the following layers:
Primary Layer: Ironclad Indemnity Corporation — $25,000,000 limit per occurrence; Policy No. IIC-PRP-2022-07541; annual premium of $980,000.
First Excess Layer: Pinnacle Surplus Lines Inc. — $15,000,000 excess of $25,000,000 ($15M xs $25M); Policy No. PSL-XS1-2022-3390; annual premium of $410,000; follows form to the Ironclad primary policy.
Second Excess Layer: Montclair Assurance Company — $10,000,000 excess of $40,000,000 ($10M xs $40M); Policy No. MAC-XS2-2022-09817; annual premium of $265,000.
Third Excess Layer: Sovereign Re Ltd. — $10,000,000 excess of $50,000,000 ($10M xs $50M); Policy No. SRL-XS3-2022-5102; annual premium of $185,000.
The total annual premium across all four layers of the insurance tower was $1,840,000. (Pellegrini Decl. ¶¶ 8–12; Orde Decl. ¶¶ 4–7.) This premium represented a significant increase over the prior policy year, a point directly relevant to the windstorm sub-limit dispute at the heart of this motion. As discussed in detail below, a substantial portion of that increase was attributable to VHG's negotiated deletion of the $15 million named-windstorm sub-limit from the Ironclad primary policy.
B. Hurricane Callista and VHG's Losses
Hurricane Callista was designated a named tropical storm by the National Hurricane Center on September 12, 2022, and rapidly intensified over the warm waters of the Gulf of Mexico in the days that followed. On September 18, 2022, at approximately 1:30 PM EDT, Hurricane Callista made landfall near Big Pine Key in the Lower Florida Keys as a powerful Category 4 hurricane, with maximum sustained winds of 145 miles per hour. (Decl. of Dr. Helen Vasquez ¶ 8, Nov. 1, 2023.) The storm produced catastrophic storm surge ranging from 8 to 14 feet in Monroe County and 6 to 10 feet in Lee County, as well as extreme rainfall, debris impact, and prolonged power outages across a wide swath of southwest and central Florida. (Id. ¶¶ 9–11.)
In advance of the storm's arrival, Monroe County issued a mandatory evacuation order on September 16, 2022, followed by Lee County on September 17, 2022. (Pellegrini Decl. ¶ 18.) VHG evacuated all guests and non-essential staff from its three affected resort properties in compliance with these orders. (Id. ¶ 19.)
VHG's three resort properties sustained catastrophic physical damage from Hurricane Callista, resulting in prolonged closures and devastating business-interruption losses:
Verimark Grand Key Resort (Mile Marker 48, Marathon, Florida 33050). This is VHG's flagship property — a 312-room luxury resort and full-service marina situated directly on the Gulf of Mexico. Prior to the storm, the Grand Key Resort operated at a pre-loss average daily rate ("ADR") of $389 and an average occupancy rate of 82%. The property sustained severe structural damage from both wind and storm surge, including destruction of the marina, damage to multiple guest-room buildings, flooding of the ground-floor conference and restaurant facilities, and destruction of landscaping and infrastructure. The Grand Key Resort was forced to close on September 18, 2022, and did not reopen until March 15, 2023 — a total closure period of 178 days. VHG's estimated business-interruption loss for this property is $31.4 million. (Pellegrini Decl. ¶¶ 20–25; Vasquez Report at 18–27.)
Verimark Harborview Hotel & Conference Center (1400 Estero Boulevard, Fort Myers Beach, Florida 33931). This 224-room hotel features a 40,000-square-foot conference facility and is one of the premier meeting and event destinations on Florida's Gulf Coast. The Harborview operated at a pre-loss ADR of $295 and an average occupancy rate of 74%. Hurricane Callista caused extensive damage to the property, including roof loss on two guest-room wings, flooding of the conference center, destruction of the pool and recreation areas, and damage to the property's electrical and mechanical systems. The hotel was closed from September 18, 2022, through January 31, 2023 — a total closure period of 135 days. VHG's estimated business-interruption loss for this property is $18.7 million. (Pellegrini Decl. ¶¶ 26–30; Vasquez Report at 28–35.)
Verimark Sunset Shores (7200 Gulf Boulevard, St. Pete Beach, Florida 33706). This 186-room boutique resort sustained significant but somewhat less severe damage than the Marathon and Fort Myers Beach properties. The Sunset Shores operated at a pre-loss ADR of $342 and an average occupancy rate of 79%. The property experienced a full closure from September 18 through November 30, 2022 (73 days), followed by a period of reduced capacity operations through February 2023, with full operational capacity not restored until February 28, 2023. VHG's estimated business-interruption loss for this property is $9.9 million. (Pellegrini Decl. ¶¶ 31–35; Vasquez Report at 36–42.)
In total, VHG's claimed business-interruption loss across all three properties is $60 million ($31.4 million + $18.7 million + $9.9 million), which equals the full tower limit of VHG's insurance program. (Pellegrini Decl. ¶ 36; Vasquez Decl. ¶ 12.)
C. The July 2022 Renewal and the Windstorm Sub-Limit Deletion
The windstorm sub-limit issue — which lies at the center of the Moving Defendants' cross-motion — arises from the circumstances surrounding the July 2022 renewal of VHG's property and business-interruption insurance program.
During the prior policy year (July 1, 2021 – July 1, 2022), the Ironclad primary policy contained a $15 million named-windstorm sub-limit applicable to business-interruption coverage. That sub-limit capped VHG's recovery for business-interruption losses arising from named windstorm events at $15 million — well below the policy's $25 million overall per-occurrence limit. VHG was aware of this sub-limit and considered it to be an unacceptable gap in its coverage, particularly given the hurricane exposure of VHG's Florida coastal properties. (Pellegrini Decl. ¶¶ 38–39; Orde Decl. ¶ 8.)
During the July 2022 renewal negotiations, VHG, acting through its broker of record Tidewater Risk Advisors and specifically through account executive Franklin Orde, negotiated with Ironclad's underwriting department to delete the $15 million named-windstorm sub-limit in exchange for an increased premium. The deletion of the sub-limit was a critical objective for VHG in the renewal negotiations, and VHG was willing to pay a meaningful premium increase to achieve it. (Orde Decl. ¶¶ 9–11; Pellegrini Decl. ¶ 40.)
Franklin Orde testified under oath at his deposition on August 28, 2023, that Ironclad's underwriter expressly agreed to delete the $15 million named-windstorm sub-limit as part of the 2022 renewal, and that VHG paid an increased premium to secure that deletion. (Orde Dep. at 47:12–49:8, 52:3–53:19, 67:14–68:22, Aug. 28, 2023.) Specifically, Mr. Orde testified that he had multiple telephone conversations and exchanged written correspondence with Ironclad's underwriting department during June and July 2022, in which the deletion of the windstorm sub-limit was discussed, negotiated, and ultimately agreed upon. (Id. at 47:12–49:8.) Mr. Orde further testified that the renewal binder issued by Ironclad reflected the deletion of the sub-limit, and that neither the binder nor the contemporaneous correspondence indicated that the sub-limit would be retained. (Id. at 52:3–53:19.)
In his sworn declaration filed on November 1, 2023, in support of VHG's own Motion for Partial Summary Judgment, Mr. Orde attests that the renewal binder and correspondence confirm the deletion agreement, and that at no point during the renewal process did Ironclad's underwriting department indicate that the sub-limit would remain in effect. (Orde Decl. ¶¶ 12–16.) Mr. Orde further attests that the premium increase VHG accepted was specifically tied, in part, to the removal of the named-windstorm sub-limit. (Id. ¶ 14.)
Sandra Pellegrini, VHG's Vice President of Risk Management, similarly testified at her deposition on August 14, 2023, and attested in her sworn declaration filed on November 1, 2023, that VHG's understanding — based on the representations made by Tidewater, the premium negotiation, and the renewal binder — was that the windstorm sub-limit had been removed for the 2022–2023 policy year. (Pellegrini Dep. at 88:4–90:16, Aug. 14, 2023; Pellegrini Decl. ¶¶ 41–44.) Ms. Pellegrini testified that VHG would not have agreed to the premium increase had VHG understood that the sub-limit would remain in place. (Pellegrini Dep. at 91:2–92:7.)
Despite this clear and consistent testimony, the renewed Ironclad primary policy, as ultimately issued in written form, contains endorsement language that the Moving Defendants now contend preserved the $15 million named-windstorm sub-limit. The endorsement at issue — Endorsement No. 14 to Policy No. IIC-PRP-2022-07541 — uses language that is ambiguous on its face and that is reasonably susceptible to VHG's interpretation that the sub-limit was deleted. The precise language and interpretation of this endorsement is addressed in detail in the Argument section below.
Critically, even Ironclad's own witnesses have provided testimony that undermines the Moving Defendants' position. Victor Haddon, Ironclad's Senior Vice President of Claims, testified at his deposition on July 10, 2023, regarding the windstorm sub-limit. As reflected in VHG's post-deposition summary prepared on September 5, 2023, certain of Mr. Haddon's testimony contains admissions favorable to VHG's interpretation — including testimony suggesting that Ironclad's claims department itself was uncertain whether the sub-limit had been deleted at the 2022 renewal. (Haddon Dep. at 112:6–114:22, 127:3–129:15, July 10, 2023.) At minimum, this testimony raises genuine factual questions about Ironclad's own internal understanding of the policy terms.
D. Ironclad's Denial and Litigation
The procedural history of VHG's claim is as follows:
VHG submitted its initial notice of loss to Ironclad on September 22, 2022 — four days after Hurricane Callista's landfall. (Pellegrini Decl. ¶ 48.) Ironclad retained Arbor Claims Services LLC as an independent adjuster, and Arbor's adjuster, Denise Whitford, conducted physical inspections of all three VHG properties on October 5, 2022. (Id. ¶ 49.) On October 12, 2022, Ironclad issued a reservation of rights letter, broadly reserving its rights under the policy without specifying particular coverage defenses. (Id. ¶ 50.)
VHG submitted a sworn statement in proof of loss in the amount of $60 million on November 15, 2022, supported by preliminary documentation of VHG's business-interruption losses. (Pellegrini Decl. ¶ 51.)
On February 3, 2023, Ironclad issued a formal coverage denial, refusing to pay VHG's claim. The denial letter asserted four bases for denial: (1) the application of the $15 million named-windstorm sub-limit, which Ironclad contended capped VHG's business-interruption recovery for losses arising from Hurricane Callista; (2) disputes regarding the applicable period of restoration under the policy; (3) the concurrent causation doctrine and the policy's flood exclusion, which Ironclad asserted barred coverage for losses attributable in whole or in part to storm surge and flooding; and (4) VHG's alleged failure to mitigate its losses. (Id. ¶ 52.)
On February 10, 2023, Pinnacle, whose first excess policy follows form to the Ironclad primary, issued its own denial of VHG's claim, adopting and incorporating by reference each of the four grounds asserted in Ironclad's denial letter. (Id. ¶ 53.)
VHG commenced this action by filing its Complaint on March 1, 2023, under Case No. 2022-CA-031547. The Complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory relief, and bad faith against all four Defendants.
Following extensive discovery, VHG filed its Motion for Partial Summary Judgment on the windstorm sub-limit issue on November 1, 2023, supported by the declarations of Franklin Orde, Sandra Pellegrini, and Dr. Helen Vasquez, as well as deposition transcripts and documentary exhibits. On November 15, 2023, the Moving Defendants filed the Cross-Motion for Partial Summary Judgment now before this Court.
III. LEGAL STANDARD
Under Florida Rule of Civil Procedure 1.510, as amended effective May 1, 2021, summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fla. R. Civ. P. 1.510(a). The 2021 amendment aligned Florida's summary judgment standard with the federal standard articulated in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986), and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986). See In re Amendments to Fla. R. Civ. P. 1.510, 317 So. 3d 72 (Fla. 2021).
The burden of establishing the absence of a genuine issue of material fact rests squarely on the moving party — here, Ironclad and Pinnacle. See Celotex, 477 U.S. at 322–23; Harvey Bldg., Inc. v. Haley, 175 So. 2d 780, 782 (Fla. 1965). A "genuine" issue of material fact exists where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248.
In evaluating a motion for summary judgment, the Court must construe all facts, draw all reasonable inferences, and resolve all doubts in the light most favorable to the non-moving party. Id. at 255; Moore v. Morris, 475 So. 2d 666, 668 (Fla. 1985). The Court's function at the summary judgment stage is not to weigh the evidence, assess credibility, or determine the truth of the matter, but rather to determine whether there exists a genuine issue for trial. Anderson, 477 U.S. at 249. Where the record contains conflicting evidence — including deposition testimony, documentary evidence, and competing interpretations of contractual language — summary judgment must be denied. See id.; Holl v. Talcott, 191 So. 2d 40, 43 (Fla. 1966).
These principles apply with particular force in insurance coverage disputes. Under Florida law, the interpretation of an insurance policy is generally a question of law for the court. See Swire Pac. Holdings, Inc. v. Glenrock Assurance Ins. Co., 845 So. 2d 161, 165 (Fla. 2003). However, when an insurance policy is ambiguous — that is, when its language is susceptible to more than one reasonable interpretation — the ambiguity must be resolved in favor of the insured and against the insurer, which drafted the policy. 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). Moreover, when the resolution of an ambiguity requires consideration of extrinsic evidence — such as the parties' course of dealing, negotiations, or other surrounding circumstances — the question becomes one of fact, inappropriate for summary judgment. See Friedman v. Va. Metal Prods. Corp., 56 So. 2d 515, 517 (Fla. 1952).
IV. ARGUMENT
A. Genuine Issues of Material Fact Preclude Summary Judgment on the Windstorm Sub-Limit Issue
The Moving Defendants' cross-motion rests on a single proposition: that the language of Endorsement No. 14 to the 2022–2023 Ironclad primary policy unambiguously preserved the $15 million named-windstorm sub-limit from the prior policy year. This proposition is wrong. The endorsement language is ambiguous, the extrinsic evidence overwhelmingly supports VHG's interpretation that the sub-limit was deleted, and the Moving Defendants cannot carry their burden of demonstrating the absence of any genuine issue of material fact.
1. The Broker Testimony Creates a Triable Factual Dispute. The testimony of Franklin Orde — VHG's insurance broker and the individual who personally conducted the renewal negotiations with Ironclad — directly and unequivocally establishes that the $15 million named-windstorm sub-limit was deleted at the July 2022 renewal.
At his deposition on August 28, 2023, Mr. Orde testified under oath that during the renewal negotiations in June and July 2022, he had multiple conversations with Ironclad's underwriting department regarding the named-windstorm sub-limit. (Orde Dep. at 47:12–49:8.) Mr. Orde testified that he specifically requested that the sub-limit be deleted from the renewed policy, that Ironclad's underwriter agreed to the deletion in exchange for an increased premium, and that VHG accepted the premium increase for the express purpose of securing the broader coverage. (Id. at 52:3–53:19.) Mr. Orde further testified about specific written correspondence with Ironclad's underwriting department that memorialized the agreement to delete the sub-limit. (Id. at 67:14–68:22.)
In his sworn declaration filed on November 1, 2023, Mr. Orde provides additional detail, attesting that the renewal binder issued by Ironclad did not contain the named-windstorm sub-limit, and that the contemporaneous correspondence between Tidewater and Ironclad confirms the parties' agreement that the sub-limit would be removed. (Orde Decl. ¶¶ 12–16.) Mr. Orde states unequivocally that "at no point during the July 2022 renewal process did any representative of Ironclad Indemnity Corporation indicate that the $15 million named-windstorm sub-limit would be retained in the renewed policy." (Id. ¶ 15.)
This testimony alone is sufficient to create a genuine issue of material fact that precludes summary judgment. At the summary judgment stage, the Court is required to credit Mr. Orde's testimony and draw all reasonable inferences in VHG's favor. See Anderson, 477 U.S. at 255. If Mr. Orde's testimony is credited — as it must be — then a reasonable factfinder could conclude that Ironclad agreed to delete the sub-limit, that the renewal binder reflected that deletion, and that the subsequently issued policy was intended to be free of the named-windstorm sub-limit.
The Moving Defendants cannot meet their burden by simply pointing to the language of Endorsement No. 14 and asking this Court to ignore the sworn testimony of the individual who negotiated the renewal on VHG's behalf. Under Florida law, where an insurance policy contains ambiguous language, extrinsic evidence — including testimony regarding the parties' negotiations and intent — is admissible to resolve the ambiguity. See Friedman, 56 So. 2d at 517; Deni Assocs. of Fla., Inc. v. State Farm Fire & Cas. Ins. Co., 711 So. 2d 1135, 1139 (Fla. 1998). The existence of such conflicting evidence — the ambiguous endorsement language on the one hand and the broker's unequivocal testimony on the other — is the very paradigm of a genuine factual dispute that cannot be resolved on summary judgment.
2. Sandra Pellegrini's Testimony Corroborates the Deletion. The testimony of Sandra Pellegrini, VHG's Vice President of Risk Management, provides independent corroboration of Mr. Orde's account of the sub-limit deletion.
Ms. Pellegrini testified at her deposition on August 14, 2023, that VHG's understanding, based on the representations it received from Tidewater and the terms of the premium negotiation, was that the named-windstorm sub-limit had been removed for the 2022–2023 policy year. (Pellegrini Dep. at 88:4–90:16.) Ms. Pellegrini further testified that VHG would not have agreed to the premium increase reflected in the 2022–2023 policy had VHG understood that the sub-limit would remain in place. (Id. at 91:2–92:7.) In her sworn declaration filed November 1, 2023, Ms. Pellegrini attests to the same facts and further states that the deletion of the windstorm sub-limit was VHG's "primary objective" in the 2022 renewal negotiations. (Pellegrini Decl. ¶ 40.)
Ms. Pellegrini's testimony is significant not only as corroboration of Mr. Orde's account but also because it speaks directly to the reasonable expectations of the insured — a doctrine recognized and applied by Florida courts in insurance coverage disputes. See, e.g., Berkshire Life Ins. Co. v. Adelberg, 698 So. 2d 828, 830 (Fla. 4th DCA 1997); Deni Assocs., 711 So. 2d at 1140. VHG reasonably expected, based on the totality of the information it received from its broker and from the premium terms of the renewal, that the windstorm sub-limit had been deleted. This reasonable expectation is a fact that a jury is entitled to consider in determining the scope of coverage under the policy.
3. Victor Haddon's Testimony Contains Admissions Favorable to VHG. Even Ironclad's own witnesses have provided testimony that undermines the Moving Defendants' position. Victor Haddon, Ironclad's Senior Vice President of Claims, testified at his deposition on July 10, 2023, regarding the windstorm sub-limit. As reflected in VHG's post-deposition summary dated September 5, 2023, Mr. Haddon's testimony included a number of admissions favorable to VHG's interpretation of the policy.
Specifically, Mr. Haddon's testimony raises questions about whether Ironclad's claims department itself was uncertain about the status of the windstorm sub-limit under the 2022–2023 policy. (Haddon Dep. at 112:6–114:22.) Mr. Haddon also testified regarding internal communications within Ironclad that suggest the underwriting department's intent may have differed from the claims department's subsequent interpretation. (Id. at 127:3–129:15.) At minimum, this testimony demonstrates that Ironclad's own internal understanding of whether the sub-limit survived the 2022 renewal is far from clear-cut — a fact that further underscores the existence of genuine factual disputes precluding summary judgment.
If Ironclad's own Senior Vice President of Claims cannot confirm with certainty that the sub-limit was retained, this Court cannot find, as a matter of law, that no reasonable factfinder could conclude the sub-limit was deleted. The Moving Defendants' cross-motion asks this Court to resolve factual ambiguities that even Ironclad's own personnel have been unable to resolve — precisely the type of disputed issue that must be left for trial.
4. The Policy Endorsement Language Is Ambiguous. The Moving Defendants' cross-motion hinges entirely on their assertion that Endorsement No. 14 to the 2022–2023 Ironclad primary policy unambiguously preserved the $15 million named-windstorm sub-limit. That assertion is incorrect. The endorsement language is, at a minimum, ambiguous — and that ambiguity alone is fatal to the Moving Defendants' motion.
Under Florida law, a policy provision is ambiguous if it is "susceptible to more than one reasonable interpretation." Auto-Owners Ins. Co., 756 So. 2d at 34. A policy need not be "utterly unintelligible" to be ambiguous; it is sufficient that reasonable minds could differ as to its meaning. See Swire Pac. Holdings, 845 So. 2d at 165. The test is objective: whether a reasonable insured reading the policy would understand its terms to have a single, definite meaning, or whether the language permits competing interpretations. See State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 1076 (Fla. 1998).
Here, the endorsement language is susceptible to more than one reasonable interpretation regarding whether the $15 million windstorm sub-limit was retained or deleted. VHG's interpretation — that the endorsement, read in context and in light of the renewal negotiations and binder, reflects the deletion of the sub-limit — is at least as reasonable as the Moving Defendants' interpretation. The endorsement does not contain clear, unequivocal language expressly stating that the $15 million named-windstorm sub-limit applies to the 2022–2023 policy period. Rather, the endorsement uses cross-references and conditional language that can reasonably be read either to preserve or to eliminate the sub-limit.
Where policy language is ambiguous, Florida law requires that the ambiguity be construed in favor of coverage and against the insurer. Auto-Owners Ins. Co., 756 So. 2d at 34; Excelsior Ins. Co., 369 So. 2d at 942. This rule of construction is particularly potent where, as here, the ambiguous language relates to a limitation on coverage — a sub-limit — rather than to a coverage grant. See Brightmoor Indemnity Co. v. Menendez, 70 So. 3d 566, 569–70 (Fla. 2011). The insurer bears the burden of establishing that a limitation on coverage applies, and any doubt must be resolved against the insurer. Id.
Moreover, the existence of ambiguity in the endorsement language is itself a reason to deny summary judgment, because the factual context surrounding the renewal — including the renewal negotiations, the broker's correspondence with Ironclad's underwriting department, the premium calculations, and the renewal binder — is necessary to resolve the meaning of the endorsement. See Friedman, 56 So. 2d at 517. When extrinsic evidence is required to interpret an ambiguous contract provision, the interpretation becomes a question of fact, not a question of law, and must be submitted to the finder of fact. See id.; Langford v. Paravant, Inc., 912 So. 2d 359, 361 (Fla. 5th DCA 2005).
For all of these reasons, the ambiguity of the endorsement language precludes summary judgment in the Moving Defendants' favor.
B. Defendants' Interpretation of the Policy Contravenes Florida Insurance Law
Even setting aside the genuine factual disputes discussed above, the Moving Defendants' interpretation of the policy is contrary to well-established principles of Florida insurance law. For this independent reason, the cross-motion should be denied.
1. Florida's Pro-Coverage Construction Rules. Florida courts have long adhered to the principle that insurance policies are to be "construed liberally in favor of the insured and strictly against the insurer." Berkshire Life Ins. Co., 698 So. 2d at 830; see also Auto-Owners Ins. Co., 756 So. 2d at 34. This rule of construction reflects the reality that insurance policies are contracts of adhesion, drafted by the insurer, and that the insured typically has no meaningful ability to negotiate or modify the policy language. See Deni Assocs., 711 So. 2d at 1138.
The pro-coverage construction rule applies with particular force to exclusions, limitations, and sub-limits — provisions that restrict the scope of coverage that the insured has purchased. See Menendez, 70 So. 3d at 569–70; Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528, 532 (Fla. 2005). A named-windstorm sub-limit is precisely such a provision: it limits the amount of coverage available for a particular category of loss, and thus operates as a restriction on the insured's right to recover under the policy. The insurer bears the burden of establishing that such a limitation applies. See Menendez, 70 So. 3d at 570; LaFarge Corp. v. Kestrel Indemnity Co. Indem. Co., 118 F.3d 1511, 1516 (11th Cir. 1997) (applying Florida law).
Ironclad, as the drafter of the policy, cannot rely on ambiguous endorsement language to impose a sub-limit that its own underwriting department agreed to remove. The Moving Defendants ask this Court to read Endorsement No. 14 as preserving the sub-limit, notwithstanding: (a) the broker's testimony that the sub-limit was deleted; (b) the increased premium VHG paid in exchange for the deletion; (c) the renewal binder that reflected the deletion; and (d) the admissions of Ironclad's own claims executive regarding uncertainty about the sub-limit's status. Under Florida's pro-coverage construction rules, this Court should not adopt an interpretation of ambiguous policy language that restricts coverage when a reasonable alternative interpretation — supported by substantial extrinsic evidence — would provide coverage.
2. The Reasonable Expectations Doctrine. Florida courts apply the reasonable expectations doctrine to insurance coverage disputes, holding that ambiguous policy provisions should be interpreted in accordance with the reasonable expectations of the insured. See Berkshire Life Ins. Co., 698 So. 2d at 830; Deni Assocs., 711 So. 2d at 1140; see also National Union Fire Ins. Co. v. Hudson Excess Ins. Co., 891 So. 2d 1088, 1093 (Fla. 4th DCA 2004). The doctrine recognizes that an insured is entitled to expect coverage consistent with the terms that were communicated to it during the placement and renewal process, and that an insurer cannot use ambiguous policy language to defeat those expectations.
VHG had a reasonable expectation that the $15 million named-windstorm sub-limit was deleted at the 2022 renewal. That expectation was based on multiple, mutually reinforcing sources of information:
(a) The express confirmation from VHG's insurance broker, Franklin Orde, that Ironclad's underwriting department had agreed to delete the sub-limit;
(b) The increased premium that VHG paid, which was calculated in part based on the removal of the sub-limit and the consequent expansion of coverage;
(c) The renewal binder issued by Ironclad, which, according to Mr. Orde's testimony, did not contain the named-windstorm sub-limit; and
(d) The absence of any communication from Ironclad, at any time during or after the renewal process, indicating that the sub-limit would remain in effect.
The Moving Defendants' cross-motion asks this Court to disregard VHG's reasonable expectations in favor of a cramped and technical reading of ambiguous endorsement language — a result that would be fundamentally inconsistent with the reasonable expectations doctrine as applied by Florida courts. This Court should decline the invitation.
3. The Parol Evidence Rule Does Not Bar Consideration of Renewal Negotiations. The Moving Defendants may argue — as they have suggested in their cross-motion briefing — that the parol evidence rule bars this Court from considering the renewal negotiations, broker correspondence, and other extrinsic evidence offered by VHG in support of its interpretation of the policy. This argument fails under well-settled Florida law.
The parol evidence rule provides that, where a written agreement is complete and unambiguous on its face, extrinsic evidence of prior or contemporaneous negotiations may not be used to vary or contradict the terms of the written agreement. See Friedman, 56 So. 2d at 517. However, this rule has a critical and well-established exception: extrinsic evidence is admissible to resolve ambiguities in written contracts, including insurance contracts. See id.; Langford, 912 So. 2d at 361; Deni Assocs., 711 So. 2d at 1139.
As demonstrated above, the endorsement language at issue in this case is ambiguous — it is susceptible to more than one reasonable interpretation regarding whether the named-windstorm sub-limit was retained or deleted. Because the language is ambiguous, extrinsic evidence is admissible to resolve the ambiguity. The renewal correspondence between Tidewater and Ironclad's underwriting department, Mr. Orde's testimony regarding the negotiations, the premium calculations, and the renewal binder are all relevant and admissible evidence that this Court may — and should — consider.
Moreover, even if the parol evidence rule were otherwise applicable, it would not bar consideration of the renewal binder, which is itself a written document forming part of the contractual relationship between the parties. Under Florida law, a binder constitutes a temporary insurance contract and is admissible evidence of the terms agreed upon by the parties. See Ranger Ins. Co. v. Bal Harbour Club, Inc., 549 So. 2d 1005, 1009 (Fla. 1989). If the renewal binder does not contain the named-windstorm sub-limit — as Mr. Orde has testified — then the binder is powerful evidence that the parties agreed to delete the sub-limit, and the subsequently issued policy should be interpreted consistently with the binder.
For these reasons, the parol evidence rule does not bar consideration of the extrinsic evidence that supports VHG's position, and the Moving Defendants' reliance on that rule is misplaced.
C. The Follow-Form Issue as to Pinnacle
Pinnacle's first excess policy, Policy No. PSL-XS1-2022-3390, is a follow-form policy that incorporates the terms, conditions, and coverage provisions of the Ironclad primary policy. By its express terms, the Pinnacle policy provides that coverage under the excess layer "shall follow the form and be subject to the same terms, conditions, exclusions, and limitations as the Underlying Policy" — i.e., the Ironclad primary.
The follow-form nature of Pinnacle's policy means that the scope of coverage available under the excess layer is determined by reference to the terms of the Ironclad primary. If the $15 million named-windstorm sub-limit was deleted from the Ironclad primary policy at the July 2022 renewal — as VHG contends and as the record evidence supports — then Pinnacle's follow-form policy likewise contains no such sub-limit. Pinnacle cannot independently impose a coverage limitation that does not exist in the underlying primary policy to which it follows form. See Lexington Ins. Co. v. W. Pa. Hosp., 423 F.3d 318, 326–27 (3d Cir. 2005) (follow-form excess policy adopts the terms of the underlying policy, including any modifications thereto); see also Zeig v. Mass. Bonding & Ins. Co., 23 F.2d 665, 666 (2d Cir. 1928) (L. Hand, J.).
Pinnacle's cross-motion therefore rises and falls with Ironclad's. Because genuine issues of material fact preclude summary judgment on the question of whether the named-windstorm sub-limit was deleted from the Ironclad primary, the same factual disputes necessarily preclude summary judgment on the parallel question of whether Pinnacle's follow-form excess policy contains a sub-limit. Pinnacle's cross-motion should be denied for the same reasons that Ironclad's cross-motion should be denied.
D. Even If the Sub-Limit Applied, It Would Not Resolve the Full $60 Million Claim
The Moving Defendants' cross-motion focuses narrowly on the windstorm sub-limit issue, but even if the Court were to find — contrary to the weight of the evidence — that the $15 million named-windstorm sub-limit survived into the 2022–2023 policy, that finding would not be dispositive of VHG's overall $60 million claim.
VHG's total claimed business-interruption losses of $60 million encompass a range of loss categories, not all of which are attributable solely to named-windstorm perils. Significant portions of VHG's losses arise from consequential damage, extended periods of restoration beyond the immediate storm event, infrastructure failures, supply chain disruption, and other non-windstorm perils that are independently covered under the Ironclad primary policy and the excess tower. Even under the Moving Defendants' interpretation of the sub-limit, VHG would be entitled to recover for business-interruption losses that are not subject to the named-windstorm sub-limit — which, depending on the allocation of losses between wind and non-wind perils, could amount to tens of millions of dollars.
Dr. Helen Vasquez of Meridian Forensic Economics LLC — VHG's designated expert on business-interruption loss quantification — has opined in her expert report dated September 15, 2023, that VHG's total business-interruption losses across all three properties exceed $60 million, regardless of whether the windstorm sub-limit applies. (Vasquez Report at 45–48; Vasquez Decl. ¶¶ 12–14, Nov. 1, 2023.) Dr. Vasquez's analysis identifies categories of loss — including extended period of restoration losses arising from infrastructure damage, supply chain disruption, and reduced market demand in the affected areas — that are not attributable to the named windstorm itself and that would not be subject to a windstorm sub-limit under any reasonable reading of the policy. (Id.)
The sub-limit issue, even if resolved entirely in the Moving Defendants' favor, would therefore not be dispositive of VHG's claim. Partial summary judgment is appropriate only when it will "genuinely simplify the trial" by resolving a discrete legal or factual issue. Here, a ruling on the sub-limit issue alone would not resolve VHG's claim, would not eliminate the need for trial on the remaining coverage issues, and would likely complicate rather than streamline the proceedings by requiring the Court and the parties to engage in a complex allocation analysis at trial. Under these circumstances, partial summary judgment would serve no legitimate purpose and should be denied.
E. Defendants' Remaining Defenses Further Demonstrate the Existence of Disputed Facts
The interrelationship between the windstorm sub-limit issue and the Moving Defendants' remaining coverage defenses further underscores the existence of material factual disputes that cannot be resolved on summary judgment.
As noted above, Ironclad's February 3, 2023 coverage denial rested on four grounds: (1) the $15 million named-windstorm sub-limit; (2) disputes regarding the applicable period of restoration; (3) the concurrent causation doctrine and the policy's flood exclusion; and (4) VHG's alleged failure to mitigate. These four defenses are interrelated and, in many respects, overlapping. The resolution of the windstorm sub-limit issue does not occur in a vacuum; rather, it is inextricably connected to the factual questions underlying the other defenses.
For example, if the Court were to rule that the windstorm sub-limit survived into the 2022–2023 policy year, VHG would still be entitled to pursue coverage for business-interruption losses attributable to non-windstorm perils — including losses arising from sustained closures due to infrastructure damage, supply chain disruption, and extended restoration periods that are not causally related to the named windstorm. This allocation analysis — determining which losses are attributable to wind versus non-wind perils — is a fact-intensive inquiry that requires expert testimony and is fundamentally unsuitable for summary judgment.
The existence of competing expert opinions on this very issue further demonstrates the presence of triable factual disputes. Jeffrey Caldwell, P.E., of Caldwell Engineering Associates Inc., VHG's designated forensic engineer, has opined on the allocation of physical damage between wind and storm surge at each of VHG's three properties. His analysis concludes that a significant portion of the damage and resulting closures were attributable to factors other than named-windstorm forces. Conversely, Dr. Warren Birk of Graystone Consulting Group LLC, the Moving Defendants' retained expert, has offered a competing analysis that attributes a larger share of the damage to wind forces. The existence of these diametrically opposed expert opinions is, standing alone, sufficient to establish a genuine issue of material fact on the allocation question — a question that is inextricably linked to the windstorm sub-limit issue.
The Moving Defendants cannot isolate the sub-limit issue from the broader factual context in which it arises. The windstorm sub-limit does not apply in a factual vacuum; its application depends on the resolution of disputed questions regarding the cause and allocation of VHG's losses, the applicable period of restoration, and other factual issues that remain hotly contested. Partial summary judgment on the sub-limit issue alone, without resolving these related factual disputes, would be premature and inappropriate.
V. CONCLUSION
For all of the foregoing reasons, the Court should deny the Cross-Motion for Partial Summary Judgment filed by Defendants Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.
The record evidence, viewed in the light most favorable to VHG as the non-moving party, demonstrates that genuine issues of material fact exist regarding whether the $15 million named-windstorm sub-limit was deleted at the July 2022 policy renewal. The sworn testimony of Franklin Orde, the corroborating testimony of Sandra Pellegrini, and the admissions of Ironclad's own Senior Vice President of Claims, Victor Haddon, all support VHG's position that the sub-limit was removed. The Moving Defendants cannot carry their burden of establishing the absence of any genuine factual dispute in the face of this evidence.
Moreover, the Moving Defendants' interpretation of the policy is contrary to Florida's well-established pro-coverage construction rules, the reasonable expectations doctrine, and the admissibility of extrinsic evidence to resolve ambiguous insurance policy provisions. Under any of these independently sufficient legal principles, the endorsement language at issue cannot be read to impose a sub-limit that the insurer's own underwriting department agreed to delete.
VHG respectfully requests that this Court:
1. DENY the Cross-Motion for Partial Summary Judgment filed by Defendants Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.; and
2. GRANT VHG's own Motion for Partial Summary Judgment filed on November 1, 2023, declaring that the $15 million named-windstorm sub-limit does not apply to Policy No. IIC-PRP-2022-07541 or, by follow-form operation, to Policy No. PSL-XS1-2022-3390 for the July 1, 2022 – July 1, 2023 policy period.
VI. SIGNATURE BLOCK AND CERTIFICATE OF SERVICE
Respectfully submitted,
CALDERWOOD & HARKNESS LLP 333 SE 2nd Avenue, Suite 4400 Miami, Florida 33131
By: ________
Elaine Forsythe (Fla. Bar No. 987452) Responsible Partner
Email: eforsythe@calderwoodharkness.com
Telephone: (305) 555-7800
Tiffany Rosenthal (Fla. Bar No. 103219) Lead Associate
Email: trosenthal@calderwoodharkness.com
Telephone: (305) 555-7815
Andrew Fitzpatrick (Fla. Bar No. 118764) Associate
Email: afitzpatrick@calderwoodharkness.com
Telephone: (305) 555-7822
Attorneys for Plaintiff Verimark Hospitality Group Inc.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on November 29, 2023, a true and correct copy of the foregoing Plaintiff's Opposition to Defendants Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc.'s Cross-Motion for Partial Summary Judgment was served upon the following counsel of record via the Florida Courts E-Filing Portal and by electronic mail:
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.
By: ________
Elaine Forsythe (Fla. Bar No. 987452)