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Commitments and Contingencies
9 Months Ended
Sep. 30, 2019
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 13: Commitments and Contingencies

We expect that insurance proceeds, excluding any applicable insurance deductibles, will be sufficient to cover a significant portion of the property damage to our two hotels in Key West, Florida and the Caribe Hilton from Hurricanes Irma and Maria in September 2017 and the resulting loss of business. We have recognized a total loss of $22 million representing losses up to the amount of our deductibles and additional amounts not expected to be recovered from insurance. The amount of expected insurance proceeds could change as more information becomes available about the nature and extent of damage. Any gain resulting from insurance proceeds, including those for business interruption, will not be recognized until all contingencies have been resolved.  

As of September 30, 2019, we had outstanding commitments under third-party contracts of approximately $68 million for capital expenditures at certain hotels. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.

We may make certain indemnifications or guarantees to select buyers of our hotels as part of the sale process. In addition, losses related to certain contingent liabilities could be apportioned to us under the distribution and tax matters agreements related to the spin-off transaction.  

We are involved in litigation arising from the normal course of business, some of which includes claims for substantial sums. We are also involved in litigation that is not in the ordinary course of business, and we are indemnified from certain of these claims under the distribution agreement with Hilton. While the ultimate results of claims and litigation relating to assets retained by Hilton in connection with the spin-off cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of September 30, 2019 will not have a material effect on our condensed consolidated results of operations, financial position or cash flows.

Following the May 6, 2019 announcement that we and Chesapeake had entered into the Merger Agreement, two purported shareholder class actions were filed in the United States District Court for the District of Delaware captioned: Kent v. Chesapeake Lodging Trust, et al., No. 1:19-cv-01201 (D.Del.) (filed June 25, 2019) (the “Kent Action”) and Terlinden v. Chesapeake Lodging Trust, et al., No. 1;19-cv-01263 (D.Del.) (filed July 8, 2019). The complaint in each case alleged purported violations of the federal securities laws and named as defendants Chesapeake, the individual members of the Chesapeake board of trustees, the Company, Domestic and Merger Sub. The plaintiffs alleged that Chesapeake and the individual defendants violated Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, by providing inadequate disclosure regarding the proposed merger in the Form S-4 Registration Statement filed with the SEC on June 14, 2019 (the “Registration Statement”). The plaintiffs also alleged that the individual defendants, the Company, Domestic and Merger Sub violated Section 20(a) of the Exchange Act. Plaintiffs sought, among other things, to enjoin or rescind the merger, an award of damages in the event the merger was consummated and an award of costs and attorneys’ fees. While we believe that these claims were without merit, in order to avoid the risk of these claims delaying or adversely affecting the Merger, to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, Chesapeake agreed to amend and supplement the definitive proxy statement filed with the SEC on July 26, 2019 in connection with the Merger in a Current Report on Form 8-K filed with the SEC on September 3, 2019. The plaintiffs in these actions subsequently dismissed each case with prejudice as to the named plaintiffs only. The cases are now closed.