Starwood 2011 Annual Report Download - page 81

Our Insurance Policies May Not Cover All Potential Losses
We carry insurance coverage for general liability, property, business interruption, and other risks with
respect to our owned and leased properties and we make available insurance programs for owners of properties
we manage. These policies offer coverage terms and conditions that we believe are usual and customary for our
industry. Generally, our “all-risk” property policies provide that coverage is available on a per occurrence basis
and that, for each occurrence, there is a limit as well as various sub-limits on the amount of insurance proceeds
we will receive in excess of applicable deductibles. In addition, there may be overall limits under the policies.
Sub-limits exist for certain types of claims such as service interruption, debris removal, expediting costs or
landscaping replacement, and the dollar amounts of these sub-limits are significantly lower than the dollar
amounts of the overall coverage limit. Our property policies also provide that for the coverage of critical
earthquake (California and Mexico), hurricane and flood, all of the claims from each of our properties resulting
from a particular insurable event must be combined together for purposes of evaluating whether the annual
aggregate limits and sub-limits contained in our policies have been exceeded and any such claims will also be
combined with the claims of owners of managed hotels that participate in our insurance program for the same
purpose. Therefore, if insurable events occur that affect more than one of our owned hotels and/or managed
hotels owned by third parties that participate in our insurance program, the claims from each affected hotel will
be added together to determine whether the per occurrence limit, annual aggregate limit or sub-limits, depending
on the type of claim, have been reached and if the limits or sub-limits are exceeded each affected hotel will only
receive a proportional share of the amount of insurance proceeds provided for under the policy. In addition, under
those circumstances, claims by third party owners will reduce the coverage available for our owned and leased
properties.
In addition, there are also other risks including but not limited to war, certain forms of terrorism such as
nuclear, biological or chemical terrorism, political risks, some environmental hazards and/or acts of God that
may be deemed to fall completely outside the general coverage limits of our policies or may be uninsurable or
may be too expensive to justify insuring against.
We may also encounter challenges with an insurance provider regarding whether it will pay a particular
claim that we believe to be covered under our policy. Should an uninsured loss or a loss in excess of insured
limits occur, we could lose all or a portion of the capital we have invested in a hotel or resort, as well as the
anticipated future revenue from the hotel or resort. In that event, we might nevertheless remain obligated for any
mortgage debt or other financial obligations related to the property.
Our Acquisitions/Dispositions and Investments in New Brands May Ultimately Not Prove Successful and
We May Not Realize Anticipated Benefits
We consider corporate as well as property acquisitions and investments that complement our business. In
many cases, we compete for these opportunities with third parties who may have substantially greater financial
resources or different or lower acceptable financial metrics than we do. There can be no assurance that we will be
able to identify acquisition or investment candidates or complete transactions on commercially reasonable terms
or at all. If transactions are consummated, there can be no assurance that any anticipated benefits will actually be
realized. Similarly, there can be no assurance that we will be able to obtain additional financing for acquisitions
or investments, or that the ability to obtain such financing will not be restricted by the terms of our debt
agreements.
We periodically review our business to identify properties or other assets that we believe either are
non-core, no longer complement our business, are in markets which may not benefit us as much as other markets
during an economic recovery or could be sold at significant premiums. We are focused on restructuring and
enhancing real estate returns and monetizing investments, and from time to time, may attempt to sell these
identified properties and assets. There can be no assurance, however, that we will be able to complete
dispositions on commercially reasonable terms or at all or that any anticipated benefits will actually be received.
We may develop and launch additional brands in the future. There can be no assurance regarding the level
of acceptance of these brands in the development and consumer marketplaces, that the cost incurred in
developing the brands will be recovered or that the anticipated benefits from these new brands will be realized.
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