CALDERWOOD & HARKNESS LLP Counselors at Law 1177 Avenue of the Americas, 34th Floor New York, NY 10036
Telephone: (212) 364-7800 Facsimile: (212) 364-7801 www.calderwoodharkness.com
August 19, 2025
Matter No. 1025-00002
VIA EMAIL AND Sundial Data Systems
Mr. Derek Mallory General Counsel & Chief Compliance Officer Quorum Insurance Holdings Corp. 280 Asylum Street, Suite 1400 Hartford, CT 06103
Re: Engagement of Calderwood & Harkness LLP — Market-Conduct Compliance Refresh for Quorum Insurance Holdings Corp. and Operating Subsidiaries Matter No. 1025-00002
Dear Mr. Mallory:
1. Purpose and Introduction
Calderwood & Harkness LLP ("C&H" or the "Firm") is pleased to confirm its engagement by Quorum Insurance Holdings Corp., a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol QIHC ("Quorum," "QIH," or the "Client"), to conduct a comprehensive market-conduct compliance refresh encompassing Quorum and its operating insurance subsidiaries and affiliated distribution entities, as more fully described herein.
This engagement has been triggered by the convergence of three significant developments bearing on the adequacy of Quorum's market-conduct compliance infrastructure. First, the recently concluded multi-state market-conduct examination cycle initiated by the Connecticut Department of Insurance ("CTDOI") in September 2023 under protocols established by the National Association of Insurance Commissioners ("NAIC") Market Regulation and Consumer Affairs (D) Committee, with the Florida Office of Insurance Regulation ("FL OIR") serving as lead examining state under the NAIC's coordinated-examination framework, resulted in a final examination report issued on May 12, 2025, containing fourteen formal findings across the areas of claims-handling timeliness, advertising practices, and policyholder complaint response procedures. Second, Internal Audit Report No. IA-2025-017, issued on August 4, 2025 by Quorum's Internal Audit department under the direction of the Chief Audit Executive, identified twenty-three control deficiencies in the market-conduct compliance program and assigned the program an overall rating of "Needs Significant Improvement" — the second-lowest rating on Quorum's four-tier internal assessment scale. Third, on August 12, 2025, the Audit & Compliance Committee (the "Committee") of the QIH Board of Directors, chaired by independent director Margaret Aldworth, formally directed management to retain new outside counsel to conduct this market-conduct compliance refresh on an expedited basis in light of pending regulatory deadlines and anticipated follow-up examinations.
This engagement letter sets forth the complete terms and conditions governing C&H's representation of Quorum in connection with the matters described herein. This letter supersedes any prior representations, proposals, term sheets, or discussions between the parties regarding the subject matter of this engagement, including but not limited to any communications exchanged during the proposal process in late July and early August 2025. In addition to the terms set forth below, this engagement is subject to C&H's Standard Terms and Conditions of Engagement, a copy of which is enclosed herewith as Enclosure A.
2. Scope of Engagement
2.1 Client Entities Covered
The engagement encompasses the following Quorum operating subsidiaries and affiliated entities, together with QIH as the holding company parent (collectively, the "Quorum Group"):
(a) Quorum Indemnity Insurance Company ("QIIC") — A Connecticut-domiciled stock property and casualty insurance company, NAIC Company Code No. 41927, currently licensed and authorized to transact insurance in twenty-eight (28) states and the District of Columbia. QIIC's principal lines of business include personal automobile insurance, homeowners insurance, and dwelling fire insurance. For the calendar year ended December 31, 2024, QIIC reported direct written premium ("DWP") of approximately $2.14 billion, as reflected in its Annual Statement filed with the CTDOI. QIIC's registered office is located at 280 Asylum Street, Suite 1400, Hartford, CT 06103. QIIC was the primary carrier subject to the FL OIR coordinated examination and is the entity to which the majority of the examination findings relate.
(b) Quorum Specialty Underwriters, Inc. ("QSU") — A Texas-domiciled stock property and casualty insurance company, NAIC Company Code No. 53812, currently licensed and authorized to transact insurance in twenty-two (22) states. QSU's principal lines of business include commercial general liability, professional liability (errors and omissions), and cyber liability. For the calendar year ended December 31, 2024, QSU reported DWP of approximately $1.38 billion, as reflected in its Annual Statement filed with the Texas Department of Insurance ("TDI"). QSU's registered office is located at 2600 Pearl Street, Suite 900, Dallas, TX 75201.
(c) Quorum Life & Annuity Company ("QLA") — An Arizona-domiciled stock life insurance company, NAIC Company Code No. 67403, currently licensed and authorized to transact insurance in nineteen (19) states. QLA's principal lines of business include term life insurance, whole life insurance, and fixed and indexed annuities. For the calendar year ended December 31, 2024, QLA reported DWP of approximately $640 million, as reflected in its Annual Statement filed with the Arizona Department of Insurance and Financial Institutions ("AZDIFI"). QLA's registered office is located at 4720 East Camelback Road, Suite 310, Scottsdale, AZ 85251.
(d) Pinnacle Bridge MGA, LLC ("Pinnacle Bridge") — A Delaware limited liability company organized to serve as Quorum's fintech-enabled distribution platform and managing general agent ("MGA"). Pinnacle Bridge holds MGA and/or surplus lines broker licenses in thirty-four (34) states and is authorized to underwrite, bind, and issue policies on behalf of QIIC and QSU pursuant to managing general agent agreements and binding authority contracts. For the calendar year ended December 31, 2024, Pinnacle Bridge's managed premium volume totaled approximately $890 million. Pinnacle Bridge's registered office is located at 280 Asylum Street, Suite 1400, Hartford, CT 06103. Pinnacle Bridge's advertising and marketing practices are a significant area of focus for this engagement, given the volume of non-compliant digital advertising identified in the examination and internal audit.
Across the three carrier subsidiaries (QIIC, QSU, and QLA), the total number of individual state insurance licenses under review is seventy-nine (79) (calculated as 28 + 22 + 19 = 69 carrier licenses, plus the ten additional states in which multiple Quorum carriers hold overlapping licenses, for a total of 79 discrete state-license pairs), representing thirty-eight (38) unique states and jurisdictions after de-duplication. The scope of review will address the regulatory requirements applicable in each such state as they pertain to the subject matter areas described in Section 2.2 below.
2.2 Subject Matter
The engagement covers market-conduct compliance across three principal subject matter areas, each of which corresponds to categories of findings identified in the FL OIR examination report and Internal Audit Report No. IA-2025-017:
(a) Claims-Handling Procedures and Timeliness. C&H will assess and remediate the Quorum Group's current claims-handling procedures with a particular focus on compliance with applicable state claims-handling statutes and regulations, including but not limited to unfair claims settlement practices acts, prompt-pay statutes, and claims acknowledgment and investigation deadlines. This workstream will include a detailed assessment of current claims acknowledgment timelines across all three carrier subsidiaries, an evaluation of prompt-pay compliance rates (including rates of compliance with interest-accrual requirements for late payments), and development and implementation of remediation measures to address the six formal claims-handling timeliness findings contained in the FL OIR examination report. As noted below, the FL OIR examination identified a claims file error rate of 11.8% across a sample of 625 claims files drawn from an examination universe of 12,400 closed claims, with the average time to initial claims acknowledgment at 18.7 business days — significantly in excess of the statutory maximums of 10 to 15 business days applicable across Quorum's licensed states.
(b) Advertising Practices. C&H will review and remediate the advertising review, filing, and approval protocols applicable to each Quorum Group entity, with particular focus on compliance with state advertising filing requirements, the NAIC Model Unfair Trade Practices Act provisions on misrepresentation, and state-specific advertising regulations in Florida, California, Illinois, and Ohio — each of which generated formal or informal findings in the examination or in separate regulatory correspondence. A central element of this workstream is the remediation of the forty-three (43) non-compliant digital advertising creatives identified during the examination period, thirty-one (31) of which (representing 72.1% of the total) were placed by Pinnacle Bridge's in-house marketing team without routing through QIIC's established advertising compliance review process. The absence of centralized advertising compliance controls over Pinnacle Bridge's marketing activities was identified as a significant control deficiency in Internal Audit Report No. IA-2025-017.
(c) Policyholder Complaint Response. C&H will assess and remediate the Quorum Group's complaint intake, logging, escalation, acknowledgment, investigation, and response procedures, including compliance with applicable state requirements for complaint response timelines, recordkeeping, and reporting to state regulators. This workstream will address the elevated complaint ratios identified in the examination and internal audit, including QIIC's complaint ratio of 1.47 complaints per 1,000 policies in force — nearly 80% above the NAIC industry median of 0.82 complaints per 1,000 policies — as well as QSU's complaint ratio of 0.93 and QLA's complaint ratio of 1.12.
2.3 Regulatory Context
The following pending or recently resolved regulatory matters fall within the scope of this engagement, and C&H's work plan has been designed to align with the deadlines and requirements arising from each:
(a) The FL OIR Corrective Action Plan ("CAP"), which was submitted by QIIC on June 30, 2025, accepted by FL OIR with modifications on July 28, 2025, and which requires full remediation of all fourteen examination findings and submission of a written compliance certification to FL OIR no later than December 31, 2025. The compliance certification must demonstrate that QIIC has implemented all corrective actions specified in the CAP and must be supported by documentary evidence of remediation.
(b) The CTDOI civil penalty of $275,000, assessed in connection with advertising compliance deficiencies identified during the coordinated examination, which was paid by QIIC on July 15, 2025 pursuant to a Consent Order and Stipulation entered between QIIC and the CTDOI.
(c) The FL OIR administrative fine of $180,000, assessed in connection with claims-handling timeliness violations identified during the coordinated examination, which is due and payable by QIIC on or before September 30, 2025.
(d) The California Department of Insurance ("CDI") Order to Show Cause issued on June 18, 2025, directing QIIC to appear before the CDI Administrative Law Judge to show cause why its California certificate of authority should not be suspended or revoked based on alleged violations of California Insurance Code §§ 790.03 and 790.06 relating to unfair claims settlement practices and advertising misrepresentation. The administrative hearing is currently scheduled for October 14, 2025, and preparation for this hearing will be addressed on an expedited basis commencing during Phase 1 of the engagement (see Section 3 below).
(e) Anticipated follow-up market-conduct examinations by FL OIR (expected to be initiated in Q4 2025), CDI (expected Q1 2026), and the New York Department of Financial Services ("NYDFS") (expected Q1 2026). C&H understands that the NYDFS examination will include particular focus on compliance with NYDFS Regulation 64 (11 NYCRR Part 216), which sets forth New York's prompt-pay requirements and claims-handling standards for insurers licensed in the state.
(f) Ongoing compliance obligations under NYDFS Regulation 64, including the requirement to pay or deny personal lines claims within thirty (30) business days of receipt of proof of loss, with interest at the statutory rate on late payments.
2.4 Limitations on Scope
The scope of this engagement is limited to the market-conduct compliance matters described above. The following matters are expressly excluded from the scope of this engagement:
(a) Representation of any Quorum Group entity in litigation matters, including but not limited to policyholder lawsuits, class actions, or declaratory judgment actions.
(b) Rate and form filings, including policy form development, actuarial analysis, rate review, or regulatory submissions relating to rates, rules, or forms with any state insurance department.
(c) Insurance holding company act filings, including Form A, Form B, Form D, Form E, and Form F filings, and any prior-approval or prior-notice filings required under state holding company act statutes.
(d) Financial examinations, including any responses to or preparations for financial condition examinations conducted by state insurance regulators.
C&H will coordinate with, but does not assume responsibility for, the separate engagement of Ridgeline Consulting Group, LLC ("Ridgeline"), Quorum's retained third-party market-conduct consulting firm. Ridgeline (Sandra Whitfield, Managing Director; 7900 Westpark Drive, Suite 220, McLean, VA 22102) is performing statistical claims-file sampling and complaint-ratio benchmarking as part of the broader remediation effort. C&H will rely upon Ridgeline's statistical analyses and sampling results as inputs into its legal assessment, but the accuracy and methodology of Ridgeline's work is the responsibility of Ridgeline and Quorum, and not of C&H.
C&H will also coordinate with Cartwright & Eddings, P.A. ("Cartwright & Eddings"), Quorum's local counsel in the State of Florida. Cartwright & Eddings (Rosa Delacroix, lead attorney; 301 East Pine Street, Suite 750, Orlando, FL 32801) is assisting with the FL OIR market-conduct examination response for QIIC, including ongoing communications with the FL OIR examiner-in-charge and logistical coordination regarding document production and examiner access. C&H will serve as lead strategic counsel on the FL OIR response, with Cartwright & Eddings continuing to handle day-to-day communications and filings in Florida as directed by C&H and the Client.
C&H notes for the record that the engagement of Quorum's prior outside regulatory counsel, Hargrove & Sattler LLP (Mitchell Ostrander, lead partner; 100 Pearl Street, 22nd Floor, Hartford, CT 06103), was concluded by mutual agreement in June 2025. C&H will review and, where appropriate, build upon work product from that prior engagement to the extent such work product is made available by the Client. C&H assumes no responsibility for the accuracy, completeness, or legal sufficiency of any work product or advice previously rendered by Hargrove & Sattler LLP.
3. Four-Phase Work Plan
C&H proposes to execute this engagement in four sequential phases as described below. The phases are designed to progress from assessment through remediation, training, and examination preparation in a logical sequence aligned with the regulatory deadlines described in Section 2.3, most critically the December 31, 2025 FL OIR compliance certification deadline and the anticipated Q1 2026 follow-up examinations.
3.1 Phase 1 — Assessment & Gap Analysis
Duration: August 19, 2025 through October 3, 2025 (approximately 6.5 weeks).
Description: Phase 1 consists of a comprehensive review and assessment of the Quorum Group's existing market-conduct compliance infrastructure, including all current compliance policies, claims-handling manuals, advertising review and approval protocols, complaint intake and response logs, and associated internal controls across all licensed states for QIIC (28 states), QSU (22 states), and QLA (19 states), representing a total of 79 individual state-license reviews. The objective of Phase 1 is to produce a complete inventory of the regulatory requirements applicable to the Quorum Group's market-conduct obligations and to map those requirements against the existing compliance framework to identify gaps, deficiencies, and areas requiring remediation.
Key Activities:
• Detailed review and analysis of the fourteen (14) formal findings from the FL OIR examination report dated May 12, 2025, including the six claims-handling timeliness findings, four advertising compliance findings, and four policyholder complaint response findings.
• Review and analysis of Internal Audit Report No. IA-2025-017 and the twenty-three (23) control deficiencies identified therein, including assessment of root causes and classification by severity.
• Analysis of complaint ratios across all three carrier subsidiaries: QIIC's complaint ratio of 1.47 per 1,000 policies in force (versus the NAIC industry median of 0.82 per 1,000 policies), QSU's complaint ratio of 0.93 per 1,000 policies, and QLA's complaint ratio of 1.12 per 1,000 policies. C&H will work with Ridgeline's benchmarking data to contextualize these ratios relative to peer companies and industry norms.
• Review and analysis of claims file error rate data from the FL OIR examination, which identified an 11.8% error rate across a stratified random sample of 625 claims files drawn from an examination universe of approximately 12,400 closed claims for the examination period (January 1, 2021 through December 31, 2023).
• Assessment of current claims acknowledgment timelines, with particular focus on the reported average of 18.7 business days from receipt of initial notice of loss to issuance of written acknowledgment, which significantly exceeds the statutory maximums of 10 to 15 business days applicable in Quorum's licensed states.
• Comprehensive review of the forty-three (43) non-compliant digital advertising creatives identified during the examination and internal audit, including analysis of the root causes of non-compliance, identification of responsible business units, and assessment of the adequacy of existing advertising compliance review workflows.
• Interviews with key Quorum personnel across claims operations, marketing, compliance, and customer service functions.
• Collection and review of relevant policies, procedures, manuals, and training materials currently in use across the Quorum Group.
• Compilation of applicable state laws, regulations, and bulletin/circular letter guidance for all 38 unique states in which Quorum Group entities are licensed.
Key Deliverables:
• Preliminary Assessment Memorandum — A comprehensive memorandum summarizing C&H's findings from the Phase 1 assessment, identifying all material compliance gaps and deficiencies, and providing a prioritized list of remediation actions ranked by regulatory risk, urgency, and estimated remediation complexity. The Preliminary Assessment Memorandum will be addressed to the Client and will be marked as attorney-client privileged and attorney work product.
• State-by-State Regulatory Requirements Matrix — A detailed matrix cataloguing the claims-handling, advertising-filing, and complaint-response requirements applicable in each of the 38 unique states in which the Quorum Group is licensed, including statutory and regulatory citations, filing deadlines, and key compliance parameters. This matrix will serve as the foundational reference document for the remediation work in Phases 2 through 4.
3.2 Phase 2 — Remediation & Policy Drafting
Duration: October 6, 2025 through November 14, 2025 (approximately 5.5 weeks).
Description: Building upon the findings and gap analysis completed in Phase 1, Phase 2 will focus on the development, drafting, and revision of the Quorum Group's market-conduct compliance policies, procedures, and standard operating procedures ("SOPs"). The objective of Phase 2 is to produce a complete suite of updated compliance documentation that addresses all identified gaps and deficiencies and positions the Quorum Group for compliance with all applicable state requirements and the terms of the FL OIR Corrective Action Plan.
Key Activities:
• Drafting of a comprehensive, revised Market-Conduct Compliance Manual for adoption by all three carrier subsidiaries and Pinnacle Bridge, incorporating uniform standards and procedures while addressing state-specific variations where required.
• Development of a uniform 10-business-day claims acknowledgment standard to be applied across all Quorum Group carriers, which exceeds the most restrictive statutory requirement currently applicable (Florida and New York each require acknowledgment within 14 calendar days; several states require acknowledgment within 10 to 15 business days). The adoption of a 10-business-day uniform standard is intended to ensure compliance across all jurisdictions and to provide a compliance margin.
• Creation of a centralized advertising review workflow for Pinnacle Bridge that requires all advertising and marketing materials — including digital ad creatives, social media content, website copy, email marketing campaigns, and third-party affiliate marketing materials — to be routed through QIIC's advertising compliance review process prior to publication or dissemination.
• Establishment of complaint-response timelines meeting the most restrictive applicable state deadlines across all Quorum-licensed jurisdictions, with built-in escalation protocols for complaints involving potential regulatory violations, litigation threats, or systemic issues.
• Coordination with Client's information technology department regarding systems and workflow automation requirements necessary to support the revised compliance procedures.
Key Deliverables:
• Revised Market-Conduct Compliance Manual (Draft) — For review and comment by Client prior to finalization and adoption.
• Advertising Review & Filing Procedures (Draft SOP) — Including the centralized Pinnacle Bridge advertising review workflow, filing requirements by state, and internal approval hierarchies.
• Claims-Handling Timeliness Remediation Protocol (Draft SOP) — Including the uniform 10-business-day acknowledgment standard, prompt-pay compliance procedures, interest-accrual calculations, and quality assurance sampling protocols.
• Consumer Complaint Response Procedures (Draft SOP) — Including complaint intake, logging, categorization, escalation, investigation, response, and regulatory reporting procedures.
Note Regarding CDI Hearing: Although the CDI Order to Show Cause hearing is scheduled for October 14, 2025, which falls during Phase 2, preparation for this hearing will be addressed on an expedited basis commencing during Phase 1. C&H will begin developing the hearing strategy, preparing the response to the Order to Show Cause, and coordinating with CDI during the first weeks of Phase 1, with the objective of having hearing preparation substantially complete by the end of the Phase 1 period.
3.3 Phase 3 — Training & Implementation
Duration: November 17, 2025 through December 5, 2025 (approximately 2.5 weeks).
Description: Phase 3 focuses on the development and delivery of compliance training materials and live training sessions to ensure that the revised policies and procedures developed in Phase 2 are effectively communicated to and adopted by the Quorum Group's operational personnel. Training will be delivered through a combination of live in-person sessions at Quorum's principal offices, live virtual sessions via webinar, and pre-recorded on-demand training modules for personnel unable to attend live sessions.
Training Audience: Approximately 815 Quorum Group employees, comprising:
• Claims adjusters: approximately 420 full-time equivalents ("FTEs"), located across Quorum's claims processing centers in Hartford, Connecticut; Dallas, Texas; and Scottsdale, Arizona.
• Marketing personnel: approximately 85 FTEs, including Pinnacle Bridge's in-house marketing team (approximately 32 FTEs) and marketing personnel at QIIC, QSU, and QLA.
• Customer service representatives: approximately 310 FTEs, including first-contact complaint intake personnel and supervisory staff responsible for complaint escalation.
Key Deliverables:
• Training Program Outline & Materials Summary — A comprehensive outline of the training program, including session agendas, learning objectives, assessment criteria, and a summary of all training materials developed.
• Training Completion Records — Documented records of training completion for each participant, suitable for use in connection with regulatory compliance certifications, including the FL OIR compliance certification due December 31, 2025, and for presentation to the Board Audit & Compliance Committee.
3.4 Phase 4 — Examination Preparation
Duration: December 8, 2025 through January 30, 2026 (approximately 7.5 weeks).
Description: Phase 4 is devoted to preparing the Quorum Group for the anticipated follow-up regulatory examinations by FL OIR (expected Q4 2025), CDI (expected Q1 2026), and NYDFS (expected Q1 2026), as well as completing the FL OIR compliance certification and preparing Board-level reporting on the status of the market-conduct compliance refresh.
Key Activities:
• Design and execution of mock-examination exercises simulating anticipated follow-up examinations by FL OIR, CDI, and NYDFS, including document request simulations, examiner interview preparations, and findings-response drills.
• Drafting of regulatory correspondence, including responses to anticipated examiner information requests and follow-up correspondence with FL OIR, CDI, and NYDFS as appropriate.
• Preparation and finalization of the FL OIR compliance certification, which is due on or before December 31, 2025 pursuant to the terms of the accepted Corrective Action Plan. C&H will draft the compliance certification letter and compile the supporting documentary evidence demonstrating completion of all corrective actions.
• Continued CDI Order to Show Cause hearing follow-up and post-hearing briefing as required.
• Preparation of Board Audit & Compliance Committee reporting materials summarizing the results of the engagement, the status of remediation efforts, and residual risk assessments.
Key Deliverables:
• Draft Letter to FL OIR — Compliance Progress Report — An interim progress report for submission to FL OIR in advance of the December 31, 2025 compliance certification deadline, demonstrating substantial progress on remediation.
• Board Audit & Compliance Committee Presentation Memorandum — A comprehensive memorandum and accompanying presentation materials for delivery to the Committee, summarizing the engagement findings, remediation actions taken, training completion metrics, and forward-looking compliance risk assessment.
• Examination Readiness Assessment — A written assessment of the Quorum Group's state of readiness for the anticipated FL OIR, CDI, and NYDFS follow-up examinations, including identification of any remaining areas of vulnerability and recommendations for ongoing compliance monitoring.
3.5 Total Engagement Duration
The total duration of the engagement is approximately twenty-three (23) weeks, commencing August 19, 2025 and concluding on or about January 30, 2026. The timeline set forth above may be adjusted by mutual written agreement of the parties based on regulatory developments, including but not limited to changes in examination schedules, extensions of regulatory deadlines, or the issuance of new regulatory orders or directives affecting the Quorum Group's market-conduct compliance obligations.
4. Engagement Team and Staffing
4.1 Team Members
C&H will assign the following attorneys to the engagement, each of whom will bill at the standard hourly rate indicated:
(a) Marcus Delgado — Responsible Partner. Practice Group: Intellectual Property (cross-staffed to this engagement due to the insurance-technology platform intellectual property overlaps arising from Pinnacle Bridge's fintech distribution platform and related digital marketing infrastructure). Standard Hourly Rate: $1,150 per hour. Role: Overall engagement supervision and strategic direction; client relationship management; senior strategic counsel on regulatory strategy and Board-level matters; presentations to the Board Audit & Compliance Committee; review and approval of all significant deliverables and regulatory filings.
(b) Catherine Bloom — Billing Partner. Practice Group: Intellectual Property. Standard Hourly Rate: $1,075 per hour. Role: Billing oversight and engagement administration, including review of invoices and time entries for accuracy and consistency; quality review of deliverables and work product; supplemental strategic counsel as needed.
(c) Carlos Espinoza — Lead Associate. Practice Group: Litigation (General), with substantial experience in regulatory enforcement matters, insurance department investigations, and administrative proceedings. Standard Hourly Rate: $725 per hour. Role: Day-to-day engagement management and primary point of contact for Client's operational personnel; lead drafter of assessment memoranda, regulatory correspondence, and compliance certification materials; lead strategist for the CDI Order to Show Cause hearing; Phase 1 assessment lead, including oversight of the State-by-State Regulatory Requirements Matrix; coordination with Ridgeline, Cartwright & Eddings, and other third-party service providers.
(d) Hannah Brinkley — Working Associate. Practice Group: Litigation (General), with a specific focus on insurance regulatory compliance matters. Standard Hourly Rate: $585 per hour. Role: State-by-state regulatory research and analysis across all 38 unique jurisdictions; preparation of the State-by-State Regulatory Requirements Matrix; drafting of SOP documents, including the Advertising Review & Filing Procedures, Claims-Handling Timeliness Remediation Protocol, and Consumer Complaint Response Procedures; development of training materials and training program outline; research and drafting support for the CDI hearing and examination preparation.
4.2 Additional Resources
C&H may, upon prior notice to the Client, assign additional attorneys, paralegals, legal assistants, or other professional staff to the engagement as reasonably necessary to meet the engagement timeline and deliverable requirements. The billing rates for any such additional personnel will be communicated to the Client in advance of any time being recorded. C&H will endeavor to staff the engagement efficiently and to use the most cost-effective mix of professional resources appropriate for each task.
In addition, C&H may, subject to the Client's prior written approval, retain specialized local counsel in jurisdictions other than Florida (where Cartwright & Eddings is already engaged) as needed to address state-specific regulatory requirements or to assist with regulatory proceedings in those jurisdictions. The fees and expenses of any such local counsel would be billed separately and would not be included within the fee arrangement described in Section 5 below.
4.3 Client Contacts
The following individuals have been designated as the Client's primary contacts for purposes of this engagement:
Primary Client Contact: Derek Mallory, General Counsel & Chief Compliance Officer, Quorum Insurance Holdings Corp. Mr. Mallory will serve as the primary point of contact for all engagement-related communications, including strategic direction, deliverable review, and authorization of matters requiring Client approval.
Additional Key Client Personnel:
• Priya Venkatesh, Vice President, Regulatory Affairs — Coordination on state regulatory requirements, regulatory correspondence, and examination logistics.
• Thomas Raeburn, Senior Vice President, Claims Operations — Coordination on claims-handling procedures, claims file sampling, and claims-related remediation measures.
• Lena Fujimoto, Director, Market Conduct & Consumer Affairs — Coordination on complaint response procedures, advertising compliance, and day-to-day market-conduct compliance operations.
The Client acknowledges that C&H will rely upon the accuracy and completeness of information and materials provided by the Client and its personnel. The Client will designate appropriate personnel to respond to C&H's requests for information and materials in a timely manner to enable C&H to meet the engagement timeline.
5. Fee Arrangement
5.1 Hybrid Fee Structure
The engagement employs a hybrid fee arrangement combining hourly billing for Phase 1 with a fixed fee for Phases 2 through 4, as described in detail below. This structure is designed to provide the flexibility necessary for the diagnostic and analytical work of Phase 1 while offering the Client fee certainty for the remediation, training, and examination preparation phases of the engagement.
5.2 Phase 1 — Hourly Billing with Soft Cap
Phase 1 (Assessment & Gap Analysis) will be billed on an hourly basis at the standard hourly rates set forth in Section 4.1 above (i.e., $1,150/hr for Mr. Delgado, $1,075/hr for Ms. Bloom, $725/hr for Mr. Espinoza, and $585/hr for Ms. Brinkley). Hourly billing for Phase 1 will be invoiced monthly in arrears with customary detail, including the identity of the timekeeper, the date on which services were performed, a narrative description of the work performed, the number of hours billed (in tenths of an hour), and the total amount for each time entry.
A soft cap of One Hundred Eighty-Five Thousand Dollars ($185,000) applies to total attorney fees billed during Phase 1. If, at any point during Phase 1, C&H reasonably anticipates that the total Phase 1 fees will exceed the soft cap, C&H will promptly notify the Client in writing, providing an explanation of the reasons for the anticipated overage and a revised estimate of the total Phase 1 fees. Any fees in excess of the $185,000 soft cap will require the Client's prior written approval before such excess fees are incurred. In the absence of such written approval, C&H will manage the Phase 1 work plan to remain within the soft cap.
5.3 Phases 2–4 — Fixed Fee
Phases 2 through 4 (Remediation & Policy Drafting, Training & Implementation, and Examination Preparation) will be billed at a combined fixed fee of Four Hundred Ten Thousand Dollars ($410,000).
The fixed fee will be invoiced in three (3) equal installments of $136,666.67 each, as follows:
(a) First installment: invoiced upon commencement of Phase 2 (on or about October 6, 2025).
(b) Second installment: invoiced upon commencement of Phase 3 (on or about November 17, 2025).
(c) Third installment: invoiced upon commencement of Phase 4 (on or about December 8, 2025).
The fixed fee covers all attorney time and standard work product for Phases 2 through 4 as described in this engagement letter. The fixed fee does not include out-of-pocket disbursements, which are addressed separately in Section 5.5 below. The fixed fee also does not include fees for the engagement of local counsel in jurisdictions other than Florida, should such engagement be authorized by the Client pursuant to Section 4.2 above.
5.4 Total Engagement Budget
The total engagement budget is Five Hundred Ninety-Five Thousand Dollars ($595,000), calculated as follows:
This budget is exclusive of out-of-pocket disbursements and expenses as described in Section 5.5 below. Actual fees for Phase 1 may be less than the $185,000 soft cap, in which case the total engagement cost would be correspondingly lower.
5.5 Disbursements and Expenses
In addition to the fees described above, the Client will reimburse C&H for all reasonable out-of-pocket disbursements incurred in connection with the engagement, including but not limited to:
• Travel expenses, including airfare (coach class for domestic flights under four hours; business class for flights over four hours, subject to the Client's travel policy), ground transportation (including car service, rental cars, and ride-sharing services), hotel accommodations, and meals incurred in connection with travel to Client offices, regulatory offices, or other locations necessary for the engagement;
• Court or regulatory filing fees, if applicable;
• Document reproduction and printing charges;
• Outside database and research charges, including charges for Westmark Data Systems, Sundial Solutions, and similar legal research services, billed at C&H's cost;
• Messenger and delivery charges, including overnight courier services;
• Long-distance telephone and teleconference charges, if any;
• Any other reasonable out-of-pocket expenses incurred with the Client's knowledge and approval.
Travel expenses will be incurred in accordance with the Client's corporate travel policy, a copy of which the Client will provide to C&H promptly following execution of this engagement letter. In the absence of a specific Client policy on any travel-related matter, C&H will apply its own standard travel guidelines, which are consistent with customary practices for professional services firms. Disbursements will be invoiced monthly along with fees, with supporting documentation available upon request.
5.6 Payment Terms
All invoices rendered by C&H are due and payable within thirty (30) days of the date of the invoice. Past-due amounts will accrue interest at the lesser of one percent (1.0%) per month (12% per annum) or the maximum rate of interest permitted by applicable law. C&H reserves the right to suspend work on the engagement in the event of a material payment delinquency, following reasonable notice to the Client and an opportunity to cure.
6. Engagement Context — Remediation Cost Summary
For the Client's reference and to provide context for the role of C&H's engagement within the broader remediation effort, C&H understands that the total estimated cost of the full market-conduct compliance remediation project — encompassing both internal and external resources — is approximately Two Million One Hundred Thousand Dollars ($2,100,000), as set forth in the following summary:
C&H's engagement budget of $595,000 represents the external legal counsel component of this total remediation investment. The Client has represented that the Quorum compliance department's annual operating budget for fiscal year 2025 is approximately $12.4 million, and the Client has confirmed that adequate budget authority exists within the organization to fund both the C&H engagement and the broader remediation effort without requiring supplemental budget approval. C&H does not independently verify the Client's budgetary representations and provides this summary solely for contextual purposes.
7. Confidentiality and Privilege
7.1 Attorney-Client Privilege
All communications between C&H and Client personnel made in connection with this engagement, including but not limited to oral discussions, written correspondence, electronic communications, memoranda, and presentations, are intended to be protected by the attorney-client privilege. The Client should take appropriate steps to preserve the privilege by clearly marking privileged communications as such and by limiting the distribution of privileged communications and work product to those individuals within the Quorum organization who have a legitimate need to know the contents thereof in connection with the matters addressed by this engagement.
All work product prepared by C&H in the course of this engagement, including memoranda, draft documents, analytical materials, research summaries, and presentation materials, is intended to be protected by the attorney work-product doctrine as materials prepared in anticipation of, or in connection with, potential regulatory enforcement actions and administrative proceedings. The Client should consult with C&H before disclosing any C&H work product to third parties, including but not limited to Ridgeline Consulting Group, external auditors, or regulators, to assess and preserve applicable privilege protections.
7.2 Confidentiality. C&H will maintain the confidentiality of all Client information provided in connection with this engagement, consistent with the applicable rules of professional conduct governing the practice of law in the State of New York, including but not limited to Rule 1.6 of the New York Rules of Professional Conduct, and C&H's obligations under applicable law.
C&H acknowledges that QIH is a publicly traded company listed on the Nasdaq Stock Market and that certain information provided to C&H in the course of this engagement may constitute material non-public information ("MNPI") within the meaning of the federal securities laws. All C&H personnel assigned to this engagement will comply with applicable securities laws, including the prohibitions on insider trading set forth in Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and with C&H's internal information-barrier policies and personal trading compliance procedures. C&H's General Counsel has been notified of the potential receipt of MNPI in connection with this engagement, and appropriate information barriers have been implemented within the Firm.
8. Conflicts of Interest
C&H has conducted a comprehensive conflicts-of-interest check in accordance with its standard conflict-clearance procedures, including a review of all current and former client representations, and has identified no conflicts of interest that would preclude this engagement under the applicable rules of professional conduct, including Rules 1.7 and 1.9 of the New York Rules of Professional Conduct.
C&H confirms that the Firm does not currently represent, and has not within the preceding twenty-four (24) months represented, any party in a matter adverse to Quorum or any Quorum Group entity in connection with the regulatory matters described in this engagement letter. C&H further confirms that the Firm does not currently represent, in any capacity, any of the state insurance regulators identified herein, including the CTDOI, FL OIR, CDI, TDI, AZDIFI, or NYDFS.
If a conflict of interest arises during the course of this engagement — whether by reason of C&H's acceptance of a new client engagement, a change in circumstances affecting an existing representation, or otherwise — C&H will promptly notify the Client and take all appropriate steps to address the conflict, which may include seeking an informed written waiver from the affected parties pursuant to the applicable rules of professional conduct, or withdrawing from this engagement or the conflicting representation, as the circumstances require.
9. Document Retention
C&H will retain all engagement files, including correspondence, memoranda, work product, research materials, and copies of Client-provided documents, in accordance with the Firm's standard document retention policy. Under C&H's current policy, engagement files are retained for a period of not less than ten (10) years following the conclusion of the engagement, after which they may be destroyed in accordance with the Firm's records management procedures.
Upon conclusion of the engagement, the Client may request the return of all original Client-provided materials in C&H's possession. The Client may also request copies of C&H work product prepared during the engagement. C&H will provide such materials within a reasonable time following receipt of the Client's request, subject to C&H's right to retain copies of all engagement files for its own records and to comply with applicable professional responsibility and regulatory requirements.
10. Coordination with Third Parties
As described in Section 2.4 above, C&H will coordinate with the following third-party service providers as necessary for the effective execution of this engagement:
(a) Ridgeline Consulting Group, LLC (Sandra Whitfield, Managing Director) — Ridgeline is performing statistical claims-file sampling, complaint-ratio benchmarking, and other quantitative analyses in support of the market-conduct compliance remediation. C&H will rely upon Ridgeline's sampling methodology, data outputs, and benchmarking results as inputs into its legal assessment and remediation recommendations.
(b) Cartwright & Eddings, P.A. (Rosa Delacroix, lead attorney) — Cartwright & Eddings is serving as Florida local counsel for the FL OIR examination response. C&H will provide strategic direction and oversight to Cartwright & Eddings on matters related to the FL OIR examination, CAP compliance, and the anticipated Q4 2025 follow-up examination, while Cartwright & Eddings will continue to handle day-to-day regulatory communications and filings in the State of Florida.
(c) Voss Kendrick & Associates, CPA, PLLC (Frank Castellano, engagement partner) — Voss Kendrick serves as the external and statutory auditor for the Quorum Group. C&H may coordinate with Voss Kendrick as needed on matters related to compliance controls, internal control over financial reporting (to the extent that market-conduct compliance controls intersect with financial reporting controls), and other audit-related matters. Such coordination will be conducted with appropriate attention to the preservation of attorney-client privilege and work-product protections.
The direction of, responsibility for, and fee arrangements with each of the above-referenced third-party engagements remain with the Client. C&H assumes no responsibility for the performance, work product, or professional judgments of Ridgeline, Cartwright & Eddings, or Voss Kendrick, except to the extent that C&H directs specific work within the scope of this engagement with the Client's authorization.
11. Termination
Either party may terminate this engagement at any time upon thirty (30) days' prior written notice to the other party. Termination by the Client will be effective upon expiration of the 30-day notice period, subject to C&H's obligations under applicable professional responsibility rules, including the obligation to take reasonable steps to protect the Client's interests.
Upon termination, the Client will be responsible for payment of all fees earned and disbursements incurred by C&H through the effective date of termination. For Phase 1, fees will be calculated based on the hourly rates set forth in Section 4.1 for all time recorded through the date of termination. In the case of termination during any of the fixed-fee phases (Phases 2, 3, or 4), the fixed fee will be prorated based on the proportion of work completed through the date of termination, as mutually agreed by the parties in good faith. In the event that the parties are unable to agree on the proportion of work completed, such determination shall be made by an independent third party mutually selected by the parties, whose determination shall be binding.
Upon termination, C&H will provide reasonable cooperation in transitioning the engagement to successor counsel designated by the Client, including but not limited to providing copies of all engagement files and work product, briefing successor counsel on the status of all pending matters and deliverables, and making C&H personnel available for a reasonable transition period. C&H's transition obligations are subject to the Client's payment of all outstanding fees and disbursements and to applicable professional responsibility rules.
12. Limitation of Liability
C&H's aggregate liability to the Client in connection with this engagement, whether arising in contract, tort, or otherwise, shall not exceed the total amount of fees actually paid by the Client to C&H under this engagement letter. This limitation applies to all claims, causes of action, and theories of recovery, including but not limited to claims for direct damages, consequential damages, lost profits, and any other form of damages.
Notwithstanding the foregoing, this limitation of liability shall not apply to liability arising from C&H's willful misconduct or gross negligence.
13. Governing Law and Dispute Resolution
This engagement letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law that would require the application of the laws of any other jurisdiction.
Any dispute, claim, or controversy arising out of or relating to this engagement letter, or the breach, termination, enforcement, interpretation, or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration in New York, New York, in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") then in effect. The arbitration shall be conducted by a single arbitrator selected in accordance with the AAA's arbitrator selection procedures. The award rendered by the arbitrator shall be final and binding upon the parties and may be entered as a judgment in any court of competent jurisdiction. Each party shall bear its own costs and attorneys' fees in connection with any arbitration proceeding, unless the arbitrator determines that the circumstances warrant a different allocation.
14. Entire Agreement; Amendments
This engagement letter, together with the Standard Terms and Conditions of Engagement enclosed as Enclosure A and the Privacy and Data Security Addendum enclosed as Enclosure B, constitutes the entire agreement between the parties with respect to the engagement described herein and supersedes all prior and contemporaneous discussions, proposals, negotiations, term sheets, correspondence, and understandings, whether oral or written, relating to the subject matter hereof.
No amendment, modification, or supplement to this engagement letter shall be effective unless set forth in a writing signed by an authorized representative of each party. No waiver of any provision of this engagement letter shall be effective unless in writing and signed by the party against whom enforcement is sought, and no such waiver shall constitute a waiver of any other provision or a continuing waiver of the same provision.
15. Acceptance and Execution
We are grateful for Quorum's confidence in selecting Calderwood & Harkness LLP for this important engagement, and we look forward to working with you and your team to achieve a successful outcome for the market-conduct compliance refresh. If the foregoing terms are acceptable, please indicate your acceptance by signing in the space provided below and returning one fully executed copy of this letter to my attention.
Please do not hesitate to contact me directly at (212) 364-7826 or at mdelgado@calderwoodharkness.com if you have any questions regarding this engagement letter or any aspect of the engagement.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Marcus Delgado
Title: Partner
Date: August 19, 2025
ACKNOWLEDGED AND ACCEPTED
By signing below, the undersigned confirms that he/she is duly authorized to execute this engagement letter on behalf of Quorum Insurance Holdings Corp. and that the Client agrees to be bound by the terms and conditions set forth herein, including the enclosed Standard Terms and Conditions of Engagement (Enclosure A) and Privacy and Data Security Addendum (Enclosure B).
QUORUM INSURANCE HOLDINGS CORP.
By: ________
Name: Derek Mallory
Title: General Counsel & Chief Compliance Officer
Date: ________
Enclosures:
Enclosure A: Calderwood & Harkness LLP Standard Terms and Conditions of Engagement (referenced herein and incorporated by reference; not reproduced in this letter)
Enclosure B: Calderwood & Harkness LLP Privacy and Data Security Addendum