Contract analysis

1. Quorum Casualty & Surety Company brings this Verified Counterclaim against Pinnacle Atlantic Reinsurance Ltd. to vindicate its contractual rights under a five-year aggregate excess-of-loss reinsurance treaty, designated Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"), entered into by QC&S and Pinnacle Atlantic on or about July 1, 2019. The Treaty is a sophisticated, arms'-length reinsurance arrangement between two

2. For Treaty Years 2022 and 2023, QC&S properly ceded an aggregate of $78,400,000 in losses — $69,700,000 for Treaty Year 2022 and $8,700,000 for Treaty Year 2023 — all of which were calculated, reported, billed, and paid in strict accordance with the Treaty's terms. Pinnacle Atlantic duly reviewed, accepted, and paid each of seven billing installments submitted between October 2022 and March 2024, without objection

3. Now, more than twenty months after completing its final payment in March 2024, Pinnacle Atlantic has reversed course. Through a pre-suit demand letter dated February 14, 2026, sent by its counsel Hargrove, Fitch & Calloway LLP, Pinnacle Atlantic demands the return of the full $78,400,000 in reinsurance recoverables, together with $12,600,000 in purported interest calculated at approximately eight percent per annum

4. Pinnacle Atlantic's demand letter rests on four grounds, each of which is factually and legally baseless: (i) that QC&S provided late notice under Article 7 of the Treaty regarding the Meridian Docks mass tort claims; (ii) that QC&S improperly allocated $22,300,000 in incurred-but-not-reported ("IBNR") reserve development to Treaty Year 2022 in alleged contravention of Article 5; (iii) that QC&S's settlement of th

5. Compounding these meritless claims, Pinnacle Atlantic has further breached the Treaty by threatening to file suit in this Court in derogation of the mandatory arbitration clause contained in Article 22 of the Treaty, which requires all disputes arising under or in connection with the Treaty to be resolved through a three-member arbitration panel convened under the ARIAS-U.S. Rules, with hearings seated in New York

6. By this Counterclaim, QC&S seeks (a) a declaratory judgment confirming the validity and enforceability of all cessions for Treaty Years 2022 and 2023 and QC&S's entitlement to retain the $78,400,000 in reinsurance recoverables previously paid by Pinnacle Atlantic, (b) a declaratory judgment that QC&S's premium reporting complied with the Treaty and that Pinnacle Atlantic has no termination right based on any alleg

7. Counterclaim-Plaintiff Quorum Casualty & Surety Company ("QC&S") is a stock property and casualty insurance company organized and existing under the laws of the State of New York. QC&S is domiciled in New York and maintains its principal offices at 200 Constitution Plaza, Suite 3200, Hartford, Connecticut 06103. QC&S is assigned NAIC No. 24891 by the National Association of Insurance Commissioners and is licensed

8. QC&S carries an A.M. Ridgeway rating of "A (Excellent)" with a Stable outlook, as of its most recent evaluation published in 2025. As of December 31, 2025, QC&S reported statutory surplus of approximately $1,420,000,000 on its annual statement filed with the New York State Department of Financial Services.

9. QC&S is a wholly owned subsidiary of Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol "QIHC." QIH is headquartered at 200 Constitution Plaza, Suite 3400, Hartford, Connecticut 06103, and had an approximate market capitalization of $6.7 billion as of February 28, 2026.

10. QC&S writes commercial casualty, professional liability, and specialty lines of insurance. For fiscal year 2025, QIH and its subsidiaries reported gross written premium of approximately $4.18 billion and net earned premium of approximately $2.93 billion.

11. QC&S is the cedent under the Treaty that is the subject of this action. B. Counterclaim-Defendant Pinnacle Atlantic Reinsurance Ltd.

12. Counterclaim-Defendant Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic") is a Bermuda Class 4 insurer registered with the Bermuda Monetary Authority under BMA Registration No. BMA-4R-2008-0331. Pinnacle Atlantic's registered office is located at Clarendon House, 14 Church Street, Hamilton HM 11, Bermuda. Pinnacle Atlantic also maintains a U.S. office at 1285 Avenue of the Americas, 28th Floor, New York, Ne

13. Pinnacle Atlantic is a subsidiary of Pinnacle Atlantic Group Holdings Ltd., a Bermuda exempted company. Pinnacle Atlantic is a global reinsurer specializing in casualty treaty and facultative reinsurance. For fiscal year 2025, Pinnacle Atlantic reported gross reinsurance assumed of approximately $9.6 billion.

14. Upon information and belief, Pinnacle Atlantic's Chief Executive Officer is Sir Edmund Haverford, its Chief Claims Officer is Lorraine Metcalf, and its Senior Vice President, Treaty Disputes & Recoveries, is Conrad Hesse.

15. Pinnacle Atlantic is the reinsurer under the Treaty that is the subject of this action.

16. Pinnacle Atlantic maintains a permanent office in New York County, transacts substantial reinsurance business in the State of New York, and is subject to the jurisdiction of this Court. The Treaty is governed by New York law pursuant to Article 16 thereof, and the Treaty's arbitration clause (Article 22) designates New York, New York as the seat of arbitration proceedings. JURISDICTION AND VENUE

17. This Court has subject-matter jurisdiction over this Counterclaim pursuant to CPLR § 3019, as the counterclaims asserted herein are compulsory and permissive counterclaims that arise from the same transaction and occurrences as the claims asserted by Pinnacle Atlantic in its Complaint. Each counterclaim concerns the same Treaty, the same cessions, and the same Treaty Years that are at issue in the main action.

18. This Court has personal jurisdiction over Pinnacle Atlantic. Pinnacle Atlantic maintains its U.S. office at 1285 Avenue of the Americas, 28th Floor, New York, New York 10019, and conducts substantial and continuous business in the State of New York and in New York County. Moreover, the Treaty is governed by New York law pursuant to Article 16, and the Treaty's arbitration clause designates New York as the seat of

19. Venue in New York County, Commercial Division, is proper pursuant to CPLR § 503, as Pinnacle Atlantic maintains offices in New York County and the Treaty's governing-law and arbitration provisions are connected to New York County.

20. QC&S reserves all rights to move to compel arbitration under Treaty Article 22, CPLR Article 75, and the Federal Arbitration Act, 9 U.S.C. §§ 1–16, and to stay this litigation pending completion of arbitration proceedings. The filing of this Counterclaim is made without waiver of QC&S's right to arbitrate and is intended solely to preserve QC&S's rights and defenses in the event this Court declines to compel arbi

21. On or about July 1, 2019, QC&S and Pinnacle Atlantic entered into Aggregate Excess-of-Loss Reinsurance Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"). The Treaty is an aggregate excess-of-loss reinsurance contract covering casualty lines of business written by QC&S. A true and correct copy of the Treaty, including all endorsements and addenda, is attached hereto as Exhibit A and is incorporated by reference.

22. The Treaty covers QC&S's commercial general liability, excess and umbrella liability, and professional liability policies — collectively, the covered lines of business. The Treaty provides reinsurance protection for aggregate net incurred losses in the covered lines in excess of a per-treaty-year retention.

23. The initial term of the Treaty was five years, from July 1, 2019 through June 30, 2024. The Treaty contains a provision for automatic annual extensions unless either party provides ninety (90) days' written notice of non-renewal. Pursuant to this automatic extension mechanism, the Treaty was extended twice: first, through June 30, 2025, and then through June 30, 2026.

24. On or about October 1, 2025, Pinnacle Atlantic provided timely notice of non-renewal to QC&S. Accordingly, the Treaty will lapse on June 30, 2026, and no further treaty years will commence after that date. All obligations with respect to cessions for prior treaty years, including run-off obligations, survive the expiration of the Treaty in accordance with its terms.

25. Article 6 of the Treaty establishes a per-treaty-year retention of $120,000,000 in aggregate net incurred losses. Once aggregate net incurred losses for a given treaty year exceed $120,000,000, QC&S is entitled to cede losses to Pinnacle Atlantic up to a per-treaty-year cession limit of $200,000,000 in excess of the retention — i.e., the Treaty covers aggregate net incurred losses from $120,000,000 to $320,000,00

26. Article 8 of the Treaty establishes the premium structure. Pinnacle Atlantic receives a treaty premium calculated at a provisional rate of 42% of ceded earned premium, subject to a slide-scale adjustment based on loss experience. The minimum premium rate is 35%, and the maximum premium rate is 52%.

27. The Treaty was placed by Broadreach Intermediaries Inc. ("Broadreach"), an intermediary broker with offices at 100 Wall Street, 18th Floor, New York, New York 10005. Broadreach is designated as the intermediary broker under Article 9 of the Treaty. The Broadreach account executive responsible for the Treaty placement was James "Jamie" Castellano.

28. Article 16 of the Treaty provides that the Treaty shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of law principles.

29. Article 22 of the Treaty contains a mandatory arbitration provision requiring all disputes arising under or in connection with the Treaty to be submitted to and resolved by a three-member arbitration panel sitting in New York, New York, in accordance with the ARIAS-U.S. Rules for the Resolution of U.S. Insurance and Reinsurance Disputes. B. QC&S's Performance Under the Treaty — Treaty Years 2022 and 2023

1. Treaty Year 2022 (July 1, 2022 — June 30, 2023).

30. Treaty Year 2022, as defined by the Treaty, encompasses the twelve-month period from July 1, 2022 through June 30, 2023.

31. QC&S's aggregate net incurred losses for Treaty Year 2022 totaled $189,700,000. This figure exceeds the per-treaty-year retention of $120,000,000 by $69,700,000, producing ceded losses of $69,700,000 ($189,700,000 minus $120,000,000) — an amount well within the per-treaty-year cession limit of $200,000,000.

32. QC&S timely and accurately reported loss development to Pinnacle Atlantic through Broadreach during Treaty Year 2022, in compliance with the reporting requirements set forth in Articles 5 and 7 of the Treaty. QC&S submitted periodic billings through the intermediary as losses developed and the retention was pierced. The first billing installment in the amount of $15,000,000 was submitted to Pinnacle Atlantic thro

33. Among the losses ceded for Treaty Year 2022 were losses arising from the Meridian Docks mass tort cluster — 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 in Newark, New Jersey. The underlying policyholder is Meridian Docks Development LLC, insured under QC&S Policy No.

34. In addition to the Meridian Docks cluster, ceded losses for Treaty Year 2022 included $22,300,000 in IBNR reserve development properly allocated to accident-year 2022 claims. This reserve development represented an actuarially sound estimate of losses that had been incurred but not yet reported as of the applicable valuation dates, and whose development factors crystallized during Treaty Year 2022. The IBNR alloc

35. The $22,300,000 IBNR reserve development was reviewed and confirmed by QC&S's consulting actuaries, Velthorn Actuarial Advisors LLC ("Velthorn"), located at 75 Ashbury Asset Advisors, Suite 1400, Boston, Massachusetts 02109. The Velthorn analysis was conducted under the supervision of Dr. Stephen Tanaka, FCAS, MAAA, a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Dr.

36. Pinnacle Atlantic reviewed and paid all billing installments attributable to Treaty Year 2022 without objection, reservation, or request for further information.

2. Treaty Year 2023 (July 1, 2023 — June 30, 2024).

37. Treaty Year 2023, as defined by the Treaty, encompasses the twelve-month period from July 1, 2023 through June 30, 2024.

38. QC&S's aggregate net incurred losses for Treaty Year 2023 totaled $128,700,000. This figure exceeds the per-treaty-year retention of $120,000,000 by $8,700,000, producing ceded losses of $8,700,000 ($128,700,000 minus $120,000,000) — an amount well within the per-treaty-year cession limit.

39. Among the losses ceded for Treaty Year 2023 were losses attributable to the Veridian Financial Services E&O cluster — three related professional liability claims brought by investors against Veridian Financial Services Inc., insured under QC&S Policy No. PL-2021-15327. The three claims alleged misrepresentation in connection with structured-product sales conducted by Veridian Financial Services Inc.

40. QC&S settled the Veridian E&O cluster on September 8, 2023, for a combined settlement amount of $34,500,000, allocated as follows: Claim A — $14,200,000; Claim B — $12,800,000; and Claim C — $7,500,000. The settlements were reached after extensive discovery, multiple mediations, and a rigorous litigation exposure analysis conducted by QC&S's in-house claims professionals and outside counsel. Each settlement was m

41. Of the $34,500,000 in total settlement payments, QC&S retained $26,100,000 net after application of other applicable reinsurance. The remaining $8,700,000 was ceded to the Treaty as part of QC&S's aggregate net incurred losses for Treaty Year 2023, after the $120,000,000 retention was exceeded.

42. The final billing installment for Treaty Year 2023, in the amount of $3,200,000, was submitted to Pinnacle Atlantic through Broadreach on or about March 29, 2024. Pinnacle Atlantic paid this installment, as it had paid all prior installments, without objection.

3. Total Cessions and Payment.

43. The total ceded losses for Treaty Years 2022 and 2023, combined, amount to $78,400,000 ($69,700,000 for Treaty Year 2022 plus $8,700,000 for Treaty Year 2023).

44. Pinnacle Atlantic paid the full $78,400,000 in reinsurance recoverables across seven (7) billing installments submitted between October 2022 and March 2024. Pinnacle Atlantic's payments were processed without delay, without offset, without reservation of rights, and without any contemporaneous objection to the validity of the cessions, the loss calculations, the notice provided, or the settlement decisions underl

45. At no time during the billing and payment process — spanning approximately eighteen months — did Pinnacle Atlantic exercise any right to audit QC&S's books and records (which right is afforded by Article 14 of the Treaty), request an independent actuarial review, issue a reservation of rights, or otherwise signal disagreement with any aspect of QC&S's cessions. C. QC&S's Compliance with Treaty Notice Requirements

46. Article 7 of the Treaty establishes notice requirements for underlying claims that may give rise to ceded losses. Article 7 requires the cedent to notify the reinsurer of individual underlying claims when the cedent's net incurred on such individual claim exceeds a reporting threshold of $1,000,000.

47. QC&S first reserved the thirty-one (31) Meridian Docks mass tort claims on or about March 15, 2021, shortly after the claims were first reported and QC&S completed an initial coverage evaluation. At the time of initial reserving, each individual Meridian Docks claim was reserved at an amount below the Article 7 individual claim reporting threshold of $1,000,000. The aggregate reserve across the thirty-one claims

48. Over the following twelve months, the Meridian Docks litigation developed significantly. Plaintiffs produced expert reports documenting the scope of alleged contamination, and additional claimants emerged. In the first quarter of 2022, reserve increases on individual Meridian Docks claims caused multiple claims to exceed the $1,000,000 individual claim reporting threshold set forth in Article 7, thereby triggerin

49. QC&S provided notice to Pinnacle Atlantic through Broadreach on May 22, 2022 — promptly after the notice obligation was triggered by the reserve increases in Q1 2022. The notice was comprehensive, identifying all thirty-one claims, providing then-current reserve information, and describing the nature of the mass tort litigation. The notice was transmitted in writing through the intermediary broker in accordance w

50. The interval of approximately fourteen months and seven days between the initial reserving of the claims on March 15, 2021 and the notice on May 22, 2022 is entirely consistent with the Treaty's requirements. The notice obligation was not triggered upon initial reserving, because individual claim reserves at that time fell below the $1,000,000 reporting threshold. The obligation arose only when reserve increases

51. Moreover, Pinnacle Atlantic has suffered no prejudice whatsoever from the timing of QC&S's notice. Pinnacle Atlantic received notice well before the $120,000,000 Treaty Year 2022 retention was pierced, well before any billing installment was submitted, and with ample time to evaluate the claims and exercise any rights it may have had under the Treaty. Pinnacle Atlantic thereafter reviewed and paid all billings wi

52. Article 3 of the Treaty governs the reporting of ceded earned premium, which forms the basis for calculation of the treaty premium payable to Pinnacle Atlantic.

53. For Treaty Year 2022, QC&S reported ceded earned premium of $38,400,000, calculated in accordance with the definitions and exclusions set forth in Article 3 and its subsections.

54. Pinnacle Atlantic now asserts that the correct figure for TY 2022 ceded earned premium is $45,200,000 — a difference of $6,800,000. Pinnacle Atlantic contends that QC&S underreported ceded earned premium by this amount.

55. The alleged $6,800,000 difference arises entirely from Pinnacle Atlantic's improper inclusion of premiums attributable to run-off portfolio transfer transactions. Article 3.4 of the Treaty expressly excludes from the definition of "ceded earned premium" any premiums arising from or attributable to run-off portfolio transfer transactions, novation agreements, or loss portfolio transfers. QC&S properly excluded the

56. QC&S's premium reporting was accurate, complete, and consistent with the Treaty's terms. No premium underreporting occurred.

57. Even assuming, arguendo, that a $6,800,000 premium discrepancy existed — which QC&S expressly denies — such a discrepancy would at most give rise to a premium adjustment under the slide-scale mechanism set forth in the Treaty. At the provisional rate of 42%, a $6,800,000 increase in ceded earned premium would produce an additional treaty premium of only $2,856,000 ($6,800,000 × 42%). Under no construction of the