Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes whether the arbitration clause contained in Article 22 of Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty") compels arbitration of all disputes raised in the pre-suit demand letter dated February 14, 2026 (the "Demand Letter"), transmitted on behalf of Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic" or "PARL") by the law firm of Hargrove, Fitch & Calloway LLP ("HFC")

1. Cedent: Quorum Casualty & Surety Company Quorum Casualty & Surety Company ("QC&S") is a New York-domiciled stock property and casualty insurance company, NAIC No. 24891, with its principal office located at 200 Constitution Plaza, Suite 3200, Hartford, Connecticut 06103. QC&S is a wholly owned subsidiary of Quorum Insurance Holdings Corp. ("QIH"), a publicly traded Delaware holding company listed on the Nasdaq Glo

2. Reinsurer: Pinnacle Atlantic Reinsurance Ltd. Pinnacle Atlantic Reinsurance Ltd. ("PARL" or "Pinnacle Atlantic") is a Bermuda Class 4 insurer registered with the Bermuda Monetary Authority under BMA Registration No. BMA-4R-2008-0331. Pinnacle Atlantic is a wholly owned subsidiary of Pinnacle Atlantic Group Holdings Ltd., a Bermuda-domiciled holding company. Pinnacle Atlantic maintains a United States office at 128

3. Intermediary: Broadreach Intermediaries Inc. Broadreach Intermediaries Inc. ("Broadreach") is a New York-licensed reinsurance intermediary with offices at 100 Wall Street, 18th Floor, New York, New York 10005. Broadreach served as the designated intermediary under Treaty Article 9, with Jamie Castellano serving as the account executive responsible for the QC&S–Pinnacle Atlantic account. Broadreach facilitated the

III. TEXT AND SCOPE OF TREATY ARTICLE 22 A. Full Text of Article 22 The operative text of Treaty Article 22, titled "ARBITRATION," provides as follows:

ARTICLE 22 — ARBITRATION 22.1 Any and all disputes or differences arising out of or relating to this Treaty, including but not limited to its formation, interpretation, performance, breach, or termination, shall be submitted to and resolved exclusively by arbitration as provided in this Article. The arbitration shall be conducted in accordance with the Rules for the Resolution of U.S. Insurance and Reinsurance Disput

IV. APPLICABLE LEGAL FRAMEWORK A. Federal Arbitration Act (9 U.S.C. §§ 1–16)

1. Applicability. The Federal Arbitration Act ("FAA") governs the enforceability of the arbitration clause in the Treaty. The FAA applies to arbitration agreements in contracts "evidencing a transaction involving commerce." 9 U.S.C. § 2. The Treaty is a reinsurance agreement between a New York-domiciled cedent (QC&S) and a Bermuda-domiciled reinsurer (Pinnacle Atlantic) involving the cession of property and casualty

2. Key Provisions FAA § 2 provides that written arbitration agreements in contracts involving commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. This provision establishes a strong federal policy in favor of enforcing arbitration agreements according to their terms. The only grounds for invalidating an arbitrat

3. Federal Policy Favoring Arbitration The Supreme Court has repeatedly emphasized the "strong federal policy favoring arbitration agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983). Under this policy, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself o

4. Preemption of Inconsistent State Law Even if Pinnacle Atlantic files suit in state court — specifically, the Supreme Court of the State of New York, New York County, Commercial Division — the FAA preempts any inconsistent state law. The Supreme Court has held that the FAA applies in both federal and state courts. Southland Corp. v. Keating, 465 U.S. 1, 10–16 (1984); Allied-Bruce Terminix, 513 U.S. at 272. Accordin

V. ANALYSIS OF HFC'S POSITION THAT ARTICLE 22 IS INAPPLICABLE A. Anticipated Arguments by Pinnacle Atlantic / HFC Based on the Demand Letter and the nature of the claims asserted, we anticipate that HFC will advance the following arguments in opposition to QC&S's invocation of the arbitration clause:

1. Claims Sound in Fraud or Misrepresentation, Not "Arising Under" the Treaty HFC may argue that Pinnacle Atlantic's allegations of IBNR misallocation, inflated settlements, and premium underreporting constitute fraud or misrepresentation that is conceptually distinct from a "dispute" under the Treaty and therefore falls outside the scope of the arbitration clause. The Demand Letter's repeated use of terms such as "m

2. Breach of Conditions Precedent (Late Notice) Is Not a "Dispute" Under the Treaty HFC may contend that the failure to satisfy the notice requirements of Treaty Article 7 is not merely a breach of a covenant but a failure to satisfy a condition precedent to the formation of Pinnacle Atlantic's reinsurance obligation. Under this theory, HFC would argue that because the condition precedent was never satisfied, the ces

3. Restitutionary Claim for Return of Funds Paid Is Independent of the Treaty HFC may argue that Pinnacle Atlantic's demand for the return of $78.4 million in reinsurance recoverables is a quasi-contractual or unjust enrichment claim that exists independently of the Treaty. Under this theory, HFC would contend that Pinnacle Atlantic is not seeking to enforce or interpret the Treaty but rather to recover funds that we

4. Waiver or Forfeiture of Arbitration Rights by QC&S Through Course of Conduct HFC may argue that QC&S has waived its right to arbitrate by engaging in an extended course of commercial discussions and billing without invoking the arbitration clause. The parties have been in communication regarding the disputed claims since at least mid-2025, when Pinnacle Atlantic first raised concerns about the Meridian Docks late

1. Fraud / Misrepresentation Argument HFC's anticipated argument that Pinnacle Atlantic's claims sound in fraud or misrepresentation and therefore fall outside the arbitration clause is not supported by the governing law. The "arising out of or relating to" language of Article 22 is broad enough to encompass fraud claims that are intertwined with the performance of the contract. Both the Second Circuit and the New Yo

2. Conditions Precedent / Late Notice Argument HFC's anticipated argument that the late notice claim falls outside the arbitration clause because Article 7 notice is a condition precedent to Pinnacle Atlantic's obligation — and therefore the dispute concerns the existence of the obligation rather than its terms — is equally unavailing. As an initial matter, whether the notice requirements of Treaty Article 7 constitu

3. Restitutionary / Quasi-Contract Argument HFC's anticipated argument that Pinnacle Atlantic's demand for return of $78.4 million is an independent quasi-contractual or unjust enrichment claim falling outside the arbitration clause is similarly without merit. The demand for return of reinsurance recoverables is inextricably linked to the Treaty. Pinnacle Atlantic paid the $78.4 million pursuant to billing statements

4. Waiver Argument HFC's anticipated waiver argument is the weakest of the four anticipated arguments, given the current procedural posture of the dispute. Under both federal and New York law, waiver of arbitration rights requires a showing of (1) an intent to waive, manifested by conduct inconsistent with the right to arbitrate, and (2) prejudice to the opposing party resulting from the inconsistent conduct. See Mor

VI. PROCEDURAL MECHANICS A. Motion to Compel Arbitration in NY Supreme Court If Pinnacle Atlantic files a complaint in the Supreme Court of the State of New York, New York County, Commercial Division, QC&S should promptly move to compel arbitration and stay all litigation proceedings. The procedural framework for such a motion is as follows: Statutory Basis. QC&S's motion would be brought under N.Y. CPLR § 7503(a), w

VII. STRATEGIC CONSIDERATIONS A. Advantages of Arbitration for QC&S

1. Panel Expertise The single most important strategic advantage of arbitration for QC&S is the expertise of the arbitration panel. Under Treaty Article 22.3, all arbitrators must be "current or former officers of insurance or reinsurance companies." This qualification requirement ensures that the panel members will have direct, hands-on experience with the concepts, customs, and technical issues at the heart of this