Contract analysis

From: Douglas Carmichael <dcarmichael@calderwoodharkness.com> To: Rachel Sondergaard <rsondergaard@quoruminsurance.com> Cc: Francesca Morano <fmorano@calderwoodharkness.com> Date: Tue, 03 Mar 2026 09:17:00 -0000 Subject: Pinnacle Atlantic Reinsurance Dispute — Engagement Kickoff and Initial Document Requests [C&H Matter No. 1025-00005]

Thank you for the confidence you and the Quorum team have placed in Calderwood & Harkness. We are pleased to confirm that the engagement letter was fully executed as of March 2, 2026, and we are prepared to move forward immediately on this matter.

As you know, this engagement concerns the pre-suit demand from Pinnacle Atlantic Reinsurance Ltd. relating to Treaty No. PA-QCS-2019-EXL-0044 — the aggregate excess-of-loss reinsurance treaty between Quorum Casualty & Surety Company, as cedent, and Pinnacle Atlantic, as reinsurer. The February 14, 2026 demand letter from Hargrove, Fitch & Calloway LLP, on behalf of Pinnacle Atlantic, seeks return of $78.4 million in

I wanted to introduce the full team that will be working on this matter:

- **Douglas Carmichael** — Responsible Partner - **Francesca Morano** — Billing Partner - **Jeffrey Park** — Lead Associate (7th year) - **Yuki Nakamura** — Working Associate (4th year)

Jeffrey Park will serve as the day-to-day point of contact for document collection and factual investigation, and I will remain directly available for all strategic discussions. Billing rates are as set forth in the executed engagement letter, and our Phase 1 budget estimate for strategy assessment and pre-litigation analysis is $450,000–$625,000.

Our Phase 1 objective is to conduct a comprehensive assessment of the merits of Pinnacle Atlantic's four grounds for dispute and to develop QC&S's defense and counter-recovery strategy. We anticipate completing an initial case assessment memorandum by approximately mid-March 2026. The key workstreams are as follows:

1. **Treaty Analysis.** Thorough review and interpretation of Treaty No. PA-QCS-2019-EXL-0044 and all endorsements and amendments, with particular focus on Articles 3 (premium reporting), 5 (losses incurred definition / IBNR allocation), 7 (notice requirements), 9 (intermediary clause — Broadreach Intermediaries Inc.), 11 (follow-the-fortunes / settlements), and 22 (arbitration — ARIAS-U.S. Rules).

2. **Late Notice Analysis (Article 7).** Evaluation of the Meridian Docks mass tort cluster notice timeline. We understand that QC&S first reserved the 31 related CGL claims on March 15, 2021, with notice provided to Pinnacle Atlantic via Broadreach on May 22, 2022. We will need to develop a full understanding of QC&S's position that individual claims were below the $1 million reporting threshold until reserve increa

3. **IBNR Allocation Analysis (Article 5).** Review of the $22.3 million IBNR reserve development that Pinnacle Atlantic contends should be allocated to Treaty Year 2021 — where aggregate net incurred loss was $104.6 million, below the $120 million retention — rather than TY 2022. We will need the Velthorn Actuarial Advisors methodology and supporting workpapers.

4. **Follow-the-Fortunes / Veridian Settlement Analysis (Article 11).** Review of the Veridian Financial Services E&O cluster settlement totaling $34.5 million (Claim A: $14.2M; Claim B: $12.8M; Claim C: $7.5M), settled September 8, 2023. Pinnacle Atlantic alleges that QC&S settled without meaningful litigation exposure analysis at inflated amounts. We will need the full claims files and all settlement evaluation doc

5. **Premium Reporting Analysis (Article 3).** Examination of the $6.8 million ceded earned premium discrepancy for TY 2022 — QC&S reported $38.4 million; Pinnacle Atlantic calculates $45.2 million — resulting in an alleged treaty premium underpayment of approximately $2.856 million at the 42% provisional rate. We will need to understand QC&S's position regarding the Article 3.4 exclusion of run-off portfolio transfe

6. **Forum/Arbitration Strategy.** Analysis of whether Treaty Article 22 compels arbitration and the viability of Hargrove, Fitch & Calloway's assertion that the arbitration clause is inapplicable to the claims at issue.

7. **Financial Impact Assessment.** Modeling of exposure scenarios and their impact on QC&S statutory surplus ($1.42 billion as of December 31, 2025), QIH GAAP financials, and covenant compliance under the $750 million revolving credit facility with Cartwright National Bank (which includes a minimum statutory surplus covenant of $1.1 billion).

To begin our analysis, we respectfully request that the following documents be collected and produced to Calderwood & Harkness as promptly as practicable. Please note that a formal litigation hold notice will follow separately tomorrow (see below), but we would like to begin the collection process immediately.

1. **Treaty and Amendments.** Fully executed copy of Treaty No. PA-QCS-2019-EXL-0044, including the original treaty effective July 1, 2019, all endorsements, amendments, addenda, and extension agreements through the current term (extended through June 30, 2026).

2. **Billing and Settlement Transmittals.** All billing statements, bordereau, loss reports, and settlement transmittals exchanged between QC&S and Pinnacle Atlantic through Broadreach Intermediaries Inc. for Treaty Years 2021, 2022, and 2023, including the seven billing installments totaling $78.4 million (from October 15, 2022 through March 29, 2024).

3. **Actuarial Certificates and Workpapers.** All actuarial certificates prepared by Velthorn Actuarial Advisors LLC (Dr. Stephen Tanaka) underlying the disputed cessions for TY 2022 and TY 2023, including loss development analyses, IBNR reserve calculations, and accident-year allocation methodology.

4. **QC&S Claims Files — Meridian Docks Mass Tort Cluster.** Complete claims files for all 31 related CGL claims under Policy No. CGL-2020-09844 (policyholder: Meridian Docks Development LLC), including initial reserving documentation, reserve-setting memoranda, internal claims committee minutes, all correspondence with the policyholder and claimants' counsel, and the notice to Pinnacle Atlantic dated May 22, 2022.

5. **QC&S Claims Files — Veridian Financial Services E&O Cluster.** Complete claims files for the three related professional liability claims under Policy No. PL-2021-15327 (policyholder: Veridian Financial Services Inc.), including settlement evaluation memoranda, litigation exposure analyses, claims committee approvals, and all documentation supporting the September 8, 2023 settlement of $34.5 million.

6. **Ceded Earned Premium Workpapers.** QC&S's workpapers supporting the reported ceded earned premium of $38.4 million for TY 2022, including identification of any amounts excluded under Article 3.4 (run-off portfolio transfer premiums) and any reconciliation with Pinnacle Atlantic's asserted figure of $45.2 million.

7. **Pinnacle Atlantic Correspondence.** Specifically: - Pinnacle Atlantic's reservation of rights letter dated December 12, 2025; - Hargrove, Fitch & Calloway LLP's pre-suit demand letter dated February 14, 2026; and - Any other correspondence between QC&S (or QIH) and Pinnacle Atlantic (or its counsel) regarding the disputed cessions or the Treaty generally.

8. **Broadreach Intermediary Records.** Any records in QC&S's possession from Broadreach Intermediaries Inc. relating to the placement, administration, and claims handling under the Treaty, including the original placement slip and cover notes.

9. **QC&S Loss Reports.** Aggregate loss reports for all treaty years (TY 2019 through TY 2025), particularly the reports showing aggregate net incurred losses of $104.6 million for TY 2021, $189.7 million for TY 2022, and $128.7 million for TY 2023.

10. **Pinnacle Atlantic Non-Renewal Notice.** Copy of the non-renewal notice sent by Pinnacle Atlantic dated October 1, 2025.

As our analysis progresses, we anticipate the need to coordinate with several of your other advisors, including:

- **Harmon & Whitfield LLP** (Elaine Whitfield-Ross) regarding regulatory implications and the Treaty's compliance with New York Insurance Law credit-for-reinsurance requirements; - **Velthorn Actuarial Advisors LLC** (Dr. Stephen Tanaka) for discussions regarding the actuarial methodology underlying the disputed reserve allocations; and - **Meridian Whitcomb & Co. LLP** (Patricia Hernandez) regarding the audit treat

Would you be comfortable authorizing us to reach out to these advisors directly, or would you prefer to facilitate introductions? Either approach works well on our end.

Additionally, may I confirm our assumption that **Diana Kessler-Hoff** (VP, Claims & Reinsurance Recoveries, QC&S) and **Tobias Engström** (SVP, Reinsurance & Capital Markets, QIH) would be the appropriate primary internal contacts for claims file production and treaty/premium questions, respectively?

**Litigation Hold — Interim Preservation Obligation**

We will be issuing a formal litigation hold notice to QIH and QC&S tomorrow, March 4, 2026, along with acknowledgment forms for all relevant custodians. In the interim, I would ask that you please ensure that no documents relating to the Treaty, the Meridian Docks claims, the Veridian settlement, the Broadreach intermediary relationship, or any communications with Pinnacle Atlantic or its counsel are deleted, modifie

- Jeffrey Park will follow up directly with Diana Kessler-Hoff and Tobias Engström regarding document collection once you confirm the appropriate contacts. - Our team will begin treaty analysis immediately upon receipt of the executed Treaty. - We would like to schedule a call with you — and with Martin Galbraith, if you think appropriate — within this first week to discuss initial strategic impressions. - We are min

Rachel, thank you again for entrusting this matter to our team. Please do not hesitate to call me directly if you have any questions in the meantime.

Douglas Carmichael Partner Calderwood & Harkness LLP One Liberty Plaza, 55th Floor New York, NY 10006 Tel: (212) 555-4100 Email: dcarmichael@calderwoodharkness.com

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