This excerpt taken from the HST 10-K filed Mar 1, 2005.
Section 5.1 Insurance.
5.1.1 Insurance Policies. (a) Borrower shall obtain and maintain, or cause to be obtained and maintained by the Managers, insurance for Borrower and each of the Individual Properties providing at least the following coverages:
(i) comprehensive all risk insurance on the Improvements and the personal property at the Individual Properties, including contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements, in each case (A) in an amount equal to one hundred percent (100%) of the Full Replacement Cost, which for purposes of this Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation, but the amount shall in no event be less than the outstanding principal balance of the Loan; (B) containing an agreed amount endorsement with respect to the Improvements and personal property at the Individual Properties waiving all co-insurance provisions; (C) providing for no deductible with respect to casualty or liability coverage in excess of One Hundred Thousand and No/100 Dollars ($100,000); provided, however, that the deductible with respect to casualty insurance for the Marriott Marquis shall not exceed Seven Hundred Fifty Thousand and No/100 Dollars ($750,000); and (D) containing an Ordinance or Law Coverage or Enforcement endorsement if any of the Improvements or the use of the Individual Property shall at any time constitute legal non-conforming structures or uses. In addition, Borrower shall obtain: (y) if any portion of the Improvements is currently or at any time in the future located in a federally designated special flood hazard area, flood hazard insurance in an amount equal to the lesser of (1) the outstanding principal balance of the Loan or (2) the maximum amount of such insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended or such greater amount as Lender shall require; and (z) earthquake insurance with a limit of at least Forty-Two Million Two Hundred Fifty Thousand and No/100 Dollars ($42,250,000), inclusive of the deductible, and in form and substance satisfactory to Lender for the Individual Property known as the San Francisco Airport Hyatt Regency located in Burlingame, California and in the amount of the probable maximum loss for any other Individual Property that is located in an area with a high degree of seismic activity, provided that the insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this subsection (i); provided, further, that notwithstanding anything to the contrary contained herein, a deductible of up to Five Million Seven Hundred Fifty Thousand ($5,750,000), as escalated by the CPI Increase, shall be permitted for earthquake insurance for the San Francisco Airport Hyatt Regency. Notwithstanding the foregoing, if at any time (i) the annual premiums for the earthquake insurance for the San Francisco Airport Hyatt Regency shall exceed $1,338,000 and (ii) Borrower shall have received written confirmation from the Rating Agencies that the requested reduction in earthquake coverage will not result in a qualification, downgrade or withdrawal of the then current ratings assigned to the Securities, Borrower shall only be required to obtain such lesser amount of earthquake insurance that can be obtained with annual premiums not in excess of $1,338,000. Pursuant to the Cash Management Agreement, the obligations of Borrower from time to time with respect to the payment of the deductible under the earthquake insurance policy for the San Francisco Airport Hyatt Regency shall be
deposited into the Earthquake Deductible Account (as defined in the Cash Management Agreement) prior to the disbursement of any excess funds to Borrower. Funds so deposited in the Earthquake Deductible Account shall be disbursed to Borrower for the Restoration of the San Francisco Airport Hyatt Regency in accordance with the procedures set forth in Section 5.3.2(b) (g) as if such amounts were Net Proceeds. If sufficient amounts have not been deposited in the Earthquake Deductible Account for the payment of the earthquake deductible within six (6) months of the insured Casualty, Guarantor shall, pursuant to the terms and conditions of the Guaranty, be liable for any shortfall.
(ii) commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Individual Property, such insurance (A) to be on the so-called occurrence form with a combined limit of not less than One Million and No/100 Dollars ($1,000,000); (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations on an if any basis; (3) independent contractors; (4) blanket contractual liability for all legal contracts; and (5) contractual liability covering the indemnities contained in Article 9 of the Mortgages to the extent the same is available;
(iii) business income insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; (C) containing an extended period of indemnity endorsement which provides that the continued loss of income will be insured from the date of the physical loss to the Improvements and Personal Property through the earlier of (1) the date such income returns to the same level it was at prior to the loss, or (2) the expiration of twelve (12) months from the date that the Individual Property is repaired or replaced and operations are resumed, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to one hundred percent (100%) of the related Individual Borrowers projected rental income from the Individual Property for such period. The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrowers reasonable estimate of the gross income from the Individual Property for the succeeding twelve (12) month period. All proceeds payable to Lender pursuant to this subsection shall be held by Lender and shall be applied to the obligations secured by the Loan Documents from time to time due and payable hereunder and under the Note; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in the Note and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance;
(iv) at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the Individual Property coverage form does not otherwise apply, (A) contractors liability insurance covering claims not covered by or under the terms or provisions of the above mentioned commercial general liability insurance policy; and (B) the insurance provided for in subsection (i) above written in a so-called builders risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to subsection (i) above, (3) including permission to occupy the Individual Property, and (4) with an agreed amount endorsement waiving co-insurance provisions;
(v) workers compensation, subject to the statutory limits of the state in which the Individual Property is located, and employers liability insurance with a limit of at least One Million and No/100 Dollars ($1,000,000) per accident and per disease per employee, and One Million and No/100 Dollars ($1,000,000) for disease aggregate in respect of any work or operations on or about the Individual Property, or in connection with the Individual Property or its operation (if applicable);
(vi) comprehensive boiler and machinery insurance, if applicable, in amounts as shall be reasonably required by Lender on terms consistent with the commercial property insurance policy required under subsection (i) above;
(vii) umbrella liability insurance in addition to primary coverage in an amount not less than One Hundred Million and No/100 Dollars ($100,000,000) per occurrence on terms consistent with the commercial general liability insurance policy required under subsection (ii) above;
(viii) motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence, of One Million and No/100 Dollars ($1,000,000);
(ix) so-called dramshop insurance or other liability insurance required in connection with the sale of alcoholic beverages;
(x) insurance against employee dishonesty in an amount not less than one (1) month of gross revenue from such Individual Property and with a deductible not greater than Ten Thousand and No/100 Dollars; and
(xi) upon sixty (60) days written notice, such other reasonable insurance and in such reasonable amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to the Individual Property located in or around the region in which the Individual Property is located.
(b) All insurance provided for in Section 5.1.1(a) shall be obtained under valid and enforceable policies (collectively, the Policies or in the singular, the Policy), and shall be subject to the reasonable approval of Lender as to deductibles, loss payees and insureds. Not less than ten (10) days prior to the expiration dates of the Policies theretofore furnished to Lender, certificates of insurance evidencing the Policies accompanied by evidence satisfactory to Lender of payment of the premiums due thereunder (the Insurance Premiums), shall be delivered by Borrower to Lender.
(c) Any blanket insurance Policy shall specifically allocate to the Individual Property the amount of coverage from time to time required hereunder and shall otherwise provide the same protection as would a separate Policy insuring only the Individual Property in compliance with the provisions of Section 5.1.1(a).
(d) All Policies of insurance provided for or contemplated by Section 5.1.1(a), except for the Policy referenced in Section 5.1.1(a)(v), shall name Borrower as the insured and Lender and its successors and/or assigns as the additional insured, as its interests may appear, and in the case of property damage, boiler and machinery, flood and earthquake insurance, shall contain a so-called New York standard non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender.
(e) All Policies of insurance provided for in Section 5.1.1(a)(v) shall contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting for Borrower, or of any tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other than to increase the coverage provided thereby) or canceled without at least thirty (30) days written notice to Lender and any other party named therein as an additional insured; and
(iii) Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder.
(f) If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right, without notice to Borrower, to take such action as Lender deems necessary to protect its interest in the Individual Property, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate and all premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and until paid shall be secured by the Mortgages and shall bear interest at the Default Rate.
(g) In the event of foreclosure of the Mortgage with respect to the Individual Property, or other transfer of title to the Individual Property in extinguishment in whole or in part of the Debt all right, title and interest of Borrower in and to the Policies that are not blanket Policies then in force concerning the Individual Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other transferee in the event of such other transfer of title.
5.1.2 Insurance Company. The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the state in which each Individual Property is located. Each of such insurance companies shall have a claims paying ability rating of AA- or better by Standard & Poors and an insurance financial strength rating of A2 or better by Moodys or, if Moodys does not provide a rating, then at least A(IX) by A.M. Best (except with respect to the earthquake insurance, for which all insurance companies shall have a claims paying ability rating of BBB- or better by S&P and an insurance financial strength rating of Baa3 or better by Moodys, with an average claims paying ability rating of A- or better by S&P and an average insurance financial strength rating of A3 or better by Moodys or, if Moodys does not provide a rating, then at least A-(VI) by A.M. Best).