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

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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., a Delaware corporation,

Plaintiff,

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

Defendants.

PLAINTIFF'S STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING THE NAMED WINDSTORM SUB-LIMIT

Before the Honorable Catherine Embry Filed: November 1, 2023

Plaintiff Verimark Hospitality Group Inc. ("VHG"), by and through its undersigned counsel, Calderwood & Harkness LLP, and pursuant to Florida Rule of Civil Procedure 1.510, hereby submits this Statement of Undisputed Material Facts in support of its Motion for Partial Summary Judgment on the issue of whether the $15,000,000 named-windstorm sub-limit in the Ironclad Indemnity Corporation primary property policy (Policy No. IIC-PRP-2022-07541) was deleted at the July 2022 renewal. All citations herein refer to deposition transcripts, documentary exhibits, declarations, and policy documents produced in the course of this action, copies of which are attached to the contemporaneously filed Appendix of Evidentiary Materials. VHG respectfully submits that the following material facts are not in genuine dispute.

I. THE PARTIES

1. VHG is a Delaware corporation with its principal place of business at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG is publicly traded on the Nasdaq Stock Market under the ticker symbol "VMRK." VHG was incorporated in 2006 and has maintained continuous operations since that date. Complaint ¶ 1; Deposition of Marcus Ellsworth (Aug. 7, 2023) ("Ellsworth Dep.") at 12:3–10.

2. VHG owns and operates luxury resort hotel properties concentrated in the Florida Keys and Gulf Coast region of the State of Florida. For fiscal year 2021, VHG reported revenues of approximately $412 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $78 million. VHG's Florida resort properties constitute the core revenue-generating assets of the company's operations. Ellsworth Dep. at 14:15–22; Exhibit 1 (VHG Annual Report FY 2021).

3. Sandra Pellegrini serves as VHG's Vice President of Risk Management and, during all times relevant to this action, was the individual responsible for overseeing VHG's insurance program, including the procurement, placement, and renewal of property and business-interruption coverage for VHG's resort properties. Ms. Pellegrini has served in that role since 2018 and reports directly to VHG's Chief Financial Officer. Deposition of Sandra Pellegrini (Aug. 14, 2023) ("Pellegrini Dep.") at 8:4–12; Declaration of Sandra Pellegrini (Nov. 1, 2023) ("Pellegrini Decl.") ¶ 2.

4. Defendant Ironclad Indemnity Corporation ("Ironclad") is a Connecticut-domiciled stock insurance company with its principal office at 55 Constitution Boulevard, Hartford, Connecticut 06103. Ironclad is assigned NAIC No. 20537. Ironclad serves as the lead carrier in VHG's property insurance program and issued the primary property and business-interruption policy to VHG for the policy period at issue in this action. Complaint ¶ 5; Ironclad's Answer ¶ 5.

5. Defendant Pinnacle Surplus Lines Inc. ("Pinnacle") is a Texas-domiciled surplus-lines insurer with its principal office at 200 Congress Avenue, Suite 1400, Austin, Texas 78701. Pinnacle is assigned NAIC No. 38214. Pinnacle issued the first excess layer policy to VHG on a follow-form basis, following the terms, conditions, and exclusions of the Ironclad primary policy. Complaint ¶ 6; Pinnacle's Answer ¶ 6.

6. Defendant Montclair Assurance Company ("Montclair") is a New York-domiciled admitted carrier with its principal office at 1 Liberty Plaza, 38th Floor, New York, New York 10006. Montclair is assigned NAIC No. 15692. Montclair issued the second excess layer policy to VHG for the policy period at issue. Complaint ¶ 7; Montclair's Answer ¶ 7.

7. Defendant Sovereign Re Ltd. ("Sovereign Re") is a Bermuda-domiciled reinsurer and excess carrier with its principal office at 14 Front Street, Hamilton HM 11, Bermuda. Sovereign Re issued the third excess layer policy to VHG for the relevant policy period. Complaint ¶ 8; Sovereign Re's Answer ¶ 8.

II. VHG'S INSURANCE PROGRAM AND THE INSURANCE TOWER

8. VHG's property and business-interruption insurance program for the policy period July 1, 2022 to July 1, 2023 (the "Policy Period") was placed by Tidewater Risk Advisors LLC ("Tidewater"), VHG's insurance broker of record, through its account executive, Franklin Orde. Tidewater's principal office is located at 2600 S. Bayshore Drive, Suite 800, Miami, Florida 33133. Tidewater has served as VHG's broker of record for property and business-interruption coverage since 2016. Franklin Orde has been the designated account executive for the VHG account since 2019. Deposition of Franklin Orde (Aug. 28, 2023) ("Orde Dep.") at 10:5–18; Pellegrini Dep. at 15:8–16.

9. The insurance program for the Policy Period consisted of four layers providing a total tower limit of $60,000,000 above a $500,000 per-occurrence deductible, structured as follows:

Exhibit 2 (Ironclad Primary Policy Declarations Page); Exhibit 3 (Pinnacle Excess Policy Declarations Page); Exhibit 4 (Montclair Excess Policy Declarations Page); Exhibit 5 (Sovereign Re Excess Policy Declarations Page); Orde Dep. at 14:2–20.

10. All four policies in the insurance tower covered "all risks" of physical loss or damage to covered property, including loss of business income (business interruption) and extra expense resulting from covered causes of loss. The policy period for each of the four layers was July 1, 2022 to July 1, 2023. The insuring agreements of the primary policy and each excess layer policy did not exclude losses arising from named windstorm events as a category of covered peril. Exhibit 2 (Ironclad Policy, Insuring Agreement, Section I.A); Orde Dep. at 16:3–10.

11. VHG paid a total annual premium of $1,840,000 for the complete four-layer insurance program for the Policy Period. The annual premium was allocated as follows: $980,000 to Ironclad for the primary layer; $410,000 to Pinnacle for the first excess layer; $265,000 to Montclair for the second excess layer; and $185,000 to Sovereign Re for the third excess layer. All premiums were timely paid in full prior to the inception of the Policy Period. Exhibit 6 (Premium Invoices and Payment Confirmations); Pellegrini Dep. at 22:11–23:5.

III. THE PRIOR POLICY YEAR AND THE NAMED WINDSTORM SUB-LIMIT

12. During the prior policy year (July 1, 2021 to July 1, 2022), the Ironclad primary policy contained a named-windstorm sub-limit endorsement—specifically designated as Endorsement No. 14 in that prior-year policy's schedule of endorsements—that capped business-interruption coverage arising from named windstorm events at $15,000,000. The sub-limit applied solely to business-interruption losses and did not cap physical damage coverage. Endorsement No. 14 was a separately identified endorsement form with its own endorsement number, effective date, and signature block. Exhibit 7 (Ironclad Prior-Year Policy, Endorsement No. 14, Named Windstorm Sub-Limit); Orde Dep. at 24:8–25:3; Deposition of Victor Haddon (July 10, 2023) ("Haddon Dep.") at 31:14–32:6.

13. VHG, acting through Sandra Pellegrini in her capacity as Vice President of Risk Management, instructed Tidewater to negotiate the removal of the $15,000,000 named-windstorm sub-limit as a condition of the July 2022 renewal. Ms. Pellegrini communicated this instruction to Franklin Orde of Tidewater in writing by email on April 18, 2022, and reiterated it during a telephone call on or about April 20, 2022. Ms. Pellegrini made clear that the deletion of the sub-limit was a priority for VHG's renewal and directed Tidewater to convey this requirement to Ironclad's underwriting department at the outset of renewal negotiations. Pellegrini Dep. at 28:4–29:12; Pellegrini Decl. ¶¶ 5–6; Exhibit 8 (Email from Sandra Pellegrini to Franklin Orde dated April 18, 2022, instructing deletion of sub-limit).

14. Sandra Pellegrini testified under oath that VHG would not have renewed the primary policy with Ironclad if the named-windstorm sub-limit had not been deleted, given VHG's concentration of assets in hurricane-prone areas along the Florida Keys and Gulf Coast. Ms. Pellegrini explained that VHG's board of directors had specifically identified the sub-limit as an unacceptable gap in coverage in light of the company's geographic risk profile and had directed management to obtain its removal at the next renewal opportunity. Pellegrini Dep. at 29:14–30:8; Pellegrini Decl. ¶ 7.

IV. THE JULY 2022 RENEWAL NEGOTIATIONS AND DELETION OF THE SUB-LIMIT

15. Franklin Orde, VHG's account executive at Tidewater, negotiated with Ironclad's underwriting department during the spring and early summer of 2022 regarding the terms of the July 2022 renewal. The renewal negotiations included, among other matters, the express deletion of the $15,000,000 named-windstorm sub-limit from the Ironclad primary policy. Mr. Orde engaged in multiple rounds of email correspondence and at least two telephone calls with Ironclad's designated underwriter during the period from May through June 2022 to reach agreement on revised terms, including the deletion of the sub-limit. Orde Dep. at 30:2–31:18; Exhibit 9 (Email chain between Franklin Orde and Ironclad underwriting, May–June 2022).

16. On June 14, 2022, Ironclad's underwriter communicated to Franklin Orde via email that Ironclad would agree to delete the named-windstorm sub-limit endorsement from the renewal policy in exchange for a premium increase. The email stated, in substance, that the underwriting department had obtained internal authorization to remove the sub-limit endorsement upon VHG's acceptance of the revised premium terms. The June 14, 2022 email did not impose any conditions on the deletion other than the stated premium increase. Exhibit 10 (Email from Ironclad underwriting to Franklin Orde dated June 14, 2022); Orde Dep. at 34:5–35:14.

17. Franklin Orde confirmed to Ironclad in a reply email on June 16, 2022 that VHG agreed to the premium increase and expected the renewal policy to be issued without the named-windstorm sub-limit endorsement. Mr. Orde's email expressly stated that the deletion of the sub-limit endorsement was a material term of the renewal and that VHG's acceptance of the premium increase was contingent upon the removal of the sub-limit. Exhibit 11 (Email from Franklin Orde to Ironclad underwriting dated June 16, 2022); Orde Dep. at 36:2–17.

18. Franklin Orde testified at deposition that, based on his communications with Ironclad's underwriting department throughout the renewal process, it was his understanding that the named-windstorm sub-limit had been deleted from the July 2022 renewal policy and that the primary policy's full $25,000,000 limit would apply to business-interruption losses arising from named windstorm events without any reduction or sub-limitation. Mr. Orde further attested to this understanding in his sworn declaration submitted in support of VHG's motion. Orde Dep. at 37:8–38:22; Declaration of Franklin Orde (Nov. 1, 2023) ("Orde Decl.") ¶¶ 4–7.

19. Following the completion of renewal negotiations and VHG's acceptance of the revised premium, Tidewater issued a binder confirmation to VHG on June 28, 2022, summarizing the terms of the renewed coverage effective July 1, 2022. The binder confirmation identified the per-occurrence limit as $25,000,000 and listed several sub-limits applicable under the renewed policy—including sub-limits for flood, earthquake, and equipment breakdown—but did not reference any named-windstorm sub-limit. The absence of the named-windstorm sub-limit from the binder confirmation was consistent with the parties' agreement to delete the sub-limit at renewal. Exhibit 12 (Tidewater Binder Confirmation dated June 28, 2022); Orde Dep. at 40:3–41:7; Pellegrini Dep. at 34:14–35:9.

20. The annual premium for the primary layer increased from $890,000 in the prior policy year (July 2021–July 2022) to $980,000 in the July 2022 renewal year—a $90,000 increase representing an approximately 10.1% premium increase. Franklin Orde testified that the premium increase reflected, in part, the deletion of the named-windstorm sub-limit and the corresponding expansion of Ironclad's exposure to business-interruption losses arising from named windstorm events. Ms. Pellegrini similarly testified that VHG understood and accepted the premium increase as consideration for the removal of the sub-limit. Orde Dep. at 42:11–43:8; Exhibit 6 (Premium Invoices); Pellegrini Dep. at 37:2–15.

V. THE IRONCLAD POLICY AS ISSUED AND THE SUB-LIMIT AMBIGUITY

21. Ironclad issued the renewal policy (Policy No. IIC-PRP-2022-07541) effective July 1, 2022 (the "Ironclad Renewal Policy"). The Ironclad Renewal Policy as issued contains a schedule of endorsements listing each endorsement forming part of the policy. The named-windstorm sub-limit endorsement that appeared in the prior-year policy as Endorsement No. 14 does not appear as a listed endorsement in the Ironclad Renewal Policy's schedule of endorsements. No endorsement in the Ironclad Renewal Policy's schedule of endorsements imposes, references, or otherwise addresses a named-windstorm sub-limit. Exhibit 2 (Ironclad Renewal Policy, Schedule of Endorsements); Orde Dep. at 44:15–45:10.

22. However, the declarations page of the Ironclad Renewal Policy contains a reference to "Named Windstorm Sub-Limit: $15,000,000" in a summary table of sub-limits that also lists sub-limits for flood, earthquake, and other specified perils. Ironclad contends that this declarations-page reference constitutes a binding sub-limit applicable to VHG's business-interruption claim. VHG contends that this reference is a vestigial clerical error that is inconsistent with the parties' agreed-upon deletion of the sub-limit, the absence of the corresponding endorsement from the policy, and the totality of the underwriting and broker correspondence documenting the deletion. Exhibit 2 (Ironclad Renewal Policy, Declarations Page, Sub-Limits Table); Haddon Dep. at 45:3–46:12; Orde Dep. at 46:8–47:22.

23. Victor Haddon, Ironclad's Senior Vice President of Claims, testified at his deposition that he was not involved in the underwriting or renewal negotiations for the VHG policy and had no personal knowledge of whether the named-windstorm sub-limit was intended to be deleted or retained at the July 2022 renewal. Mr. Haddon stated that his involvement with the VHG account began only after Hurricane Callista occurred and VHG submitted its notice of loss. Haddon Dep. at 48:2–49:14.

24. When asked at deposition whether Ironclad's underwriting department maintained any records, memoranda, or internal communications confirming the intent to retain the named-windstorm sub-limit for the 2022–2023 policy year, Victor Haddon testified that he was not aware of any such records and stated that the question should be directed to underwriting personnel. Ironclad did not designate any representative from its underwriting department as a deposition witness in this action. Haddon Dep. at 50:5–51:3.

25. Through the completion of discovery in this action, Ironclad has not produced any written communication from its underwriting department to Tidewater or to VHG, generated during the renewal period, that stated or confirmed that the named-windstorm sub-limit would be retained in the July 2022 renewal policy. VHG served two sets of requests for production specifically seeking all documents relating to the decision to retain or delete the named-windstorm sub-limit at the July 2022 renewal. Ironclad's responses did not identify or produce any such document. Defendants' Responses to Plaintiff's First and Second Requests for Production; Orde Dep. at 48:14–49:6.

VI. THE EXCESS LAYER POLICIES AND FOLLOW-FORM PROVISIONS

26. Pinnacle's first excess layer policy (Policy No. PSL-XS1-2022-3390) is written on a follow-form basis, following the terms, conditions, and exclusions of the Ironclad primary policy, including any sub-limits, unless otherwise specified in the Pinnacle policy. The Pinnacle policy does not independently impose a named-windstorm sub-limit or any other limitation on business-interruption coverage for named windstorm events that differs from or supplements the terms of the Ironclad primary policy. Accordingly, the resolution of the named-windstorm sub-limit issue in the primary policy directly determines the scope of coverage available under the first excess layer. Exhibit 3 (Pinnacle Policy, Follow-Form Endorsement); Orde Dep. at 52:8–53:2.

27. Montclair and Sovereign Re each issued reservation of rights letters in response to VHG's claim but did not issue formal denial letters. Both carriers took the position that the resolution of the named-windstorm sub-limit issue in the Ironclad primary policy would determine whether VHG's claimed business-interruption losses would reach their respective attachment points of $40,000,000 (Montclair) and $50,000,000 (Sovereign Re). If the named-windstorm sub-limit applies, VHG's business-interruption recovery under the primary policy would be capped at a level well below the attachment point of either excess layer, thereby precluding any obligation on the part of Montclair or Sovereign Re. Exhibit 13 (Montclair Reservation of Rights Letter); Exhibit 14 (Sovereign Re Reservation of Rights Letter).

VII. HURRICANE CALLISTA AND PROPERTY DAMAGE

28. Hurricane Callista was named by the National Hurricane Center on September 12, 2022. Hurricane Callista intensified rapidly over the warm waters of the Gulf of Mexico and made landfall as a Category 4 hurricane on the Saffir-Veltason Hurricane Wind Scale, with maximum sustained winds of approximately 145 miles per hour, in the Lower Florida Keys near Big Pine Key at approximately 1:30 PM Eastern Daylight Time on September 18, 2022. Storm surge of 8 to 14 feet was recorded in Monroe County and 6 to 10 feet in Lee County. Hurricane Callista caused catastrophic wind and storm-surge damage throughout the Florida Keys and the southwest Florida coast. Exhibit 15 (National Hurricane Center Advisory and Post-Tropical Cyclone Report for Hurricane Callista); Complaint ¶¶ 20–22.

29. In advance of Hurricane Callista's landfall, Monroe County issued a mandatory evacuation order for all residents and visitors in the Florida Keys on September 16, 2022. Lee County issued a similar mandatory evacuation order on September 17, 2022. VHG evacuated all guests, staff, and non-essential personnel from each of its three resort properties in compliance with these orders and in accordance with VHG's emergency preparedness protocols. Exhibit 16 (Monroe County Emergency Order dated Sept. 16, 2022); Exhibit 17 (Lee County Emergency Order dated Sept. 17, 2022); Ellsworth Dep. at 28:4–29:11.

30. VHG owns and operates three resort properties that sustained significant physical damage and prolonged business-interruption losses as a result of Hurricane Callista:

(a) Verimark Grand Key Resort, located at Mile Marker 48, Marathon, Florida 33050. The Grand Key Resort is a 312-room luxury resort and marina. Prior to Hurricane Callista, the property maintained a pre-loss average daily rate ("ADR") of $389 and an average occupancy rate of 82%. The Grand Key Resort was closed from September 18, 2022 through March 15, 2023, a total of 178 days, due to extensive wind and storm-surge damage to guest rooms, common areas, the marina, and related infrastructure.

(b) Verimark Harborview Hotel & Conference Center, located at 1400 Estero Boulevard, Fort Myers Beach, Florida 33931. The Harborview Hotel is a 224-room hotel with a 40,000-square-foot conference facility. Prior to Hurricane Callista, the property maintained a pre-loss ADR of $295 and an average occupancy rate of 74%. The Harborview Hotel was closed from September 18, 2022 through January 31, 2023, a total of 135 days, due to severe storm-surge flooding and structural damage.

(c) Verimark Sunset Shores, located at 7200 Gulf Boulevard, St. Pete Beach, Florida 33706. Sunset Shores is a 186-room boutique resort. Prior to Hurricane Callista, the property maintained a pre-loss ADR of $342 and an average occupancy rate of 79%. Sunset Shores was fully closed from September 18, 2022 through November 30, 2022, a total of 73 days, and thereafter operated at reduced capacity through February 28, 2023, due to wind damage and partial roof failure requiring phased restoration.

Ellsworth Dep. at 30:8–34:22; Deposition of Diane Calder (Aug. 8, 2023) ("Calder Dep.") at 18:3–22:15; Pellegrini Dep. at 40:5–44:18.

VIII. THE INSURANCE CLAIM AND DENIAL

31. VHG submitted an initial notice of loss to Ironclad on September 22, 2022, four days after Hurricane Callista's landfall. The notice of loss identified Hurricane Callista as the cause of loss, described the damage to each of VHG's three resort properties, and requested that Ironclad assign an adjuster to inspect the properties and commence the claims process. Exhibit 18 (VHG Notice of Loss dated Sept. 22, 2022); Pellegrini Dep. at 48:2–14.

32. Following receipt of VHG's notice of loss, Ironclad retained Arbor Claims Services LLC ("Arbor Claims"), an independent adjusting firm based in Tampa, Florida, to conduct physical inspections of the VHG properties and to assist in the adjustment of VHG's claim. Denise Whitford, a licensed independent adjuster employed by Arbor Claims, conducted initial site inspections of all three VHG resort properties on October 5, 2022. Haddon Dep. at 22:6–23:14; Deposition of Denise Whitford (July 24, 2023) ("Whitford Dep.") at 10:3–11:8.

33. On October 12, 2022, Ironclad issued a reservation of rights letter to VHG, reserving its rights under the Ironclad Renewal Policy on multiple grounds. Among the grounds identified in the reservation of rights letter, Ironclad expressly reserved its right to assert the applicability of the named-windstorm sub-limit as a limitation on VHG's business-interruption recovery. Exhibit 19 (Ironclad Reservation of Rights Letter dated Oct. 12, 2022); Haddon Dep. at 25:7–26:18.

34. On November 15, 2022, VHG submitted a sworn statement in proof of loss to Ironclad claiming total business-interruption losses of $60,000,000 across VHG's three resort properties, allocated as follows: $31,400,000 for the Grand Key Resort; $18,700,000 for the Harborview Hotel & Conference Center; and $9,900,000 for Sunset Shores. The sworn statement in proof of loss was prepared with the assistance of Diane Calder, VHG's Director of Finance, and was supported by detailed schedules of lost revenue, continuing expenses, and extra expense incurred by each property. Exhibit 20 (VHG Sworn Statement in Proof of Loss dated Nov. 15, 2022); Calder Dep. at 30:4–31:12.

35. On February 3, 2023, Ironclad issued a formal coverage denial letter to VHG. The denial letter identified four bases for Ironclad's denial of VHG's business-interruption claim. Among the four stated bases for denial, Ironclad asserted that the Ironclad Renewal Policy contains a named-windstorm sub-limit of $15,000,000 for business-interruption losses arising from named windstorm events and that VHG's business-interruption claim was therefore capped at $15,000,000 under the primary layer, regardless of the total amount of business-interruption loss sustained. Exhibit 21 (Ironclad Coverage Denial Letter dated Feb. 3, 2023); Haddon Dep. at 55:2–56:20.

36. On February 10, 2023, Pinnacle issued a follow-form denial letter to VHG, declining coverage under the first excess layer on the same bases asserted by Ironclad in its February 3, 2023 denial letter, including the asserted applicability of the named-windstorm sub-limit. Pinnacle's denial rested on its follow-form obligation and deferred to Ironclad's coverage determination with respect to the primary policy. Exhibit 22 (Pinnacle Follow-Form Denial Letter dated Feb. 10, 2023).

IX. THE WINDSTORM SUB-LIMIT IS THE CENTRAL ISSUE FOR PARTIAL SUMMARY JUDGMENT

37. If the named-windstorm sub-limit of $15,000,000 applies as Defendants contend, VHG's recovery under the Ironclad primary policy would be capped at $15,000,000 for business-interruption losses caused by Hurricane Callista. Because a $15,000,000 cap would fall well below the $25,000,000 attachment point of the first excess layer, none of the excess layers would be triggered, and VHG's total business-interruption recovery across the entire insurance tower would be limited to $15,000,000—a fraction of VHG's claimed losses. Haddon Dep. at 58:3–59:8; Exhibit 13 (Montclair Reservation of Rights Letter); Exhibit 14 (Sovereign Re Reservation of Rights Letter).

38. If, as VHG contends, the named-windstorm sub-limit was deleted at the July 2022 renewal and does not apply, the full $25,000,000 primary layer limit applies to VHG's business-interruption losses from Hurricane Callista without any windstorm-specific sub-limitation. In that event, VHG's claimed business-interruption losses of $60,000,000 would potentially reach all four layers of the insurance tower, triggering coverage obligations on the part of each of the Defendants. Orde Dep. at 55:3–56:14; Pellegrini Decl. ¶¶ 9–10; Declaration of Dr. Helen Vasquez (Nov. 1, 2023) ("Vasquez Decl.") ¶¶ 4–6.

39. Dr. Helen Vasquez, CPA, CFF, a forensic economist retained by VHG through Meridian Forensic Economics LLC, opined in her expert report served September 15, 2023, that VHG's total business-interruption losses resulting from Hurricane Callista exceed $60,000,000, irrespective of the resolution of the windstorm sub-limit dispute. Dr. Vasquez's analysis considered lost room revenue, lost food and beverage revenue, lost ancillary revenue, continuing fixed expenses, and extra expense incurred by each of VHG's three resort properties during their respective periods of closure and reduced-capacity operation. Vasquez Decl. ¶¶ 7–9; Expert Report of Dr. Helen Vasquez dated Sept. 15, 2023 ("Vasquez Report") at 42–44.

X. DEFENDANTS HAVE NOT PRODUCED EVIDENCE SUPPORTING RETENTION OF THE SUB-LIMIT

40. Through the close of fact and expert discovery in this action, Defendants have not produced any written agreement, endorsement, policy amendment, or contemporaneous underwriting communication from the July 2022 renewal period that affirmatively confirms the parties' intent to retain the named-windstorm sub-limit in the Ironclad Renewal Policy. VHG's First and Second Requests for Production specifically requested all documents relating to the underwriting decision to retain or delete the named-windstorm sub-limit at the July 2022 renewal. Ironclad's responses to those requests did not identify or produce any responsive document. Defendants' Responses and Objections to Plaintiff's First and Second Requests for Production; Orde Dep. at 48:14–49:6.

41. Victor Haddon, Ironclad's designated corporate representative for claims-related matters, acknowledged at deposition that he could not identify any Ironclad employee who had personal knowledge that the named-windstorm sub-limit was intended to remain in effect for the 2022–2023 policy year. Mr. Haddon testified that he had not spoken with anyone in Ironclad's underwriting department about whether the sub-limit was intended to be retained or deleted at the July 2022 renewal. Haddon Dep. at 62:8–63:15.

42. The named-windstorm sub-limit endorsement (Endorsement No. 14) that was present in the prior-year Ironclad policy and that imposed the $15,000,000 sub-limit does not appear in the schedule of endorsements for the Ironclad Renewal Policy (Policy No. IIC-PRP-2022-07541). No replacement endorsement, amended endorsement, or substitute endorsement imposing a named-windstorm sub-limit was issued for the 2022–2023 renewal period. The schedule of endorsements for the Ironclad Renewal Policy lists seventeen endorsements, none of which references or imposes a named-windstorm sub-limit. Exhibit 2 (Ironclad Renewal Policy, Schedule of Endorsements); Exhibit 7 (Ironclad Prior-Year Policy, Schedule of Endorsements and Endorsement No. 14).

CONCLUSION

The foregoing undisputed material facts demonstrate that the $15,000,000 named-windstorm sub-limit was deleted from the Ironclad primary policy at the July 2022 renewal by mutual agreement of the parties. The deletion is reflected in and confirmed by: (i) VHG's written instruction to its broker to negotiate removal of the sub-limit as a condition of renewal; (ii) Ironclad's underwriter's written agreement on June 14, 2022 to delete the sub-limit endorsement in exchange for a premium increase; (iii) VHG's acceptance of the premium increase on June 16, 2022, expressly contingent on the removal of the sub-limit; (iv) the Tidewater binder confirmation of June 28, 2022, which summarized the renewal terms and did not reference any named-windstorm sub-limit; (v) the 10.1% increase in the primary layer premium, a portion of which reflects the consideration paid for the deletion of the sub-limit; (vi) the absence of the named-windstorm sub-limit endorsement (Endorsement No. 14) from the renewal policy's schedule of endorsements; (vii) the deposition testimony of Franklin Orde and Sandra Pellegrini confirming the mutual intent to delete the sub-limit; and (viii) the complete absence from the record of any document or testimony supporting Defendants' contention that the sub-limit was intended to be retained. The sole basis for Defendants' contrary position—a vestigial reference to a "Named Windstorm Sub-Limit: $15,000,000" on the declarations page sub-limits table—is at best a clerical artifact carried over from the prior-year policy that cannot override the unambiguous intent of the contracting parties as expressed through the totality of the documentary and testimonial evidence.

VHG respectfully requests that the Court grant partial summary judgment in VHG's favor on the named-windstorm sub-limit issue and enter an order declaring that the Ironclad primary policy (Policy No. IIC-PRP-2022-07541) does not contain a $15,000,000 named-windstorm sub-limit for business-interruption coverage, and that the full $25,000,000 per-occurrence policy limit applies to VHG's business-interruption claim arising from Hurricane Callista.

RESPECTFULLY SUBMITTED this 1st day of November, 2023.

CALDERWOOD & HARKNESS LLP Counsel for Plaintiff Verimark Hospitality Group Inc. 333 SE 2nd Avenue, Suite 4400 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201 Engagement No. 1021-00003

By: ________

Elaine Forsythe, Esq. Florida Bar No. 0094217 eforsythe@calderwoodharkness.com Responsible Partner

Tiffany Rosenthal, Esq. Florida Bar No. 0118503 trosenthal@calderwoodharkness.com Lead Associate

Andrew Fitzpatrick, Esq. Florida Bar No. 0126884 afitzpatrick@calderwoodharkness.com Working Associate

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on November 1, 2023, a true and correct copy of the foregoing Plaintiff's Statement of Undisputed Material Facts in Support of Its Motion for Partial Summary Judgment Regarding the Named Windstorm Sub-Limit was served via the Florida Courts E-Filing Portal and by email upon the following counsel of record:

Gregory Stanton, Esq. Meredith Liang, Esq. Fendowell Rourke & Stanton LLP 280 Trumbull Street, Suite 2200 Hartford, Connecticut 06103 and 101 E. Kennedy Boulevard, Suite 3900 Tampa, Florida 33602 Telephone: (860) 555-3100 / (813) 555-4400 gstanton@bracewellrourke.com mliang@bracewellrourke.com 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, New York 10022 Telephone: (212) 555-8800 pkraus@delvecchiokraus.com rcho@delvecchiokraus.com Counsel for Defendants Montclair Assurance Company and Sovereign Re Ltd.

By: ________

Elaine Forsythe, Esq. Florida Bar No. 0094217

Layer	Carrier	Limit	Attachment Point	Policy Number
Primary	Ironclad Indemnity Corporation	$25,000,000	$500,000 deductible	IIC-PRP-2022-07541
1st Excess	Pinnacle Surplus Lines Inc.	$15,000,000	$25,000,000	PSL-XS1-2022-3390
2nd Excess	Montclair Assurance Company	$10,000,000	$40,000,000	MAC-XS2-2022-09817
3rd Excess	Sovereign Re Ltd.	$10,000,000	$50,000,000	SRL-XS3-2022-5102

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., a Delaware corporation,
Plaintiff,
v.
IRONCLAD INDEMNITY CORPORATION, a Connecticut stock insurance company; PINNACLE SURPLUS LINES INC., a Texas surplus-lines insurer; MONTCLAIR ASSURANCE COMPANY, a New York admitted carrier; and SOVEREIGN RE LTD., a Bermuda excess carrier,
Defendants.
PLAINTIFF'S STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING THE NAMED WINDSTORM SUB-LIMIT
Before the Honorable Catherine Embry Filed: November 1, 2023
Plaintiff Verimark Hospitality Group Inc. ("VHG"), by and through its undersigned counsel, Calderwood & Harkness LLP, and pursuant to Florida Rule of Civil Procedure 1.510, hereby submits this Statement of Undisputed Material Facts in support of its Motion for Partial Summary Judgment on the issue of whether the $15,000,000 named-windstorm sub-limit in the Ironclad Indemnity Corporation primary property policy (Policy No. IIC-PRP-2022-07541) was deleted at the July 2022 renewal. All citations herein refer to deposition transcripts, documentary exhibits, declarations, and policy documents produced in the course of this action, copies of which are attached to the contemporaneously filed Appendix of Evidentiary Materials. VHG respectfully submits that the following material facts are not in genuine dispute.
I. THE PARTIES
1. VHG is a Delaware corporation with its principal place of business at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. VHG is publicly traded on the Nasdaq Stock Market under the ticker symbol "VMRK." VHG was incorporated in 2006 and has maintained continuous operations since that date. Complaint ¶ 1; Deposition of Marcus Ellsworth (Aug. 7, 2023) ("Ellsworth Dep.") at 12:3–10.
2. VHG owns and operates luxury resort hotel properties concentrated in the Florida Keys and Gulf Coast region of the State of Florida. For fiscal year 2021, VHG reported revenues of approximately $412 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $78 million. VHG's Florida resort properties constitute the core revenue-generating assets of the company's operations. Ellsworth Dep. at 14:15–22; Exhibit 1 (VHG Annual Report FY 2021).
3. Sandra Pellegrini serves as VHG's Vice President of Risk Management and, during all times relevant to this action, was the individual responsible for overseeing VHG's insurance program, including the procurement, placement, and renewal of property and business-interruption coverage for VHG's resort properties. Ms. Pellegrini has served in that role since 2018 and reports directly to VHG's Chief Financial Officer. Deposition of Sandra Pellegrini (Aug. 14, 2023) ("Pellegrini Dep.") at 8:4–12; Declaration of Sandra Pellegrini (Nov. 1, 2023) ("Pellegrini Decl.") ¶ 2.
4. Defendant Ironclad Indemnity Corporation ("Ironclad") is a Connecticut-domiciled stock insurance company with its principal office at 55 Constitution Boulevard, Hartford, Connecticut 06103. Ironclad is assigned NAIC No. 20537. Ironclad serves as the lead carrier in VHG's property insurance program and issued the primary property and business-interruption policy to VHG for the policy period at issue in this action. Complaint ¶ 5; Ironclad's Answer ¶ 5.
5. Defendant Pinnacle Surplus Lines Inc. ("Pinnacle") is a Texas-domiciled surplus-lines insurer with its principal office at 200 Congress Avenue, Suite 1400, Austin, Texas 78701. Pinnacle is assigned NAIC No. 38214. Pinnacle issued the first excess layer policy to VHG on a follow-form basis, following the terms, conditions, and exclusions of the Ironclad primary policy. Complaint ¶ 6; Pinnacle's Answer ¶ 6.
6. Defendant Montclair Assurance Company ("Montclair") is a New York-domiciled admitted carrier with its principal office at 1 Liberty Plaza, 38th Floor, New York, New York 10006. Montclair is assigned NAIC No. 15692. Montclair issued the second excess layer policy to VHG for the policy period at issue. Complaint ¶ 7; Montclair's Answer ¶ 7.
7. Defendant Sovereign Re Ltd. ("Sovereign Re") is a Bermuda-domiciled reinsurer and excess carrier with its principal office at 14 Front Street, Hamilton HM 11, Bermuda. Sovereign Re issued the third excess layer policy to VHG for the relevant policy period. Complaint ¶ 8; Sovereign Re's Answer ¶ 8.
II. VHG'S INSURANCE PROGRAM AND THE INSURANCE TOWER
8. VHG's property and business-interruption insurance program for the policy period July 1, 2022 to July 1, 2023 (the "Policy Period") was placed by Tidewater Risk Advisors LLC ("Tidewater"), VHG's insurance broker of record, through its account executive, Franklin Orde. Tidewater's principal office is located at 2600 S. Bayshore Drive, Suite 800, Miami, Florida 33133. Tidewater has served as VHG's broker of record for property and business-interruption coverage since 2016. Franklin Orde has been the designated account executive for the VHG account since 2019. Deposition of Franklin Orde (Aug. 28, 2023) ("Orde Dep.") at 10:5–18; Pellegrini Dep. at 15:8–16.
9. The insurance program for the Policy Period consisted of four layers providing a total tower limit of $60,000,000 above a $500,000 per-occurrence deductible, structured as follows:
Exhibit 2 (Ironclad Primary Policy Declarations Page); Exhibit 3 (Pinnacle Excess Policy Declarations Page); Exhibit 4 (Montclair Excess Policy Declarations Page); Exhibit 5 (Sovereign Re Excess Policy Declarations Page); Orde Dep. at 14:2–20.
10. All four policies in the insurance tower covered "all risks" of physical loss or damage to covered property, including loss of business income (business interruption) and extra expense resulting from covered causes of loss. The policy period for each of the four layers was July 1, 2022 to July 1, 2023. The insuring agreements of the primary policy and each excess layer policy did not exclude losses arising from named windstorm events as a category of covered peril. Exhibit 2 (Ironclad Policy, Insuring Agreement, Section I.A); Orde Dep. at 16:3–10.
11. VHG paid a total annual premium of $1,840,000 for the complete four-layer insurance program for the Policy Period. The annual premium was allocated as follows: $980,000 to Ironclad for the primary layer; $410,000 to Pinnacle for the first excess layer; $265,000 to Montclair for the second excess layer; and $185,000 to Sovereign Re for the third excess layer. All premiums were timely paid in full prior to the inception of the Policy Period. Exhibit 6 (Premium Invoices and Payment Confirmations); Pellegrini Dep. at 22:11–23:5.
III. THE PRIOR POLICY YEAR AND THE NAMED WINDSTORM SUB-LIMIT
12. During the prior policy year (July 1, 2021 to July 1, 2022), the Ironclad primary policy contained a named-windstorm sub-limit endorsement—specifically designated as Endorsement No. 14 in that prior-year policy's schedule of endorsements—that capped business-interruption coverage arising from named windstorm events at $15,000,000. The sub-limit applied solely to business-interruption losses and did not cap physical damage coverage. Endorsement No. 14 was a separately identified endorsement form with its own endorsement number, effective date, and signature block. Exhibit 7 (Ironclad Prior-Year Policy, Endorsement No. 14, Named Windstorm Sub-Limit); Orde Dep. at 24:8–25:3; Deposition of Victor Haddon (July 10, 2023) ("Haddon Dep.") at 31:14–32:6.
13. VHG, acting through Sandra Pellegrini in her capacity as Vice President of Risk Management, instructed Tidewater to negotiate the removal of the $15,000,000 named-windstorm sub-limit as a condition of the July 2022 renewal. Ms. Pellegrini communicated this instruction to Franklin Orde of Tidewater in writing by email on April 18, 2022, and reiterated it during a telephone call on or about April 20, 2022. Ms. Pellegrini made clear that the deletion of the sub-limit was a priority for VHG's renewal and directed Tidewater to convey this requirement to Ironclad's underwriting department at the outset of renewal negotiations. Pellegrini Dep. at 28:4–29:12; Pellegrini Decl. ¶¶ 5–6; Exhibit 8 (Email from Sandra Pellegrini to Franklin Orde dated April 18, 2022, instructing deletion of sub-limit).
14. Sandra Pellegrini testified under oath that VHG would not have renewed the primary policy with Ironclad if the named-windstorm sub-limit had not been deleted, given VHG's concentration of assets in hurricane-prone areas along the Florida Keys and Gulf Coast. Ms. Pellegrini explained that VHG's board of directors had specifically identified the sub-limit as an unacceptable gap in coverage in light of the company's geographic risk profile and had directed management to obtain its removal at the next renewal opportunity. Pellegrini Dep. at 29:14–30:8; Pellegrini Decl. ¶ 7.
IV. THE JULY 2022 RENEWAL NEGOTIATIONS AND DELETION OF THE SUB-LIMIT
15. Franklin Orde, VHG's account executive at Tidewater, negotiated with Ironclad's underwriting department during the spring and early summer of 2022 regarding the terms of the July 2022 renewal. The renewal negotiations included, among other matters, the express deletion of the $15,000,000 named-windstorm sub-limit from the Ironclad primary policy. Mr. Orde engaged in multiple rounds of email correspondence and at least two telephone calls with Ironclad's designated underwriter during the period from May through June 2022 to reach agreement on revised terms, including the deletion of the sub-limit. Orde Dep. at 30:2–31:18; Exhibit 9 (Email chain between Franklin Orde and Ironclad underwriting, May–June 2022).
16. On June 14, 2022, Ironclad's underwriter communicated to Franklin Orde via email that Ironclad would agree to delete the named-windstorm sub-limit endorsement from the renewal policy in exchange for a premium increase. The email stated, in substance, that the underwriting department had obtained internal authorization to remove the sub-limit endorsement upon VHG's acceptance of the revised premium terms. The June 14, 2022 email did not impose any conditions on the deletion other than the stated premium increase. Exhibit 10 (Email from Ironclad underwriting to Franklin Orde dated June 14, 2022); Orde Dep. at 34:5–35:14.
17. Franklin Orde confirmed to Ironclad in a reply email on June 16, 2022 that VHG agreed to the premium increase and expected the renewal policy to be issued without the named-windstorm sub-limit endorsement. Mr. Orde's email expressly stated that the deletion of the sub-limit endorsement was a material term of the renewal and that VHG's acceptance of the premium increase was contingent upon the removal of the sub-limit. Exhibit 11 (Email from Franklin Orde to Ironclad underwriting dated June 16, 2022); Orde Dep. at 36:2–17.
18. Franklin Orde testified at deposition that, based on his communications with Ironclad's underwriting department throughout the renewal process, it was his understanding that the named-windstorm sub-limit had been deleted from the July 2022 renewal policy and that the primary policy's full $25,000,000 limit would apply to business-interruption losses arising from named windstorm events without any reduction or sub-limitation. Mr. Orde further attested to this understanding in his sworn declaration submitted in support of VHG's motion. Orde Dep. at 37:8–38:22; Declaration of Franklin Orde (Nov. 1, 2023) ("Orde Decl.") ¶¶ 4–7.
19. Following the completion of renewal negotiations and VHG's acceptance of the revised premium, Tidewater issued a binder confirmation to VHG on June 28, 2022, summarizing the terms of the renewed coverage effective July 1, 2022. The binder confirmation identified the per-occurrence limit as $25,000,000 and listed several sub-limits applicable under the renewed policy—including sub-limits for flood, earthquake, and equipment breakdown—but did not reference any named-windstorm sub-limit. The absence of the named-windstorm sub-limit from the binder confirmation was consistent with the parties' agreement to delete the sub-limit at renewal. Exhibit 12 (Tidewater Binder Confirmation dated June 28, 2022); Orde Dep. at 40:3–41:7; Pellegrini Dep. at 34:14–35:9.
20. The annual premium for the primary layer increased from $890,000 in the prior policy year (July 2021–July 2022) to $980,000 in the July 2022 renewal year—a $90,000 increase representing an approximately 10.1% premium increase. Franklin Orde testified that the premium increase reflected, in part, the deletion of the named-windstorm sub-limit and the corresponding expansion of Ironclad's exposure to business-interruption losses arising from named windstorm events. Ms. Pellegrini similarly testified that VHG understood and accepted the premium increase as consideration for the removal of the sub-limit. Orde Dep. at 42:11–43:8; Exhibit 6 (Premium Invoices); Pellegrini Dep. at 37:2–15.
V. THE IRONCLAD POLICY AS ISSUED AND THE SUB-LIMIT AMBIGUITY
21. Ironclad issued the renewal policy (Policy No. IIC-PRP-2022-07541) effective July 1, 2022 (the "Ironclad Renewal Policy"). The Ironclad Renewal Policy as issued contains a schedule of endorsements listing each endorsement forming part of the policy. The named-windstorm sub-limit endorsement that appeared in the prior-year policy as Endorsement No. 14 does not appear as a listed endorsement in the Ironclad Renewal Policy's schedule of endorsements. No endorsement in the Ironclad Renewal Policy's schedule of endorsements imposes, references, or otherwise addresses a named-windstorm sub-limit. Exhibit 2 (Ironclad Renewal Policy, Schedule of Endorsements); Orde Dep. at 44:15–45:10.
22. However, the declarations page of the Ironclad Renewal Policy contains a reference to "Named Windstorm Sub-Limit: $15,000,000" in a summary table of sub-limits that also lists sub-limits for flood, earthquake, and other specified perils. Ironclad contends that this declarations-page reference constitutes a binding sub-limit applicable to VHG's business-interruption claim. VHG contends that this reference is a vestigial clerical error that is inconsistent with the parties' agreed-upon deletion of the sub-limit, the absence of the corresponding endorsement from the policy, and the totality of the underwriting and broker correspondence documenting the deletion. Exhibit 2 (Ironclad Renewal Policy, Declarations Page, Sub-Limits Table); Haddon Dep. at 45:3–46:12; Orde Dep. at 46:8–47:22.
23. Victor Haddon, Ironclad's Senior Vice President of Claims, testified at his deposition that he was not involved in the underwriting or renewal negotiations for the VHG policy and had no personal knowledge of whether the named-windstorm sub-limit was intended to be deleted or retained at the July 2022 renewal. Mr. Haddon stated that his involvement with the VHG account began only after Hurricane Callista occurred and VHG submitted its notice of loss. Haddon Dep. at 48:2–49:14.
24. When asked at deposition whether Ironclad's underwriting department maintained any records, memoranda, or internal communications confirming the intent to retain the named-windstorm sub-limit for the 2022–2023 policy year, Victor Haddon testified that he was not aware of any such records and stated that the question should be directed to underwriting personnel. Ironclad did not designate any representative from its underwriting department as a deposition witness in this action. Haddon Dep. at 50:5–51:3.
25. Through the completion of discovery in this action, Ironclad has not produced any written communication from its underwriting department to Tidewater or to VHG, generated during the renewal period, that stated or confirmed that the named-windstorm sub-limit would be retained in the July 2022 renewal policy. VHG served two sets of requests for production specifically seeking all documents relating to the decision to retain or delete the named-windstorm sub-limit at the July 2022 renewal. Ironclad's responses did not identify or produce any such document. Defendants' Responses to Plaintiff's First and Second Requests for Production; Orde Dep. at 48:14–49:6.
VI. THE EXCESS LAYER POLICIES AND FOLLOW-FORM PROVISIONS
26. Pinnacle's first excess layer policy (Policy No. PSL-XS1-2022-3390) is written on a follow-form basis, following the terms, conditions, and exclusions of the Ironclad primary policy, including any sub-limits, unless otherwise specified in the Pinnacle policy. The Pinnacle policy does not independently impose a named-windstorm sub-limit or any other limitation on business-interruption coverage for named windstorm events that differs from or supplements the terms of the Ironclad primary policy. Accordingly, the resolution of the named-windstorm sub-limit issue in the primary policy directly determines the scope of coverage available under the first excess layer. Exhibit 3 (Pinnacle Policy, Follow-Form Endorsement); Orde Dep. at 52:8–53:2.
27. Montclair and Sovereign Re each issued reservation of rights letters in response to VHG's claim but did not issue formal denial letters. Both carriers took the position that the resolution of the named-windstorm sub-limit issue in the Ironclad primary policy would determine whether VHG's claimed business-interruption losses would reach their respective attachment points of $40,000,000 (Montclair) and $50,000,000 (Sovereign Re). If the named-windstorm sub-limit applies, VHG's business-interruption recovery under the primary policy would be capped at a level well below the attachment point of either excess layer, thereby precluding any obligation on the part of Montclair or Sovereign Re. Exhibit 13 (Montclair Reservation of Rights Letter); Exhibit 14 (Sovereign Re Reservation of Rights Letter).
VII. HURRICANE CALLISTA AND PROPERTY DAMAGE
28. Hurricane Callista was named by the National Hurricane Center on September 12, 2022. Hurricane Callista intensified rapidly over the warm waters of the Gulf of Mexico and made landfall as a Category 4 hurricane on the Saffir-Veltason Hurricane Wind Scale, with maximum sustained winds of approximately 145 miles per hour, in the Lower Florida Keys near Big Pine Key at approximately 1:30 PM Eastern Daylight Time on September 18, 2022. Storm surge of 8 to 14 feet was recorded in Monroe County and 6 to 10 feet in Lee County. Hurricane Callista caused catastrophic wind and storm-surge damage throughout the Florida Keys and the southwest Florida coast. Exhibit 15 (National Hurricane Center Advisory and Post-Tropical Cyclone Report for Hurricane Callista); Complaint ¶¶ 20–22.
29. In advance of Hurricane Callista's landfall, Monroe County issued a mandatory evacuation order for all residents and visitors in the Florida Keys on September 16, 2022. Lee County issued a similar mandatory evacuation order on September 17, 2022. VHG evacuated all guests, staff, and non-essential personnel from each of its three resort properties in compliance with these orders and in accordance with VHG's emergency preparedness protocols. Exhibit 16 (Monroe County Emergency Order dated Sept. 16, 2022); Exhibit 17 (Lee County Emergency Order dated Sept. 17, 2022); Ellsworth Dep. at 28:4–29:11.
30. VHG owns and operates three resort properties that sustained significant physical damage and prolonged business-interruption losses as a result of Hurricane Callista:
(a) Verimark Grand Key Resort, located at Mile Marker 48, Marathon, Florida 33050. The Grand Key Resort is a 312-room luxury resort and marina. Prior to Hurricane Callista, the property maintained a pre-loss average daily rate ("ADR") of $389 and an average occupancy rate of 82%. The Grand Key Resort was closed from September 18, 2022 through March 15, 2023, a total of 178 days, due to extensive wind and storm-surge damage to guest rooms, common areas, the marina, and related infrastructure.
(b) Verimark Harborview Hotel & Conference Center, located at 1400 Estero Boulevard, Fort Myers Beach, Florida 33931. The Harborview Hotel is a 224-room hotel with a 40,000-square-foot conference facility. Prior to Hurricane Callista, the property maintained a pre-loss ADR of $295 and an average occupancy rate of 74%. The Harborview Hotel was closed from September 18, 2022 through January 31, 2023, a total of 135 days, due to severe storm-surge flooding and structural damage.
(c) Verimark Sunset Shores, located at 7200 Gulf Boulevard, St. Pete Beach, Florida 33706. Sunset Shores is a 186-room boutique resort. Prior to Hurricane Callista, the property maintained a pre-loss ADR of $342 and an average occupancy rate of 79%. Sunset Shores was fully closed from September 18, 2022 through November 30, 2022, a total of 73 days, and thereafter operated at reduced capacity through February 28, 2023, due to wind damage and partial roof failure requiring phased restoration.
Ellsworth Dep. at 30:8–34:22; Deposition of Diane Calder (Aug. 8, 2023) ("Calder Dep.") at 18:3–22:15; Pellegrini Dep. at 40:5–44:18.
VIII. THE INSURANCE CLAIM AND DENIAL
31. VHG submitted an initial notice of loss to Ironclad on September 22, 2022, four days after Hurricane Callista's landfall. The notice of loss identified Hurricane Callista as the cause of loss, described the damage to each of VHG's three resort properties, and requested that Ironclad assign an adjuster to inspect the properties and commence the claims process. Exhibit 18 (VHG Notice of Loss dated Sept. 22, 2022); Pellegrini Dep. at 48:2–14.
32. Following receipt of VHG's notice of loss, Ironclad retained Arbor Claims Services LLC ("Arbor Claims"), an independent adjusting firm based in Tampa, Florida, to conduct physical inspections of the VHG properties and to assist in the adjustment of VHG's claim. Denise Whitford, a licensed independent adjuster employed by Arbor Claims, conducted initial site inspections of all three VHG resort properties on October 5, 2022. Haddon Dep. at 22:6–23:14; Deposition of Denise Whitford (July 24, 2023) ("Whitford Dep.") at 10:3–11:8.
33. On October 12, 2022, Ironclad issued a reservation of rights letter to VHG, reserving its rights under the Ironclad Renewal Policy on multiple grounds. Among the grounds identified in the reservation of rights letter, Ironclad expressly reserved its right to assert the applicability of the named-windstorm sub-limit as a limitation on VHG's business-interruption recovery. Exhibit 19 (Ironclad Reservation of Rights Letter dated Oct. 12, 2022); Haddon Dep. at 25:7–26:18.
34. On November 15, 2022, VHG submitted a sworn statement in proof of loss to Ironclad claiming total business-interruption losses of $60,000,000 across VHG's three resort properties, allocated as follows: $31,400,000 for the Grand Key Resort; $18,700,000 for the Harborview Hotel & Conference Center; and $9,900,000 for Sunset Shores. The sworn statement in proof of loss was prepared with the assistance of Diane Calder, VHG's Director of Finance, and was supported by detailed schedules of lost revenue, continuing expenses, and extra expense incurred by each property. Exhibit 20 (VHG Sworn Statement in Proof of Loss dated Nov. 15, 2022); Calder Dep. at 30:4–31:12.
35. On February 3, 2023, Ironclad issued a formal coverage denial letter to VHG. The denial letter identified four bases for Ironclad's denial of VHG's business-interruption claim. Among the four stated bases for denial, Ironclad asserted that the Ironclad Renewal Policy contains a named-windstorm sub-limit of $15,000,000 for business-interruption losses arising from named windstorm events and that VHG's business-interruption claim was therefore capped at $15,000,000 under the primary layer, regardless of the total amount of business-interruption loss sustained. Exhibit 21 (Ironclad Coverage Denial Letter dated Feb. 3, 2023); Haddon Dep. at 55:2–56:20.
36. On February 10, 2023, Pinnacle issued a follow-form denial letter to VHG, declining coverage under the first excess layer on the same bases asserted by Ironclad in its February 3, 2023 denial letter, including the asserted applicability of the named-windstorm sub-limit. Pinnacle's denial rested on its follow-form obligation and deferred to Ironclad's coverage determination with respect to the primary policy. Exhibit 22 (Pinnacle Follow-Form Denial Letter dated Feb. 10, 2023).
IX. THE WINDSTORM SUB-LIMIT IS THE CENTRAL ISSUE FOR PARTIAL SUMMARY JUDGMENT
37. If the named-windstorm sub-limit of $15,000,000 applies as Defendants contend, VHG's recovery under the Ironclad primary policy would be capped at $15,000,000 for business-interruption losses caused by Hurricane Callista. Because a $15,000,000 cap would fall well below the $25,000,000 attachment point of the first excess layer, none of the excess layers would be triggered, and VHG's total business-interruption recovery across the entire insurance tower would be limited to $15,000,000—a fraction of VHG's claimed losses. Haddon Dep. at 58:3–59:8; Exhibit 13 (Montclair Reservation of Rights Letter); Exhibit 14 (Sovereign Re Reservation of Rights Letter).
38. If, as VHG contends, the named-windstorm sub-limit was deleted at the July 2022 renewal and does not apply, the full $25,000,000 primary layer limit applies to VHG's business-interruption losses from Hurricane Callista without any windstorm-specific sub-limitation. In that event, VHG's claimed business-interruption losses of $60,000,000 would potentially reach all four layers of the insurance tower, triggering coverage obligations on the part of each of the Defendants. Orde Dep. at 55:3–56:14; Pellegrini Decl. ¶¶ 9–10; Declaration of Dr. Helen Vasquez (Nov. 1, 2023) ("Vasquez Decl.") ¶¶ 4–6.
39. Dr. Helen Vasquez, CPA, CFF, a forensic economist retained by VHG through Meridian Forensic Economics LLC, opined in her expert report served September 15, 2023, that VHG's total business-interruption losses resulting from Hurricane Callista exceed $60,000,000, irrespective of the resolution of the windstorm sub-limit dispute. Dr. Vasquez's analysis considered lost room revenue, lost food and beverage revenue, lost ancillary revenue, continuing fixed expenses, and extra expense incurred by each of VHG's three resort properties during their respective periods of closure and reduced-capacity operation. Vasquez Decl. ¶¶ 7–9; Expert Report of Dr. Helen Vasquez dated Sept. 15, 2023 ("Vasquez Report") at 42–44.
X. DEFENDANTS HAVE NOT PRODUCED EVIDENCE SUPPORTING RETENTION OF THE SUB-LIMIT
40. Through the close of fact and expert discovery in this action, Defendants have not produced any written agreement, endorsement, policy amendment, or contemporaneous underwriting communication from the July 2022 renewal period that affirmatively confirms the parties' intent to retain the named-windstorm sub-limit in the Ironclad Renewal Policy. VHG's First and Second Requests for Production specifically requested all documents relating to the underwriting decision to retain or delete the named-windstorm sub-limit at the July 2022 renewal. Ironclad's responses to those requests did not identify or produce any responsive document. Defendants' Responses and Objections to Plaintiff's First and Second Requests for Production; Orde Dep. at 48:14–49:6.
41. Victor Haddon, Ironclad's designated corporate representative for claims-related matters, acknowledged at deposition that he could not identify any Ironclad employee who had personal knowledge that the named-windstorm sub-limit was intended to remain in effect for the 2022–2023 policy year. Mr. Haddon testified that he had not spoken with anyone in Ironclad's underwriting department about whether the sub-limit was intended to be retained or deleted at the July 2022 renewal. Haddon Dep. at 62:8–63:15.
42. The named-windstorm sub-limit endorsement (Endorsement No. 14) that was present in the prior-year Ironclad policy and that imposed the $15,000,000 sub-limit does not appear in the schedule of endorsements for the Ironclad Renewal Policy (Policy No. IIC-PRP-2022-07541). No replacement endorsement, amended endorsement, or substitute endorsement imposing a named-windstorm sub-limit was issued for the 2022–2023 renewal period. The schedule of endorsements for the Ironclad Renewal Policy lists seventeen endorsements, none of which references or imposes a named-windstorm sub-limit. Exhibit 2 (Ironclad Renewal Policy, Schedule of Endorsements); Exhibit 7 (Ironclad Prior-Year Policy, Schedule of Endorsements and Endorsement No. 14).
CONCLUSION
The foregoing undisputed material facts demonstrate that the $15,000,000 named-windstorm sub-limit was deleted from the Ironclad primary policy at the July 2022 renewal by mutual agreement of the parties. The deletion is reflected in and confirmed by: (i) VHG's written instruction to its broker to negotiate removal of the sub-limit as a condition of renewal; (ii) Ironclad's underwriter's written agreement on June 14, 2022 to delete the sub-limit endorsement in exchange for a premium increase; (iii) VHG's acceptance of the premium increase on June 16, 2022, expressly contingent on the removal of the sub-limit; (iv) the Tidewater binder confirmation of June 28, 2022, which summarized the renewal terms and did not reference any named-windstorm sub-limit; (v) the 10.1% increase in the primary layer premium, a portion of which reflects the consideration paid for the deletion of the sub-limit; (vi) the absence of the named-windstorm sub-limit endorsement (Endorsement No. 14) from the renewal policy's schedule of endorsements; (vii) the deposition testimony of Franklin Orde and Sandra Pellegrini confirming the mutual intent to delete the sub-limit; and (viii) the complete absence from the record of any document or testimony supporting Defendants' contention that the sub-limit was intended to be retained. The sole basis for Defendants' contrary position—a vestigial reference to a "Named Windstorm Sub-Limit: $15,000,000" on the declarations page sub-limits table—is at best a clerical artifact carried over from the prior-year policy that cannot override the unambiguous intent of the contracting parties as expressed through the totality of the documentary and testimonial evidence.
VHG respectfully requests that the Court grant partial summary judgment in VHG's favor on the named-windstorm sub-limit issue and enter an order declaring that the Ironclad primary policy (Policy No. IIC-PRP-2022-07541) does not contain a $15,000,000 named-windstorm sub-limit for business-interruption coverage, and that the full $25,000,000 per-occurrence policy limit applies to VHG's business-interruption claim arising from Hurricane Callista.
RESPECTFULLY SUBMITTED this 1st day of November, 2023.
CALDERWOOD & HARKNESS LLP Counsel for Plaintiff Verimark Hospitality Group Inc. 333 SE 2nd Avenue, Suite 4400 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201 Engagement No. 1021-00003
By: ________
Elaine Forsythe, Esq. Florida Bar No. 0094217 eforsythe@calderwoodharkness.com Responsible Partner
Tiffany Rosenthal, Esq. Florida Bar No. 0118503 trosenthal@calderwoodharkness.com Lead Associate
Andrew Fitzpatrick, Esq. Florida Bar No. 0126884 afitzpatrick@calderwoodharkness.com Working Associate
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on November 1, 2023, a true and correct copy of the foregoing Plaintiff's Statement of Undisputed Material Facts in Support of Its Motion for Partial Summary Judgment Regarding the Named Windstorm Sub-Limit was served via the Florida Courts E-Filing Portal and by email upon the following counsel of record:
Gregory Stanton, Esq. Meredith Liang, Esq. Fendowell Rourke & Stanton LLP 280 Trumbull Street, Suite 2200 Hartford, Connecticut 06103 and 101 E. Kennedy Boulevard, Suite 3900 Tampa, Florida 33602 Telephone: (860) 555-3100 / (813) 555-4400 gstanton@bracewellrourke.com mliang@bracewellrourke.com 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, New York 10022 Telephone: (212) 555-8800 pkraus@delvecchiokraus.com rcho@delvecchiokraus.com Counsel for Defendants Montclair Assurance Company and Sovereign Re Ltd.
By: ________
Elaine Forsythe, Esq. Florida Bar No. 0094217
Layer | Carrier | Limit | Attachment Point | Policy Number
Primary | Ironclad Indemnity Corporation | $25,000,000 | $500,000 deductible | IIC-PRP-2022-07541
1st Excess | Pinnacle Surplus Lines Inc. | $15,000,000 | $25,000,000 | PSL-XS1-2022-3390
2nd Excess | Montclair Assurance Company | $10,000,000 | $40,000,000 | MAC-XS2-2022-09817
3rd Excess | Sovereign Re Ltd. | $10,000,000 | $50,000,000 | SRL-XS3-2022-5102

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

CASE NO. 2022-CA-031547

I. THE PARTIES

II. VHG'S INSURANCE PROGRAM AND THE INSURANCE TOWER

III. THE PRIOR POLICY YEAR AND THE NAMED WINDSTORM SUB-LIMIT

IV. THE JULY 2022 RENEWAL NEGOTIATIONS AND DELETION OF THE SUB-LIMIT

V. THE IRONCLAD POLICY AS ISSUED AND THE SUB-LIMIT AMBIGUITY

VI. THE EXCESS LAYER POLICIES AND FOLLOW-FORM PROVISIONS

VII. HURRICANE CALLISTA AND PROPERTY DAMAGE

VIII. THE INSURANCE CLAIM AND DENIAL

IX. THE WINDSTORM SUB-LIMIT IS THE CENTRAL ISSUE FOR PARTIAL SUMMARY JUDGMENT

X. DEFENDANTS HAVE NOT PRODUCED EVIDENCE SUPPORTING RETENTION OF THE SUB-LIMIT

CONCLUSION

CERTIFICATE OF SERVICE

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