PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
MEMORANDUM
From: Elaine Forsythe, Responsible Partner, and Natasha Forbes, Lead Associate — Calderwood & Harkness LLP, 1585 Broadway, 34th Floor, New York, NY 10036
To: Dennis R. Okonkwo, General Counsel & Corporate Secretary, Quorum Insurance Holdings Corp., 280 Asylum Street, Suite 2200, Hartford, CT 06103
Date: November 18, 2025
Re: Board Delegation of Authority Under Delaware General Corporation Law §§ 141(a) and 141(c) — Analysis in Connection with Proposed Governance Overhaul
Engagement: 1025-00005
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I. Executive Summary
The purpose of this memorandum is to provide a comprehensive legal analysis of the scope, limitations, and fiduciary implications of the proposed revisions to the Delegation of Authority Matrix (the "DOA Matrix") and committee charter framework of Quorum Insurance Holdings Corp. ("Quorum" or the "Company") under the Delaware General Corporation Law (the "DGCL"). This analysis is furnished in connection with the governance overhaul project authorized by the Quorum Board of Directors (the "Board") on July 22, 2025, and is intended to guide the Board's deliberations in advance of the anticipated adoption of an omnibus board resolution at the Board's regularly scheduled meeting on December 11, 2025.
Quorum is a Delaware corporation (Delaware Division of Corporations File Number 4927361), publicly traded on the New York Stock Exchange under the ticker symbol "QIHC." As of September 30, 2025, the Company had a market capitalization of approximately $4.8 billion, consolidated fiscal year 2024 revenue of $3.12 billion, and total consolidated assets of $18.7 billion. The Company is a diversified insurance holding company with five principal operating subsidiaries spanning property-casualty insurance, specialty insurance, surety and indemnity, managing general agency operations, and insurtech solutions.
The existing DOA Matrix was last comprehensively updated on October 6, 2017, with only a single interim amendment adopted on April 22, 2020, which adjusted claims-payment thresholds in response to increased litigation-settlement volumes during that period. The proposed overhaul would materially increase certain delegation thresholds across multiple authority categories, reflecting the significant growth in the Company's scale and complexity over the intervening eight years.
This memorandum addresses two specific questions raised by Mr. Okonkwo in his instruction letter dated October 3, 2025:
First, whether the proposed increase in the M&A/strategic-transaction board-approval threshold from $10.0 million to $25.0 million is permissible under Delaware law; and
Second, whether the proposed expansion of the Chief Executive Officer's claims-settlement authority at the parent level (from a $5.0 million ceiling to a $10.0 million ceiling) raises fiduciary concerns under Delaware law.
Conclusion. Both proposed threshold increases are legally permissible under DGCL §§ 141(a), 141(c), and 142, subject to proper board adoption, the maintenance of ongoing monitoring obligations consistent with the Delaware Court of Chancery's Caremark line of decisions, and the implementation of periodic review mechanisms. Delaware law affords the Board broad discretion in structuring delegations of authority to officers and committees. The DGCL expressly contemplates that the business and affairs of a corporation will be managed not only by the board of directors but also under the direction of the board — a formulation that has been understood since the 1974 statutory amendment to authorize precisely the type of tiered delegation framework embodied in the proposed DOA Matrix. The principal legal constraint is not the dollar amount of delegation thresholds per se, but rather the Board's ongoing duty to maintain adequate information and reporting systems, to monitor the exercise of delegated authority, and to ensure that certain categories of corporate action identified as non-delegable by statute (including statutory mergers, sales of substantially all assets, bylaw amendments, and certain dividend declarations) remain reserved for Board-level action.
The balance of this memorandum sets forth the factual context, the governing legal framework, a detailed analysis of the two specific questions presented, a discussion of fiduciary duties in the delegation context, and structural recommendations for the revised DOA Matrix, committee charters, and conforming bylaw amendments.
II. Background and Factual Context
A. Quorum's Corporate Structure
Quorum Insurance Holdings Corp. is a Delaware corporation originally incorporated on March 17, 2009, in connection with the business combination of two regional property-casualty insurance carriers: Hartford Regional Mutual Insurance Company and Tri-State Casualty Group, Inc. The Company redomesticated to Delaware as part of that combination and has maintained its state of incorporation in Delaware continuously since that date. Its registered agent is Capitol Registered Agents, Inc., located at 1209 Orange Street, Wilmington, Delaware 19801.
The Board of Directors currently consists of eleven directors, of whom eight are independent within the meaning of NYSE Listed Company Manual Section 303A.02 and the Company's own Director Independence Standards, and three are management or otherwise non-independent directors. The current composition of the Board and senior management relevant to this analysis is as follows:
•  Margaret A. Calloway — Chief Executive Officer and Chair of the Board
•  Arthur J. Pennington — Lead Independent Director
•  Patricia Sung-Hee Lam — Chief Financial Officer
•  Dennis R. Okonkwo — General Counsel and Corporate Secretary
•  Ivan D. Pruett — Chief Compliance Officer
•  Renata M. Vásquez — Chief Audit Executive (Vice President, Internal Audit)
The combined CEO/Chair role, together with the designation of a Lead Independent Director, is consistent with the Company's existing Corporate Governance Guidelines (last amended June 14, 2021) and reflects a governance structure that places particular importance on the integrity of the delegation framework, as the CEO serves as the primary delegate of Board authority in operational matters.
B. Subsidiary Structure
Quorum operates through five principal subsidiaries, each of which maintains its own officers, governance documents, and (in certain cases) regulatory authority frameworks:
1.  Quorum Property & Casualty Insurance Company — a Connecticut-domiciled regulated insurance company (NAIC Company Code 38472), which serves as the Company's flagship property-casualty underwriting platform. President: Dexter W. Ng. This entity is subject to regulation by the Connecticut Insurance Department and is the largest operating subsidiary by premium volume.
2.  Lone Star Specialty Insurance Company — a Texas-domiciled regulated insurance company (NAIC Company Code 41359), which underwrites specialty lines including excess and surplus lines, professional liability, and environmental liability coverages. This subsidiary is regulated by the Texas Department of Insurance.
3.  Great Lakes Surety & Indemnity Co. — an Ohio-domiciled regulated insurance company (NAIC Company Code 29814), which provides surety bonds, fidelity bonds, and commercial indemnity products. This subsidiary is regulated by the Ohio Department of Insurance.
4.  Quorum MGA Services, LLC — a Delaware limited liability company that operates as a managing general agent, placing risks with both affiliated and non-affiliated carriers. As a Delaware LLC, its internal governance is governed by the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq., and its limited liability company agreement.
5.  Vantage Digital Insurance Solutions, Inc. — a Delaware corporation that serves as the Company's fintech and insurtech subsidiary, developing digital distribution platforms, data analytics tools, and automated underwriting capabilities. President: Camille R. DuPont.
The subsidiary structure is relevant to this analysis because the DOA Matrix establishes delegation thresholds at both the parent and subsidiary levels, and the alignment (or misalignment) of those thresholds has been a source of the compliance gaps that triggered this governance overhaul.
C. Current Governance Framework and Triggers for Overhaul
The Company currently maintains five standing committees of the Board, each operating under a committee charter adopted by the Board:
The committee charters were originally adopted on February 12, 2016, and have been amended twice: first on March 20, 2019, and again on June 14, 2021. The charters are due for comprehensive restatement as part of this governance overhaul.
The DOA Matrix, which sits alongside the committee charters as a key element of the Company's internal governance architecture, was last comprehensively updated on October 6, 2017, during the tenure of the Company's prior General Counsel. An interim amendment was adopted on April 22, 2020, which adjusted certain claims-payment thresholds in response to increased settlement activity during that period, but did not address other authority categories. In the intervening years, the Company has undergone substantial growth — revenue has increased from approximately $1.9 billion in fiscal year 2017 to $3.12 billion in fiscal year 2024, and total assets have grown from approximately $11.2 billion to $18.7 billion — rendering the 2017 thresholds increasingly misaligned with the operational reality of the business.
Several specific events triggered the Board's decision to undertake a comprehensive governance overhaul:
Garrett & Whitfield LLP Management Letter (March 14, 2025). The Company's independent auditors, Garrett & Whitfield LLP, issued a management letter in connection with the fiscal year 2024 audit that identified multiple DOA inconsistencies across the subsidiary structure. Most significantly, the management letter noted that Lone Star Specialty Insurance Company had been operating at a de facto claims-settlement authority of $3.0 million per claim, whereas the current DOA Matrix authorized subsidiary CEO claims-settlement authority of only $1.0 million per claim. The management letter characterized this discrepancy as a "material weakness in internal controls over claims-settlement delegation" and recommended immediate remediation.
Veltrano Institutional Partners, LP Shareholder Letter (June 18, 2025). Veltrano Institutional Partners, LP, the Company's largest institutional shareholder with an approximate 8.3% ownership stake, transmitted a letter to the Board expressing concern regarding the Company's governance practices, including the staleness of the DOA Matrix and the absence of a dedicated technology and cybersecurity oversight committee. The Veltrano letter cited the increasing frequency of cyber incidents in the insurance industry and the Company's own investment in the Vantage Digital Insurance Solutions platform as grounds for enhanced board-level oversight of technology risks.
Apex Proxy Advisors, Inc. Governance Benchmarking Report (June 30, 2025). The Company engaged Apex Proxy Advisors, Inc. to conduct a governance benchmarking study comparing Quorum's governance framework against a peer group of fourteen publicly traded insurance holding companies of comparable size and complexity. The Apex report, delivered on June 30, 2025, identified several areas where Quorum's governance structures lagged peer practices, including: (a) the absence of a standalone technology/cybersecurity committee (nine of fourteen peers maintained one); (b) DOA Matrix thresholds that were significantly below peer median levels across most authority categories; and (c) the absence of formalized annual review and exception-reporting mechanisms in the DOA framework.
In response to these inputs, the Board authorized the governance overhaul project at its regularly scheduled meeting on July 22, 2025. The Calderwood & Harkness engagement was opened on September 5, 2025, following completion of conflict-clearance procedures, and this memorandum represents the first substantive deliverable under the engagement.
D. Proposed Changes Relevant to This Analysis
The governance overhaul encompasses a broad range of changes to the Company's governance framework, including the restatement of all five existing committee charters, the adoption of conforming bylaw amendments, updates to the Company's Corporate Governance Guidelines, and revisions to the Company's proxy statement governance disclosures. This memorandum focuses on the following elements that are within its scope:
Creation of a Sixth Standing Committee. The Board proposes to establish a Technology & Cybersecurity Oversight Committee as the sixth standing committee of the Board. The proposed chair of the new committee is Priya Narasimhan, an independent director with extensive experience in technology management and cybersecurity governance. The new committee's charter will include inter-committee coordination protocols with the Risk Committee and the Audit Committee to ensure comprehensive coverage of technology-related risks without duplication of oversight responsibilities.
Comprehensive DOA Matrix Revision. The proposed DOA Matrix revision encompasses material threshold increases across all authority categories, reflecting the Company's growth in scale and complexity since the 2017 comprehensive update. A summary of proposed threshold changes is set forth in Appendix B to this memorandum.
Specific Questions from Mr. Okonkwo. As noted above, this memorandum addresses two specific questions: (1) the permissibility of the proposed M&A/strategic-transaction threshold increase from $10.0 million to $25.0 million, and (2) whether the expanded CEO claims-settlement authority (from a $5.0 million ceiling to a $10.0 million ceiling at the parent level) raises fiduciary concerns under Delaware law.
III. Legal Framework: Board Authority and Delegation Under the DGCL
A. DGCL § 141(a) — General Board Authority
The foundational provision governing the allocation of corporate authority in Delaware is Section 141(a) of the DGCL, which provides in pertinent part:
"The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation."
This provision establishes the board of directors as the locus of corporate governance authority. However, its language is not limited to direct management by the board. The critical phrase — "by or under the direction of" — expressly contemplates that the board may manage the corporation's business and affairs indirectly, through the delegation of operational authority to officers, employees, committees, and agents, while retaining ultimate oversight responsibility.
The significance of this formulation cannot be overstated. Prior to 1974, Section 141(a) provided that the business and affairs of the corporation "shall be managed by" the board of directors, without the "or under the direction of" language. The 1974 amendment to Section 141(a) was adopted specifically to conform the statute to the operational reality that, in corporations of any significant size and complexity, the board does not and cannot manage day-to-day operations directly. Rather, the board establishes policies, sets strategic direction, appoints and oversees officers, and maintains oversight of the corporation's affairs through information and reporting systems, while delegating operational decision-making authority to management.
The Delaware courts have consistently interpreted Section 141(a) as conferring broad discretion on the board in structuring delegations of authority. In Grimes v. Donald, 673 A.2d 1207 (Del. 1996), the Delaware Supreme Court held that a board does not violate Section 141(a) by delegating operational authority to officers, provided the board retains the ultimate power to oversee and, if necessary, countermand the actions of its delegates. The Court distinguished between a permissible delegation of authority, in which the board empowers officers or committees to act within defined parameters while retaining ultimate oversight and the power to revoke or modify the delegation, and an impermissible abdication of the board's statutory responsibility, in which the board effectively surrenders its managerial authority in a manner that precludes it from exercising oversight or intervening when necessary.
The distinction between delegation and abdication is central to the analysis presented in this memorandum. A properly structured DOA Matrix — one that defines clear thresholds, specifies the scope of delegated authority, reserves certain categories of action for Board-level approval, and establishes reporting and monitoring mechanisms — is a paradigmatic exercise of the Section 141(a) power to manage the corporation's business and affairs "under the direction of" the board. By contrast, a delegation that conferred unreviewable and unlimited authority on an officer, with no mechanism for board oversight, periodic review, or revocation, could be challenged as an abdication of the board's statutory duty. The proposed DOA Matrix, as described in Section II.D above and analyzed in Section IV below, falls well within the permissible delegation category.
Application to Quorum. The Board's adoption of a DOA Matrix delegating specified categories and dollar amounts of authority to the CEO, CFO, General Counsel, and subsidiary officers is a paradigmatic and well-established exercise of the Section 141(a) power. The proposed revisions to the DOA Matrix — including the increase of certain dollar thresholds — do not alter the fundamental character of the delegation. They adjust the parameters of that delegation to reflect the Company's current scale and operational requirements, while preserving the Board's ultimate authority, oversight role, and power to revoke or modify any delegation at any time.
B. DGCL § 141(c) — Committee Powers and Limitations
1. Permissible Scope of Committee Delegation
Section 141(c)(2) of the DGCL provides that the board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each consisting of one or more members of the board. The statute further provides that:
"Any such committee, to the extent provided in the resolution of the board of directors, or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation . . . ."
This provision is notable for its breadth. A properly constituted board committee may exercise "all the powers and authority of the board of directors" — not merely advisory or recommendatory functions — to the extent the board's authorizing resolution or the corporation's bylaws so provide. The scope of authority that may be conferred upon a committee is, in the first instance, a matter for the board's judgment. A committee may be vested with broad decision-making authority over an entire functional area (e.g., the Audit Committee's authority to engage, compensate, and oversee the independent auditor), or its authority may be carefully circumscribed to specific categories of action within defined dollar thresholds (e.g., the Risk Committee's authority to approve claims settlements above a specified amount but below the level requiring full board approval).
The flexibility inherent in Section 141(c)(2) is fundamental to the operation of the modern public company board. In a company of Quorum's scale and complexity, the full Board cannot be convened to approve every operational decision. Committees serve as the Board's agents, exercising Board-level authority within their respective areas of competence and subject to the parameters established by the Board's authorizing resolutions and the committee charters.
Application to Quorum. The five existing standing committees (Audit, Compensation & Human Capital, Nominating & Corporate Governance, Risk, and Investment) and the proposed sixth committee (Technology & Cybersecurity Oversight) may be vested with decision-making authority up to specified thresholds in the DOA Matrix and as defined in their restated charters. For example, the Risk Committee may be authorized to approve claims settlements in the range of $10.0 million to a level set by the Board (e.g., $25.0 million or $50.0 million), with settlements above that level requiring full Board approval. The Investment Committee may be authorized to approve individual investment transactions up to a specified dollar amount without full Board involvement. In each case, the committee acts with the full authority of the Board within its designated parameters, subject to the limitations discussed below.
2. Statutory Limitations — Non-Delegable Actions
While Section 141(c)(2) grants committees broad authority, it also imposes two express limitations on the scope of permissible committee delegation. A committee may not exercise the power of the board to:
(a) Approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval; or
(b) Adopt, amend, or repeal any bylaw of the corporation.
These statutory carve-outs reflect the legislature's judgment that certain fundamental corporate actions — those that require stockholder approval and those that alter the corporation's internal governance rules — are of such significance that they must be acted upon by the full board and may not be delegated to a subset of directors acting through a committee.
In addition to these two express limitations, other provisions of the DGCL impose board-level approval requirements that, read in conjunction with Section 141(c)(2), effectively render certain categories of action non-delegable to committees or officers:
Declaration of Dividends (§ 170). While the board may delegate to a committee or officer the ministerial authority to determine the timing and amount of a dividend payment within board-approved parameters (e.g., authorizing the CEO or CFO to set the record date and payment date for a previously declared dividend), the fundamental authorization of a dividend — the determination that the corporation has sufficient surplus to support a distribution — requires board action.
Approval of Mergers and Consolidations (§ 251). The approval of an agreement of merger or consolidation requires a resolution adopted by the board of directors declaring the advisability of the agreement and directing its submission to stockholders for their vote. This is a board-level action that may not be delegated to a committee under Section 141(c)(2), because it constitutes the approval of a matter expressly required by the DGCL to be submitted to stockholders. However, it is important to note that the preliminary steps leading up to a merger — including the identification and evaluation of potential targets, the negotiation of terms, the engagement of financial and legal advisors, the conduct of due diligence, and the execution of non-binding letters of intent or expressions of interest — are operational activities that may be delegated to officers or committees.
Sale of Substantially All Assets (§ 271). The authorization of the sale, lease, or exchange of all or substantially all of the corporation's assets requires a resolution of the board and the approval of the holders of a majority of the outstanding stock. As with mergers, the preliminary evaluation and negotiation activities may be delegated, but the formal authorization requires board action.
Dissolution (§ 275). A resolution of dissolution must be adopted by the board of directors and approved by stockholders.
Application to Quorum's M&A Threshold. The proposed increase in the M&A/strategic-transaction threshold from $10.0 million to $25.0 million does not implicate the non-delegation restrictions of Section 141(c)(2), for two reasons. First, the threshold pertains to management-level authority to conduct preliminary strategic activities — including engagement of advisors, execution of non-binding letters of intent, and conduct of due diligence — below the dollar level, not to the final statutory board approval of a merger, consolidation, or sale of substantially all assets. Second, the proposed DOA Matrix expressly reserves to the full Board the approval of all statutory mergers under Section 251, all sales of substantially all assets under Section 271, and all transactions above $25.0 million, regardless of their characterization. In other words, the increase in the management-level threshold enlarges the zone within which officers may conduct preliminary and exploratory M&A activities without full Board pre-approval, but does not delegate the authority to consummate a statutory transaction that requires Board and stockholder approval.
C. DGCL § 142 — Officer Authority
Section 142(a) of the DGCL provides that every corporation organized under the DGCL "shall have such officers with such titles and duties as shall be stated in the bylaws or in a resolution of the board of directors which is not inconsistent with the bylaws." The statute further provides that "[o]fficers shall be chosen in such manner and shall hold their offices for such terms as are prescribed by the bylaws or determined by the board of directors or other governing body."
Notably, Section 142(a) does not itself impose any substantive limitation on the scope of authority that may be delegated to officers. Unlike Section 141(c)(2), which carves out specific categories of non-delegable action for committees, Section 142 leaves the scope of officer authority entirely to the determination of the board, the bylaws, or the resolutions by which officers are appointed and their duties defined. The practical scope of officer authority is therefore a function of the board's delegation — as expressed through bylaws, board resolutions, the DOA Matrix, and the officer's position description and employment agreement — and the general principles of agency law that govern the relationship between a corporation and its officers.
It is important to distinguish between committee authority under Section 141(c) and officer authority under Section 142, as the two forms of delegation operate under different legal frameworks. When a committee of the board acts, it acts as the board itself — exercising the board's own power and authority within its designated parameters. The committee's actions are treated, for legal purposes, as actions of the board. By contrast, when an officer acts pursuant to delegated authority, the officer acts as an agent of the corporation under the board's direction. The officer's authority derives from the board's delegation, and the officer's actions bind the corporation to the extent of the authority actually or apparently conferred.
Significance for the DOA Matrix. When the proposed DOA Matrix authorizes the CEO to settle claims up to $10.0 million or to approve capital expenditures up to $5.0 million, this is an officer-level delegation under Section 142 — not a committee delegation under Section 141(c). The officer exercises delegated authority as an agent of the corporation, subject to the board's continuing oversight and the officer's own fiduciary duties. Officers of Delaware corporations owe fiduciary duties to the corporation, including the duty of care and the duty of loyalty, in exercising their delegated authority. This principle was confirmed by the Delaware Supreme Court in Gantler v. Stephens, 965 A.2d 695 (Del. 2009), which held that corporate officers, like directors, owe fiduciary duties to the corporation and its stockholders.
The practical implication is that the Board's setting of dollar thresholds for officer-level authority in the DOA Matrix is an exercise of the board's own managerial authority under Section 141(a), implemented through the officer-appointment and authority-definition mechanisms contemplated by Section 142. The dollar amounts are a matter of business judgment, not statutory prescription.
D. Interplay Between Board, Committee, and Officer Authority in the DOA Matrix
The proposed DOA Matrix establishes a tiered structure of authority that is designed to ensure that corporate actions of increasing magnitude and significance receive correspondingly higher levels of review and approval. The general architecture of the proposed tiers is as follows:
Tier 1 — Officer Sole Authority: For actions below specified dollar thresholds, a single designated officer (typically the CEO, CFO, or General Counsel, depending on the authority category) may act without the involvement of any other officer, committee, or the full Board.
Tier 2 — Dual-Officer Approval: For actions within specified intermediate dollar ranges, two designated officers must concur in the action (e.g., CEO and CFO jointly for capital expenditures between $5.0 million and $15.0 million).
Tier 3 — Committee Approval: For actions above the dual-officer threshold but below the full-Board threshold, the relevant standing committee (e.g., Risk Committee for claims settlements, Audit Committee for litigation settlements, Investment Committee for investment transactions) must approve the action.
Tier 4 — Full Board Approval: For actions exceeding the committee threshold, or for any action falling within a category reserved to the full Board regardless of dollar amount (e.g., statutory mergers, bylaw amendments, dividend declarations), the full Board must act.
This layered approach is fully consistent with Delaware law's flexible delegation framework. The DGCL does not prescribe any particular number of tiers, any specific dollar thresholds, or any particular allocation of authority among officers, committees, and the full board. Those design decisions are committed to the board's business judgment. What the law does require is that each tier of authority be traceable to a board resolution or bylaw provision authorizing the delegation, and that the non-delegable categories identified in Sections 141(c)(2), 251, 271, and 275 be expressly reserved to the full Board.
The omnibus board resolution proposed for the December 11, 2025 Board meeting, together with the restated committee charters and the conforming bylaw amendments described in Section VI.C below, will collectively establish the legal foundation for the revised DOA Matrix. We recommend that the omnibus resolution expressly adopt the DOA Matrix by reference, delegate authority to the officers and committees identified therein in accordance with the tiers and thresholds specified, reserve to the full Board the categories of action identified as non-delegable, and authorize the CEO, in consultation with the General Counsel, to make ministerial and non-substantive amendments to the DOA Matrix (e.g., updating officer titles) between annual Board reviews, with any substantive amendments requiring Board approval.
IV. Analysis of Specific Questions
A. Proposed M&A/Strategic Transaction Threshold Increase ($10.0M → $25.0M)
1. Description of Proposed Change
Under the current DOA Matrix, adopted in comprehensive form on October 6, 2017, any M&A transaction or strategic transaction with an aggregate value exceeding $10.0 million requires full Board approval prior to the execution of a binding agreement or the commitment of material corporate resources. In practice, this threshold has required the Board to convene (often on short notice via telephonic meetings) to approve the engagement of financial advisors, the submission of non-binding indications of interest, and the execution of non-binding letters of intent for transactions that, while above $10.0 million in notional value, are routine add-on acquisitions or strategic investments well within the Company's operational and financial capacity.
The proposed revision would increase the threshold for full Board approval of M&A and strategic transactions from $10.0 million to $25.0 million. Under the revised DOA Matrix, the authority structure for M&A and strategic transactions would operate as follows:
•  Below $10.0 million: The CEO has sole authority to authorize preliminary strategic activities, including engagement of advisors, execution of non-binding letters of intent, conduct of due diligence, and negotiation of terms, without committee or Board involvement, subject to quarterly reporting to the Board.
•  $10.0 million to $25.0 million: The CEO, in consultation with the Lead Independent Director, may authorize the same categories of preliminary activity. The "consultation" requirement is intended to ensure that the Lead Independent Director is aware of and has an opportunity to provide input on sub-threshold M&A activity of increasing significance, without requiring formal committee or Board approval.
•  Above $25.0 million: Full Board approval is required prior to the commitment of material corporate resources or the execution of any binding agreement.
•  Regardless of dollar amount: Full Board approval is required for any transaction constituting a statutory merger under DGCL § 251, any consolidation, any sale of substantially all assets under DGCL § 271, and any transaction involving a related party or presenting a conflict of interest.
The rationale for the proposed increase is grounded in both operational efficiency and peer alignment. The Apex Proxy Advisors benchmarking study, based on a fourteen-peer comparison group of publicly traded insurance holding companies, found that the median Board-level M&A approval threshold among peers was $30.0 million, with a range from $15.0 million to $50.0 million. Quorum's current $10.0 million threshold was the lowest in the peer group. Moreover, the Company's significant growth since 2017 — from $1.9 billion in revenue and $11.2 billion in total assets to $3.12 billion in revenue and $18.7 billion in total assets — means that a $10.0 million transaction represents a smaller proportion of the Company's resources today than it did when the threshold was established. The proposed $25.0 million threshold positions Quorum below the peer median, reflecting a conservative approach that balances operational flexibility with appropriate Board oversight.
2. Delaware Law Analysis
The proposed increase in the M&A/strategic-transaction threshold is legally permissible under DGCL § 141(a). As discussed in Section III.A above, the Board has full discretion under the DGCL to determine the threshold at which management-level authority ends and Board-level authority begins for non-statutory corporate actions. There is no provision of the DGCL that prescribes a dollar amount above which Board approval is required for M&A or strategic transactions. The dollar threshold is a matter of business judgment, not statutory mandate.
The critical legal constraint is the requirement that certain categories of corporate action — specifically, statutory mergers under Section 251, consolidations, and sales of substantially all assets under Section 271 — remain reserved for Board-level action and cannot be delegated to officers or committees. The proposed DOA Matrix expressly addresses this constraint by carving out all statutory mergers, consolidations, and sales of substantially all assets from officer-level authority regardless of the dollar amount of the transaction. This carve-out ensures compliance with both Section 141(c)(2)'s prohibition on delegating actions required to be submitted to stockholders and the substantive board-approval requirements of Sections 251 and 271.
It bears emphasis that the authority delegated to the CEO and Lead Independent Director under the proposed sub-$25.0 million tier is limited to preliminary strategic activities — the engagement of advisors, the execution of non-binding letters of intent, the conduct of due diligence, and the negotiation of terms. The execution of binding definitive agreements — whether asset purchase agreements, stock purchase agreements, merger agreements, or investment agreements — should always require Board approval regardless of the dollar amount of the transaction. We address this recommendation in Section IV.A.2 below.
Delaware case law supports broad delegation of preliminary M&A authority to officers. In Grimes v. Donald, the Delaware Supreme Court recognized that the board may lawfully delegate operational authority to officers, including authority to negotiate and evaluate business opportunities, provided the board retains the ultimate power to oversee and countermand. In practice, Delaware corporations routinely delegate to their CEOs the authority to identify acquisition targets, engage investment bankers and legal counsel, negotiate preliminary terms, and execute non-binding expressions of interest — all without prior Board approval. The proposed DOA Matrix is consistent with this well-established practice.
Recommended Safeguards. While the proposed increase is legally permissible, we recommend that the DOA Matrix include the following safeguards to ensure the delegation is appropriately bounded and does not give rise to Caremark-type monitoring concerns:
(a) The DOA Matrix should include a clear and specific definition of "strategic transaction" that identifies the categories of transactions subject to the threshold (e.g., acquisitions of businesses or business units, acquisitions of equity interests in other entities, strategic investments, joint venture formations, licensing arrangements involving material intellectual property, and strategic alliances involving significant capital commitments or exclusive arrangements).
(b) The DOA Matrix should specify that the execution of binding definitive agreements — whether for asset purchases, stock purchases, mergers, or strategic investments — always requires Board approval, regardless of the dollar amount. The sub-$25.0 million authority is limited to preliminary activities, not consummation.
(c) The DOA Matrix should include an aggregation provision, requiring that a series of related transactions be treated as a single transaction for threshold purposes. This prevents the structuring of a larger transaction as a series of smaller sub-threshold transactions.
(d) A periodic reporting protocol should be established: the CEO should report quarterly to the full Board on all strategic transactions evaluated, pursued, or consummated below the $25.0 million threshold, whether or not they resulted in a completed transaction. In addition, the CEO should immediately report to the Board any transaction that, while below $25.0 million individually, is part of a related series of transactions that in the aggregate exceeds the threshold.
3. Fiduciary Considerations
The Board's decision to increase the M&A/strategic-transaction threshold is itself a business decision subject to fiduciary duties. Board members must exercise informed judgment (duty of care) in setting the threshold. In this regard, the Board's reliance on the Apex Proxy Advisors peer benchmarking data, the recommendations of management (including Mr. Okonkwo as General Counsel), the observations in the Garrett & Whitfield management letter, and the advice of outside counsel (Calderwood & Harkness) satisfies the duty-of-care requirement that the Board act on an informed basis. The process of engaging independent governance consultants, conducting a fourteen-peer benchmarking study, and deliberating over a multi-month period is precisely the type of informed, deliberative process that the Delaware courts have identified as satisfying the duty of care. See Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).
Once the threshold is set, the Board's fiduciary obligations do not end. Under the Caremark line of decisions, the Board has an ongoing duty to maintain information systems and reporting mechanisms sufficient to ensure that the Board remains informed of M&A activity conducted below the threshold. The quarterly reporting protocol recommended above is designed to fulfill this obligation. In addition, the DOA Matrix should require that any transaction that, while below $25.0 million, raises unusual risk factors — such as transactions in new geographic markets, transactions involving counterparties with which the Company has no prior relationship, or transactions that could give rise to regulatory complications — be escalated to the Board or a designated committee regardless of dollar amount.
B. Expanded CEO Claims-Settlement Authority
1. Description of Proposed Change
Under the current DOA Matrix, the CEO of Quorum Insurance Holdings Corp. (at the parent level) has authority to authorize claims settlements in the range of greater than $1.0 million up to $5.0 million per claim. Subsidiary CEOs have authority to settle claims up to $1.0 million per claim. Claims settlements exceeding $5.0 million at the parent level require the approval of the Board or the Risk Committee.
The proposed revision would restructure the claims-settlement authority tiers as follows:
The proposed thresholds represent a significant increase in management-level claims-settlement authority, reflecting the growth in the Company's claims portfolio, the increasing frequency and severity of claims in the property-casualty and specialty lines, and the operational need for management to respond promptly to settlement demands without the delays inherent in convening a Board or committee meeting.
A critical background issue informs this proposed change. As noted in Section II.C above, the Garrett & Whitfield management letter dated March 14, 2025 identified that Lone Star Specialty Insurance Company had been operating at a de facto claims-settlement authority of $3.0 million per claim, versus the $1.0 million threshold authorized in the current DOA Matrix. This discrepancy persisted for an undetermined period and involved an undetermined number of claims settlements. While the management letter did not identify any individual settlement that appeared unreasonable or inconsistent with sound claims-handling practices, the systematic exceedance of the authorized threshold represents a compliance gap that must be addressed. The proposed threshold increases are designed both to reflect the Company's current business scale and to regularize existing practice, bringing Lone Star's operations within the bounds of the authorized DOA framework going forward.
2. Delaware Law Analysis
Claims settlement is an operational decision that lies at the core of the business of an insurance holding company and its operating subsidiaries. The resolution of insurance claims — including the evaluation of coverage, the assessment of liability exposure, the negotiation of settlement terms, and the authorization of settlement payments — is precisely the type of day-to-day operational activity that the DGCL contemplates will be managed "under the direction of" the board through delegation to officers, rather than by the board directly. The delegation of claims-settlement authority to officers is well within the scope of Sections 141(a) and 142 of the DGCL.
No provision of the DGCL restricts the dollar amount of claims-settlement authority that may be delegated to officers. Claims settlement does not fall within any of the non-delegable categories identified in Section 141(c)(2) (it is not an action requiring stockholder approval, nor is it a bylaw amendment), nor does it implicate the board-level approval requirements of Sections 251, 271, or 275. The Board therefore has unfettered discretion to set the dollar threshold for officer-level claims-settlement authority at whatever level it deems appropriate in the exercise of its business judgment.
The Board's authority to set and revise claims-settlement dollar thresholds is a business judgment protected by the business judgment rule, provided the directors act on an informed basis, in good faith, and in the honest belief that the action is in the best interests of the corporation. Aronson v. Lewis, 473 A.2d 805 (Del. 1984). The factors that inform the Board's judgment in this regard — including the volume and severity of the Company's claims portfolio, industry trends in settlement values, the expertise and judgment of the claims professionals to whom authority is delegated, peer practices, and the operational need for prompt settlement authority — are precisely the type of business considerations that the business judgment rule is designed to protect from judicial second-guessing.
The Lone Star Compliance Gap. The Lone Star Specialty claims-authority exceedance raises a distinct set of legal issues. The fact that a subsidiary officer exercised authority in excess of the authorized DOA threshold for an extended period, without Board awareness or ratification, does not, by itself, create Delaware law liability for the directors. Under the Caremark framework, director liability for a failure of oversight requires a showing that the directors either (a) utterly failed to implement any reporting or information system, or (b) having implemented such a system, consciously failed to monitor or oversee its operation, thereby disabling themselves from being informed of risks or problems requiring their attention. Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006).
Here, the Company did maintain a DOA Matrix and a claims-reporting framework, and the Lone Star exceedance was ultimately identified — albeit by the external auditors rather than through the Company's own internal monitoring mechanisms. This circumstance suggests a deficiency in the internal audit function's coverage of DOA compliance, rather than a complete failure to implement monitoring systems. A single deficiency of this nature, in the absence of evidence of conscious disregard by the directors, is unlikely to give rise to Caremark liability. Nevertheless, the gap underscores the importance of the monitoring and reporting recommendations set forth in Sections V and VI of this memorandum.
Ratification. We recommend that the omnibus board resolution proposed for the December 11, 2025 meeting include a ratification clause covering prior claims-settlement actions taken by Lone Star Specialty Insurance Company in excess of the then-authorized $1.0 million subsidiary CEO threshold but within the proposed $2.5 million threshold, for the period from October 6, 2017 (the date of the last comprehensive DOA update) through the date of Board adoption of the revised DOA Matrix. This ratification should be conditioned on a representation by management that the settlements in question were made in good faith, in the ordinary course of business, and in accordance with sound claims-handling practices. Ratification under these circumstances is legally permissible and eliminates any residual ambiguity regarding the validity of the prior settlements. We address ratification in further detail in Section VIII below.
3. Regulatory Overlay Considerations
While this memorandum is limited to an analysis of Delaware corporate law, we note that state insurance regulatory requirements in Connecticut, Texas, and Ohio may impose independent constraints on the delegation of claims-settlement authority at the subsidiary level. Insurance holding company acts and related regulations in these jurisdictions may require that certain types of claims decisions — including settlements above specified thresholds, settlements of bad-faith claims, or settlements involving policyholders in specified categories — be subject to regulatory reporting, advance notice, or approval requirements.
These state insurance regulatory implications are addressed in a separate memorandum being prepared in coordination with Broadleaf Insurance Regulatory Consultants, LLC (Harold J. Emmerich, Managing Director), which is expected to be completed by December 1, 2025, in advance of the December 11, 2025 Board meeting. The DOA Matrix should cross-reference applicable state regulatory authority limitations for each regulated subsidiary, and subsidiary-level DOA matrices should be calibrated to comply with both the parent DOA framework and the applicable state regulatory requirements. We have prepared a model subsidiary DOA template for this purpose, which will be provided under separate cover.
V. Fiduciary Duties in the Delegation Context
A. Duty of Care
The duty of care requires that directors act with the care that an ordinarily prudent person would exercise in a like position under similar circumstances. See DGCL § 141(e); Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985). In the context of delegation decisions, the duty of care is not satisfied merely by the initial act of establishing the DOA Matrix and setting appropriate thresholds. Rather, the duty of care imposes a continuing obligation that encompasses four distinct dimensions:
First, the Board must exercise informed judgment when establishing delegation parameters. This requires that the Board review and consider relevant information — including benchmarking data, financial information regarding the Company's scale and operations, management recommendations, legal analysis, and regulatory guidance — before approving the DOA Matrix and its thresholds. The process currently underway, which involves the engagement of independent governance consultants (Apex Proxy Advisors), outside counsel (Calderwood & Harkness), and regulatory advisors (Broadleaf Insurance Regulatory Consultants), and which will include committee-level workshops and a full Board deliberation at the December 11, 2025 meeting, is designed to satisfy this requirement.
Second, the Board must select competent delegates. When the DOA Matrix authorizes the CEO, CFO, General Counsel, or subsidiary officers to exercise specified categories of authority, the Board implicitly represents that it has confidence in the competence, integrity, and judgment of those officers. The duty of care requires that the Board exercise reasonable diligence in the selection and oversight of the officers to whom authority is delegated, including through the annual performance evaluation process overseen by the Compensation & Human Capital Committee.
Third, the Board must establish adequate reporting mechanisms. The delegation of authority does not relieve the Board of its oversight responsibility; it merely changes the mechanism through which oversight is exercised. The Board must ensure that it receives regular, timely, and accurate reports on the exercise of delegated authority, including reports on actions taken within delegated thresholds, exceptions to established thresholds, near-threshold actions, and material trends or developments in the areas covered by the DOA Matrix.
Fourth, the Board must periodically review and update the delegation thresholds. Business conditions change, the Company's scale and complexity evolve, and thresholds that were appropriate at one point in time may become either too restrictive (impeding operational efficiency) or too permissive (creating unacceptable risk) as circumstances change.
Application to Quorum. The current DOA Matrix was last comprehensively updated on October 6, 2017 — an interval of more than eight years. During this period, the Company's revenue has grown by approximately 64%, its total assets have grown by approximately 67%, and the competitive and regulatory landscape of the insurance industry has changed significantly. While the absence of a comprehensive update over this period does not, by itself, constitute a breach of the duty of care — particularly given the interim amendment adopted in April 2020 — it highlights the importance of implementing a formal annual review cycle going forward.
We recommend that annual review of the DOA Matrix be incorporated into the Board calendar, with responsibility for leading the review assigned to the Audit Committee (for financial authority categories) and the Risk Committee (for insurance-specific authority categories), with input from the General Counsel. The Compensation & Human Capital Committee should have oversight of the officer-hiring authority thresholds, and the Investment Committee should review the investment-transaction thresholds. The results of the annual review should be presented to the full Board at its first regularly scheduled meeting following the end of each fiscal year.
B. Duty of Loyalty
The duty of loyalty requires that directors act in good faith and in the best interests of the corporation and its stockholders, rather than in their own personal interests or the interests of third parties. In the delegation context, the duty of loyalty is implicated when delegation decisions are motivated by improper purposes — for example, a desire to insulate management from Board oversight, to facilitate self-dealing by officers, or to create opacity around corporate decision-making for the benefit of insiders.
No loyalty concerns are implicated by the proposed threshold increases under consideration. The changes are motivated by legitimate business objectives: operational efficiency, alignment with peer practices, and regularization of existing practice at the subsidiary level. There is no indication that any director or officer stands to gain a personal benefit from the proposed threshold increases, and the changes do not diminish the Board's ultimate authority over the categories of corporate action — statutory mergers, sales of substantially all assets, conflict-of-interest transactions — that are most likely to implicate loyalty concerns.
We note that conflict-of-interest transactions remain subject to the requirements of DGCL § 144 (interested director transactions) regardless of the dollar thresholds established in the DOA Matrix. Section 144 provides that a transaction between the corporation and a director (or an entity in which a director has a financial interest) is not voidable solely because of the director's interest if the transaction is approved in good faith by a majority of disinterested directors, approved in good faith by a vote of the stockholders, or is fair to the corporation at the time it is authorized. The DOA Matrix should include a clear statement that all transactions involving a conflict of interest or a related party must be reviewed and approved through the Company's related-party transaction approval procedures, regardless of dollar amount.
C. Caremark Monitoring Obligations
The Delaware Court of Chancery's decision in In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), and its progeny — most notably Stone v. Ritter, 911 A.2d 362 (Del. 2006), and Marchand v. Barnhill, 212 A.3d 805 (Del. 2019) — establish that directors have an affirmative duty to implement and monitor information and reporting systems reasonably designed to provide the Board with timely and accurate information regarding the corporation's compliance with law and the corporation's business performance. A sustained or systematic failure to exercise oversight — a failure to act in the face of a known duty to act — constitutes a breach of the duty of loyalty, not merely the duty of care. Stone v. Ritter, 911 A.2d at 370.
The Caremark standard is demanding in its requirements but forgiving in its application. Directors are not guarantors of corporate compliance, and the mere occurrence of a compliance failure does not give rise to Caremark liability. Liability attaches only where the directors have either (a) utterly failed to implement any reporting or information system (a "prong one" claim), or (b) having implemented such a system, consciously failed to monitor or oversee its operation, thereby disabling themselves from being informed of risks or problems requiring their attention (a "prong two" claim).
However, the Delaware Supreme Court's decision in Marchand v. Barnhill — which addressed the duties of the board of Blue Bell Creameries, a food safety company that experienced a listeria outbreak — made clear that for companies operating in industries subject to significant regulatory requirements and where compliance failures can have existential consequences, the Caremark duty is not merely theoretical. In Marchand, the Court held that the absence of any board-level committee charged with monitoring food safety, the absence of any regular management reports to the Board on food safety compliance, and the absence of any board-level discussion of food safety issues, when taken together, were sufficient to support an inference that the directors had failed to make a good-faith effort to implement a monitoring system.
Application to Quorum. The Caremark and Marchand principles have direct application to Quorum as a regulated insurance holding company. The Company's compliance obligations — spanning insurance regulatory requirements across multiple states, financial reporting requirements under the securities laws, claims-handling standards, and cybersecurity and data-privacy obligations — are extensive and complex. The Board's monitoring duties are correspondingly heightened.
The Lone Star Specialty claims-authority exceedance identified by Garrett & Whitfield illustrates the type of compliance gap that Caremark monitoring duties are designed to prevent. While the exceedance does not, by itself, give rise to Caremark liability for the reasons discussed in Section IV.B.2 above, it serves as a cautionary signal that the Company's internal monitoring mechanisms may not have been adequate to detect DOA compliance deviations at the subsidiary level in a timely manner.
We recommend that the Board take the following steps to strengthen its monitoring architecture in connection with the governance overhaul:
(1) Committee Charter Mandates. Each restated committee charter should include an express mandate to monitor DOA compliance within the committee's area of oversight. The Audit Committee charter should include oversight of DOA compliance as a component of its internal controls mandate. The Risk Committee charter should include oversight of claims-settlement DOA compliance. The Investment Committee charter should include oversight of investment-transaction DOA compliance.
(2) Internal Audit Coverage. The internal audit function, headed by Renata M. Vásquez, Chief Audit Executive, should include DOA-threshold compliance as a standing item in its annual audit plan. Internal audit should conduct periodic testing of DOA compliance at both the parent and subsidiary levels, with results reported to the Audit Committee. We understand that DOA compliance was not a specific focus of the internal audit plan in fiscal years 2023 or 2024, which may have contributed to the delayed identification of the Lone Star Specialty exceedance.
(3) Exception Reporting. The DOA Matrix itself should include express reporting and escalation requirements for exceptions and near-threshold actions. Any action taken outside the established thresholds — or any action that falls within a defined proximity of the threshold (e.g., within 80% of the applicable threshold) — should be reported to the relevant committee within five business days.
(4) Management Certifications. On a quarterly basis, the CEO, CFO, and General Counsel should provide written certifications to the Audit Committee confirming that, to the best of their knowledge after reasonable inquiry, all actions taken during the quarter were within the authority established by the DOA Mat