1025-00002 · QUORUM INSURANCE HOLDINGS · Policy Drafts

claims-handling-timeliness-remediation-protocol-draft.docx DOCUMENT M&A / Corporate

9 / 12 ← → ✕

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

This document has been prepared by Calderwood & Harkness LLP at the direction of counsel for Quorum Insurance Holdings Corp. and is protected by the attorney-client privilege and the work-product doctrine. This document should not be disclosed to any third party without the prior written consent of Derek Mallory, General Counsel & Chief Compliance Officer, Quorum Insurance Holdings Corp. Any inadvertent disclosure does not constitute a waiver of privilege.

CLAIMS-HANDLING TIMELINESS REMEDIATION PROTOCOL

Standard Operating Procedure

(Draft).

Prepared by:

Calderwood & Harkness LLP 1177 Avenue of the Americas, 34th Floor New York, NY 10036

Matter No. 1025-00002

Authors:

Carlos Espinoza, Lead Associate Hannah Brinkley, Working Associate

Under the Supervision of Marcus Delgado, Responsible Partner

Prepared for:

Quorum Insurance Holdings Corp. 280 Asylum Street, Suite 1400 Hartford, CT 06103

Attention:

Derek Mallory, General Counsel & Chief Compliance Officer Thomas Raeburn, Senior Vice President, Claims Operations

Applicable Entities:

Quorum Indemnity Insurance Company (NAIC No. 41927) Quorum Specialty Underwriters, Inc. (NAIC No. 53812) Quorum Life & Annuity Company (NAIC No. 67403) Pinnacle Bridge MGA, LLC (as delegated claims administrator)

Draft Date: October 2025 (Phase 2 Deliverable)

Version: 1.0 — Draft for Internal Review

Supersedes: Prior Quorum Claims Procedures Manual, Version 4.2 (March 2022)

Target Effective Date: Upon approval by Thomas Raeburn and Derek Mallory; implementation under Phase 3 (November 17, 2025 – December 5, 2025)

Right-click to update Table of Contents

SECTION 1: PURPOSE AND BACKGROUND

1.1 Purpose

The purpose of this Claims-Handling Timeliness Remediation Protocol — Standard Operating Procedure (this "SOP") is to establish uniform, enterprise-wide claims-handling timeliness standards across all three Quorum Insurance Holdings Corp. ("QIH" or "Quorum") carrier subsidiaries — Quorum Indemnity Insurance Company ("QIIC"), Quorum Specialty Underwriters, Inc. ("QSU"), and Quorum Life & Annuity Company ("QLA") — as well as Pinnacle Bridge MGA, LLC ("Pinnacle Bridge"), in its capacity as a delegated claims administrator operating under binding authority agreements with QIIC and QSU. This SOP is designed to ensure full and consistent compliance with all applicable state statutory and regulatory requirements governing claims acknowledgment, claims investigation, and prompt payment of insurance claims across all jurisdictions in which the Quorum entities are licensed to transact the business of insurance.

This SOP constitutes a core deliverable of the market-conduct compliance refresh engagement between Quorum Insurance Holdings Corp. and Calderwood & Harkness LLP, Matter No. 1025-00002. The engagement was initiated on August 19, 2025, following the direction of the QIH Board of Directors' Audit & Compliance Committee that management retain new outside counsel to conduct a comprehensive review and remediation of the enterprise's market-conduct compliance program. This SOP has been developed during Phase 2 of the engagement (October 6, 2025 – November 14, 2025) and is intended to be finalized, approved, and deployed during Phase 3 (November 17, 2025 – December 5, 2025).

This SOP is designed specifically and directly to remediate the six (6) claims-handling timeliness findings identified in the final multi-state market-conduct examination report issued by the Florida Office of Insurance Regulation ("FL OIR") on May 12, 2025 (the "Final Examination Report"). The six findings addressed deficiencies in claims acknowledgment timing, investigation completion timelines, prompt-pay compliance rates, documentation of claims-handling activities, supervisory review of aged claims files, and consistency of claims-handling practices across jurisdictions. Each of the standards, procedures, escalation protocols, and reporting requirements set forth in this SOP has been calibrated to address one or more of these findings and to ensure that Quorum meets the remediation benchmarks and compliance certification deadline established in the Corrective Action Plan ("CAP") accepted by FL OIR on July 28, 2025.

Nothing in this SOP is intended to create any rights, obligations, or expectations in favor of any third party, including any policyholder, claimant, or regulatory authority. This SOP is an internal compliance document prepared under the direction of counsel and is subject to modification, revision, or withdrawal at the discretion of Quorum management and Calderwood & Harkness LLP.

1.2 Regulatory Background and Triggering Events

The regulatory events giving rise to this SOP are described in detail below.

Initiation of Multi-State Market-Conduct Examination. In September 2023, the Connecticut Department of Insurance ("CTDOI") initiated a coordinated multi-state market-conduct examination of Quorum Indemnity Insurance Company pursuant to the protocols and standards established by the National Association of Insurance Commissioners ("NAIC") Market Regulation and Consumer Affairs (D) Committee. Connecticut, as QIIC's state of domicile, served as the coordinating regulator. Following consultation among participating state regulators, the Florida Office of Insurance Regulation was designated as the lead examining state and assumed primary responsibility for the conduct and supervision of the examination, with participation by examiners from Connecticut, New York, Texas, California, and Ohio.

Examination Period. The examination covered the three-year period from January 1, 2021 through December 31, 2023 (the "Examination Period"). The scope of the examination encompassed QIIC's claims-handling practices, complaint-handling procedures, advertising and marketing activities, and underwriting practices across all lines of business and all states in which QIIC held an active certificate of authority during the Examination Period.

Final Examination Report. The Final Examination Report was issued by FL OIR on May 12, 2025, following a period of comment and response by QIIC management. The report contained fourteen (14) formal findings across three categories: (i) six (6) findings related to claims-handling timeliness deficiencies; (ii) five (5) findings related to advertising and marketing compliance violations; and (iii) three (3) findings related to complaint-handling inadequacies. This SOP addresses the six claims-handling timeliness findings; the advertising and complaint-handling findings are addressed in separate companion SOPs prepared concurrently by Calderwood & Harkness LLP.

Examination Universe and Sample. The examination universe comprised 12,400 QIIC claims files closed during the Examination Period. Examiners selected and reviewed a random stratified sample of 625 files, representing a 5.04% sample rate consistent with NAIC market-regulation sampling standards. Of the 625 sampled files, 74 files (11.8% error rate) were found to contain one or more claims-handling timeliness deficiencies. The error rate of 11.8% substantially exceeded the 7% threshold that FL OIR and participating state regulators consider indicative of systemic non-compliance, triggering the requirement for a formal corrective action plan.

Corrective Action Plan. QIIC submitted a Corrective Action Plan to FL OIR on July 1, 2025, as required by the Final Examination Report. FL OIR reviewed the submitted CAP and, on July 28, 2025, accepted the CAP with modifications. The modifications included a requirement that QIIC achieve full remediation and submit a written compliance certification, signed by an authorized officer, no later than December 31, 2025. The accepted CAP also required QIIC to engage an independent consulting firm to conduct statistical validation of claims-handling improvements and to submit quarterly progress reports to FL OIR.

Regulatory Penalties. In connection with the examination findings, two regulatory penalties were assessed against QIIC:

(a) The Connecticut Department of Insurance assessed a civil penalty in the amount of $275,000 for violations of Connecticut General Statutes §§ 38a-816(6) and 38a-817 related to unfair claims settlement practices and claims-handling timeliness. This penalty was paid by QIIC on July 15, 2025.

(b) The Florida Office of Insurance Regulation assessed an administrative fine in the amount of $180,000 for violations of Florida Statutes §§ 626.9541 and 627.70131 related to unfair claims settlement practices and failure to comply with property claims prompt-pay requirements. Payment of this fine was due on September 30, 2025.

The total regulatory penalties assessed in connection with the examination findings amount to $455,000. Additional penalties, fines, or enforcement actions may be assessed by other participating or non-participating state regulators, and the risk of such additional regulatory consequences constitutes a significant factor motivating the comprehensive remediation effort reflected in this SOP.

Internal Audit Findings. On August 4, 2025, Quorum's Director of Internal Audit, Neil Granger, issued Internal Audit Report No. IA-2025-017 (the "Internal Audit Report"). The Internal Audit Report assessed the enterprise-wide market-conduct compliance program across all three carrier subsidiaries — QIIC, QSU, and QLA — and identified twenty-three (23) control deficiencies in the areas of claims-handling timeliness, advertising compliance, complaint management, and supervisory oversight. The Internal Audit Report rated the overall market-conduct compliance program as "Needs Significant Improvement," which is the second-lowest rating on Quorum's five-tier internal audit rating scale (the tiers being, from highest to lowest: Effective, Adequate, Needs Improvement, Needs Significant Improvement, and Unsatisfactory). Several of the identified control deficiencies related directly to claims-handling timeliness, including the absence of automated system alerts for approaching statutory deadlines, inconsistent application of state-specific claims-handling timelines, inadequate supervisory review of aged claims files, and insufficient documentation of investigation activities.

Board Direction. On August 12, 2025, the QIH Board of Directors' Audit & Compliance Committee, chaired by independent director Margaret Aldworth, convened a special meeting to review the Final Examination Report, the Internal Audit Report, and the status of the QIIC Corrective Action Plan. Following discussion, the Committee directed management to retain new outside counsel to conduct a comprehensive compliance refresh engagement, encompassing a full review and remediation of claims-handling, advertising, and complaint-handling procedures across all Quorum entities. The Committee noted dissatisfaction with the level of progress achieved under the prior regulatory counsel engagement with Hargrove & Sattler LLP and directed that a new engagement be established with a firm possessing deep market-conduct examination experience.

Retention of Calderwood & Harkness LLP. Calderwood & Harkness LLP was retained effective August 19, 2025, pursuant to an engagement letter executed by Derek Mallory, General Counsel & Chief Compliance Officer of QIH. The engagement is led by Marcus Delgado, Responsible Partner, with Carlos Espinoza serving as Lead Associate and Hannah Brinkley serving as Working Associate. The engagement is structured in four phases: Phase 1 (Assessment & Gap Analysis, August 19 – October 4, 2025); Phase 2 (SOP Development & System Configuration, October 6 – November 14, 2025); Phase 3 (Training & Implementation, November 17 – December 5, 2025); and Phase 4 (Examination Preparation, December 8, 2025 – January 30, 2026).

1.3 Current Performance Deficiencies

The following performance metrics document the scope of the claims-handling timeliness deficiencies that this SOP is designed to remediate. These metrics were compiled from QIIC internal data systems and independently validated by Ridgeline Consulting Group, LLC ("Ridgeline"), a market-conduct consulting firm engaged to perform statistical claims-file sampling and complaint-ratio benchmarking in support of the remediation effort. Ridgeline's engagement is led by Sandra Whitfield, Managing Director.

Average Claims Acknowledgment Time. For calendar year 2024, QIIC's average claims acknowledgment time was 18.7 business days. This average substantially exceeds the statutory maximums applicable in the jurisdictions in which QIIC operates, which range from 10 to 15 business days depending on the state. Measured against the most stringent 10-business-day requirement (applicable in multiple states, including Arizona and several others), the 18.7-business-day average represents a deficiency of approximately 87% above the statutory maximum. Even measured against the most permissive 15-business-day standard, the average acknowledgment time exceeds the deadline by approximately 25%. The acknowledgment-time deficiency was identified as the most critical finding in the Final Examination Report and is the primary focus of this SOP's remediation standards.

Timely Claims Payment Rate. For calendar year 2024, QIIC paid only 74.2% of all claims within the applicable statutory prompt-pay windows, measured on a jurisdiction-by-jurisdiction basis. This performance falls significantly short of the enterprise's internal target of 95% timely payment, representing a gap of 20.8 percentage points. The shortfall is particularly acute in states with shorter prompt-pay windows, including Texas (where prompt-pay compliance was 68.4%) and New York (where compliance with NYDFS Regulation 64 requirements was 71.9%). Prompt-pay deficiencies expose the enterprise to statutory penalties, interest charges on overdue payments, and the risk of individual enforcement actions by state regulators. QSU and QLA prompt-pay rates were not the subject of the FL OIR examination but were assessed by Internal Audit and found to exhibit similar, though less severe, deficiencies.

Complaint Ratios. Consumer complaint ratios for calendar year 2024, as compiled from NAIC Consumer Information Source data and Quorum's internal complaint management system, reveal that all three carrier subsidiaries are performing above the NAIC median for their respective peer groups:

(a) QIIC recorded a complaint ratio of 1.47 complaints per 1,000 policies in force, compared to the NAIC median of 0.82 for property and casualty insurers of comparable size. QIIC's ratio is 79.3% above the NAIC median.

(b) QSU recorded a complaint ratio of 0.93 complaints per 1,000 policies in force, compared to the NAIC median of 0.82 for specialty commercial lines insurers. QSU's ratio is 13.4% above the NAIC median.

(c) QLA recorded a complaint ratio of 1.12 complaints per 1,000 policies in force, compared to the NAIC median of 0.82 for life and annuity insurers. QLA's ratio is 36.6% above the NAIC median.

Analysis of complaint narratives performed by Ridgeline Consulting Group and confirmed by Lena Fujimoto's Market Conduct & Consumer Affairs team indicates that claims-handling timeliness — particularly delayed acknowledgment and delayed payment — is the primary driver of consumer complaints across all three subsidiaries.

Total Consumer Complaints. Across all three carrier subsidiaries, a total of 2,847 consumer complaints were filed in calendar year 2024, including complaints received directly from consumers, complaints forwarded by state departments of insurance, and complaints submitted through the NAIC's Consumer Information Source. This volume represents a 14.2% increase over the 2,493 complaints received in calendar year 2023 and underscores the urgency of the remediation effort.

The performance deficiencies described above were confirmed through independent analysis by Ridgeline Consulting Group, LLC, under the direction of Sandra Whitfield, Managing Director. Ridgeline performed statistical claims-file sampling consistent with NAIC market-regulation protocols and complaint-ratio benchmarking against NAIC peer-group medians. Ridgeline's findings are consistent with the findings of the FL OIR examination and the Internal Audit Report and have been incorporated into the baseline metrics against which this SOP's remediation targets are measured.

1.4 Scope of Application

This SOP applies to all claims operations personnel across all three Quorum carrier subsidiaries and Pinnacle Bridge MGA, LLC, as follows:

Licensed States and Jurisdictions. QIIC is currently licensed to transact the business of insurance in twenty-eight (28) states, QSU is licensed in twenty-two (22) states, and QLA is licensed in nineteen (19) states. Collectively, these three carriers hold a total of seventy-nine (79) state-license combinations across thirty-eight (38) unique states and the District of Columbia. This SOP applies to claims-handling activities in every jurisdiction in which any Quorum carrier subsidiary holds an active certificate of authority.

Lines of Business. This SOP applies to all lines of business written by the Quorum carrier subsidiaries, including:

(a) QIIC: personal automobile, homeowners, and dwelling fire insurance;

(b) QSU: commercial general liability, professional liability (errors and omissions), and cyber liability insurance; and

Delegated Claims Authority. This SOP applies with equal force to claims handled directly by carrier claims departments and to claims handled by Pinnacle Bridge MGA, LLC, under delegated claims authority. Pinnacle Bridge operates as Quorum's fintech distribution platform and is licensed as a managing general agent in thirty-four (34) states. In calendar year 2024, Pinnacle Bridge managed approximately $890 million in premium volume on behalf of QIIC and QSU. The specific procedures governing Pinnacle Bridge's compliance obligations under this SOP are set forth in Section 12 below.

Personnel. Approximately 420 claims adjuster full-time equivalents ("FTEs") across all subsidiaries and Pinnacle Bridge are subject to this SOP. All such personnel will receive mandatory training under Phase 3 of the Calderwood & Harkness engagement (November 17, 2025 through December 5, 2025), as described in Section 10 below. In addition, this SOP applies to all claims supervisors, regional claims managers, and senior claims operations leadership who exercise oversight of claims-handling activities.

SECTION 2: DEFINITIONS

2.1 Key Terms

For purposes of this SOP, the following terms have the meanings ascribed to them below. Where a term is not defined in this Section, it shall have the meaning commonly ascribed to it in insurance industry usage or as defined by applicable state statute or regulation.

"Acknowledgment" means a written or electronic communication transmitted to the claimant, policyholder, or authorized representative confirming receipt of the claim and providing, at a minimum, the assigned claim number, the name and direct contact information of the assigned adjuster, and a summary of the next steps in the claims-handling process. An Acknowledgment must satisfy the requirements of the applicable state's unfair claims settlement practices statute or regulation, and where a state prescribes a specific form or content for the acknowledgment, the state-specific requirement controls.

"Business Day" means any day other than a Saturday, Sunday, or a state or federal holiday officially observed in the jurisdiction where the claim was filed or where the policy was issued. For purposes of computing statutory deadlines under this SOP, if a claim involves multiple jurisdictions (for example, a policy issued in one state with a loss occurring in another state), the most restrictive business-day definition shall apply — that is, the definition that results in the shortest available compliance window.

"Claim" means any first-party or third-party demand, request, or submission for payment, benefits, or indemnification under an insurance policy issued by QIIC, QSU, or QLA, regardless of the method or channel through which the demand is communicated, including demands made by telephone, in writing, electronically through a web portal or mobile application, or through an agent, broker, or delegated authority such as Pinnacle Bridge MGA, LLC.

"Claims Acknowledgment Deadline" means the statutory or regulatory deadline by which an insurer must acknowledge receipt of a claim, as established by the laws and regulations of the state in which the claim was filed or the policy was issued. The Claims Acknowledgment Deadline varies by state; however, this SOP adopts a uniform ten (10) business-day standard as the enterprise minimum, as described in Section 4.1 below.

"Prompt-Pay Window" means the statutory or regulatory period within which an insurer must pay or deny a claim (or a portion thereof) following the completion of the investigation and the determination of the amount due, as established by applicable state law. The Prompt-Pay Window varies by state and, in some jurisdictions, by line of business.

"Escalation Trigger" means a system-generated or manual alert indicating that a claim is approaching a statutory or internal deadline and requires supervisory or management intervention. Escalation Triggers are classified in tiers (Tier 1 through Tier 4) as described in Section 6.1 below.

"SLA" means a Service Level Agreement, which is an internal performance benchmark established by Quorum that is more stringent than the applicable statutory or regulatory requirement. SLA targets are aspirational performance goals designed to provide a compliance buffer and are not themselves regulatory requirements.

"FNOL" means First Notice of Loss, which is the initial notification received by the insurer (or its agent, broker, or delegated authority) that a loss or event giving rise to a potential claim has occurred. The date and time of FNOL receipt establishes the start of the statutory clock for claims acknowledgment and, in some jurisdictions, for investigation and payment timelines.

"Statutory Maximum" means the most stringent applicable deadline imposed by the state in which the policy was issued or the claim was filed, as determined by reference to the State-by-State Regulatory Requirements Matrix maintained by Calderwood & Harkness LLP. Where multiple state deadlines apply to a single claim, the shortest deadline (i.e., the most restrictive requirement) controls for purposes of this SOP.

"State-by-State Regulatory Requirements Matrix" or "Matrix" means the comprehensive reference document prepared by Hannah Brinkley of Calderwood & Harkness LLP setting forth all applicable claims-handling, advertising, and complaint-handling timeliness requirements for each state in which QIIC, QSU, or QLA is licensed to transact business. The Matrix is maintained as a living document and is updated as state legislatures and departments of insurance amend applicable requirements.

"CAP" means the Corrective Action Plan submitted by QIIC to FL OIR on July 1, 2025, as modified and accepted by FL OIR on July 28, 2025, requiring full remediation and compliance certification by December 31, 2025.

"Final Examination Report" means the final multi-state market-conduct examination report issued by the Florida Office of Insurance Regulation on May 12, 2025, containing fourteen (14) formal findings.

"Internal Audit Report" means Internal Audit Report No. IA-2025-017, issued August 4, 2025, by Director of Internal Audit Neil Granger.

2.2 Subsidiary abbreviations

The following abbreviations are used throughout this SOP to refer to the Quorum carrier subsidiaries and Pinnacle Bridge MGA:

Throughout this SOP, references to "Quorum" or "the enterprise" refer collectively to Quorum Insurance Holdings Corp. and all of its subsidiary entities, unless the context requires reference to a specific entity. References to "the carriers" or "carrier subsidiaries" refer collectively to QIIC, QSU, and QLA.

SECTION 3: GOVERNANCE AND ACCOUNTABILITY

3.1 Program Owner

Thomas Raeburn, Senior Vice President, Claims Operations, Quorum Insurance Holdings Corp., is hereby designated as the enterprise-wide program owner for claims-handling timeliness compliance under this SOP (the "Program Owner"). In this capacity, Mr. Raeburn bears primary responsibility for the implementation, operation, and ongoing effectiveness of the claims-handling timeliness standards, escalation protocols, and reporting requirements established by this SOP across all three carrier subsidiaries and Pinnacle Bridge MGA, LLC.

Mr. Raeburn has direct reporting responsibility to Derek Mallory, General Counsel & Chief Compliance Officer of QIH, on all matters related to claims-handling timeliness compliance and remediation progress. Mr. Raeburn also reports ultimately to Vivian Trask, Chief Executive Officer of QIH, on matters requiring executive-level decision-making or resource allocation, including staffing adjustments, system upgrades, and escalation of material compliance incidents.

Mr. Raeburn is identified as the responsible Quorum personnel for all claims-related CAP milestones in the FL OIR Corrective Action Plan Compliance Tracker, an internal working document maintained by Priya Venkatesh, Vice President of Regulatory Affairs, to monitor remediation progress against the CAP milestones and the December 31, 2025 compliance certification deadline. Any deviation from CAP milestones or risk of failure to meet the compliance certification deadline must be escalated by Mr. Raeburn to Mr. Mallory immediately upon identification.

3.2 Compliance Oversight

In addition to the Program Owner, the following individuals exercise oversight responsibilities relevant to claims-handling timeliness compliance under this SOP:

Lena Fujimoto, Director of Market Conduct & Consumer Affairs, provides second-line oversight of claims-handling compliance metrics and complaint correlation data. Ms. Fujimoto is responsible for conducting internal compliance testing (as described in Section 7.2), monitoring consumer complaint trends related to claims timeliness, coordinating training logistics for the Phase 3 training rollout (as described in Section 10), and reviewing and approving acknowledgment letter templates and other consumer-facing communications for regulatory compliance. Ms. Fujimoto reports to Derek Mallory and works in close coordination with Thomas Raeburn.

Priya Venkatesh, Vice President of Regulatory Affairs, serves as the primary regulatory liaison for all state department of insurance communications concerning claims-handling timeliness, including correspondence with FL OIR, CTDOI, TDI, CDI, NYDFS, ADIFI, and other state regulators. Ms. Venkatesh is responsible for maintaining the State-by-State Regulatory Requirements Matrix, preparing and submitting CAP progress reports to FL OIR, coordinating responses to regulatory inquiries and data calls, and managing the enterprise's participation in anticipated follow-up examinations. Ms. Venkatesh reports to Derek Mallory.

Derek Mallory, General Counsel & Chief Compliance Officer, retains ultimate compliance authority over all market-conduct compliance matters, including claims-handling timeliness. Mr. Mallory is the designated recipient for all Tier 4 (Breach) escalation notifications, as described in Section 6.1, and is responsible for board-level reporting to the Audit & Compliance Committee. Mr. Mallory exercises supervisory authority over all compliance oversight personnel and serves as the primary point of contact for Calderwood & Harkness LLP on engagement matters.

Neil Granger, Director of Internal Audit, will perform periodic independent testing of SOP adherence as part of ongoing internal audit activities, consistent with the third-line-of-defense governance model. Mr. Granger's testing will include verification that the claims-handling timeliness standards, escalation protocols, and reporting requirements of this SOP are being followed in practice across all subsidiaries and Pinnacle Bridge. Results of internal audit testing will be reported to the Audit & Compliance Committee through the normal internal audit reporting channel, with copies provided to Derek Mallory and Thomas Raeburn.

3.3 Pinnacle Bridge MGA Oversight

Pinnacle Bridge MGA, LLC, when acting under delegated claims authority on behalf of QIIC or QSU, is required to comply with all timeliness standards, escalation protocols, reporting requirements, and documentation standards set forth in this SOP without exception or modification. The delegated claims authority does not relieve QIIC or QSU of regulatory responsibility for the handling of claims by Pinnacle Bridge; to the contrary, each carrier retains full regulatory accountability for the conduct of its delegated authority.

QIIC and QSU claims management must receive weekly compliance dashboards from Pinnacle Bridge for all claims handled under delegated authority. These dashboards must include, at a minimum, the metrics described in Section 8.1 below, broken down by state and line of business, and must be delivered no later than the second business day of each week covering the immediately preceding week's activity.

Thomas Raeburn, as Program Owner, or his designee has the authority to revoke, restrict, or suspend Pinnacle Bridge's delegated claims authority, in whole or in part, if Pinnacle Bridge's timeliness metrics fall below the thresholds defined in Section 6 of this SOP. Specifically, if Pinnacle Bridge's timeliness performance falls below the 85% compliance threshold for any calendar month (as measured by the percentage of claims acknowledged and paid within applicable statutory deadlines), Mr. Raeburn may impose enhanced oversight measures, including but not limited to requiring pre-approval of all claims determinations, reducing the scope of delegated authority, or temporarily suspending delegated claims-handling activities pending remediation. Any revocation or material restriction of delegated authority must be communicated to Derek Mallory and documented in writing.

3.4 Board Reporting

Remediation status under this SOP and the broader compliance refresh engagement shall be reported to the QIH Board of Directors' Audit & Compliance Committee at each regularly scheduled meeting of the Committee, which currently occur on a quarterly basis, and on an ad hoc basis as warranted by material developments, including but not limited to receipt of new examination findings, assessment of additional regulatory penalties, material breach incidents, or significant changes in claims timeliness metrics. The Committee is chaired by independent director Margaret Aldworth, who has been designated by the full Board as the lead director for market-conduct compliance oversight.

Beginning in the first quarter of 2026, quarterly compliance scorecards summarizing claims timeliness metrics across all three carrier subsidiaries will be provided to the Audit & Compliance Committee. These scorecards will incorporate benchmarking data from Ridgeline Consulting Group and will track progress against the KPIs and targets established in Section 8.1 of this SOP. The format and content of the quarterly compliance scorecards will be developed by Lena Fujimoto in consultation with Derek Mallory and Calderwood & Harkness LLP.

SECTION 4: UNIFORM CLAIMS TIMELINESS STANDARDS

4.1 Claims Acknowledgment Standard

Enterprise-Wide Standard. All claims received by QIIC, QSU, QLA, or Pinnacle Bridge MGA, LLC must be acknowledged in writing (or electronically, where electronic communication is permitted by applicable state law and the policyholder or claimant has consented to electronic delivery) within ten (10) business days of receipt of FNOL. This ten-business-day standard applies uniformly across all subsidiaries, all lines of business, and all jurisdictions, regardless of whether the applicable state statute permits a longer acknowledgment period.

Rationale for Uniform Standard. This ten-business-day enterprise-wide standard has been adopted because it corresponds to the most stringent state statutory requirement for claims acknowledgment across all thirty-eight (38) unique states in which the Quorum carrier subsidiaries are licensed. By adopting the most restrictive requirement as the enterprise standard, Quorum ensures uniform compliance regardless of the jurisdiction in which a particular claim is filed or policy was issued, eliminates the risk of adjuster error in applying variable state-specific deadlines, and simplifies system configuration for automated deadline calculation and escalation alerts.

Current Performance Gap. The current enterprise average for claims acknowledgment time is 18.7 business days (based on QIIC 2024 data), which is approximately 87% above the ten-business-day enterprise standard. Reducing the average acknowledgment time from 18.7 business days to at or below 10 business days is the single most critical remediation objective of this SOP and is required by the FL OIR Corrective Action Plan.

State-Specific Deadlines. For states with claims acknowledgment requirements shorter than ten (10) business days (if any exist within the Quorum licensing footprint), the state-specific deadline controls and must be observed in addition to the enterprise standard. Adjusters and supervisors must consult the State-by-State Regulatory Requirements Matrix prepared by Hannah Brinkley of Calderwood & Harkness LLP for the specific acknowledgment deadline applicable to each jurisdiction. The Matrix identifies any jurisdictions in which the applicable acknowledgment deadline is measured in calendar days rather than business days, and adjusters must apply the correct unit of measurement as specified.

4.2 Internal SLA Targets (Aspirational)

In addition to the ten-business-day compliance standard, this SOP establishes the following internal Service Level Agreement targets, which are aspirational performance benchmarks designed to provide a buffer against compliance failures:

Acknowledgment SLA Target. Seven (7) business days from FNOL receipt. This target is set at approximately 30% below the ten-business-day compliance standard, providing a three-business-day buffer to accommodate processing delays, temporary system outages, staffing disruptions, and surge volumes associated with catastrophe events or seasonal claim activity.

Interim Milestones. The following interim milestones have been established to track progress toward the compliance standard and SLA target:

(a) By November 30, 2025, reduce the average claims acknowledgment time from the current 18.7 business days to no more than 12 business days across all subsidiaries.

(b) By December 31, 2025, achieve full compliance with the ten-business-day enterprise standard, with an average acknowledgment time at or below 10 business days, as required by the FL OIR Corrective Action Plan compliance certification deadline.

Rationale. The seven-business-day internal SLA target is not a regulatory requirement; it is an operational best practice designed to provide margin for the inevitable variability in claims processing times. Industry experience demonstrates that insurers targeting the statutory minimum without an internal buffer frequently experience compliance failures during periods of elevated claim volume, staff turnover, or technology disruptions. The three-business-day buffer afforded by the SLA target is intended to substantially reduce the likelihood of such failures.

4.3 Investigation Timeliness Standards

Property & Casualty Claims (QIIC and QSU). For all property and casualty claims handled by QIIC and QSU, the investigation must be completed and a coverage determination must be communicated to the claimant within thirty (30) calendar days of FNOL receipt, unless the nature and complexity of the claim reasonably require additional investigation. Where additional investigation is required, the adjuster must provide written notice to the claimant at least every thirty (30) calendar days with a status update explaining the reason for the delay, the additional investigation steps being undertaken, and the estimated timeline for resolution. The obligation to provide periodic status updates continues until the claim is resolved through payment, denial, or withdrawal.

Life & Annuity Claims (QLA). For death benefit claims under life insurance policies issued by QLA, the investigation must be completed and payment or denial must be communicated to the beneficiary or authorized representative within thirty (30) calendar days of receipt of satisfactory proof of loss, including a certified copy of the death certificate and a completed claim form. For annuity surrender requests and withdrawal requests, processing must be completed within seven (7) business days of receipt of completed documentation, including any required surrender forms, tax withholding elections, and identity verification.

State-Specific Variations. The investigation timeliness standards set forth above represent enterprise minimums. Where applicable state law imposes shorter investigation deadlines, the state-specific deadline controls. Adjusters and supervisors must cross-reference the State-by-State Regulatory Requirements Matrix for jurisdiction-specific investigation timelines.

4.4 Prompt-Pay Standards

Enterprise-Wide Target. Ninety-five percent (95%) of all claims across all three carrier subsidiaries must be paid within the applicable statutory prompt-pay window. The current timely payment rate for QIIC is 74.2%, representing a gap of 20.8 percentage points from the target. Closing this gap is a core objective of this SOP.

NYDFS Regulation 64 Compliance. For all claims arising under policies issued in New York or involving New York–sited losses, payment must be made in compliance with the requirements of New York Department of Financial Services Regulation 64 (11 NYCRR Part 216). Specifically, for property claims, payment must be made within thirty-five (35) business days of receipt of proof of loss. For all other claims, payment must be made within thirty (30) calendar days of the insurer's determination of the amount due. Regulation 64 provides for the assessment of statutory penalties for non-compliance, including interest on overdue payments, and the NYDFS has demonstrated a willingness to impose significant enforcement actions for prompt-pay violations. NYDFS is anticipated to conduct a follow-up examination in the first quarter of 2026, and compliance with Regulation 64 prompt-pay requirements will be a focus of that examination.

Prompt-Pay SLA. The internal SLA target for payment processing is five (5) business days from the date of claim approval or settlement agreement, not to exceed the applicable state-specific prompt-pay window. This SLA target applies to both check issuance and electronic payment methods. Where the applicable state prompt-pay window is shorter than five business days (as in Texas, where payment must be made within five business days of acceptance of a claim), the state-specific deadline controls.

Interim Milestones. The following interim milestones have been established:

(a) By November 30, 2025, achieve a timely payment rate of at least 85% across all subsidiaries.

(b) By March 31, 2026, achieve the 95% enterprise-wide target on a sustained basis.

4.5 Denial Timeliness Standards

All claim denials must be issued in writing within the applicable state statutory deadline following completion of the investigation. Denial communications must satisfy the following requirements:

(a) The denial must be communicated in writing and delivered to the claimant, policyholder, or authorized representative by mail, email, or other method permitted by applicable state law.

(b) The denial must contain a clear and specific statement of the reasons for denial, including a citation to the specific policy provisions, exclusions, conditions, or limitations upon which the denial is based.

(c) The denial must inform the claimant of any applicable appeal rights, including internal review procedures and the right to file a complaint with the applicable state department of insurance.

(d) Where required by state law, the denial must include a copy of the relevant policy provisions or a clear reference to where the policyholder may access the full policy language.

(e) A copy of each denial letter must be logged in the claims management system with the date of issuance, the name of the adjuster who prepared the denial, and the name of the supervisor who reviewed and approved the denial.

Compliance with denial timeliness standards will be monitored through the same KPI tracking and escalation protocols applicable to acknowledgment and prompt-pay standards.

SECTION 5: CLAIMS WORKFLOW — STEP-BY-STEP PROCEDURES

5.1 FNOL Intake

A standardized First Notice of Loss intake process shall be implemented uniformly across all Quorum carrier subsidiaries and Pinnacle Bridge MGA, LLC, regardless of the channel through which the FNOL is received. The following procedures apply to all FNOL intake activities:

Channels. FNOL may be received through any of the following channels: (a) telephone call to a Quorum carrier's claims reporting center or after-hours reporting service; (b) submission through the carrier's web portal; (c) submission through the carrier's mobile application; (d) submission by an agent or broker on behalf of the policyholder or claimant; or (e) submission through the Pinnacle Bridge MGA platform. Regardless of the channel of receipt, the FNOL must be entered into the applicable carrier's claims management system and processed in accordance with this SOP.

Timestamp Capture. A system-generated timestamp must be captured at the moment of FNOL receipt to establish the statutory-clock start date for all subsequent timeliness obligations, including acknowledgment, investigation, and prompt-pay deadlines. For telephone-reported claims, the timestamp is the date and time of the incoming call as recorded by the call management system. For web portal and mobile application submissions, the timestamp is the date and time of electronic submission as recorded by the application server. For agent/broker submissions, the timestamp is the date and time the submission is received by the carrier's claims management system (or, where state law requires, the date and time the agent or broker first received the notice from the insured). For Pinnacle Bridge–originated claims, the timestamp is the date and time of FNOL receipt by Pinnacle Bridge's platform, as transmitted to the carrier's system.

Claim Number Generation and Assignment. Upon receipt of FNOL, the claims management system must auto-generate a unique claim number and assign the claim to the appropriate adjusting unit within one (1) business day of FNOL receipt. The adjusting unit assignment must be based on the line of business, state of loss, and complexity indicators associated with the claim. Auto-assignment logic must be configured to distribute claims equitably across adjusting staff, taking into account current caseload levels.

Pinnacle Bridge Data Feed. For FNOL received through the Pinnacle Bridge MGA platform, Pinnacle Bridge must transmit a real-time data feed of the FNOL information — including the policyholder name, policy number, date of loss, description of loss, contact information, and FNOL timestamp — to the applicable carrier's claims management system. The data feed must be transmitted within four (4) hours of FNOL receipt, as specified in Section 12.2 below. Failure to maintain real-time or near-real-time data integration will be considered a material non-compliance issue subject to the oversight and remediation provisions of Section 3.3 and Section 12.3.

5.2 Claim Assignment

All claims must be assigned to a licensed adjuster within two (2) business days of FNOL receipt. The assignment must be documented in the claims management system with the date and time of assignment, the identity of the assigned adjuster, and the adjusting unit.

Caseload Management. Claim assignment must account for the assigned adjuster's current open caseload. To ensure that adjusters have sufficient capacity to handle claims within the timeliness standards established by this SOP, the following maximum caseload thresholds are recommended and shall be implemented on a subsidiary-specific basis:

(a) P&C Claims (QIIC and QSU): Maximum of 150 open claim files per adjuster at any given time.

(b) Life & Annuity Claims (QLA): Maximum of 100 open claim files per adjuster at any given time.

These caseload thresholds are subject to adjustment by Thomas Raeburn based on staffing levels, claim complexity, and seasonal volume fluctuations. Any deviation from these thresholds must be documented and approved by the regional claims manager. Where caseload volumes consistently exceed these thresholds, Thomas Raeburn must evaluate staffing needs and, if appropriate, request additional adjuster resources through the normal budget approval process.

Supervisory Review of Assignment Queue. Unit supervisors must review the claim assignment queue at least once daily to ensure that all FNOL received within the preceding business day have been assigned to an adjuster and that no claims are aging in an unassigned status. Unassigned claims aging beyond two (2) business days from FNOL receipt must be escalated immediately to the regional claims manager for resolution.

5.3 Acknowledgment Letter / Communication

An Acknowledgment must be sent to the claimant, policyholder, or authorized representative within ten (10) business days of FNOL receipt (the enterprise standard) or sooner if required by the applicable state. The Acknowledgment is a critical regulatory compliance obligation and the timeliness of its issuance is the primary metric tracked under this SOP.

Required Content. Each Acknowledgment must include, at a minimum, the following information:

(a) The unique claim number assigned to the claim;

(b) The date of loss as reported by the policyholder or claimant;

(c) The name and direct contact information (telephone number, email address, and mailing address) of the assigned adjuster;

(d) A brief, clear description of the next steps in the claims-handling process, including what information or documentation the claimant may need to provide and the estimated timeline for the investigation;

(e) A reference to applicable state consumer rights information, where required by state regulation, including the right to file a complaint with the state department of insurance and the department's contact information.

Templates. Standard Acknowledgment letter templates shall be developed for each subsidiary and line of business, customized to reflect the specific regulatory requirements of each jurisdiction in which the subsidiary is licensed. All templates must be reviewed and pre-approved by Lena Fujimoto's Market Conduct & Consumer Affairs unit to ensure regulatory compliance, consistency of messaging, and clarity of communication. Templates will be stored in the claims management system for adjuster access and must be used for all Acknowledgment communications. Ad hoc or non-template Acknowledgment letters are prohibited unless approved by a claims supervisor.

Method of Delivery. Acknowledgment may be delivered by first-class mail, email, or other electronic communication method, as permitted by the applicable state law and the policyholder's communication preferences. Where a state requires delivery by a specific method (e.g., first-class mail), that requirement must be observed regardless of the policyholder's stated preference.

5.4 Investigation and Documentation

Contemporaneous Documentation. All investigation activities must be documented in the claims management system within two (2) business days of occurrence. Documentation must include a description of the activity performed, the date and time, the identity of the adjuster or other person performing the activity, and any findings or results. Contemporaneous documentation is essential for demonstrating compliance with regulatory requirements upon examination and for supporting coverage determinations.

Investigation Checklists. Standardized investigation checklists, organized by line of business, shall be developed and implemented for each subsidiary. The checklists will identify the required investigation steps for each claim type (e.g., personal auto liability, homeowners property damage, commercial general liability, professional liability, term life death benefit, annuity surrender) and will serve as a guide for adjusters to ensure that all necessary investigation activities are completed in a timely and thorough manner.

Timely Initiation of Investigation Steps. Mandatory investigation steps — including but not limited to recorded statements, property appraisals, medical record requests, expert consultations, and police or fire report requests — must be initiated within five (5) business days of claim assignment. Failure to initiate required investigation steps within this timeframe will be considered a timeliness deficiency and may trigger escalation under the protocols described in Section 6.

Status Updates to Claimants. Where the investigation extends beyond the initial thirty (30) calendar-day window (or such shorter period as may be required by applicable state law), the assigned adjuster must provide a written status update to the claimant at least every thirty (30) calendar days. The status update must explain the reason the investigation remains open, describe the additional steps being taken, and provide an estimated timeline for resolution. More frequent status updates are required in jurisdictions where state law mandates shorter intervals between communications, as identified in the State-by-State Regulatory Requirements Matrix.

5.5 Coverage Determination and Payment / Denial

Internal Documentation of Coverage Determination. Before any payment or denial communication is issued to the claimant, the assigned adjuster must memorialize the coverage determination in writing within the claims management system. The internal claim note documenting the coverage determination must identify the specific policy provisions, coverage grants, exclusions, conditions, and limitations considered; the factual basis for the determination; and the recommended disposition (payment, partial payment, or denial).

Supervisory Review. Supervisory review is required for the following categories of claims before any external communication of the coverage determination:

(a) All claim denials, regardless of claim value;

(b) All claims with an estimated value exceeding $50,000;

(c) All claims filed in states subject to active regulatory scrutiny, including Florida, California, New York, Illinois, and Ohio, which have been specifically flagged due to ongoing or anticipated regulatory examinations or enforcement actions; and

(d) All claims involving coverage disputes, reservation-of-rights issues, or potential bad-faith exposure.

Payment Processing. Upon approval of a claim for payment, payment processing must be initiated within two (2) business days of the date of claim approval or execution of a settlement agreement. Check issuance or electronic payment must be completed within the applicable state-specific prompt-pay window. The claims management system must capture the date of payment initiation, the date of check issuance or electronic payment transmission, and the amount paid.

Denial Letter Review. All denial letters must be reviewed by the assigned adjuster's immediate supervisor before issuance. For complex or high-exposure denials — including denials involving coverage disputes, large-value claims, bad-faith risk, or claims in states with active regulatory scrutiny — the denial letter must also be reviewed by in-house counsel or, where appropriate, by Calderwood & Harkness LLP before issuance. The denial letter must comply with the content requirements set forth in Section 4.5 above.

5.6 File Closure

Claims must not be closed in the claims management system without documented evidence of one of the following dispositions:

(a) Payment has been made and a release or settlement agreement has been obtained from the claimant (where applicable);

(b) The claim has been denied, the denial letter has been issued and documented, and the applicable appeal period has expired without the claimant exercising appeal rights; or

All file-closing documentation, including final payment records, settlement agreements, releases, denial letters, withdrawal correspondence, and any other material documents, must be captured and retained in the claims management system. The system must record the date of file closure, the identity of the adjuster and supervisor authorizing closure, and the disposition category (payment, denial, or withdrawal). Closed files must be retained in accordance with the record retention requirements set forth in Section 11.

SECTION 6: ESCALATION PROTOCOLS AND SYSTEM-ALERT CONFIGURATIONS

6.1 Tiered Escalation Framework

The following tiered escalation framework shall be implemented through automated system alerts configured in the claims management systems of all three carrier subsidiaries and integrated with the Pinnacle Bridge MGA platform. The purpose of the escalation framework is to ensure that claims approaching or exceeding statutory deadlines receive timely supervisory and management attention, and that compliance breaches are documented, investigated, and remediated.

Tier 1 — Yellow Alert (Day 6 of Acknowledgment Clock). On the sixth (6th) business day following FNOL receipt, if the Acknowledgment has not yet been sent, the claims management system shall generate an automated alert to the assigned adjuster and the adjuster's unit supervisor. The Yellow Alert indicates that the claim has reached 60% of the ten-business-day acknowledgment deadline and that action is required. Upon receipt of a Yellow Alert, the assigned adjuster must take immediate steps to prepare and send the Acknowledgment within one (1) business day. The unit supervisor must verify that the adjuster has received the alert and is taking appropriate action.

Tier 2 — Orange Alert (Day 8 of Acknowledgment Clock). On the eighth (8th) business day following FNOL receipt, if the Acknowledgment has not yet been sent, the claims management system shall generate an automated alert to the assigned adjuster, the unit supervisor, and the regional claims manager. The Orange Alert indicates that the claim has reached 80% of the acknowledgment deadline and that supervisory intervention is required. Upon receipt of an Orange Alert, the unit supervisor must ensure that the Acknowledgment is issued within the next two (2) business days and must document the reason for the delay in the claims file.

Tier 3 — Red Alert (Day 10 of Acknowledgment Clock — Deadline Day). On the tenth (10th) business day following FNOL receipt, if the Acknowledgment has not yet been sent, the claims management system shall generate an automated alert to all prior recipients (assigned adjuster, unit supervisor, and regional claims manager) as well as to Thomas Raeburn, Senior Vice President, Claims Operations, and Lena Fujimoto, Director of Market Conduct & Consumer Affairs. The Red Alert indicates that the claim has reached the statutory compliance deadline and that failure to send the Acknowledgment by end of business on this day will constitute a compliance breach. If the Acknowledgment has not been issued by end of business on the tenth business day, this constitutes a compliance breach requiring immediate corrective action and the generation of a formal compliance-incident report, as described in Section 6.1 (Tier 4) below.

Tier 4 — Breach Escalation (Day 11 and Beyond). If the Acknowledgment has not been sent by the close of business on the tenth (10th) business day following FNOL receipt, the incident is escalated to Derek Mallory, General Counsel & Chief Compliance Officer. A formal compliance-incident report must be generated using the Compliance Incident Report Form (Appendix F). The claim is flagged in the claims management system for root-cause analysis, and the assigned adjuster's supervisor must complete the root-cause analysis within five (5) business days. Tier 4 incidents are tracked as Key Performance Indicators under Section 8.1 and are reported to senior management and the Audit & Compliance Committee.

The tiered escalation framework described above reflects the acknowledgment deadline; parallel escalation tiers for investigation and denial deadlines shall be configured using the same proportional thresholds (60%, 80%, and 100% of the applicable deadline), with breach escalation triggered upon expiration of the deadline.

6.2 Prompt-Pay Escalation

A parallel tiered escalation framework shall be implemented for prompt-pay deadlines, as follows:

(a) Yellow Alert: Triggered when 50% of the applicable prompt-pay window has elapsed following claim approval or settlement agreement, if payment has not yet been issued.

(b) Orange Alert: Triggered when 75% of the applicable prompt-pay window has elapsed, if payment has not yet been issued. Notification to assigned adjuster, unit supervisor, and regional claims manager.

(c) Red Alert: Triggered when 90% of the applicable prompt-pay window has elapsed, if payment has not yet been issued. Notification to all prior recipients plus Thomas Raeburn and Lena Fujimoto.

(d) Breach Escalation: Triggered upon expiration of the statutory prompt-pay deadline without payment or written denial. Escalation to Derek Mallory; formal compliance-incident report generated.

Special Handling for NYDFS Regulation 64 Claims. Claims subject to NYDFS Regulation 64 requirements (New York–sited claims) shall receive enhanced escalation handling due to the heightened penalty exposure associated with Regulation 64 non-compliance and the anticipated NYDFS follow-up examination in the first quarter of 2026. For Regulation 64 claims, the Yellow Alert threshold is set at 40% of the applicable prompt-pay window (rather than 50%), and the Red Alert threshold is set at 80% (rather than 90%), providing additional lead time for supervisory intervention.

6.3 System Configuration Requirements

To support the tiered escalation framework and the uniform claims timeliness standards established by this SOP, the claims management systems of all three carrier subsidiaries must be configured with the following capabilities:

Automated Deadline Calculation. The claims management system must be capable of automatically calculating statutory deadlines for acknowledgment, investigation, and prompt pay based on three variables: (a) the state in which the policy was issued; (b) the state in which the claim was filed; and (c) the line of business. Where the state of policy issuance and the state of claim filing differ, the system must calculate the deadline using the most restrictive applicable requirement.

Regulatory Requirements Matrix Integration. Deadline calculations must reference the State-by-State Regulatory Requirements Matrix maintained by Hannah Brinkley of Calderwood & Harkness LLP and updated by Priya Venkatesh, Vice President of Regulatory Affairs. The Matrix must be embedded in the claims management system in a machine-readable format that can be updated as state requirements change.

Business-Day Calculations. The system must support business-day calculations that correctly account for state-specific holiday schedules. Each state's official holiday calendar must be maintained in the system an

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
This document has been prepared by Calderwood & Harkness LLP at the direction of counsel for Quorum Insurance Holdings Corp. and is protected by the attorney-client privilege and the work-product doctrine. This document should not be disclosed to any third party without the prior written consent of Derek Mallory, General Counsel & Chief Compliance Officer, Quorum Insurance Holdings Corp. Any inadvertent disclosure does not constitute a waiver of privilege.
CLAIMS-HANDLING TIMELINESS REMEDIATION PROTOCOL
Standard Operating Procedure
(Draft).
Prepared by:
Calderwood & Harkness LLP 1177 Avenue of the Americas, 34th Floor New York, NY 10036
Matter No. 1025-00002
Authors:
Carlos Espinoza, Lead Associate Hannah Brinkley, Working Associate
Under the Supervision of Marcus Delgado, Responsible Partner
Prepared for:
Quorum Insurance Holdings Corp. 280 Asylum Street, Suite 1400 Hartford, CT 06103
Attention:
Derek Mallory, General Counsel & Chief Compliance Officer Thomas Raeburn, Senior Vice President, Claims Operations
Applicable Entities:
Quorum Indemnity Insurance Company (NAIC No. 41927) Quorum Specialty Underwriters, Inc. (NAIC No. 53812) Quorum Life & Annuity Company (NAIC No. 67403) Pinnacle Bridge MGA, LLC (as delegated claims administrator)
Draft Date: October 2025 (Phase 2 Deliverable)
Version: 1.0 — Draft for Internal Review
Supersedes: Prior Quorum Claims Procedures Manual, Version 4.2 (March 2022)
Target Effective Date: Upon approval by Thomas Raeburn and Derek Mallory; implementation under Phase 3 (November 17, 2025 – December 5, 2025)
Right-click to update Table of Contents
SECTION 1: PURPOSE AND BACKGROUND
1.1 Purpose
The purpose of this Claims-Handling Timeliness Remediation Protocol — Standard Operating Procedure (this "SOP") is to establish uniform, enterprise-wide claims-handling timeliness standards across all three Quorum Insurance Holdings Corp. ("QIH" or "Quorum") carrier subsidiaries — Quorum Indemnity Insurance Company ("QIIC"), Quorum Specialty Underwriters, Inc. ("QSU"), and Quorum Life & Annuity Company ("QLA") — as well as Pinnacle Bridge MGA, LLC ("Pinnacle Bridge"), in its capacity as a delegated claims administrator operating under binding authority agreements with QIIC and QSU. This SOP is designed to ensure full and consistent compliance with all applicable state statutory and regulatory requirements governing claims acknowledgment, claims investigation, and prompt payment of insurance claims across all jurisdictions in which the Quorum entities are licensed to transact the business of insurance.
This SOP constitutes a core deliverable of the market-conduct compliance refresh engagement between Quorum Insurance Holdings Corp. and Calderwood & Harkness LLP, Matter No. 1025-00002. The engagement was initiated on August 19, 2025, following the direction of the QIH Board of Directors' Audit & Compliance Committee that management retain new outside counsel to conduct a comprehensive review and remediation of the enterprise's market-conduct compliance program. This SOP has been developed during Phase 2 of the engagement (October 6, 2025 – November 14, 2025) and is intended to be finalized, approved, and deployed during Phase 3 (November 17, 2025 – December 5, 2025).
This SOP is designed specifically and directly to remediate the six (6) claims-handling timeliness findings identified in the final multi-state market-conduct examination report issued by the Florida Office of Insurance Regulation ("FL OIR") on May 12, 2025 (the "Final Examination Report"). The six findings addressed deficiencies in claims acknowledgment timing, investigation completion timelines, prompt-pay compliance rates, documentation of claims-handling activities, supervisory review of aged claims files, and consistency of claims-handling practices across jurisdictions. Each of the standards, procedures, escalation protocols, and reporting requirements set forth in this SOP has been calibrated to address one or more of these findings and to ensure that Quorum meets the remediation benchmarks and compliance certification deadline established in the Corrective Action Plan ("CAP") accepted by FL OIR on July 28, 2025.
Nothing in this SOP is intended to create any rights, obligations, or expectations in favor of any third party, including any policyholder, claimant, or regulatory authority. This SOP is an internal compliance document prepared under the direction of counsel and is subject to modification, revision, or withdrawal at the discretion of Quorum management and Calderwood & Harkness LLP.
1.2 Regulatory Background and Triggering Events
The regulatory events giving rise to this SOP are described in detail below.
Initiation of Multi-State Market-Conduct Examination. In September 2023, the Connecticut Department of Insurance ("CTDOI") initiated a coordinated multi-state market-conduct examination of Quorum Indemnity Insurance Company pursuant to the protocols and standards established by the National Association of Insurance Commissioners ("NAIC") Market Regulation and Consumer Affairs (D) Committee. Connecticut, as QIIC's state of domicile, served as the coordinating regulator. Following consultation among participating state regulators, the Florida Office of Insurance Regulation was designated as the lead examining state and assumed primary responsibility for the conduct and supervision of the examination, with participation by examiners from Connecticut, New York, Texas, California, and Ohio.
Examination Period. The examination covered the three-year period from January 1, 2021 through December 31, 2023 (the "Examination Period"). The scope of the examination encompassed QIIC's claims-handling practices, complaint-handling procedures, advertising and marketing activities, and underwriting practices across all lines of business and all states in which QIIC held an active certificate of authority during the Examination Period.
Final Examination Report. The Final Examination Report was issued by FL OIR on May 12, 2025, following a period of comment and response by QIIC management. The report contained fourteen (14) formal findings across three categories: (i) six (6) findings related to claims-handling timeliness deficiencies; (ii) five (5) findings related to advertising and marketing compliance violations; and (iii) three (3) findings related to complaint-handling inadequacies. This SOP addresses the six claims-handling timeliness findings; the advertising and complaint-handling findings are addressed in separate companion SOPs prepared concurrently by Calderwood & Harkness LLP.
Examination Universe and Sample. The examination universe comprised 12,400 QIIC claims files closed during the Examination Period. Examiners selected and reviewed a random stratified sample of 625 files, representing a 5.04% sample rate consistent with NAIC market-regulation sampling standards. Of the 625 sampled files, 74 files (11.8% error rate) were found to contain one or more claims-handling timeliness deficiencies. The error rate of 11.8% substantially exceeded the 7% threshold that FL OIR and participating state regulators consider indicative of systemic non-compliance, triggering the requirement for a formal corrective action plan.
Corrective Action Plan. QIIC submitted a Corrective Action Plan to FL OIR on July 1, 2025, as required by the Final Examination Report. FL OIR reviewed the submitted CAP and, on July 28, 2025, accepted the CAP with modifications. The modifications included a requirement that QIIC achieve full remediation and submit a written compliance certification, signed by an authorized officer, no later than December 31, 2025. The accepted CAP also required QIIC to engage an independent consulting firm to conduct statistical validation of claims-handling improvements and to submit quarterly progress reports to FL OIR.
Regulatory Penalties. In connection with the examination findings, two regulatory penalties were assessed against QIIC:
(a) The Connecticut Department of Insurance assessed a civil penalty in the amount of $275,000 for violations of Connecticut General Statutes §§ 38a-816(6) and 38a-817 related to unfair claims settlement practices and claims-handling timeliness. This penalty was paid by QIIC on July 15, 2025.
(b) The Florida Office of Insurance Regulation assessed an administrative fine in the amount of $180,000 for violations of Florida Statutes §§ 626.9541 and 627.70131 related to unfair claims settlement practices and failure to comply with property claims prompt-pay requirements. Payment of this fine was due on September 30, 2025.
The total regulatory penalties assessed in connection with the examination findings amount to $455,000. Additional penalties, fines, or enforcement actions may be assessed by other participating or non-participating state regulators, and the risk of such additional regulatory consequences constitutes a significant factor motivating the comprehensive remediation effort reflected in this SOP.
Internal Audit Findings. On August 4, 2025, Quorum's Director of Internal Audit, Neil Granger, issued Internal Audit Report No. IA-2025-017 (the "Internal Audit Report"). The Internal Audit Report assessed the enterprise-wide market-conduct compliance program across all three carrier subsidiaries — QIIC, QSU, and QLA — and identified twenty-three (23) control deficiencies in the areas of claims-handling timeliness, advertising compliance, complaint management, and supervisory oversight. The Internal Audit Report rated the overall market-conduct compliance program as "Needs Significant Improvement," which is the second-lowest rating on Quorum's five-tier internal audit rating scale (the tiers being, from highest to lowest: Effective, Adequate, Needs Improvement, Needs Significant Improvement, and Unsatisfactory). Several of the identified control deficiencies related directly to claims-handling timeliness, including the absence of automated system alerts for approaching statutory deadlines, inconsistent application of state-specific claims-handling timelines, inadequate supervisory review of aged claims files, and insufficient documentation of investigation activities.
Board Direction. On August 12, 2025, the QIH Board of Directors' Audit & Compliance Committee, chaired by independent director Margaret Aldworth, convened a special meeting to review the Final Examination Report, the Internal Audit Report, and the status of the QIIC Corrective Action Plan. Following discussion, the Committee directed management to retain new outside counsel to conduct a comprehensive compliance refresh engagement, encompassing a full review and remediation of claims-handling, advertising, and complaint-handling procedures across all Quorum entities. The Committee noted dissatisfaction with the level of progress achieved under the prior regulatory counsel engagement with Hargrove & Sattler LLP and directed that a new engagement be established with a firm possessing deep market-conduct examination experience.
Retention of Calderwood & Harkness LLP. Calderwood & Harkness LLP was retained effective August 19, 2025, pursuant to an engagement letter executed by Derek Mallory, General Counsel & Chief Compliance Officer of QIH. The engagement is led by Marcus Delgado, Responsible Partner, with Carlos Espinoza serving as Lead Associate and Hannah Brinkley serving as Working Associate. The engagement is structured in four phases: Phase 1 (Assessment & Gap Analysis, August 19 – October 4, 2025); Phase 2 (SOP Development & System Configuration, October 6 – November 14, 2025); Phase 3 (Training & Implementation, November 17 – December 5, 2025); and Phase 4 (Examination Preparation, December 8, 2025 – January 30, 2026).
1.3 Current Performance Deficiencies
The following performance metrics document the scope of the claims-handling timeliness deficiencies that this SOP is designed to remediate. These metrics were compiled from QIIC internal data systems and independently validated by Ridgeline Consulting Group, LLC ("Ridgeline"), a market-conduct consulting firm engaged to perform statistical claims-file sampling and complaint-ratio benchmarking in support of the remediation effort. Ridgeline's engagement is led by Sandra Whitfield, Managing Director.
Average Claims Acknowledgment Time. For calendar year 2024, QIIC's average claims acknowledgment time was 18.7 business days. This average substantially exceeds the statutory maximums applicable in the jurisdictions in which QIIC operates, which range from 10 to 15 business days depending on the state. Measured against the most stringent 10-business-day requirement (applicable in multiple states, including Arizona and several others), the 18.7-business-day average represents a deficiency of approximately 87% above the statutory maximum. Even measured against the most permissive 15-business-day standard, the average acknowledgment time exceeds the deadline by approximately 25%. The acknowledgment-time deficiency was identified as the most critical finding in the Final Examination Report and is the primary focus of this SOP's remediation standards.
Timely Claims Payment Rate. For calendar year 2024, QIIC paid only 74.2% of all claims within the applicable statutory prompt-pay windows, measured on a jurisdiction-by-jurisdiction basis. This performance falls significantly short of the enterprise's internal target of 95% timely payment, representing a gap of 20.8 percentage points. The shortfall is particularly acute in states with shorter prompt-pay windows, including Texas (where prompt-pay compliance was 68.4%) and New York (where compliance with NYDFS Regulation 64 requirements was 71.9%). Prompt-pay deficiencies expose the enterprise to statutory penalties, interest charges on overdue payments, and the risk of individual enforcement actions by state regulators. QSU and QLA prompt-pay rates were not the subject of the FL OIR examination but were assessed by Internal Audit and found to exhibit similar, though less severe, deficiencies.
Complaint Ratios. Consumer complaint ratios for calendar year 2024, as compiled from NAIC Consumer Information Source data and Quorum's internal complaint management system, reveal that all three carrier subsidiaries are performing above the NAIC median for their respective peer groups:
(a) QIIC recorded a complaint ratio of 1.47 complaints per 1,000 policies in force, compared to the NAIC median of 0.82 for property and casualty insurers of comparable size. QIIC's ratio is 79.3% above the NAIC median.
(b) QSU recorded a complaint ratio of 0.93 complaints per 1,000 policies in force, compared to the NAIC median of 0.82 for specialty commercial lines insurers. QSU's ratio is 13.4% above the NAIC median.
(c) QLA recorded a complaint ratio of 1.12 complaints per 1,000 policies in force, compared to the NAIC median of 0.82 for life and annuity insurers. QLA's ratio is 36.6% above the NAIC median.
Analysis of complaint narratives performed by Ridgeline Consulting Group and confirmed by Lena Fujimoto's Market Conduct & Consumer Affairs team indicates that claims-handling timeliness — particularly delayed acknowledgment and delayed payment — is the primary driver of consumer complaints across all three subsidiaries.
Total Consumer Complaints. Across all three carrier subsidiaries, a total of 2,847 consumer complaints were filed in calendar year 2024, including complaints received directly from consumers, complaints forwarded by state departments of insurance, and complaints submitted through the NAIC's Consumer Information Source. This volume represents a 14.2% increase over the 2,493 complaints received in calendar year 2023 and underscores the urgency of the remediation effort.
The performance deficiencies described above were confirmed through independent analysis by Ridgeline Consulting Group, LLC, under the direction of Sandra Whitfield, Managing Director. Ridgeline performed statistical claims-file sampling consistent with NAIC market-regulation protocols and complaint-ratio benchmarking against NAIC peer-group medians. Ridgeline's findings are consistent with the findings of the FL OIR examination and the Internal Audit Report and have been incorporated into the baseline metrics against which this SOP's remediation targets are measured.
1.4 Scope of Application
This SOP applies to all claims operations personnel across all three Quorum carrier subsidiaries and Pinnacle Bridge MGA, LLC, as follows:
Licensed States and Jurisdictions. QIIC is currently licensed to transact the business of insurance in twenty-eight (28) states, QSU is licensed in twenty-two (22) states, and QLA is licensed in nineteen (19) states. Collectively, these three carriers hold a total of seventy-nine (79) state-license combinations across thirty-eight (38) unique states and the District of Columbia. This SOP applies to claims-handling activities in every jurisdiction in which any Quorum carrier subsidiary holds an active certificate of authority.
Lines of Business. This SOP applies to all lines of business written by the Quorum carrier subsidiaries, including:
(a) QIIC: personal automobile, homeowners, and dwelling fire insurance;
(b) QSU: commercial general liability, professional liability (errors and omissions), and cyber liability insurance; and
(c) QLA: term life insurance, whole life insurance, fixed annuities, and indexed annuities.
Delegated Claims Authority. This SOP applies with equal force to claims handled directly by carrier claims departments and to claims handled by Pinnacle Bridge MGA, LLC, under delegated claims authority. Pinnacle Bridge operates as Quorum's fintech distribution platform and is licensed as a managing general agent in thirty-four (34) states. In calendar year 2024, Pinnacle Bridge managed approximately $890 million in premium volume on behalf of QIIC and QSU. The specific procedures governing Pinnacle Bridge's compliance obligations under this SOP are set forth in Section 12 below.
Personnel. Approximately 420 claims adjuster full-time equivalents ("FTEs") across all subsidiaries and Pinnacle Bridge are subject to this SOP. All such personnel will receive mandatory training under Phase 3 of the Calderwood & Harkness engagement (November 17, 2025 through December 5, 2025), as described in Section 10 below. In addition, this SOP applies to all claims supervisors, regional claims managers, and senior claims operations leadership who exercise oversight of claims-handling activities.
SECTION 2: DEFINITIONS
2.1 Key Terms
For purposes of this SOP, the following terms have the meanings ascribed to them below. Where a term is not defined in this Section, it shall have the meaning commonly ascribed to it in insurance industry usage or as defined by applicable state statute or regulation.
"Acknowledgment" means a written or electronic communication transmitted to the claimant, policyholder, or authorized representative confirming receipt of the claim and providing, at a minimum, the assigned claim number, the name and direct contact information of the assigned adjuster, and a summary of the next steps in the claims-handling process. An Acknowledgment must satisfy the requirements of the applicable state's unfair claims settlement practices statute or regulation, and where a state prescribes a specific form or content for the acknowledgment, the state-specific requirement controls.
"Business Day" means any day other than a Saturday, Sunday, or a state or federal holiday officially observed in the jurisdiction where the claim was filed or where the policy was issued. For purposes of computing statutory deadlines under this SOP, if a claim involves multiple jurisdictions (for example, a policy issued in one state with a loss occurring in another state), the most restrictive business-day definition shall apply — that is, the definition that results in the shortest available compliance window.
"Claim" means any first-party or third-party demand, request, or submission for payment, benefits, or indemnification under an insurance policy issued by QIIC, QSU, or QLA, regardless of the method or channel through which the demand is communicated, including demands made by telephone, in writing, electronically through a web portal or mobile application, or through an agent, broker, or delegated authority such as Pinnacle Bridge MGA, LLC.
"Claims Acknowledgment Deadline" means the statutory or regulatory deadline by which an insurer must acknowledge receipt of a claim, as established by the laws and regulations of the state in which the claim was filed or the policy was issued. The Claims Acknowledgment Deadline varies by state; however, this SOP adopts a uniform ten (10) business-day standard as the enterprise minimum, as described in Section 4.1 below.
"Prompt-Pay Window" means the statutory or regulatory period within which an insurer must pay or deny a claim (or a portion thereof) following the completion of the investigation and the determination of the amount due, as established by applicable state law. The Prompt-Pay Window varies by state and, in some jurisdictions, by line of business.
"Escalation Trigger" means a system-generated or manual alert indicating that a claim is approaching a statutory or internal deadline and requires supervisory or management intervention. Escalation Triggers are classified in tiers (Tier 1 through Tier 4) as described in Section 6.1 below.
"SLA" means a Service Level Agreement, which is an internal performance benchmark established by Quorum that is more stringent than the applicable statutory or regulatory requirement. SLA targets are aspirational performance goals designed to provide a compliance buffer and are not themselves regulatory requirements.
"FNOL" means First Notice of Loss, which is the initial notification received by the insurer (or its agent, broker, or delegated authority) that a loss or event giving rise to a potential claim has occurred. The date and time of FNOL receipt establishes the start of the statutory clock for claims acknowledgment and, in some jurisdictions, for investigation and payment timelines.
"Statutory Maximum" means the most stringent applicable deadline imposed by the state in which the policy was issued or the claim was filed, as determined by reference to the State-by-State Regulatory Requirements Matrix maintained by Calderwood & Harkness LLP. Where multiple state deadlines apply to a single claim, the shortest deadline (i.e., the most restrictive requirement) controls for purposes of this SOP.
"State-by-State Regulatory Requirements Matrix" or "Matrix" means the comprehensive reference document prepared by Hannah Brinkley of Calderwood & Harkness LLP setting forth all applicable claims-handling, advertising, and complaint-handling timeliness requirements for each state in which QIIC, QSU, or QLA is licensed to transact business. The Matrix is maintained as a living document and is updated as state legislatures and departments of insurance amend applicable requirements.
"CAP" means the Corrective Action Plan submitted by QIIC to FL OIR on July 1, 2025, as modified and accepted by FL OIR on July 28, 2025, requiring full remediation and compliance certification by December 31, 2025.
"Final Examination Report" means the final multi-state market-conduct examination report issued by the Florida Office of Insurance Regulation on May 12, 2025, containing fourteen (14) formal findings.
"Internal Audit Report" means Internal Audit Report No. IA-2025-017, issued August 4, 2025, by Director of Internal Audit Neil Granger.
2.2 Subsidiary abbreviations
The following abbreviations are used throughout this SOP to refer to the Quorum carrier subsidiaries and Pinnacle Bridge MGA:
Throughout this SOP, references to "Quorum" or "the enterprise" refer collectively to Quorum Insurance Holdings Corp. and all of its subsidiary entities, unless the context requires reference to a specific entity. References to "the carriers" or "carrier subsidiaries" refer collectively to QIIC, QSU, and QLA.
SECTION 3: GOVERNANCE AND ACCOUNTABILITY
3.1 Program Owner
Thomas Raeburn, Senior Vice President, Claims Operations, Quorum Insurance Holdings Corp., is hereby designated as the enterprise-wide program owner for claims-handling timeliness compliance under this SOP (the "Program Owner"). In this capacity, Mr. Raeburn bears primary responsibility for the implementation, operation, and ongoing effectiveness of the claims-handling timeliness standards, escalation protocols, and reporting requirements established by this SOP across all three carrier subsidiaries and Pinnacle Bridge MGA, LLC.
Mr. Raeburn has direct reporting responsibility to Derek Mallory, General Counsel & Chief Compliance Officer of QIH, on all matters related to claims-handling timeliness compliance and remediation progress. Mr. Raeburn also reports ultimately to Vivian Trask, Chief Executive Officer of QIH, on matters requiring executive-level decision-making or resource allocation, including staffing adjustments, system upgrades, and escalation of material compliance incidents.
Mr. Raeburn is identified as the responsible Quorum personnel for all claims-related CAP milestones in the FL OIR Corrective Action Plan Compliance Tracker, an internal working document maintained by Priya Venkatesh, Vice President of Regulatory Affairs, to monitor remediation progress against the CAP milestones and the December 31, 2025 compliance certification deadline. Any deviation from CAP milestones or risk of failure to meet the compliance certification deadline must be escalated by Mr. Raeburn to Mr. Mallory immediately upon identification.
3.2 Compliance Oversight
In addition to the Program Owner, the following individuals exercise oversight responsibilities relevant to claims-handling timeliness compliance under this SOP:
Lena Fujimoto, Director of Market Conduct & Consumer Affairs, provides second-line oversight of claims-handling compliance metrics and complaint correlation data. Ms. Fujimoto is responsible for conducting internal compliance testing (as described in Section 7.2), monitoring consumer complaint trends related to claims timeliness, coordinating training logistics for the Phase 3 training rollout (as described in Section 10), and reviewing and approving acknowledgment letter templates and other consumer-facing communications for regulatory compliance. Ms. Fujimoto reports to Derek Mallory and works in close coordination with Thomas Raeburn.
Priya Venkatesh, Vice President of Regulatory Affairs, serves as the primary regulatory liaison for all state department of insurance communications concerning claims-handling timeliness, including correspondence with FL OIR, CTDOI, TDI, CDI, NYDFS, ADIFI, and other state regulators. Ms. Venkatesh is responsible for maintaining the State-by-State Regulatory Requirements Matrix, preparing and submitting CAP progress reports to FL OIR, coordinating responses to regulatory inquiries and data calls, and managing the enterprise's participation in anticipated follow-up examinations. Ms. Venkatesh reports to Derek Mallory.
Derek Mallory, General Counsel & Chief Compliance Officer, retains ultimate compliance authority over all market-conduct compliance matters, including claims-handling timeliness. Mr. Mallory is the designated recipient for all Tier 4 (Breach) escalation notifications, as described in Section 6.1, and is responsible for board-level reporting to the Audit & Compliance Committee. Mr. Mallory exercises supervisory authority over all compliance oversight personnel and serves as the primary point of contact for Calderwood & Harkness LLP on engagement matters.
Neil Granger, Director of Internal Audit, will perform periodic independent testing of SOP adherence as part of ongoing internal audit activities, consistent with the third-line-of-defense governance model. Mr. Granger's testing will include verification that the claims-handling timeliness standards, escalation protocols, and reporting requirements of this SOP are being followed in practice across all subsidiaries and Pinnacle Bridge. Results of internal audit testing will be reported to the Audit & Compliance Committee through the normal internal audit reporting channel, with copies provided to Derek Mallory and Thomas Raeburn.
3.3 Pinnacle Bridge MGA Oversight
Pinnacle Bridge MGA, LLC, when acting under delegated claims authority on behalf of QIIC or QSU, is required to comply with all timeliness standards, escalation protocols, reporting requirements, and documentation standards set forth in this SOP without exception or modification. The delegated claims authority does not relieve QIIC or QSU of regulatory responsibility for the handling of claims by Pinnacle Bridge; to the contrary, each carrier retains full regulatory accountability for the conduct of its delegated authority.
QIIC and QSU claims management must receive weekly compliance dashboards from Pinnacle Bridge for all claims handled under delegated authority. These dashboards must include, at a minimum, the metrics described in Section 8.1 below, broken down by state and line of business, and must be delivered no later than the second business day of each week covering the immediately preceding week's activity.
Thomas Raeburn, as Program Owner, or his designee has the authority to revoke, restrict, or suspend Pinnacle Bridge's delegated claims authority, in whole or in part, if Pinnacle Bridge's timeliness metrics fall below the thresholds defined in Section 6 of this SOP. Specifically, if Pinnacle Bridge's timeliness performance falls below the 85% compliance threshold for any calendar month (as measured by the percentage of claims acknowledged and paid within applicable statutory deadlines), Mr. Raeburn may impose enhanced oversight measures, including but not limited to requiring pre-approval of all claims determinations, reducing the scope of delegated authority, or temporarily suspending delegated claims-handling activities pending remediation. Any revocation or material restriction of delegated authority must be communicated to Derek Mallory and documented in writing.
3.4 Board Reporting
Remediation status under this SOP and the broader compliance refresh engagement shall be reported to the QIH Board of Directors' Audit & Compliance Committee at each regularly scheduled meeting of the Committee, which currently occur on a quarterly basis, and on an ad hoc basis as warranted by material developments, including but not limited to receipt of new examination findings, assessment of additional regulatory penalties, material breach incidents, or significant changes in claims timeliness metrics. The Committee is chaired by independent director Margaret Aldworth, who has been designated by the full Board as the lead director for market-conduct compliance oversight.
Beginning in the first quarter of 2026, quarterly compliance scorecards summarizing claims timeliness metrics across all three carrier subsidiaries will be provided to the Audit & Compliance Committee. These scorecards will incorporate benchmarking data from Ridgeline Consulting Group and will track progress against the KPIs and targets established in Section 8.1 of this SOP. The format and content of the quarterly compliance scorecards will be developed by Lena Fujimoto in consultation with Derek Mallory and Calderwood & Harkness LLP.
SECTION 4: UNIFORM CLAIMS TIMELINESS STANDARDS
4.1 Claims Acknowledgment Standard
Enterprise-Wide Standard. All claims received by QIIC, QSU, QLA, or Pinnacle Bridge MGA, LLC must be acknowledged in writing (or electronically, where electronic communication is permitted by applicable state law and the policyholder or claimant has consented to electronic delivery) within ten (10) business days of receipt of FNOL. This ten-business-day standard applies uniformly across all subsidiaries, all lines of business, and all jurisdictions, regardless of whether the applicable state statute permits a longer acknowledgment period.
Rationale for Uniform Standard. This ten-business-day enterprise-wide standard has been adopted because it corresponds to the most stringent state statutory requirement for claims acknowledgment across all thirty-eight (38) unique states in which the Quorum carrier subsidiaries are licensed. By adopting the most restrictive requirement as the enterprise standard, Quorum ensures uniform compliance regardless of the jurisdiction in which a particular claim is filed or policy was issued, eliminates the risk of adjuster error in applying variable state-specific deadlines, and simplifies system configuration for automated deadline calculation and escalation alerts.
Current Performance Gap. The current enterprise average for claims acknowledgment time is 18.7 business days (based on QIIC 2024 data), which is approximately 87% above the ten-business-day enterprise standard. Reducing the average acknowledgment time from 18.7 business days to at or below 10 business days is the single most critical remediation objective of this SOP and is required by the FL OIR Corrective Action Plan.
State-Specific Deadlines. For states with claims acknowledgment requirements shorter than ten (10) business days (if any exist within the Quorum licensing footprint), the state-specific deadline controls and must be observed in addition to the enterprise standard. Adjusters and supervisors must consult the State-by-State Regulatory Requirements Matrix prepared by Hannah Brinkley of Calderwood & Harkness LLP for the specific acknowledgment deadline applicable to each jurisdiction. The Matrix identifies any jurisdictions in which the applicable acknowledgment deadline is measured in calendar days rather than business days, and adjusters must apply the correct unit of measurement as specified.
4.2 Internal SLA Targets (Aspirational)
In addition to the ten-business-day compliance standard, this SOP establishes the following internal Service Level Agreement targets, which are aspirational performance benchmarks designed to provide a buffer against compliance failures:
Acknowledgment SLA Target. Seven (7) business days from FNOL receipt. This target is set at approximately 30% below the ten-business-day compliance standard, providing a three-business-day buffer to accommodate processing delays, temporary system outages, staffing disruptions, and surge volumes associated with catastrophe events or seasonal claim activity.
Interim Milestones. The following interim milestones have been established to track progress toward the compliance standard and SLA target:
(a) By November 30, 2025, reduce the average claims acknowledgment time from the current 18.7 business days to no more than 12 business days across all subsidiaries.
(b) By December 31, 2025, achieve full compliance with the ten-business-day enterprise standard, with an average acknowledgment time at or below 10 business days, as required by the FL OIR Corrective Action Plan compliance certification deadline.
(c) By March 31, 2026, achieve the seven-business-day internal SLA target on a sustained basis.
Rationale. The seven-business-day internal SLA target is not a regulatory requirement; it is an operational best practice designed to provide margin for the inevitable variability in claims processing times. Industry experience demonstrates that insurers targeting the statutory minimum without an internal buffer frequently experience compliance failures during periods of elevated claim volume, staff turnover, or technology disruptions. The three-business-day buffer afforded by the SLA target is intended to substantially reduce the likelihood of such failures.
4.3 Investigation Timeliness Standards
Property & Casualty Claims (QIIC and QSU). For all property and casualty claims handled by QIIC and QSU, the investigation must be completed and a coverage determination must be communicated to the claimant within thirty (30) calendar days of FNOL receipt, unless the nature and complexity of the claim reasonably require additional investigation. Where additional investigation is required, the adjuster must provide written notice to the claimant at least every thirty (30) calendar days with a status update explaining the reason for the delay, the additional investigation steps being undertaken, and the estimated timeline for resolution. The obligation to provide periodic status updates continues until the claim is resolved through payment, denial, or withdrawal.
Life & Annuity Claims (QLA). For death benefit claims under life insurance policies issued by QLA, the investigation must be completed and payment or denial must be communicated to the beneficiary or authorized representative within thirty (30) calendar days of receipt of satisfactory proof of loss, including a certified copy of the death certificate and a completed claim form. For annuity surrender requests and withdrawal requests, processing must be completed within seven (7) business days of receipt of completed documentation, including any required surrender forms, tax withholding elections, and identity verification.
State-Specific Variations. The investigation timeliness standards set forth above represent enterprise minimums. Where applicable state law imposes shorter investigation deadlines, the state-specific deadline controls. Adjusters and supervisors must cross-reference the State-by-State Regulatory Requirements Matrix for jurisdiction-specific investigation timelines.
4.4 Prompt-Pay Standards
Enterprise-Wide Target. Ninety-five percent (95%) of all claims across all three carrier subsidiaries must be paid within the applicable statutory prompt-pay window. The current timely payment rate for QIIC is 74.2%, representing a gap of 20.8 percentage points from the target. Closing this gap is a core objective of this SOP.
NYDFS Regulation 64 Compliance. For all claims arising under policies issued in New York or involving New York–sited losses, payment must be made in compliance with the requirements of New York Department of Financial Services Regulation 64 (11 NYCRR Part 216). Specifically, for property claims, payment must be made within thirty-five (35) business days of receipt of proof of loss. For all other claims, payment must be made within thirty (30) calendar days of the insurer's determination of the amount due. Regulation 64 provides for the assessment of statutory penalties for non-compliance, including interest on overdue payments, and the NYDFS has demonstrated a willingness to impose significant enforcement actions for prompt-pay violations. NYDFS is anticipated to conduct a follow-up examination in the first quarter of 2026, and compliance with Regulation 64 prompt-pay requirements will be a focus of that examination.
Prompt-Pay SLA. The internal SLA target for payment processing is five (5) business days from the date of claim approval or settlement agreement, not to exceed the applicable state-specific prompt-pay window. This SLA target applies to both check issuance and electronic payment methods. Where the applicable state prompt-pay window is shorter than five business days (as in Texas, where payment must be made within five business days of acceptance of a claim), the state-specific deadline controls.
Interim Milestones. The following interim milestones have been established:
(a) By November 30, 2025, achieve a timely payment rate of at least 85% across all subsidiaries.
(b) By March 31, 2026, achieve the 95% enterprise-wide target on a sustained basis.
4.5 Denial Timeliness Standards
All claim denials must be issued in writing within the applicable state statutory deadline following completion of the investigation. Denial communications must satisfy the following requirements:
(a) The denial must be communicated in writing and delivered to the claimant, policyholder, or authorized representative by mail, email, or other method permitted by applicable state law.
(b) The denial must contain a clear and specific statement of the reasons for denial, including a citation to the specific policy provisions, exclusions, conditions, or limitations upon which the denial is based.
(c) The denial must inform the claimant of any applicable appeal rights, including internal review procedures and the right to file a complaint with the applicable state department of insurance.
(d) Where required by state law, the denial must include a copy of the relevant policy provisions or a clear reference to where the policyholder may access the full policy language.
(e) A copy of each denial letter must be logged in the claims management system with the date of issuance, the name of the adjuster who prepared the denial, and the name of the supervisor who reviewed and approved the denial.
Compliance with denial timeliness standards will be monitored through the same KPI tracking and escalation protocols applicable to acknowledgment and prompt-pay standards.
SECTION 5: CLAIMS WORKFLOW — STEP-BY-STEP PROCEDURES
5.1 FNOL Intake
A standardized First Notice of Loss intake process shall be implemented uniformly across all Quorum carrier subsidiaries and Pinnacle Bridge MGA, LLC, regardless of the channel through which the FNOL is received. The following procedures apply to all FNOL intake activities:
Channels. FNOL may be received through any of the following channels: (a) telephone call to a Quorum carrier's claims reporting center or after-hours reporting service; (b) submission through the carrier's web portal; (c) submission through the carrier's mobile application; (d) submission by an agent or broker on behalf of the policyholder or claimant; or (e) submission through the Pinnacle Bridge MGA platform. Regardless of the channel of receipt, the FNOL must be entered into the applicable carrier's claims management system and processed in accordance with this SOP.
Timestamp Capture. A system-generated timestamp must be captured at the moment of FNOL receipt to establish the statutory-clock start date for all subsequent timeliness obligations, including acknowledgment, investigation, and prompt-pay deadlines. For telephone-reported claims, the timestamp is the date and time of the incoming call as recorded by the call management system. For web portal and mobile application submissions, the timestamp is the date and time of electronic submission as recorded by the application server. For agent/broker submissions, the timestamp is the date and time the submission is received by the carrier's claims management system (or, where state law requires, the date and time the agent or broker first received the notice from the insured). For Pinnacle Bridge–originated claims, the timestamp is the date and time of FNOL receipt by Pinnacle Bridge's platform, as transmitted to the carrier's system.
Claim Number Generation and Assignment. Upon receipt of FNOL, the claims management system must auto-generate a unique claim number and assign the claim to the appropriate adjusting unit within one (1) business day of FNOL receipt. The adjusting unit assignment must be based on the line of business, state of loss, and complexity indicators associated with the claim. Auto-assignment logic must be configured to distribute claims equitably across adjusting staff, taking into account current caseload levels.
Pinnacle Bridge Data Feed. For FNOL received through the Pinnacle Bridge MGA platform, Pinnacle Bridge must transmit a real-time data feed of the FNOL information — including the policyholder name, policy number, date of loss, description of loss, contact information, and FNOL timestamp — to the applicable carrier's claims management system. The data feed must be transmitted within four (4) hours of FNOL receipt, as specified in Section 12.2 below. Failure to maintain real-time or near-real-time data integration will be considered a material non-compliance issue subject to the oversight and remediation provisions of Section 3.3 and Section 12.3.
5.2 Claim Assignment
All claims must be assigned to a licensed adjuster within two (2) business days of FNOL receipt. The assignment must be documented in the claims management system with the date and time of assignment, the identity of the assigned adjuster, and the adjusting unit.
Caseload Management. Claim assignment must account for the assigned adjuster's current open caseload. To ensure that adjusters have sufficient capacity to handle claims within the timeliness standards established by this SOP, the following maximum caseload thresholds are recommended and shall be implemented on a subsidiary-specific basis:
(a) P&C Claims (QIIC and QSU): Maximum of 150 open claim files per adjuster at any given time.
(b) Life & Annuity Claims (QLA): Maximum of 100 open claim files per adjuster at any given time.
These caseload thresholds are subject to adjustment by Thomas Raeburn based on staffing levels, claim complexity, and seasonal volume fluctuations. Any deviation from these thresholds must be documented and approved by the regional claims manager. Where caseload volumes consistently exceed these thresholds, Thomas Raeburn must evaluate staffing needs and, if appropriate, request additional adjuster resources through the normal budget approval process.
Supervisory Review of Assignment Queue. Unit supervisors must review the claim assignment queue at least once daily to ensure that all FNOL received within the preceding business day have been assigned to an adjuster and that no claims are aging in an unassigned status. Unassigned claims aging beyond two (2) business days from FNOL receipt must be escalated immediately to the regional claims manager for resolution.
5.3 Acknowledgment Letter / Communication
An Acknowledgment must be sent to the claimant, policyholder, or authorized representative within ten (10) business days of FNOL receipt (the enterprise standard) or sooner if required by the applicable state. The Acknowledgment is a critical regulatory compliance obligation and the timeliness of its issuance is the primary metric tracked under this SOP.
Required Content. Each Acknowledgment must include, at a minimum, the following information:
(a) The unique claim number assigned to the claim;
(b) The date of loss as reported by the policyholder or claimant;
(c) The name and direct contact information (telephone number, email address, and mailing address) of the assigned adjuster;
(d) A brief, clear description of the next steps in the claims-handling process, including what information or documentation the claimant may need to provide and the estimated timeline for the investigation;
(e) A reference to applicable state consumer rights information, where required by state regulation, including the right to file a complaint with the state department of insurance and the department's contact information.
Templates. Standard Acknowledgment letter templates shall be developed for each subsidiary and line of business, customized to reflect the specific regulatory requirements of each jurisdiction in which the subsidiary is licensed. All templates must be reviewed and pre-approved by Lena Fujimoto's Market Conduct & Consumer Affairs unit to ensure regulatory compliance, consistency of messaging, and clarity of communication. Templates will be stored in the claims management system for adjuster access and must be used for all Acknowledgment communications. Ad hoc or non-template Acknowledgment letters are prohibited unless approved by a claims supervisor.
Method of Delivery. Acknowledgment may be delivered by first-class mail, email, or other electronic communication method, as permitted by the applicable state law and the policyholder's communication preferences. Where a state requires delivery by a specific method (e.g., first-class mail), that requirement must be observed regardless of the policyholder's stated preference.
5.4 Investigation and Documentation
Contemporaneous Documentation. All investigation activities must be documented in the claims management system within two (2) business days of occurrence. Documentation must include a description of the activity performed, the date and time, the identity of the adjuster or other person performing the activity, and any findings or results. Contemporaneous documentation is essential for demonstrating compliance with regulatory requirements upon examination and for supporting coverage determinations.
Investigation Checklists. Standardized investigation checklists, organized by line of business, shall be developed and implemented for each subsidiary. The checklists will identify the required investigation steps for each claim type (e.g., personal auto liability, homeowners property damage, commercial general liability, professional liability, term life death benefit, annuity surrender) and will serve as a guide for adjusters to ensure that all necessary investigation activities are completed in a timely and thorough manner.
Timely Initiation of Investigation Steps. Mandatory investigation steps — including but not limited to recorded statements, property appraisals, medical record requests, expert consultations, and police or fire report requests — must be initiated within five (5) business days of claim assignment. Failure to initiate required investigation steps within this timeframe will be considered a timeliness deficiency and may trigger escalation under the protocols described in Section 6.
Status Updates to Claimants. Where the investigation extends beyond the initial thirty (30) calendar-day window (or such shorter period as may be required by applicable state law), the assigned adjuster must provide a written status update to the claimant at least every thirty (30) calendar days. The status update must explain the reason the investigation remains open, describe the additional steps being taken, and provide an estimated timeline for resolution. More frequent status updates are required in jurisdictions where state law mandates shorter intervals between communications, as identified in the State-by-State Regulatory Requirements Matrix.
5.5 Coverage Determination and Payment / Denial
Internal Documentation of Coverage Determination. Before any payment or denial communication is issued to the claimant, the assigned adjuster must memorialize the coverage determination in writing within the claims management system. The internal claim note documenting the coverage determination must identify the specific policy provisions, coverage grants, exclusions, conditions, and limitations considered; the factual basis for the determination; and the recommended disposition (payment, partial payment, or denial).
Supervisory Review. Supervisory review is required for the following categories of claims before any external communication of the coverage determination:
(a) All claim denials, regardless of claim value;
(b) All claims with an estimated value exceeding $50,000;
(c) All claims filed in states subject to active regulatory scrutiny, including Florida, California, New York, Illinois, and Ohio, which have been specifically flagged due to ongoing or anticipated regulatory examinations or enforcement actions; and
(d) All claims involving coverage disputes, reservation-of-rights issues, or potential bad-faith exposure.
Payment Processing. Upon approval of a claim for payment, payment processing must be initiated within two (2) business days of the date of claim approval or execution of a settlement agreement. Check issuance or electronic payment must be completed within the applicable state-specific prompt-pay window. The claims management system must capture the date of payment initiation, the date of check issuance or electronic payment transmission, and the amount paid.
Denial Letter Review. All denial letters must be reviewed by the assigned adjuster's immediate supervisor before issuance. For complex or high-exposure denials — including denials involving coverage disputes, large-value claims, bad-faith risk, or claims in states with active regulatory scrutiny — the denial letter must also be reviewed by in-house counsel or, where appropriate, by Calderwood & Harkness LLP before issuance. The denial letter must comply with the content requirements set forth in Section 4.5 above.
5.6 File Closure
Claims must not be closed in the claims management system without documented evidence of one of the following dispositions:
(a) Payment has been made and a release or settlement agreement has been obtained from the claimant (where applicable);
(b) The claim has been denied, the denial letter has been issued and documented, and the applicable appeal period has expired without the claimant exercising appeal rights; or
(c) The claimant has withdrawn the claim, and the withdrawal has been documented in writing.
All file-closing documentation, including final payment records, settlement agreements, releases, denial letters, withdrawal correspondence, and any other material documents, must be captured and retained in the claims management system. The system must record the date of file closure, the identity of the adjuster and supervisor authorizing closure, and the disposition category (payment, denial, or withdrawal). Closed files must be retained in accordance with the record retention requirements set forth in Section 11.
SECTION 6: ESCALATION PROTOCOLS AND SYSTEM-ALERT CONFIGURATIONS
6.1 Tiered Escalation Framework
The following tiered escalation framework shall be implemented through automated system alerts configured in the claims management systems of all three carrier subsidiaries and integrated with the Pinnacle Bridge MGA platform. The purpose of the escalation framework is to ensure that claims approaching or exceeding statutory deadlines receive timely supervisory and management attention, and that compliance breaches are documented, investigated, and remediated.
Tier 1 — Yellow Alert (Day 6 of Acknowledgment Clock). On the sixth (6th) business day following FNOL receipt, if the Acknowledgment has not yet been sent, the claims management system shall generate an automated alert to the assigned adjuster and the adjuster's unit supervisor. The Yellow Alert indicates that the claim has reached 60% of the ten-business-day acknowledgment deadline and that action is required. Upon receipt of a Yellow Alert, the assigned adjuster must take immediate steps to prepare and send the Acknowledgment within one (1) business day. The unit supervisor must verify that the adjuster has received the alert and is taking appropriate action.
Tier 2 — Orange Alert (Day 8 of Acknowledgment Clock). On the eighth (8th) business day following FNOL receipt, if the Acknowledgment has not yet been sent, the claims management system shall generate an automated alert to the assigned adjuster, the unit supervisor, and the regional claims manager. The Orange Alert indicates that the claim has reached 80% of the acknowledgment deadline and that supervisory intervention is required. Upon receipt of an Orange Alert, the unit supervisor must ensure that the Acknowledgment is issued within the next two (2) business days and must document the reason for the delay in the claims file.
Tier 3 — Red Alert (Day 10 of Acknowledgment Clock — Deadline Day). On the tenth (10th) business day following FNOL receipt, if the Acknowledgment has not yet been sent, the claims management system shall generate an automated alert to all prior recipients (assigned adjuster, unit supervisor, and regional claims manager) as well as to Thomas Raeburn, Senior Vice President, Claims Operations, and Lena Fujimoto, Director of Market Conduct & Consumer Affairs. The Red Alert indicates that the claim has reached the statutory compliance deadline and that failure to send the Acknowledgment by end of business on this day will constitute a compliance breach. If the Acknowledgment has not been issued by end of business on the tenth business day, this constitutes a compliance breach requiring immediate corrective action and the generation of a formal compliance-incident report, as described in Section 6.1 (Tier 4) below.
Tier 4 — Breach Escalation (Day 11 and Beyond). If the Acknowledgment has not been sent by the close of business on the tenth (10th) business day following FNOL receipt, the incident is escalated to Derek Mallory, General Counsel & Chief Compliance Officer. A formal compliance-incident report must be generated using the Compliance Incident Report Form (Appendix F). The claim is flagged in the claims management system for root-cause analysis, and the assigned adjuster's supervisor must complete the root-cause analysis within five (5) business days. Tier 4 incidents are tracked as Key Performance Indicators under Section 8.1 and are reported to senior management and the Audit & Compliance Committee.
The tiered escalation framework described above reflects the acknowledgment deadline; parallel escalation tiers for investigation and denial deadlines shall be configured using the same proportional thresholds (60%, 80%, and 100% of the applicable deadline), with breach escalation triggered upon expiration of the deadline.
6.2 Prompt-Pay Escalation
A parallel tiered escalation framework shall be implemented for prompt-pay deadlines, as follows:
(a) Yellow Alert: Triggered when 50% of the applicable prompt-pay window has elapsed following claim approval or settlement agreement, if payment has not yet been issued.
(b) Orange Alert: Triggered when 75% of the applicable prompt-pay window has elapsed, if payment has not yet been issued. Notification to assigned adjuster, unit supervisor, and regional claims manager.
(c) Red Alert: Triggered when 90% of the applicable prompt-pay window has elapsed, if payment has not yet been issued. Notification to all prior recipients plus Thomas Raeburn and Lena Fujimoto.
(d) Breach Escalation: Triggered upon expiration of the statutory prompt-pay deadline without payment or written denial. Escalation to Derek Mallory; formal compliance-incident report generated.
Special Handling for NYDFS Regulation 64 Claims. Claims subject to NYDFS Regulation 64 requirements (New York–sited claims) shall receive enhanced escalation handling due to the heightened penalty exposure associated with Regulation 64 non-compliance and the anticipated NYDFS follow-up examination in the first quarter of 2026. For Regulation 64 claims, the Yellow Alert threshold is set at 40% of the applicable prompt-pay window (rather than 50%), and the Red Alert threshold is set at 80% (rather than 90%), providing additional lead time for supervisory intervention.
6.3 System Configuration Requirements
To support the tiered escalation framework and the uniform claims timeliness standards established by this SOP, the claims management systems of all three carrier subsidiaries must be configured with the following capabilities:
Automated Deadline Calculation. The claims management system must be capable of automatically calculating statutory deadlines for acknowledgment, investigation, and prompt pay based on three variables: (a) the state in which the policy was issued; (b) the state in which the claim was filed; and (c) the line of business. Where the state of policy issuance and the state of claim filing differ, the system must calculate the deadline using the most restrictive applicable requirement.
Regulatory Requirements Matrix Integration. Deadline calculations must reference the State-by-State Regulatory Requirements Matrix maintained by Hannah Brinkley of Calderwood & Harkness LLP and updated by Priya Venkatesh, Vice President of Regulatory Affairs. The Matrix must be embedded in the claims management system in a machine-readable format that can be updated as state requirements change.
Business-Day Calculations. The system must support business-day calculations that correctly account for state-specific holiday schedules. Each state's official holiday calendar must be maintained in the system an

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

CLAIMS-HANDLING TIMELINESS REMEDIATION PROTOCOL

SECTION 1: PURPOSE AND BACKGROUND

SECTION 2: DEFINITIONS

SECTION 3: GOVERNANCE AND ACCOUNTABILITY

SECTION 4: UNIFORM CLAIMS TIMELINESS STANDARDS

SECTION 6: ESCALATION PROTOCOLS AND SYSTEM-ALERT CONFIGURATIONS

Record

Parties

Dates

Amounts