Contract analysis

I. INTRODUCTORY PARAGRAPH AND OATH STATE OF CONNECTICUT, COUNTY OF HARTFORD, ss.: Diana Kessler-Hoff, being duly sworn, deposes and states the following:

1. I submit this affidavit in support of Respondent Quorum Casualty & Surety Company's ("QC&S") opposition to the claims asserted by Petitioner Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic") and in support of QC&S's motion to compel arbitration pursuant to Article 22 of Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty") and to stay the above-captioned litigation pending completion of such arbitration. All state

II. BACKGROUND AND QUALIFICATIONS OF THE AFFIANT A. Current Position

2. My full name is Diana Kessler-Hoff. I am currently employed as Vice President, Claims & Reinsurance Recoveries of Quorum Casualty & Surety Company. QC&S is a New York-domiciled stock property and casualty insurance company, NAIC Company Code No. 24891, with its principal office located at 200 Constitution Plaza, Suite 3200, Hartford, Connecticut 06103. QC&S is licensed to write property and casualty insurance in a

3. QC&S is the principal insurance subsidiary of Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation that is publicly traded on the Nasdaq Stock Market under the ticker symbol "QIHC." QIH maintains its corporate headquarters at 200 Constitution Plaza, Suite 3400, Hartford, Connecticut 06103. QIH is the ultimate parent of QC&S and several other insurance and insurance-related subsidiaries, but QC&S is the

4. I have served as Vice President, Claims & Reinsurance Recoveries of QC&S since January 2017, a period of approximately nine years. In this capacity, I am responsible for the overall oversight, management, and strategic direction of QC&S's claims department, including the handling, reserving, and resolution of commercial general liability claims, excess and umbrella liability claims, and professional liability (err

5. In addition to my claims management responsibilities, I directly supervise QC&S's reinsurance recoveries function. This function includes, among other things, the preparation and submission of reinsurance billings to QC&S's treaty and facultative reinsurers, the maintenance and reconciliation of reinsurance recoverables reported on Schedule F of QC&S's statutory financial statements filed with the Connecticut Insu

6. Prior to joining QC&S, I accumulated approximately twenty-three years of experience in insurance claims management, including senior claims leadership positions at National Mutual Indemnity Company (2008–2016) and Atlantic Coast Insurance Group (2001–2008), and earlier claims examiner and adjuster roles at Continental Omnivrel Insurance Corporation (1994–2001). Throughout my career, I have been directly involved i

7. I hold the Associate in Claims (AIC) and Chartered Property Casualty Underwriter (CPCU) professional designations. I am a member of the American Institute for Chartered Property Casualty Underwriters, the Claims and Litigation Management Alliance, and the Association of Insurance and Reinsurance Run-Off Companies. I have attended and presented at multiple industry conferences on topics relating to claims managemen

8. By virtue of my position, experience, and professional training, I am thoroughly familiar with, and directly responsible for, QC&S's compliance with the notice, reporting, and claims-handling obligations imposed by QC&S's reinsurance treaties, including the Treaty at issue in this proceeding. C. Familiarity with the Treaty and Dispute

9. I am personally familiar with Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"), which is the aggregate excess-of-loss reinsurance treaty between QC&S, as cedent, and Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic"), as reinsurer. A copy of the relevant excerpts of the Treaty (Articles 3, 5, 7, 9, 11, and 22) is attached hereto as Exhibit A and incorporated herein by reference.

10. The Treaty became effective on July 1, 2019, and covers losses arising under commercial general liability, excess and umbrella liability, and professional liability (errors and omissions) insurance policies issued or renewed by QC&S during the treaty period. The Treaty provides aggregate excess-of-loss reinsurance protection to QC&S, with a per-treaty-year aggregate retention of $120,000,000. Losses incurred in e

11. The initial treaty term was five years, from July 1, 2019 through June 30, 2024, with automatic annual extensions thereafter unless either party provided at least ninety (90) days' advance written notice of non-renewal. The Treaty was extended through June 30, 2026 by operation of the automatic extension provision. On October 1, 2025, Pinnacle Atlantic provided written notice of non-renewal, effective as of June

12. My department — Claims & Reinsurance Recoveries — was and is responsible for identifying individual claims that triggered cession under the Treaty, preparing loss reports and notices required by the Treaty, and coordinating the submission of reinsurance billings through Broadreach Intermediaries Inc. ("Broadreach"), which serves as the designated intermediary broker under Treaty Article 9. I have personally revie

13. I am familiar with the pre-suit demand letter dated February 14, 2026, sent by the law firm of Hargrove, Fitch & Calloway LLP on behalf of Pinnacle Atlantic, which disputes $78,400,000 in reinsurance recoverables previously paid by Pinnacle Atlantic under the Treaty and demands the return of that amount plus $12,600,000 in alleged pre-judgment interest, for a total claimed amount of $91,000,000. A copy of that le

III. QC&S'S REINSURANCE NOTICE PRACTICES AND PROCEDURES — GENERAL A. Overview of QC&S Claims Handling Infrastructure

14. QC&S maintains a dedicated claims department staffed by experienced claims professionals, including senior claims examiners, claims managers, and claims directors, each of whom possesses specialized expertise in the lines of business they oversee. QC&S's claims department is organized by line of business, with separate units responsible for commercial general liability claims, excess and umbrella liability claims

15. All claims received by QC&S are opened, reserved, and managed using QC&S's electronic claims management system, known internally as "ClaimsTrack." ClaimsTrack is a proprietary web-based platform that was developed and customized for QC&S and that serves as the single authoritative repository for all claims data, including claim number assignments, policyholder and claimant information, claims handler assignments,

16. All reserve-setting decisions made by QC&S's claims professionals are documented in ClaimsTrack, including the factual basis for initial reserves, the reasoning underlying subsequent reserve increases or decreases, and the identity of the claims professional and, where applicable, the claims committee members who authorized or approved the reserve changes. This system of documentation ensures that QC&S's reserve

17. QC&S maintains written internal procedures governing reinsurance treaty reporting and notice. These procedures, which are periodically updated and distributed to the relevant claims and reinsurance recovery personnel, set forth the specific steps that must be followed to ensure compliance with QC&S's obligations under each of its active reinsurance treaties, including the Treaty at issue in this proceeding.

18. Under Treaty Article 7, which is titled "Notice of Loss," QC&S is required to provide notice to Pinnacle Atlantic of individual claims or occurrences when certain specified thresholds are met. Specifically, the Treaty sets an individual claim reporting threshold: QC&S is required to provide notice to Pinnacle Atlantic when an individual claim's incurred loss — defined as the sum of paid losses and outstanding cas

19. Consistent with standard reinsurance market practice and the express terms of Treaty Article 9, all notices of loss under Article 7 are transmitted through Broadreach Intermediaries Inc. ("Broadreach"), the intermediary broker designated by the parties under the Treaty. Broadreach's principal office is located at 100 Wall Street, 18th Floor, New York, New York 10005. The designated account executive at Broadreach

20. In addition to individual claim notices required under Article 7, QC&S provides quarterly aggregate loss reports to Pinnacle Atlantic through Broadreach. These quarterly reports summarize QC&S's aggregate net incurred losses by treaty year and by covered line of business, and they provide Pinnacle Atlantic with ongoing visibility into the development of aggregate losses relative to the Treaty retention. The quart

21. It is important to understand the Treaty's structural framework in order to evaluate Pinnacle Atlantic's late notice allegations. The Treaty is an aggregate excess-of-loss treaty — not a per-occurrence or per-risk treaty. Under an aggregate excess-of-loss treaty structure, cessions to the reinsurer attach only when the cedent's total aggregate net incurred losses for a given treaty year exceed the specified reten

22. In this context, the individual claim notice obligation under Article 7 serves a fundamentally informational purpose: it is designed to keep the reinsurer informed of material individual loss exposures that may contribute to aggregate loss development, but the notice itself does not trigger a cession, nor does the timing of notice with respect to any individual claim affect the calculation of aggregate ceded loss

23. QC&S's practice, consistent with its obligations under Article 7, is to report individual claims promptly upon the claim crossing the $1,000,000 individual reporting threshold, and to provide ongoing aggregate loss development information through the quarterly reports described above. This two-track reporting system — individual claim notices for material exposures, plus quarterly aggregate reports — ensures that

IV. THE MERIDIAN DOCKS MASS TORT CLUSTER — CLAIMS HANDLING AND NOTICE TIMELINE A. Nature of the Meridian Docks Claims

24. The first principal claim cluster at issue in this dispute is a group of thirty-one (31) related commercial general liability bodily injury claims arising from alleged toxic contamination at the Meridian Docks industrial waterfront redevelopment project located in Newark, New Jersey (the "Meridian Docks claims"). The Meridian Docks project was a large-scale redevelopment of a formerly industrial waterfront site t

25. The policyholder for the Meridian Docks claims is Meridian Docks Development LLC, a New Jersey limited liability company that served as the developer and general contractor for the redevelopment project. QC&S issued a commercial general liability policy to Meridian Docks Development LLC bearing policy number CGL-2020-09844.

26. The thirty-one claims allege personal injuries suffered by construction workers who were employed at the redevelopment site and by residents of nearby neighborhoods. The claimants allege that they were exposed to hazardous substances — including volatile organic compounds, heavy metals, and asbestos-containing materials — that were disturbed, released, or inadequately remediated during the course of the redevelop

27. QC&S first established reserves for the Meridian Docks claims on March 15, 2021, following initial receipt and investigation of the underlying claims. At that time, the thirty-one claims were at a very early stage of development. Liability had not been established, and the nature and extent of the claimed injuries were uncertain. Medical documentation was preliminary and, for many of the claims, limited to initia

28. Each of the thirty-one individual claims was initially reserved at an amount well below the $1,000,000 individual claim reporting threshold established by Treaty Article 7. The initial per-claim reserves were set to reflect the preliminary and uncertain nature of the bodily injury allegations, the early-stage posture of the litigation, and the wide range of possible outcomes for claims of this type. At that stage

29. While the aggregate initial reserves across all thirty-one Meridian Docks claims were material to QC&S's overall commercial general liability book of business, no individual claim was reserved at or near the $1,000,000 level. Accordingly, as of March 15, 2021, no individual Meridian Docks claim had triggered an individual claim notice obligation under Treaty Article 7. C. Development Through 2021 and Early 2022

30. Throughout the remainder of 2021 and into early 2022, QC&S's claims professionals continued to actively monitor and manage the Meridian Docks claims. The claims handlers assigned to the Meridian Docks cluster received and reviewed medical reports, environmental testing data, and litigation discovery materials on a rolling basis as they became available. Individual claim reserves were adjusted from time to time as

31. During 2021, individual claim reserves for the Meridian Docks claims developed gradually upward as additional medical information and expert assessments were obtained, but the reserve development was incremental. No individual Meridian Docks claim reached the $1,000,000 individual reporting threshold at any point during calendar year 2021. QC&S's ClaimsTrack records confirm this fact, and a printout from ClaimsTr

32. In the first quarter of 2022 — approximately January through March 2022 — QC&S's claims department conducted a comprehensive reserve review of the entire Meridian Docks claim cluster. This review was prompted by the receipt of significant new information that materially altered the claims team's assessment of the likely exposure for a substantial number of the individual claims.

33. Specifically, the Q1 2022 reserve review was driven by three principal developments: (a) Newly obtained environmental testing data. In late 2021 and early 2022, additional rounds of soil, groundwater, and air quality testing were completed at and around the Meridian Docks site. The results of these tests identified significantly higher concentrations of certain hazardous substances than had been detected in earli

34. In light of these developments, QC&S's claims professionals conducted a thorough claim-by-claim reassessment of reserves for the Meridian Docks cluster. This reassessment resulted in material upward reserve adjustments for a significant number of the thirty-one claims. As a result of these adjustments, multiple individual Meridian Docks claims crossed the $1,000,000 individual reporting threshold under Treaty Art

35. QC&S provided notice of the Meridian Docks claims to Pinnacle Atlantic through Broadreach Intermediaries Inc. on May 22, 2022. The notice identified each of the individual Meridian Docks claims that had reached or exceeded the $1,000,000 individual reporting threshold, together with supporting information regarding the nature of the claims, the policy at issue, and the current reserve status. A copy of the Notice

36. The notice was provided promptly after the individual claims crossed the Article 7 reporting threshold in Q1 2022. The interval between QC&S's initial establishment of reserves for the Meridian Docks claims (March 15, 2021) and the provision of notice (May 22, 2022) — a period of approximately fourteen months and seven days — reflects the time during which no individual Meridian Docks claim was reserved at or abo

37. QC&S's position is that it fully complied with Article 7 by providing notice promptly after the individual claim threshold was triggered. The Treaty does not impose a notice obligation for claims that have not reached the specified threshold, and QC&S was under no obligation under Article 7 to provide notice of claims that were reserved below $1,000,000.

38. Moreover, QC&S had been reporting aggregate loss development information to Pinnacle Atlantic, including aggregate reserve amounts for the covered lines of business, in its quarterly aggregate loss reports throughout treaty year 2021 and treaty year 2022. Copies of those quarterly aggregate loss reports are attached hereto as Exhibit F. Pinnacle Atlantic therefore had ongoing visibility into the development of QC

39. QC&S's current net incurred loss across all thirty-one Meridian Docks claims is $41,200,000. These losses represent a significant component of the aggregate net incurred losses for treaty year 2022 (July 1, 2022 through June 30, 2023). The Meridian Docks claims continue to be actively managed by QC&S's claims department, and reserves are subject to ongoing evaluation and adjustment as the litigation progresses an

40. In its pre-suit demand letter dated February 14, 2026 (Exhibit I), Pinnacle Atlantic alleges that QC&S failed to provide timely notice of the Meridian Docks claims under Article 7, characterizing the approximately fourteen-month gap between the initial establishment of reserves in March 2021 and the provision of notice in May 2022 as a violation of the Treaty. I respectfully and categorically disagree with this c

41. As set forth above, the Treaty's Article 7 notice obligation is expressly keyed to the individual claim reporting threshold of $1,000,000. QC&S's obligation to provide notice arose when individual claims reached or exceeded that threshold — not at the earlier point when the claims were first opened and reserved at amounts well below the threshold. QC&S's notice was timely measured from when the Article 7 threshol

42. QC&S's ClaimsTrack records confirm that no individual Meridian Docks claim was reserved at or above $1,000,000 at any time prior to Q1 2022. The claims management system's audit trail of reserve entries and adjustments provides a complete, contemporaneous, and reliable record of the reserve development for each of the thirty-one claims, and I have personally reviewed those records in connection with the preparati

43. Additionally, to my knowledge, Pinnacle Atlantic has not identified any specific prejudice it suffered as a result of the timing of QC&S's notice. During 2021, the Meridian Docks claims were at early stages of development, with liability and damages both uncertain and evolving. Pinnacle Atlantic would not have been in a position to take any different or additional action had notice been given earlier. The Treaty

V. THE VERIDIAN FINANCIAL SERVICES E&O CLUSTER — CLAIMS HANDLING AND SETTLEMENT A. Nature of the Veridian Claims

44. The second principal claim cluster at issue in this dispute consists of three related errors and omissions / professional liability claims brought by investors against Veridian Financial Services Inc. ("Veridian"), a Delaware corporation (the "Veridian claims"). Veridian is a registered investment adviser and broker-dealer that markets and sells structured financial products to institutional and high-net-worth in

45. The three claims were brought by separate groups of investors and allege that Veridian engaged in material misrepresentations and omissions in connection with the marketing, structuring, and sale of certain structured financial products. The claimants allege that they suffered substantial investment losses as a direct result of Veridian's alleged misconduct. The three claims are referred to herein as Claim A, Cla

46. QC&S issued a professional liability (errors and omissions) policy to Veridian bearing policy number PL-2021-15327. The Veridian claims were reported to QC&S and processed under that policy. B. Claims Handling Process

47. QC&S assigned experienced professional liability claims handlers to the Veridian claims. The assigned claims professionals possessed extensive experience in handling errors and omissions claims arising from the financial services sector, including claims involving misrepresentation, suitability, and fiduciary duty allegations. The claims handlers worked under the supervision of QC&S's professional liability claim

48. QC&S retained qualified and experienced defense counsel to represent Veridian in connection with the three claims. Defense counsel was selected from QC&S's approved panel of professional liability defense firms, and the retention was made in the ordinary course of QC&S's claims handling operations.

49. QC&S's claims team conducted ongoing, rigorous evaluation of the Veridian claims throughout the pendency of the litigation. This evaluation included assessment of liability exposure, damages exposure, settlement value, defense costs, and the range of potential trial outcomes. The claims team regularly communicated with defense counsel, reviewed litigation pleadings and discovery materials, and obtained updated as

50. QC&S's claims committee reviewed the Veridian claims at multiple intervals during the course of the litigation. The claims committee is a senior-level internal body composed of experienced claims professionals and, for claims of this magnitude, the participation of members of QC&S's executive management. Each claims committee review was documented in written memoranda that set forth the committee's assessment of

51. The claims committee also considered the costs of continued defense. At the time the settlement was evaluated, QC&S had already incurred substantial defense costs in connection with the Veridian claims, and the committee assessed the likely additional defense costs through trial and any post-trial proceedings. These defense cost considerations were one of several factors weighed in the committee's settlement anal

52. After thorough evaluation and deliberation, QC&S settled the three Veridian claims on September 8, 2023, for a combined total of $34,500,000, allocated among the three claims as follows: (a) Claim A: $14,200,000 (b) Claim B: $12,800,000 (c) Claim C: $7,500,000

53. Copies of the executed settlement agreements for Claims A, B, and C are attached hereto as Exhibit E.

54. The settlement was achieved after extensive, arms-length negotiations between QC&S (through its retained defense counsel) and the respective claimants' counsel for each of the three claims. The negotiations took place over a period of several months and involved the exchange of detailed settlement demand and counteroffer correspondence, as well as in-person and telephonic negotiation sessions. The settlement proc

55. QC&S's claims committee authorized the settlement of each of the three Veridian claims after a thorough analysis of the litigation exposure. The committee's analysis indicated that the combined trial exposure — meaning the range of probable jury verdicts if the three cases proceeded to trial — significantly exceeded the aggregate settlement amount of $34,500,000. Specifically, the committee's internal assessment