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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

March 12, 2026

MEMORANDUM OF LAW

FROM: Jeffrey Park, Senior Associate, Calderwood & Harkness LLP

TO: Douglas Carmichael, Responsible Partner, Calderwood & Harkness LLP Rachel Sondergaard, General Counsel, Quorum Insurance Holdings Corp.

RE: Late Notice Defense Analysis — Article 7 of Treaty No. PA-QCS-2019-EXL-0044; Meridian Docks Mass Tort Cluster

MATTER NO.: 1025-00005

CLASSIFICATION: Privileged and Confidential — Prepared in Anticipation of Litigation

This memorandum has been prepared by Calderwood & Harkness LLP at the direction of Quorum Insurance Holdings Corp. in anticipation of litigation and is protected by the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. This memorandum is not intended for distribution outside the attorney-client relationship and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

I. EXECUTIVE SUMMARY

This memorandum analyzes the strength of Quorum Casualty & Surety Company's ("QC&S") defense to the first ground of dispute asserted by Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic" or "PARL") — namely, the allegation that QC&S provided untimely notice of the Meridian Docks mass tort cluster in violation of Article 7 of Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"). This memorandum has been prepared at the request of Douglas Carmichael, the responsible partner on this matter, and Rachel Sondergaard, General Counsel of Quorum Insurance Holdings Corp. ("QIH"), the parent company of QC&S.

The core factual issue is the 14-month, 7-day gap between the date QC&S first reserved the 31 individual claims constituting the Meridian Docks cluster (March 15, 2021) and the date on which QC&S provided formal notice of those claims to Pinnacle Atlantic through the designated intermediary, Broadreach Intermediaries Inc. ("Broadreach") (May 22, 2022). Pinnacle Atlantic contends that this delay in notification was untimely under Article 7 and that it vitiates coverage for the contribution of the Meridian Docks claims to the aggregate excess-of-loss retention breach under the Treaty.

The stakes on this single ground are significant. The Meridian Docks claims represent $41.2 million in QC&S net incurred losses and are a substantial driver of treaty year ("TY") 2022 aggregate net incurred losses, which totaled $189.7 million — exceeding the $120 million aggregate retention by $69.7 million. If the Meridian Docks claims were excluded from the aggregate calculation, TY 2022 ceded losses would fall from $69.7 million to $28.5 million, representing a $41.2 million reduction in reinsurance recoverables on this ground alone.

QC&S's central defense rests on two pillars. First, QC&S contends that it was not contractually obligated to provide notice of the Meridian Docks claims until individual claim incurred losses reached or exceeded the $1 million per-claim reporting threshold expressly stated in Article 7. Because no individual claim in the cluster crossed that threshold until reserve increases in Q1 2022, QC&S's May 22, 2022 notice was arguably prompt — provided within approximately two to five months of the triggering event. Second, and more fundamentally, QC&S will rely on the well-established principle under New York law that a reinsurer asserting a late notice defense bears the burden of demonstrating actual prejudice resulting from the cedent's delay. Given the aggregate excess-of-loss treaty structure, in which Pinnacle Atlantic had no right to associate in the defense of underlying claims and its financial exposure did not attach until aggregate losses exceeded the retention, Pinnacle Atlantic will face a formidable challenge in establishing the requisite prejudice.

Our overall assessment is that QC&S has strong but not unassailable defenses on this ground. Under the applicable legal framework, the late notice defense is likely to fail absent a showing of actual prejudice, and the treaty structure makes such a showing difficult. However, the extended duration of the delay and the volume of claims in the cluster create litigation risk. The 14-month gap is facially significant and could produce adverse optics before a court or an arbitration panel, particularly if QC&S's internal files reveal earlier awareness of the cluster's potential aggregate significance. We therefore recommend immediate document collection and review, witness preparation, and a calibrated litigation strategy that foregrounds the prejudice defense while preserving all contractual and equitable defenses.

II. FACTUAL BACKGROUND

A. The 2019 Treaty — Overview

Treaty No. PA-QCS-2019-EXL-0044 is an aggregate excess-of-loss reinsurance treaty covering casualty lines, specifically commercial general liability ("CGL"), excess and umbrella liability, and professional liability. The Treaty was effective July 1, 2019, with a five-year initial term running through June 30, 2024, subject to automatic annual extensions upon mutual agreement of the parties. The Treaty was in fact extended through June 30, 2026, pursuant to the automatic renewal mechanism, until Pinnacle Atlantic gave formal notice of non-renewal on October 1, 2025, effective at the conclusion of the current extension period.

The cedent under the Treaty is Quorum Casualty & Surety Company, a New York-domiciled stock insurance company (NAIC No. 24891) and a wholly owned subsidiary of Quorum Insurance Holdings Corp. The reinsurer is Pinnacle Atlantic Reinsurance Ltd., a Bermuda Class 4 insurer (BMA Registration No. BMA-4R-2008-0331) licensed to conduct long-term and general insurance business under the laws of Bermuda.

The economic terms of the Treaty are straightforward. QC&S retains the first $120 million in aggregate net incurred losses per treaty year. The Treaty provides a cession limit of $200 million per treaty year, covering aggregate net incurred losses from $120 million to $320 million. Treaty years are measured on a July 1 to June 30 fiscal basis, aligning with QC&S's reinsurance program year.

Under Article 9 of the Treaty, Broadreach Intermediaries Inc. is designated as the intermediary for all communications and transactions between QC&S and Pinnacle Atlantic, including the transmission of premium, the submission of loss reports and bordereau, and the provision of notices required under the Treaty. The account executive at Broadreach responsible for this Treaty is Jamie Castellano.

Pursuant to Article 16, the Treaty is governed by the laws of the State of New York, without regard to conflict-of-laws principles. Article 22 provides for dispute resolution through arbitration administered under the ARIAS-U.S. Rules, with a three-member panel seated in New York, New York.

B. Article 7 — Notice Requirements (Detailed Textual Analysis)

Article 7 of the Treaty establishes the notice and reporting obligations that govern QC&S's duty to inform Pinnacle Atlantic of claims activity affecting the Treaty. Based on our review of the executed Treaty documentation in QC&S's possession, the relevant provisions of Article 7 may be summarized as follows.

Article 7, Section 1 imposes an obligation on QC&S to provide "prompt notice" to Pinnacle Atlantic of any individual claim or occurrence arising under the covered casualty lines that has met or exceeded $1,000,000 in incurred losses. "Incurred losses" is defined elsewhere in the Treaty as the sum of case reserves and paid losses (net of salvage and subrogation), consistent with standard reinsurance treaty terminology. The $1 million figure operates as an individual claim reporting threshold — claims that have not reached this level are not subject to individual notice requirements under this section, though they are captured in the aggregate reporting mechanism described below.

Article 7, Section 2 establishes a quarterly aggregate loss reporting obligation. QC&S is required to submit bordereau to Pinnacle Atlantic, through Broadreach, within sixty (60) days following the close of each calendar quarter. The bordereau are to include, at minimum, a listing of all open claims, paid losses, case reserves, and aggregate incurred loss totals for the applicable treaty year. These quarterly submissions serve as the primary mechanism for Pinnacle Atlantic to monitor the aggregate loss development that determines its exposure under the Treaty.

Article 7, Section 3 specifies that all notices required under Article 7 shall be transmitted through the intermediary designated in Article 9 — here, Broadreach Intermediaries Inc. — and that delivery of a notice to the intermediary shall be deemed delivery to the reinsurer for purposes of the Treaty's notice provisions.

Several features of Article 7 are critical to the present analysis:

First, Article 7 does not contain an express "condition precedent" provision. The notice obligation is framed using the word "prompt" rather than the more demanding formulations — such as "immediately," "as soon as practicable," or "as a condition precedent to coverage" — that would more clearly establish notice as a condition of recovery. The absence of condition-precedent language is a significant factor in the legal analysis, as discussed in Part III below.

Second, Article 7 does not contain an express forfeiture-for-late-notice provision. There is no clause stating that failure to provide timely notice will result in the forfeiture of reinsurance coverage, the exclusion of claims from the aggregate calculation, or any other specified remedy. This omission further supports the characterization of the notice obligation as a covenant rather than a condition precedent.

Third, Article 7 establishes a clear individual claim reporting threshold of $1 million. The notice obligation is triggered by an individual claim reaching or exceeding $1 million in incurred losses. This threshold-based trigger is central to QC&S's defense, as discussed in Part IV.A below.

Fourth, the quarterly bordereau requirement under Section 2 operates independently of the individual claim notice requirement under Section 1. The bordereau capture aggregate loss data, including claims that individually fall below the $1 million threshold, and thus provide the reinsurer with an ongoing picture of aggregate loss development even in the absence of individual claim notices.

We note that the foregoing is based on our review of the executed Treaty in QC&S's files. We recommend that the full original executed text of Article 7, including any amendments, endorsements, or addenda, be obtained and confirmed prior to the submission of any formal response to Pinnacle Atlantic's counsel.

C. The Meridian Docks Mass Tort Cluster — Chronology

The Meridian Docks claims arise from an alleged toxic contamination at the Meridian Docks industrial waterfront redevelopment project located along the Passaic River in Newark, New Jersey. The development project, undertaken by Meridian Docks Development LLC (the "Policyholder"), involved the remediation and redevelopment of a former industrial waterfront site for mixed commercial and residential use. During the construction and remediation process, workers and nearby residents were allegedly exposed to hazardous substances, including volatile organic compounds, heavy metals, and residual industrial waste products, resulting in a range of claimed bodily injuries.

QC&S issued commercial general liability policy CGL-2020-09844 to Meridian Docks Development LLC, effective for the 2020 policy year. The policy was a standard ISO-form CGL policy with occurrence-based coverage, subject to per-occurrence and aggregate limits. QC&S is the primary CGL insurer for the policyholder during the relevant period.

The cluster consists of 31 related bodily injury claims filed by individual claimants — predominantly construction workers and residents of adjacent properties — alleging exposure-related injuries including respiratory conditions, dermatological disorders, and neurological symptoms. The claims are being litigated in the Superior Court of New Jersey, Essex County, and have been consolidated for discovery and pretrial proceedings.

The chronology of events relevant to the late notice issue is as follows:

March 15, 2021 — Initial Reserving. QC&S's claims department first established case reserves for the 31 Meridian Docks claims. At this stage, the claims were in their early infancy. Limited exposure information was available — initial plaintiff filings were sparse, medical documentation was incomplete, and the scope of the environmental contamination had not been fully assessed. Accordingly, individual claim reserves were set at modest levels, each well below the $1 million per-claim reporting threshold specified in Article 7. The aggregate initial reserve for the entire cluster was substantially below the amount that would later develop as the claims matured. The reserving reflected QC&S's standard early-stage mass tort reserving practices, in which initial reserves are conservative estimates based on limited information, subject to revision as the claims develop.

Q1 2022 (January through March 2022) — Reserve Increases. During the first quarter of 2022, QC&S's claims department conducted a comprehensive reserve review of the Meridian Docks cluster in light of significant developments that had occurred over the preceding months. These developments included the filing of additional plaintiff complaints expanding the scope of alleged injuries, the production of environmental testing data by the New Jersey Department of Environmental Protection confirming the presence of elevated contaminant levels, and the receipt of updated medical evidence from treating physicians and retained experts. Based on this new information, individual claim reserves were increased substantially, and individual claims within the cluster began exceeding the $1 million reporting threshold for the first time. The precise dates on which individual claims crossed the $1 million threshold varied across the cluster, but the bulk of the threshold breaches occurred during the January-to-March 2022 period.

May 22, 2022 — Notice to Pinnacle Atlantic. QC&S provided formal notice of the Meridian Docks claims cluster to Pinnacle Atlantic through the designated intermediary, Broadreach Intermediaries Inc., by letter dated May 22, 2022. The notice identified the 31 claims, described the nature of the underlying allegations, and reported the current reserve and paid loss figures for the cluster. The notice was transmitted in the manner specified by Articles 7 and 9 of the Treaty.

The time gap between QC&S's first reserving of the claims (March 15, 2021) and the provision of notice (May 22, 2022) is 14 months and 7 days. This is the figure cited by Pinnacle Atlantic in its pre-suit demand letter as the measure of the delay. However, from QC&S's perspective, the more relevant measure is the gap between the first breach of the $1 million per-claim threshold (Q1 2022) and the notice date (May 22, 2022) — a period of approximately two to five months, depending on the specific claim and the precise date of the threshold breach.

Current Financial Position. As of the date of this memorandum, QC&S's total net incurred losses across the 31 Meridian Docks claims stand at $41.2 million. These losses are a substantial component of the TY 2022 aggregate net incurred losses of $189.7 million, which exceeded the $120 million retention by $69.7 million. The Meridian Docks cluster thus represents approximately 59% of the TY 2022 ceded losses ($41.2M of $69.7M) and approximately 21.7% of total TY 2022 aggregate net incurred losses.

D. Pinnacle Atlantic's Allegations

Pinnacle Atlantic's position on the late notice issue is set forth in a pre-suit demand letter dated February 14, 2026, sent by its counsel, Hargrove, Fitch & Calloway LLP, under the signatures of lead partner Nathaniel R. Calloway III and senior associate Priya Subramanian. The late notice allegation was first raised in a reservation-of-rights letter issued by Pinnacle Atlantic on December 12, 2025, which identified four separate grounds of dispute concerning the Treaty.

With respect to the late notice ground, Pinnacle Atlantic makes the following principal contentions:

First, Pinnacle Atlantic asserts that QC&S's notice was untimely by a period of 14 months and 7 days, measured from the date QC&S first reserved the Meridian Docks claims (March 15, 2021) to the date notice was transmitted through Broadreach (May 22, 2022). Pinnacle Atlantic contends that the notice clock began running at the point of first reserving, regardless of whether individual claims had reached the $1 million threshold.

Second, Pinnacle Atlantic alleges that QC&S was, or should have been, aware of the potential significance of the Meridian Docks cluster to the aggregate excess-of-loss treaty well before individual claims crossed the $1 million threshold. Pinnacle Atlantic points to the size of the cluster (31 related claims), the mass tort nature of the underlying litigation, and QC&S's sophistication as a national casualty insurer as factors that should have prompted earlier notification.

Third, Pinnacle Atlantic implies — though it does not specifically articulate — that the delay prejudiced its ability to participate in or monitor the claims-handling and reserving process for the Meridian Docks cluster. The demand letter references Pinnacle Atlantic's "right to be informed" and its "interest in the prudent and timely administration of the cedent's claims," though it stops short of identifying any specific act or omission that would have occurred differently had notice been provided earlier.

Fourth, the demand letter cites the late notice ground as one of four bases for demanding the return of $78.4 million in previously paid reinsurance recoverables, plus $12.6 million in pre-judgment interest, for a total demand of $91.0 million. The four grounds asserted are: (1) late notice (the subject of this memorandum); (2) improper IBNR allocation to TY 2022; (3) breach of the utmost good faith obligation; and (4) misrepresentation of aggregate loss development in quarterly reporting. The late notice ground targets the $41.2 million attributable to the Meridian Docks cluster specifically.

III. LEGAL FRAMEWORK — LATE NOTICE IN REINSURANCE UNDER NEW YORK LAW

A. The General Rule: Prejudice Requirement in Reinsurance

The legal framework governing late notice defenses in the reinsurance context under New York law differs materially from the framework applicable to direct insurance. In the direct insurance context, New York Insurance Law § 3420(a) historically permitted insurers to disclaim coverage based on the insured's failure to provide timely notice without regard to prejudice. This rule was modified by a 2008 legislative amendment (effective January 17, 2009), which added Section 3420(a)(5), requiring that, for claims arising under liability insurance policies, the insurer demonstrate prejudice from late notice as a prerequisite to a disclaimer. However, these statutory provisions are by their terms applicable to policies of insurance issued to insureds and do not extend to reinsurance contracts, which are contracts between sophisticated commercial parties and are not subject to the same regulatory protections.

In the reinsurance context, New York courts have developed a distinct body of common law addressing the late notice defense. The prevailing rule, established through a line of decisions by the New York Court of Appeals and the Appellate Division, is that notice provisions in reinsurance treaties are generally construed as covenants rather than conditions precedent to coverage, unless the treaty language unambiguously and expressly establishes timely notice as a condition precedent. This distinction is of fundamental importance.

Where a notice provision is construed as a covenant, the reinsurer's remedy for a breach of the notice obligation is limited to a claim for damages — specifically, the reinsurer must demonstrate that it suffered actual prejudice as a result of the cedent's delay in providing notice. Absent such a showing, the reinsurer may not decline coverage or withhold payment of otherwise valid reinsurance recoverables. By contrast, where a notice provision is expressly established as a condition precedent, the cedent's failure to comply results in forfeiture of coverage for the affected claims, without regard to whether the reinsurer has suffered any prejudice.

The application of this framework to Article 7 of the Treaty strongly favors QC&S. As discussed in Part II.B above, Article 7 employs a "prompt notice" formulation. It does not state that timely notice is a "condition precedent" to the reinsurer's obligations under the Treaty. It does not provide that failure to provide timely notice will result in the forfeiture or exclusion of claims from the aggregate calculation. And it does not use the kind of emphatic or precatory language — such as "it shall be a condition of this Treaty that" or "the Cedent's right to recover hereunder is conditioned upon" — that New York courts have looked for in determining whether a notice provision rises to the level of a true condition precedent.

Accordingly, it is our assessment that Article 7's notice provision will be construed as a covenant, not a condition precedent. This means that even if QC&S's notice is deemed untimely, Pinnacle Atlantic may not decline or reduce coverage unless it can demonstrate that the delay caused it actual prejudice.

B. The Prejudice Standard

Under the prejudice requirement applicable to notice covenants in reinsurance treaties, the reinsurer bears the burden of demonstrating actual prejudice resulting from the cedent's late notice. This burden is not a light one. New York courts have consistently held that "actual prejudice" requires more than a theoretical or speculative possibility of harm. The reinsurer must demonstrate a concrete, material adverse impact on its ability to protect its interests — an impact that was caused by the delay in notice and that would not have occurred had notice been provided in a timely fashion.

The types of prejudice that courts have recognized in the reinsurance context include the following:

(a) Loss of opportunity to investigate. If the delay deprived the reinsurer of the ability to investigate the underlying claims at a critical juncture, resulting in the loss of evidence, the unavailability of witnesses, or the inability to independently assess liability or damages, this may constitute actual prejudice. However, the reinsurer must demonstrate that such investigation would have been undertaken and that the delay, rather than other factors, caused the loss of the investigative opportunity.

(b) Loss of opportunity to associate in the defense. In reinsurance treaties that grant the reinsurer a right to associate in the defense of underlying claims (typically per-risk excess treaties), the cedent's failure to provide timely notice may deprive the reinsurer of the opportunity to participate in defense strategy, settlement discussions, or coverage determinations. This is a recognized form of prejudice. However, this form of prejudice is largely inapplicable in the aggregate excess-of-loss context, where the reinsurer typically does not have an association right with respect to individual underlying claims.

(c) Inability to verify reserves or conduct independent evaluation. If the delay prevented the reinsurer from reviewing and, if warranted, challenging the cedent's reserve-setting at a time when reserve estimates were still fluid, this may constitute prejudice. However, the reinsurer must demonstrate that earlier access to reserve information would have led to a materially different outcome — a mere assertion that it "would have reviewed" the reserves is insufficient.

(d) Loss of subrogation or recovery rights. If the delay in notice caused the expiration of statutes of limitation, the dissipation of assets, or the loss of other recovery opportunities that the reinsurer could have pursued, this may constitute actual prejudice.

(e) Adverse reserve development attributable to the delay. If the reinsurer can demonstrate that the delay in notice directly caused or contributed to adverse reserve development — for example, by preventing the reinsurer from providing input on claims-handling strategy that would have reduced the ultimate loss — this may constitute prejudice. However, this theory is highly fact-specific and difficult to prove.

Critically, the mere passage of time is generally insufficient to establish actual prejudice. A reinsurer cannot satisfy its burden simply by pointing to the length of the delay and asserting that, in the abstract, earlier notice would have been preferable. There must be a demonstrated causal connection between the specific delay at issue and a concrete harm suffered by the reinsurer.

C. Leading New York Precedent on Reinsurance Late Notice

The body of New York precedent addressing late notice defenses in the reinsurance context is substantial, reflecting the prominence of New York as the governing law for a significant share of the domestic and international reinsurance market. Several lines of authority are particularly relevant to the present dispute.

New York's appellate courts have repeatedly addressed the threshold question of whether a notice provision in a reinsurance treaty constitutes a covenant or a condition precedent. The consistent holding is that, in the absence of clear and unambiguous language establishing notice as a condition precedent, the provision will be construed as a covenant, and the prejudice requirement will apply. Courts have looked to the specific language of the notice clause, the overall structure of the treaty, and the parties' course of dealing in making this determination. The use of general language such as "prompt" notice, "timely" notice, or "notice as soon as reasonably practicable" has been held insufficient to create a condition precedent, absent express condition-precedent language.

Courts have also addressed the question that is central to the present dispute: in an aggregate excess-of-loss treaty, when does the notice obligation accrue? The issue arises because the reinsurer's exposure under such a treaty is a function of aggregate losses, not individual claim outcomes. Some decisions have held that the cedent's notice obligation is triggered at the individual claim level, consistent with any per-claim reporting threshold stated in the treaty, and that the cedent is not required to anticipate the aggregate impact of individual claims that have not yet reached the threshold. Other decisions have suggested that a cedent's awareness of a developing pattern or cluster of claims that, in the aggregate, may materially affect the treaty should trigger a notice obligation even if individual claims remain below the threshold — a "knew or should have known" standard applied at the cluster level.

This latter line of authority is the primary source of risk for QC&S. If an arbitration panel or court were to adopt the "aggregate awareness" standard, the notice clock could be deemed to have started running at some point before individual claims crossed the $1 million threshold — potentially as early as March 15, 2021, when QC&S first reserved the cluster. However, the "aggregate awareness" cases tend to involve circumstances in which the cedent had clear, documented knowledge that the claims at issue would likely breach the treaty threshold and deliberately delayed notification. They are distinguishable from the present case on the facts, as discussed in Part IV.B below.

Additionally, New York courts have addressed the role of intermediaries in the notice chain. Where a treaty designates an intermediary for the transmission of notices, courts have held that delivery of notice to the intermediary constitutes delivery to the reinsurer. Moreover, if the intermediary has transmitted information about the claims to the reinsurer through other channels — for example, through quarterly bordereau submissions or informal communications — courts have considered whether such transmissions constitute constructive notice that would toll or excuse the cedent's obligation to provide formal individual claim notice. This line of authority is directly relevant here, given Broadreach's role as the designated intermediary under Article 9 and its responsibility for transmitting quarterly bordereau to Pinnacle Atlantic.

Finally, courts and arbitration panels have distinguished between "claims-made" notice requirements, which are triggered by the making of a claim and typically carry strict time limits, and "occurrence-based" or "losses incurred" notice triggers, which are tied to the development of losses and are construed more flexibly. Article 7's notice obligation is tied to the level of incurred losses, not to the date a claim is first made or reported. This occurrence-based/losses-incurred framework supports a more flexible interpretation of the "prompt notice" obligation and is consistent with QC&S's position that notice was triggered by the crossing of the $1 million threshold, not by the initial reserving.

D. Federal Arbitration Act and ARIAS-U.S. Considerations

If this dispute proceeds to arbitration, as contemplated by Article 22 of the Treaty, the arbitration will be conducted under the ARIAS-U.S. Rules before a three-member panel seated in New York. Although the arbitrators will be required to apply New York substantive law (per Article 16), the practical reality of reinsurance arbitration is that panels frequently give significant weight to industry custom and practice in interpreting treaty provisions and evaluating the parties' conduct.

This is a potentially important consideration on the late notice issue. Reinsurance arbitration panels, composed of experienced reinsurance professionals, are generally familiar with the practical realities of claims reporting in the context of aggregate excess-of-loss treaties. Such panels have historically been sympathetic to cedent defenses based on per-claim reporting thresholds and have shown reluctance to impose forfeiture-like consequences for late notice absent clear evidence of actual prejudice. The industry custom of measuring notice obligations against stated reporting thresholds, rather than against broader notions of "aggregate awareness," is well established and is a point that QC&S can effectively leverage in the arbitral forum.

Moreover, arbitration panels in the ARIAS-U.S. framework are not bound by strict rules of evidence and may consider a broader range of materials and testimony — including expert testimony on industry custom and practice — than would be admissible in a judicial proceeding. This flexibility could benefit QC&S if it retains an industry practices expert to testify regarding the customary treatment of mass tort clusters in the notice and reporting context, as discussed in Part VI.C below.

From a strategic standpoint, arbitration may be a more favorable forum for QC&S on the late notice issue than litigation. While this calculus involves multiple variables and cannot be assessed solely on the basis of the late notice ground, the historical orientation of reinsurance arbitration panels toward pragmatic, prejudice-based analysis counsels in favor of proceeding in the arbitral forum on this issue.

IV. ANALYSIS OF QC&S'S LATE NOTICE DEFENSE

A. Article 7 Reporting Threshold — The $1 Million Per-Claim Trigger

QC&S's central defense to the late notice allegation rests on the express terms of Article 7 itself. Article 7, Section 1 imposes an obligation to provide prompt notice of individual claims or occurrences that have "met or exceeded" $1,000,000 in incurred losses. This is a clear, quantitative threshold that defines the triggering event for the notice obligation. QC&S's position is straightforward: until individual Meridian Docks claims reached or exceeded $1 million in incurred losses, no notice obligation was triggered, and no notice was required.

The factual predicate for this defense is well supported. The 31 Meridian Docks claims were first reserved on March 15, 2021. At that time, each individual claim carried a reserve well below the $1 million threshold. The initial reserves reflected the early stage of the mass tort litigation — limited plaintiff filings, incomplete medical evidence, and an uncertain scope of environmental contamination. Individual claim reserves at this stage were set consistent with QC&S's standard mass tort reserving methodology, which applies conservative initial estimates subject to periodic review and adjustment as additional information becomes available. There is nothing unusual or improper about this approach; it is the standard practice of a prudent cedent managing a developing mass tort portfolio.

The critical inflection point occurred in Q1 2022, when QC&S's claims department conducted a comprehensive review of the Meridian Docks cluster in light of several significant developments: the filing of additional plaintiff complaints expanding the scope of alleged injuries and the number of affected individuals; the production by the New Jersey Department of Environmental Protection of environmental testing data confirming elevated contaminant levels at the site; and the receipt of updated medical evidence establishing more serious and widespread injury patterns than initially documented. Based on these developments, individual claim reserves were substantially increased, and claims within the cluster began exceeding the $1 million threshold for the first time. The precise timing varied by claim, but the bulk of the threshold breaches occurred during the January-to-March 2022 period.

QC&S provided notice to Pinnacle Atlantic on May 22, 2022 — approximately two to five months after the first claims crossed the $1 million threshold. While the question of whether a two-to-five-month interval constitutes "prompt" notice is inherently fact-specific and somewhat subjective, it is well within the range that courts and arbitration panels have found reasonable in the context of complex mass tort claims. The preparation and compilation of a comprehensive notice covering 31 related claims, including the assembly of supporting reserve and claims data, is not a ministerial task that can be completed overnight. A period of several weeks to a few months to prepare and transmit such a notice is both reasonable and consistent with industry practice.

The key interpretive question is whether the notice clock should run from (a) the date individual claims crossed the $1 million threshold (QC&S's position) or (b) the date QC&S first reserved the claims, even at below-threshold amounts (Pinnacle Atlantic's position). QC&S's reading is the natural and textually faithful reading of Article 7. The provision expressly conditions the individual claim notice obligation on the attainment of a $1 million incurred loss threshold. Pinnacle Atlantic's position — that notice was required at the time of first reserving, regardless of the threshold — effectively reads the $1 million threshold out of the contract. If the parties had intended that notice be required for all claims regardless of size, they could have drafted Article 7 without a threshold. The inclusion of a specific dollar threshold necessarily implies that claims below that threshold are not subject to the individual notice requirement.

This interpretation is further supported by the treaty's overall notice architecture. Article 7 establishes two complementary reporting mechanisms: individual claim notice (triggered by the $1 million threshold) and quarterly bordereau (capturing all claims, regardless of size). This two-track structure reflects a deliberate allocation of reporting responsibilities: individual claims of significance are flagged through specific notices, while the aggregate loss picture is maintained through periodic bordereau submissions. Reading the individual claim notice obligation as triggered by first reserving — at any amount — would collapse this two-track structure into a single obligation and would render the $1 million threshold superfluous.

B. The "Cluster" or "Aggregate Awareness" Argument

Pinnacle Atlantic's most potent counterargument to the threshold defense is the contention that QC&S, even if individual claims were below $1 million, should have provided notice when it became aware that the cluster of 31 related claims could, in the aggregate, materially affect the treaty year retention. This is the "aggregate awareness" or "cluster notification" theory, and it represents the primary analytical challenge to QC&S's threshold-based defense.

The argument proceeds as follows: a cedent that is aware of a developing pattern of related claims, which in the aggregate may drive its treaty-year losses above the retention level, has an implied duty to alert its reinsurer to this developing exposure, even if no individual claim has reached the specified reporting threshold. Under this theory, the notice obligation is triggered not by the individual claim threshold but by the cedent's awareness — actual or constructive — of the cluster's aggregate significance to the treaty.

QC&S has several strong counterarguments to this theory. First, as a matter of contract interpretation, Article 7 specifies an individual claim threshold, not an aggregate awareness trigger. The treaty contains no provision requiring notice of claim clusters, aggregate reserve increases, or developing patterns of related claims outside the individual claim notice and quarterly bordereau framework. If the parties had intended to impose such an obligation, they could have included an express provision — for example, a requirement to provide notice of any "occurrence," "event," or "group of related claims" that could reasonably be expected to reach a specified aggregate threshold. The absence of such language should be given effect, not disregarded.

Second, the treaty's aggregate reporting is addressed through the quarterly bordereau mechanism. The bordereau submissions are designed to give Pinnacle Atlantic an ongoing picture of aggregate loss development, including the contribution of individual claims — whether above or below the $1 million threshold — to the overall aggregate. To the extent Pinnacle Atlantic had an interest in monitoring the aggregate trajectory of the treaty year, that interest was served by the bordereau, not by the individual claim notice provision.

This leads to a factual question of significant importance: whether QC&S's quarterly bordereau submissions during the relevant period included the Meridian Docks claims in the aggregate loss data. If the Meridian Docks claims were included in the bordereau — even if they were not individually identified by name or separately flagged — then Pinnacle Atlantic may have had constructive notice of the claims and their contribution to aggregate losses. This would substantially undercut Pinnacle Atlantic's argument that it was surprised by the May 22, 2022 notice and would support an argument that the bordereau provided the reinsurer with the aggregate information it needed to monitor its exposure, consistent with the treaty's notice architecture.

We do not currently have copies of the relevant bordereau submissions in our files. This is a critical gap in the factual record that must be addressed immediately. We strongly recommend that QC&S and Broadreach produce all quarterly bordereau submissions for TY 2021 and TY 2022 for our review. The content and format of these submissions will bear directly on both the constructive notice argument and the broader assessment of QC&S's compliance with its reporting obligations.

Third, even under an "aggregate awareness" standard, the question of when QC&S should have known of the cluster's aggregate significance is not self-evident. In March 2021, when the claims were first reserved, TY 2021 aggregate losses stood at $104.6 million — below the $120 million retention. The Meridian Docks claims, at their initial reserve levels, represented a modest fraction of the aggregate. It was not until Q1 2022, when individual reserves were substantially increased and aggregate losses for TY 2022 began trending toward the retention level, that the cluster's potential treaty significance became apparent. QC&S's position — that it provided notice promptly once the significance became clear — is reasonable and defensible, even under an aggregate awareness framework.

C. The Role of Broadreach Intermediaries Inc.

The intermediary's role in this dispute warrants close examination. Under Article 9, Broadreach is the designated intermediary for all communications between QC&S and Pinnacle Atlantic, including the provision of notices required under Article 7. QC&S transmitted its May 22, 2022 notice through Broadreach, consistent with the treaty's intermediary clause, and Article 7, Section 3 provides that delivery to the intermediary constitutes delivery to the reinsurer.

Two questions arise regarding Broadreach's role. First, did Broadreach transmit any information to Pinnacle Atlantic regarding the Meridian Docks claims prior to the May 22, 2022 formal notice? This might have occurred in connection with the transmission of quarterly bordereau, in the course of routine account management communications, or through informal discussions between Broadreach's account executive (Jamie Castellano) and Pinnacle Atlantic's treaty management team. If any such earlier communications occurred and included references to the Meridian Docks claims, they could constitute earlier effective notice or, at a minimum, estop Pinnacle Atlantic from claiming that it was unaware of the claims before May 2022.

Second, was there any delay between QC&S's delivery of the notice to Broadreach and Broadreach's transmission of the notice to Pinnacle Atlantic? If QC&S delivered the notice to Broadreach on or about May 22, 2022, but Broadreach delayed in forwarding it to Pinnacle Atlantic, this would be relevant to the notice timeline. Under Article 7, Section 3, delivery to Broadreach constitutes delivery to the reinsurer, so any intermediary delay would not be attributable to QC&S. However, the facts surrounding the transmission should be confirmed.

We have included in the draft third-party subpoena to Broadreach a request for all correspondence, transmittals, emails, and communications between Broadreach and Pinnacle Atlantic (and between Broadreach and QC&S) regarding the Meridian Docks claims for the period from January 1, 2021 through December 31, 2022. This discovery is essential to a complete assessment of the notice timeline and to the development of the constructive notice and estoppel arguments.

D. Prejudice Analysis

Even assuming, arguendo, that QC&S's notice is deemed untimely — whether measured from March 15, 2021 (Pinnacle Atlantic's position) or from a date somewhat earlier than May 22, 2022 (under an "aggregate awareness" theory) — QC&S's most powerful defense is the absence of actual prejudice to Pinnacle Atlantic. Under the legal framework described in Part III, Pinnacle Atlantic bears the burden of demonstrating that the delay in notice caused it concrete, material harm. In our assessment, Pinnacle Atlantic will face formidable obstacles in meeting this burden.

Factors Weighing Against a Finding of Prejudice:

(1) No Association Right. Under an aggregate excess-of-loss treaty, the reinsurer does not typically have a right to associate in the defense of individual underlying claims. Pinnacle Atlantic's exposure under the Treaty is a function of aggregate losses across all covered casualty lines — it does not insure or reinsure any individual claim. Unlike a per-risk excess treaty, where the reinsurer's exposure is tied to the outcome of specific claims and where the right to associate in the defense is a meaningful contractual protection, the aggregate excess-of-loss structure does not give Pinnacle Atlantic a stake in the handling of any particular claim. Accordingly, Pinnacle Atlantic cannot credibly argue that earlier notice would have enabled it to participate in the defense of the Meridian Docks claims. It had no such right, and the absence of notice did not deprive it of anything it was entitled to receive.

(2) Aggregate Treaty Structure — No Current Financial Exposure at Time of First Reserving. At the time QC&S first reserved the Meridian Docks claims (March 15, 2021), TY 2021 aggregate net incurred losses stood at $104.6 million — below the $120 million retention. Pinnacle Atlantic had no current financial exposure at that time; its obligations under the Treaty had not been triggered because the retention had not been breached. Accordingly, the delay in notice did not affect any existing obligation of Pinnacle Atlantic or impair its ability to manage a current financial exposure. It is only with the benefit of hindsight — knowing that TY 2022 aggregate losses ultimately exceeded the retention — that the significance of the Meridian Docks claims to the treaty becomes apparent. A prejudice analysis must focus on the reinsurer's position at the time of the delay, not on subsequent developments.

(3) No Loss of Subrogation or Recovery Rights. There is no indication in the record that the delay in notice resulted in the loss of any subrogation, contribution, or recovery rights against third parties. The Meridian Docks claims remain in active litigation, and all potential avenues of recovery appear to remain available. Pinnacle Atlantic has not alleged the loss of any specific recovery opportunity attributable to the delay.

(4) Reserve Adequacy Not Challenged. Pinnacle Atlantic has not alleged that the Meridian Docks reserves are excessive, that they were set in bad faith, or that Pinnacle Atlantic would have reserved the claims differently had it received earlier notice. The claims developed in the ordinary course of mass tort litigation, and the reserve increases in Q1 2022 were driven by objective developments — expanded plaintiff filings, environmental testing data, and medical evidence — not by any action or inaction attributable to QC&S's notice practices. If Pinnacle Atlantic cannot demonstrate that earlier notice would have resulted in lower reserves or different claims outcomes, it cannot demonstrate prejudice.

(5) No Defense Prejudice. Pinnacle Atlantic was not the defense insurer for the Meridian Docks claims. It had no right to control, direct, or participate in the defense of the underlying tort claims. It was not responsible for the selection of defense counsel, the development of defense strategy, or the negotiation of settlements. The delay in notice did not deprive Pinnacle Atlantic of any defense-related right or opportunity.

Factors Pinnacle Atlantic May Assert as Prejudice:

(1) Monitoring Opportunity. Pinnacle Atlantic may argue that earlier notice would have allowed it to monitor the development of the Meridian Docks claims and, specifically, to review and potentially challenge the reserve increases that occurred in Q1 2022 before those increases were reflected in the aggregate loss calculations submitted under the Treaty. This is the most plausible prejudice theory available to Pinnacle Atlantic, but it faces significant analytical challenges. The reserve increases were driven by objective external developments (environmental data, medical evidence, additional plaintiff filings), not by discretionary judgments that Pinnacle Atlantic could have influenced through monitoring. Moreover, the right to "monitor" reserves is not the same as the right to control or override the cedent's reserve-setting — under the Treaty, QC&S retains exclusive authority over its reserving practices, and Pinnacle Atlantic's monitoring rights, to the extent they exist, are informational rather than decisional. A monitoring opportunity that would not have changed the outcome does not constitute actual prejudice.

(2) Bilateral Communication. Pinnacle Atlantic may contend that earlier awareness of the Meridian Docks cluster would have enabled it to provide input on claims-handling strategy — for example, by suggesting alternative defense approaches, recommending particular experts, or advocating for early mediation. However, this argument is undermined by the same structural feature noted above: in an aggregate excess-of-loss treaty, the reinsurer does not typically have a right to direct or influence the cedent's claims-handling at the individual claim level. Any input Pinnacle Atlantic might have offered would have been advisory at best, and there is no basis for concluding that QC&S would have handled the claims differently in response to such input.

(3) IBNR Implications. Pinnacle Atlantic may argue that the delay in notice compressed the timeline for reviewing actuarial projections relating to the Meridian Docks claims, affecting its ability to assess incurred-but-not-reported ("IBNR") reserves. However, this argument overlaps substantially with Pinnacle Atlantic's separate IBNR allocation dispute (Ground 2 of the four asserted grounds) and raises distinct issues that are beyond the scope of this memorandum. To the extent the IBNR argument is repackaged as a prejudice theory for the late notice ground, it suffers from the same deficiency: Pinnacle Atlantic has not identified any specific IBNR adjustment it would have made differently had notice been received earlier.

Assessment. On balance, Pinnacle Atlantic will struggle to demonstrate the concrete, material prejudice required to sustain a late notice defense under New York law. The aggregate excess-of-loss treaty structure is fundamentally incompatible with the most common forms of prejudice recognized in the case law — loss of defense participation, loss of association rights, and loss of claims-handling influence. The monitoring and communication theories are speculative and do not rise to the level of "actual prejudice" as that term has been construed by New York courts. This defense is the strongest arrow in QC&S's quiver on the late notice issue and should be positioned as the primary argument in any response or arbitration proceeding.

E. Waiver and Estoppel Considerations

In addition to the contractual and prejudice defenses, QC&S has a potentially powerful affirmative defense based on waiver and estoppel.

The timeline of Pinnacle Atlantic's payments is critical. Following QC&S's notice of the Meridian Docks claims on May 22, 2022, Pinnacle Atlantic paid the full $78.4 million in reinsurance recoverables under the Treaty across seven billing installments spanning from October 15, 2022 through March 29, 2024. The first installment — $15.0 million for TY 2022 — was paid on October 15, 2022, approximately five months after notice was provided. All seven installments were paid without any reservation of rights, without any written objection to the timeliness of the Meridian Docks notice, and without any assertion that the Meridian Docks claims should be excluded from the aggregate calculation.

Pinnacle Atlantic did not raise the late notice issue until its reservation-of-rights letter dated December 12, 2025 — more than three years after notice was provided and approximately 20 months after the final payment of $3.2 million on March 29, 2024. The pre-suit demand letter from Hargrove, Fitch & Calloway LLP followed on February 14, 2026.

Under New York law, the voluntary payment of reinsurance recoverables with knowledge of the facts giving rise to a potential defense may constitute a waiver of that defense. Waiver is the intentional relinquishment of a known right. Where a reinsurer has actual or constructive knowledge of a potential late notice defense — as Pinnacle Atlantic did here, given that it received the May 22, 2022 notice and was in a position to assess its timeliness — and nevertheless pays claims without reservation over an extended period, the reinsurer may be deemed to have waived its right to assert the defense.

Similarly, the doctrine of estoppel may preclude Pinnacle Atlantic from asserting a late notice defense where its conduct — specifically, the payment of $78.4 million in recoverables without objection — induced QC&S to rely on the expectation that the claims would be covered and that no notice-related dispute would arise. If QC&S can demonstrate detrimental reliance on Pinnacle Atlantic's course of payment — for example, by showing that QC&S relied on the reinsurance recoverables in its financial planning, statutory surplus calculations, or regulatory filings — the estoppel argument is strengthened.

We note a potential counter-argument: Pinnacle Atlantic may contend that its payments were made subject to a general reservation of rights or that the December 12, 2025 reservation-of-rights letter was timely in the context of a long-tail reinsurance relationship. However, based on the information currently available to us, we are not aware of any written reservation of rights accompanying or predating the seven payment installments. If Pinnacle Atlantic's payment confirmations or accompanying correspondence are silent on the issue of notice, the waiver argument is compelling. We recommend a thorough review of all correspondence between QC&S, Broadreach, and Pinnacle Atlantic accompanying each payment installment to confirm the absence of any reservation language.

Additionally, the mere delay in asserting a defense — here, more than three years from the date of notice and 20 months from the date of the last payment — may itself constitute waiver under New York law. While there is no bright-line rule establishing a specific time period after which a defense is waived, the length of the delay, combined with the active course of payment, significantly strengthens QC&S's position.

F. Quantitative Impact Assessment

The financial stakes associated with the late notice ground are substantial and warrant careful quantification.

If Pinnacle Atlantic prevails fully on the late notice defense — i.e., if all $41.2 million in Meridian Docks net incurred losses are excluded from the TY 2022 aggregate — the financial impact is as follows:

• TY 2022 original aggregate net incurred losses: $189.7 million

• Meridian Docks exclusion: ($41.2 million)

• TY 2022 revised aggregate net incurred losses: $148.5 million

• Less TY 2022 retention: ($120.0 million)

• Revised TY 2022 ceded loss: $28.5 million (compared to the originally calculated $69.7 million)

• Reduction in TY 2022 ceded loss: $41.2 million

On a total Treaty basis (combining TY 2022 and TY 2023 cessions):

• Total revised cessions (TY 2022 + TY 2023): $28.5 million + $8.7 million = $37.2 million

• Total claimed cessions: $78.4 million

• Reduction: $78.4 million − $37.2 million = $41.2 million at risk on this ground alone

This analysis assumes a full exclusion of all 31 Meridian Docks claims from the aggregate. However, partial exclusion scenarios are also possible. If only a subset of the 31 claims is found to have triggered a late notice violation — for example, if notice is deemed timely for claims that crossed the $1 million threshold shortly before the May 22, 2022 notice but untimely for claims that may have crossed earlier in Q1 2022 — the exclusion would be proportionally reduced. The precise amount at risk under partial exclusion scenarios depends on the reserve levels and threshold-crossing dates of individual claims, which must be confirmed through a detailed review of QC&S's claim-level reserve records.

It bears emphasis that the $41.2 million exposure on the late notice ground is a component of Pinnacle Atlantic's total demand of $91.0 million ($78.4 million in recoverables plus $12.6 million in interest). While the late notice ground is the most significant single ground in terms of dollar exposure, the four grounds are not mutually exclusive, and a partial adverse outcome on multiple grounds could produce cumulative exposure beyond the amount attributable to any single ground.

V. COUNTERARGUMENTS AND RISK ASSESSMENT

A. Strengths of QC&S's Position

QC&S enters this dispute from a position of considerable strength on the late notice ground. The principal factors supporting QC&S's defense are as follows:

1. Article 7's $1 million per-claim threshold is an express, unambiguous contractual term that directly addresses the triggering event for individual claim notice. QC&S's interpretation — that no notice obligation arose until individual claims crossed the threshold — is the natural reading of the provision and is consistent with the treaty's overall notice architecture, which distinguishes between individual claim notice (threshold-triggered) and aggregate reporting (quarterly bordereau).

2. New York law places the burden of demonstrating actual prejudice squarely on the reinsurer asserting a late notice defense. This is not a mere pleading requirement — it is a substantive burden that requires proof of concrete, material harm causally linked to the delay. Pinnacle Atlantic will bear this burden throughout any arbitration or litigation proceeding.

3. The aggregate excess-of-loss treaty structure fundamentally limits the types of prejudice available to Pinnacle Atlantic. Unlike a per-risk excess treaty, the aggregate treaty does not give the reinsurer a right to associate in defense, control claims handling, or direct settlement strategy for individual underlying claims. The most commonly recognized forms of prejudice in the reinsurance context — loss of defense participation, loss of investigation opportunity, loss of claims-handling influence — are largely inapplicable here.

4. Pinnacle Atlantic's extended course of payment — $78.4 million across seven installments over approximately 17 months, all without any reservation of rights or objection regarding notice — provides strong support for waiver and estoppel defenses. The three-year delay between notice and the first assertion of the late notice defense further reinforces these arguments.

5. If the quarterly bordereau submissions for TY 2021 and TY 2022 included the Meridian Docks claims in aggregate loss data, QC&S can argue that Pinnacle Atlantic had constructive notice of the claims and their contribution to aggregate losses, further undercutting any claim of surprise or prejudice.

B. Weaknesses and Risks

Notwithstanding the strengths of QC&S's position, several factors create litigation risk and must be carefully managed:

1. The 14-month, 7-day gap between first reserving and notice is facially significant. While the legal analysis supports QC&S's position, the raw length of the delay may create adverse optics before a court or arbitration panel. Decision-makers assessing the "prompt notice" standard may be influenced by the intuitive perception that 14 months is a long time, even if the delay is explained by the operation of the $1 million threshold.

2. Pinnacle Atlantic may argue that QC&S, as a sophisticated national casualty insurer, should have anticipated that a cluster of 31 related mass tort claims would, in the aggregate, have significant treaty implications, and should have provided notice even before individual claims reached $1 million. This "sophisticated cedent" argument, while not supported by the text of Article 7, may resonate with decision-makers who are sympathetic to the reinsurer's interest in early information.

3. The most significant factual risk is the potential for adverse documents in QC&S's internal files. If QC&S's claims committee minutes, internal memoranda, actuarial projections, or correspondence reflect an awareness, prior to Q1 2022, that the Meridian Docks cluster could materially affect the treaty-year aggregate — or, worse, if

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
March 12, 2026
MEMORANDUM OF LAW
FROM: Jeffrey Park, Senior Associate, Calderwood & Harkness LLP
TO: Douglas Carmichael, Responsible Partner, Calderwood & Harkness LLP Rachel Sondergaard, General Counsel, Quorum Insurance Holdings Corp.
RE: Late Notice Defense Analysis — Article 7 of Treaty No. PA-QCS-2019-EXL-0044; Meridian Docks Mass Tort Cluster
MATTER NO.: 1025-00005
CLASSIFICATION: Privileged and Confidential — Prepared in Anticipation of Litigation
This memorandum has been prepared by Calderwood & Harkness LLP at the direction of Quorum Insurance Holdings Corp. in anticipation of litigation and is protected by the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. This memorandum is not intended for distribution outside the attorney-client relationship and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
I. EXECUTIVE SUMMARY
This memorandum analyzes the strength of Quorum Casualty & Surety Company's ("QC&S") defense to the first ground of dispute asserted by Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic" or "PARL") — namely, the allegation that QC&S provided untimely notice of the Meridian Docks mass tort cluster in violation of Article 7 of Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"). This memorandum has been prepared at the request of Douglas Carmichael, the responsible partner on this matter, and Rachel Sondergaard, General Counsel of Quorum Insurance Holdings Corp. ("QIH"), the parent company of QC&S.
The core factual issue is the 14-month, 7-day gap between the date QC&S first reserved the 31 individual claims constituting the Meridian Docks cluster (March 15, 2021) and the date on which QC&S provided formal notice of those claims to Pinnacle Atlantic through the designated intermediary, Broadreach Intermediaries Inc. ("Broadreach") (May 22, 2022). Pinnacle Atlantic contends that this delay in notification was untimely under Article 7 and that it vitiates coverage for the contribution of the Meridian Docks claims to the aggregate excess-of-loss retention breach under the Treaty.
The stakes on this single ground are significant. The Meridian Docks claims represent $41.2 million in QC&S net incurred losses and are a substantial driver of treaty year ("TY") 2022 aggregate net incurred losses, which totaled $189.7 million — exceeding the $120 million aggregate retention by $69.7 million. If the Meridian Docks claims were excluded from the aggregate calculation, TY 2022 ceded losses would fall from $69.7 million to $28.5 million, representing a $41.2 million reduction in reinsurance recoverables on this ground alone.
QC&S's central defense rests on two pillars. First, QC&S contends that it was not contractually obligated to provide notice of the Meridian Docks claims until individual claim incurred losses reached or exceeded the $1 million per-claim reporting threshold expressly stated in Article 7. Because no individual claim in the cluster crossed that threshold until reserve increases in Q1 2022, QC&S's May 22, 2022 notice was arguably prompt — provided within approximately two to five months of the triggering event. Second, and more fundamentally, QC&S will rely on the well-established principle under New York law that a reinsurer asserting a late notice defense bears the burden of demonstrating actual prejudice resulting from the cedent's delay. Given the aggregate excess-of-loss treaty structure, in which Pinnacle Atlantic had no right to associate in the defense of underlying claims and its financial exposure did not attach until aggregate losses exceeded the retention, Pinnacle Atlantic will face a formidable challenge in establishing the requisite prejudice.
Our overall assessment is that QC&S has strong but not unassailable defenses on this ground. Under the applicable legal framework, the late notice defense is likely to fail absent a showing of actual prejudice, and the treaty structure makes such a showing difficult. However, the extended duration of the delay and the volume of claims in the cluster create litigation risk. The 14-month gap is facially significant and could produce adverse optics before a court or an arbitration panel, particularly if QC&S's internal files reveal earlier awareness of the cluster's potential aggregate significance. We therefore recommend immediate document collection and review, witness preparation, and a calibrated litigation strategy that foregrounds the prejudice defense while preserving all contractual and equitable defenses.
II. FACTUAL BACKGROUND
A. The 2019 Treaty — Overview
Treaty No. PA-QCS-2019-EXL-0044 is an aggregate excess-of-loss reinsurance treaty covering casualty lines, specifically commercial general liability ("CGL"), excess and umbrella liability, and professional liability. The Treaty was effective July 1, 2019, with a five-year initial term running through June 30, 2024, subject to automatic annual extensions upon mutual agreement of the parties. The Treaty was in fact extended through June 30, 2026, pursuant to the automatic renewal mechanism, until Pinnacle Atlantic gave formal notice of non-renewal on October 1, 2025, effective at the conclusion of the current extension period.
The cedent under the Treaty is Quorum Casualty & Surety Company, a New York-domiciled stock insurance company (NAIC No. 24891) and a wholly owned subsidiary of Quorum Insurance Holdings Corp. The reinsurer is Pinnacle Atlantic Reinsurance Ltd., a Bermuda Class 4 insurer (BMA Registration No. BMA-4R-2008-0331) licensed to conduct long-term and general insurance business under the laws of Bermuda.
The economic terms of the Treaty are straightforward. QC&S retains the first $120 million in aggregate net incurred losses per treaty year. The Treaty provides a cession limit of $200 million per treaty year, covering aggregate net incurred losses from $120 million to $320 million. Treaty years are measured on a July 1 to June 30 fiscal basis, aligning with QC&S's reinsurance program year.
Under Article 9 of the Treaty, Broadreach Intermediaries Inc. is designated as the intermediary for all communications and transactions between QC&S and Pinnacle Atlantic, including the transmission of premium, the submission of loss reports and bordereau, and the provision of notices required under the Treaty. The account executive at Broadreach responsible for this Treaty is Jamie Castellano.
Pursuant to Article 16, the Treaty is governed by the laws of the State of New York, without regard to conflict-of-laws principles. Article 22 provides for dispute resolution through arbitration administered under the ARIAS-U.S. Rules, with a three-member panel seated in New York, New York.
B. Article 7 — Notice Requirements (Detailed Textual Analysis)
Article 7 of the Treaty establishes the notice and reporting obligations that govern QC&S's duty to inform Pinnacle Atlantic of claims activity affecting the Treaty. Based on our review of the executed Treaty documentation in QC&S's possession, the relevant provisions of Article 7 may be summarized as follows.
Article 7, Section 1 imposes an obligation on QC&S to provide "prompt notice" to Pinnacle Atlantic of any individual claim or occurrence arising under the covered casualty lines that has met or exceeded $1,000,000 in incurred losses. "Incurred losses" is defined elsewhere in the Treaty as the sum of case reserves and paid losses (net of salvage and subrogation), consistent with standard reinsurance treaty terminology. The $1 million figure operates as an individual claim reporting threshold — claims that have not reached this level are not subject to individual notice requirements under this section, though they are captured in the aggregate reporting mechanism described below.
Article 7, Section 2 establishes a quarterly aggregate loss reporting obligation. QC&S is required to submit bordereau to Pinnacle Atlantic, through Broadreach, within sixty (60) days following the close of each calendar quarter. The bordereau are to include, at minimum, a listing of all open claims, paid losses, case reserves, and aggregate incurred loss totals for the applicable treaty year. These quarterly submissions serve as the primary mechanism for Pinnacle Atlantic to monitor the aggregate loss development that determines its exposure under the Treaty.
Article 7, Section 3 specifies that all notices required under Article 7 shall be transmitted through the intermediary designated in Article 9 — here, Broadreach Intermediaries Inc. — and that delivery of a notice to the intermediary shall be deemed delivery to the reinsurer for purposes of the Treaty's notice provisions.
Several features of Article 7 are critical to the present analysis:
First, Article 7 does not contain an express "condition precedent" provision. The notice obligation is framed using the word "prompt" rather than the more demanding formulations — such as "immediately," "as soon as practicable," or "as a condition precedent to coverage" — that would more clearly establish notice as a condition of recovery. The absence of condition-precedent language is a significant factor in the legal analysis, as discussed in Part III below.
Second, Article 7 does not contain an express forfeiture-for-late-notice provision. There is no clause stating that failure to provide timely notice will result in the forfeiture of reinsurance coverage, the exclusion of claims from the aggregate calculation, or any other specified remedy. This omission further supports the characterization of the notice obligation as a covenant rather than a condition precedent.
Third, Article 7 establishes a clear individual claim reporting threshold of $1 million. The notice obligation is triggered by an individual claim reaching or exceeding $1 million in incurred losses. This threshold-based trigger is central to QC&S's defense, as discussed in Part IV.A below.
Fourth, the quarterly bordereau requirement under Section 2 operates independently of the individual claim notice requirement under Section 1. The bordereau capture aggregate loss data, including claims that individually fall below the $1 million threshold, and thus provide the reinsurer with an ongoing picture of aggregate loss development even in the absence of individual claim notices.
We note that the foregoing is based on our review of the executed Treaty in QC&S's files. We recommend that the full original executed text of Article 7, including any amendments, endorsements, or addenda, be obtained and confirmed prior to the submission of any formal response to Pinnacle Atlantic's counsel.
C. The Meridian Docks Mass Tort Cluster — Chronology
The Meridian Docks claims arise from an alleged toxic contamination at the Meridian Docks industrial waterfront redevelopment project located along the Passaic River in Newark, New Jersey. The development project, undertaken by Meridian Docks Development LLC (the "Policyholder"), involved the remediation and redevelopment of a former industrial waterfront site for mixed commercial and residential use. During the construction and remediation process, workers and nearby residents were allegedly exposed to hazardous substances, including volatile organic compounds, heavy metals, and residual industrial waste products, resulting in a range of claimed bodily injuries.
QC&S issued commercial general liability policy CGL-2020-09844 to Meridian Docks Development LLC, effective for the 2020 policy year. The policy was a standard ISO-form CGL policy with occurrence-based coverage, subject to per-occurrence and aggregate limits. QC&S is the primary CGL insurer for the policyholder during the relevant period.
The cluster consists of 31 related bodily injury claims filed by individual claimants — predominantly construction workers and residents of adjacent properties — alleging exposure-related injuries including respiratory conditions, dermatological disorders, and neurological symptoms. The claims are being litigated in the Superior Court of New Jersey, Essex County, and have been consolidated for discovery and pretrial proceedings.
The chronology of events relevant to the late notice issue is as follows:
March 15, 2021 — Initial Reserving. QC&S's claims department first established case reserves for the 31 Meridian Docks claims. At this stage, the claims were in their early infancy. Limited exposure information was available — initial plaintiff filings were sparse, medical documentation was incomplete, and the scope of the environmental contamination had not been fully assessed. Accordingly, individual claim reserves were set at modest levels, each well below the $1 million per-claim reporting threshold specified in Article 7. The aggregate initial reserve for the entire cluster was substantially below the amount that would later develop as the claims matured. The reserving reflected QC&S's standard early-stage mass tort reserving practices, in which initial reserves are conservative estimates based on limited information, subject to revision as the claims develop.
Q1 2022 (January through March 2022) — Reserve Increases. During the first quarter of 2022, QC&S's claims department conducted a comprehensive reserve review of the Meridian Docks cluster in light of significant developments that had occurred over the preceding months. These developments included the filing of additional plaintiff complaints expanding the scope of alleged injuries, the production of environmental testing data by the New Jersey Department of Environmental Protection confirming the presence of elevated contaminant levels, and the receipt of updated medical evidence from treating physicians and retained experts. Based on this new information, individual claim reserves were increased substantially, and individual claims within the cluster began exceeding the $1 million reporting threshold for the first time. The precise dates on which individual claims crossed the $1 million threshold varied across the cluster, but the bulk of the threshold breaches occurred during the January-to-March 2022 period.
May 22, 2022 — Notice to Pinnacle Atlantic. QC&S provided formal notice of the Meridian Docks claims cluster to Pinnacle Atlantic through the designated intermediary, Broadreach Intermediaries Inc., by letter dated May 22, 2022. The notice identified the 31 claims, described the nature of the underlying allegations, and reported the current reserve and paid loss figures for the cluster. The notice was transmitted in the manner specified by Articles 7 and 9 of the Treaty.
The time gap between QC&S's first reserving of the claims (March 15, 2021) and the provision of notice (May 22, 2022) is 14 months and 7 days. This is the figure cited by Pinnacle Atlantic in its pre-suit demand letter as the measure of the delay. However, from QC&S's perspective, the more relevant measure is the gap between the first breach of the $1 million per-claim threshold (Q1 2022) and the notice date (May 22, 2022) — a period of approximately two to five months, depending on the specific claim and the precise date of the threshold breach.
Current Financial Position. As of the date of this memorandum, QC&S's total net incurred losses across the 31 Meridian Docks claims stand at $41.2 million. These losses are a substantial component of the TY 2022 aggregate net incurred losses of $189.7 million, which exceeded the $120 million retention by $69.7 million. The Meridian Docks cluster thus represents approximately 59% of the TY 2022 ceded losses ($41.2M of $69.7M) and approximately 21.7% of total TY 2022 aggregate net incurred losses.
D. Pinnacle Atlantic's Allegations
Pinnacle Atlantic's position on the late notice issue is set forth in a pre-suit demand letter dated February 14, 2026, sent by its counsel, Hargrove, Fitch & Calloway LLP, under the signatures of lead partner Nathaniel R. Calloway III and senior associate Priya Subramanian. The late notice allegation was first raised in a reservation-of-rights letter issued by Pinnacle Atlantic on December 12, 2025, which identified four separate grounds of dispute concerning the Treaty.
With respect to the late notice ground, Pinnacle Atlantic makes the following principal contentions:
First, Pinnacle Atlantic asserts that QC&S's notice was untimely by a period of 14 months and 7 days, measured from the date QC&S first reserved the Meridian Docks claims (March 15, 2021) to the date notice was transmitted through Broadreach (May 22, 2022). Pinnacle Atlantic contends that the notice clock began running at the point of first reserving, regardless of whether individual claims had reached the $1 million threshold.
Second, Pinnacle Atlantic alleges that QC&S was, or should have been, aware of the potential significance of the Meridian Docks cluster to the aggregate excess-of-loss treaty well before individual claims crossed the $1 million threshold. Pinnacle Atlantic points to the size of the cluster (31 related claims), the mass tort nature of the underlying litigation, and QC&S's sophistication as a national casualty insurer as factors that should have prompted earlier notification.
Third, Pinnacle Atlantic implies — though it does not specifically articulate — that the delay prejudiced its ability to participate in or monitor the claims-handling and reserving process for the Meridian Docks cluster. The demand letter references Pinnacle Atlantic's "right to be informed" and its "interest in the prudent and timely administration of the cedent's claims," though it stops short of identifying any specific act or omission that would have occurred differently had notice been provided earlier.
Fourth, the demand letter cites the late notice ground as one of four bases for demanding the return of $78.4 million in previously paid reinsurance recoverables, plus $12.6 million in pre-judgment interest, for a total demand of $91.0 million. The four grounds asserted are: (1) late notice (the subject of this memorandum); (2) improper IBNR allocation to TY 2022; (3) breach of the utmost good faith obligation; and (4) misrepresentation of aggregate loss development in quarterly reporting. The late notice ground targets the $41.2 million attributable to the Meridian Docks cluster specifically.
III. LEGAL FRAMEWORK — LATE NOTICE IN REINSURANCE UNDER NEW YORK LAW
A. The General Rule: Prejudice Requirement in Reinsurance
The legal framework governing late notice defenses in the reinsurance context under New York law differs materially from the framework applicable to direct insurance. In the direct insurance context, New York Insurance Law § 3420(a) historically permitted insurers to disclaim coverage based on the insured's failure to provide timely notice without regard to prejudice. This rule was modified by a 2008 legislative amendment (effective January 17, 2009), which added Section 3420(a)(5), requiring that, for claims arising under liability insurance policies, the insurer demonstrate prejudice from late notice as a prerequisite to a disclaimer. However, these statutory provisions are by their terms applicable to policies of insurance issued to insureds and do not extend to reinsurance contracts, which are contracts between sophisticated commercial parties and are not subject to the same regulatory protections.
In the reinsurance context, New York courts have developed a distinct body of common law addressing the late notice defense. The prevailing rule, established through a line of decisions by the New York Court of Appeals and the Appellate Division, is that notice provisions in reinsurance treaties are generally construed as covenants rather than conditions precedent to coverage, unless the treaty language unambiguously and expressly establishes timely notice as a condition precedent. This distinction is of fundamental importance.
Where a notice provision is construed as a covenant, the reinsurer's remedy for a breach of the notice obligation is limited to a claim for damages — specifically, the reinsurer must demonstrate that it suffered actual prejudice as a result of the cedent's delay in providing notice. Absent such a showing, the reinsurer may not decline coverage or withhold payment of otherwise valid reinsurance recoverables. By contrast, where a notice provision is expressly established as a condition precedent, the cedent's failure to comply results in forfeiture of coverage for the affected claims, without regard to whether the reinsurer has suffered any prejudice.
The application of this framework to Article 7 of the Treaty strongly favors QC&S. As discussed in Part II.B above, Article 7 employs a "prompt notice" formulation. It does not state that timely notice is a "condition precedent" to the reinsurer's obligations under the Treaty. It does not provide that failure to provide timely notice will result in the forfeiture or exclusion of claims from the aggregate calculation. And it does not use the kind of emphatic or precatory language — such as "it shall be a condition of this Treaty that" or "the Cedent's right to recover hereunder is conditioned upon" — that New York courts have looked for in determining whether a notice provision rises to the level of a true condition precedent.
Accordingly, it is our assessment that Article 7's notice provision will be construed as a covenant, not a condition precedent. This means that even if QC&S's notice is deemed untimely, Pinnacle Atlantic may not decline or reduce coverage unless it can demonstrate that the delay caused it actual prejudice.
B. The Prejudice Standard
Under the prejudice requirement applicable to notice covenants in reinsurance treaties, the reinsurer bears the burden of demonstrating actual prejudice resulting from the cedent's late notice. This burden is not a light one. New York courts have consistently held that "actual prejudice" requires more than a theoretical or speculative possibility of harm. The reinsurer must demonstrate a concrete, material adverse impact on its ability to protect its interests — an impact that was caused by the delay in notice and that would not have occurred had notice been provided in a timely fashion.
The types of prejudice that courts have recognized in the reinsurance context include the following:
(a) Loss of opportunity to investigate. If the delay deprived the reinsurer of the ability to investigate the underlying claims at a critical juncture, resulting in the loss of evidence, the unavailability of witnesses, or the inability to independently assess liability or damages, this may constitute actual prejudice. However, the reinsurer must demonstrate that such investigation would have been undertaken and that the delay, rather than other factors, caused the loss of the investigative opportunity.
(b) Loss of opportunity to associate in the defense. In reinsurance treaties that grant the reinsurer a right to associate in the defense of underlying claims (typically per-risk excess treaties), the cedent's failure to provide timely notice may deprive the reinsurer of the opportunity to participate in defense strategy, settlement discussions, or coverage determinations. This is a recognized form of prejudice. However, this form of prejudice is largely inapplicable in the aggregate excess-of-loss context, where the reinsurer typically does not have an association right with respect to individual underlying claims.
(c) Inability to verify reserves or conduct independent evaluation. If the delay prevented the reinsurer from reviewing and, if warranted, challenging the cedent's reserve-setting at a time when reserve estimates were still fluid, this may constitute prejudice. However, the reinsurer must demonstrate that earlier access to reserve information would have led to a materially different outcome — a mere assertion that it "would have reviewed" the reserves is insufficient.
(d) Loss of subrogation or recovery rights. If the delay in notice caused the expiration of statutes of limitation, the dissipation of assets, or the loss of other recovery opportunities that the reinsurer could have pursued, this may constitute actual prejudice.
(e) Adverse reserve development attributable to the delay. If the reinsurer can demonstrate that the delay in notice directly caused or contributed to adverse reserve development — for example, by preventing the reinsurer from providing input on claims-handling strategy that would have reduced the ultimate loss — this may constitute prejudice. However, this theory is highly fact-specific and difficult to prove.
Critically, the mere passage of time is generally insufficient to establish actual prejudice. A reinsurer cannot satisfy its burden simply by pointing to the length of the delay and asserting that, in the abstract, earlier notice would have been preferable. There must be a demonstrated causal connection between the specific delay at issue and a concrete harm suffered by the reinsurer.
C. Leading New York Precedent on Reinsurance Late Notice
The body of New York precedent addressing late notice defenses in the reinsurance context is substantial, reflecting the prominence of New York as the governing law for a significant share of the domestic and international reinsurance market. Several lines of authority are particularly relevant to the present dispute.
New York's appellate courts have repeatedly addressed the threshold question of whether a notice provision in a reinsurance treaty constitutes a covenant or a condition precedent. The consistent holding is that, in the absence of clear and unambiguous language establishing notice as a condition precedent, the provision will be construed as a covenant, and the prejudice requirement will apply. Courts have looked to the specific language of the notice clause, the overall structure of the treaty, and the parties' course of dealing in making this determination. The use of general language such as "prompt" notice, "timely" notice, or "notice as soon as reasonably practicable" has been held insufficient to create a condition precedent, absent express condition-precedent language.
Courts have also addressed the question that is central to the present dispute: in an aggregate excess-of-loss treaty, when does the notice obligation accrue? The issue arises because the reinsurer's exposure under such a treaty is a function of aggregate losses, not individual claim outcomes. Some decisions have held that the cedent's notice obligation is triggered at the individual claim level, consistent with any per-claim reporting threshold stated in the treaty, and that the cedent is not required to anticipate the aggregate impact of individual claims that have not yet reached the threshold. Other decisions have suggested that a cedent's awareness of a developing pattern or cluster of claims that, in the aggregate, may materially affect the treaty should trigger a notice obligation even if individual claims remain below the threshold — a "knew or should have known" standard applied at the cluster level.
This latter line of authority is the primary source of risk for QC&S. If an arbitration panel or court were to adopt the "aggregate awareness" standard, the notice clock could be deemed to have started running at some point before individual claims crossed the $1 million threshold — potentially as early as March 15, 2021, when QC&S first reserved the cluster. However, the "aggregate awareness" cases tend to involve circumstances in which the cedent had clear, documented knowledge that the claims at issue would likely breach the treaty threshold and deliberately delayed notification. They are distinguishable from the present case on the facts, as discussed in Part IV.B below.
Additionally, New York courts have addressed the role of intermediaries in the notice chain. Where a treaty designates an intermediary for the transmission of notices, courts have held that delivery of notice to the intermediary constitutes delivery to the reinsurer. Moreover, if the intermediary has transmitted information about the claims to the reinsurer through other channels — for example, through quarterly bordereau submissions or informal communications — courts have considered whether such transmissions constitute constructive notice that would toll or excuse the cedent's obligation to provide formal individual claim notice. This line of authority is directly relevant here, given Broadreach's role as the designated intermediary under Article 9 and its responsibility for transmitting quarterly bordereau to Pinnacle Atlantic.
Finally, courts and arbitration panels have distinguished between "claims-made" notice requirements, which are triggered by the making of a claim and typically carry strict time limits, and "occurrence-based" or "losses incurred" notice triggers, which are tied to the development of losses and are construed more flexibly. Article 7's notice obligation is tied to the level of incurred losses, not to the date a claim is first made or reported. This occurrence-based/losses-incurred framework supports a more flexible interpretation of the "prompt notice" obligation and is consistent with QC&S's position that notice was triggered by the crossing of the $1 million threshold, not by the initial reserving.
D. Federal Arbitration Act and ARIAS-U.S. Considerations
If this dispute proceeds to arbitration, as contemplated by Article 22 of the Treaty, the arbitration will be conducted under the ARIAS-U.S. Rules before a three-member panel seated in New York. Although the arbitrators will be required to apply New York substantive law (per Article 16), the practical reality of reinsurance arbitration is that panels frequently give significant weight to industry custom and practice in interpreting treaty provisions and evaluating the parties' conduct.
This is a potentially important consideration on the late notice issue. Reinsurance arbitration panels, composed of experienced reinsurance professionals, are generally familiar with the practical realities of claims reporting in the context of aggregate excess-of-loss treaties. Such panels have historically been sympathetic to cedent defenses based on per-claim reporting thresholds and have shown reluctance to impose forfeiture-like consequences for late notice absent clear evidence of actual prejudice. The industry custom of measuring notice obligations against stated reporting thresholds, rather than against broader notions of "aggregate awareness," is well established and is a point that QC&S can effectively leverage in the arbitral forum.
Moreover, arbitration panels in the ARIAS-U.S. framework are not bound by strict rules of evidence and may consider a broader range of materials and testimony — including expert testimony on industry custom and practice — than would be admissible in a judicial proceeding. This flexibility could benefit QC&S if it retains an industry practices expert to testify regarding the customary treatment of mass tort clusters in the notice and reporting context, as discussed in Part VI.C below.
From a strategic standpoint, arbitration may be a more favorable forum for QC&S on the late notice issue than litigation. While this calculus involves multiple variables and cannot be assessed solely on the basis of the late notice ground, the historical orientation of reinsurance arbitration panels toward pragmatic, prejudice-based analysis counsels in favor of proceeding in the arbitral forum on this issue.
IV. ANALYSIS OF QC&S'S LATE NOTICE DEFENSE
A. Article 7 Reporting Threshold — The $1 Million Per-Claim Trigger
QC&S's central defense to the late notice allegation rests on the express terms of Article 7 itself. Article 7, Section 1 imposes an obligation to provide prompt notice of individual claims or occurrences that have "met or exceeded" $1,000,000 in incurred losses. This is a clear, quantitative threshold that defines the triggering event for the notice obligation. QC&S's position is straightforward: until individual Meridian Docks claims reached or exceeded $1 million in incurred losses, no notice obligation was triggered, and no notice was required.
The factual predicate for this defense is well supported. The 31 Meridian Docks claims were first reserved on March 15, 2021. At that time, each individual claim carried a reserve well below the $1 million threshold. The initial reserves reflected the early stage of the mass tort litigation — limited plaintiff filings, incomplete medical evidence, and an uncertain scope of environmental contamination. Individual claim reserves at this stage were set consistent with QC&S's standard mass tort reserving methodology, which applies conservative initial estimates subject to periodic review and adjustment as additional information becomes available. There is nothing unusual or improper about this approach; it is the standard practice of a prudent cedent managing a developing mass tort portfolio.
The critical inflection point occurred in Q1 2022, when QC&S's claims department conducted a comprehensive review of the Meridian Docks cluster in light of several significant developments: the filing of additional plaintiff complaints expanding the scope of alleged injuries and the number of affected individuals; the production by the New Jersey Department of Environmental Protection of environmental testing data confirming elevated contaminant levels at the site; and the receipt of updated medical evidence establishing more serious and widespread injury patterns than initially documented. Based on these developments, individual claim reserves were substantially increased, and claims within the cluster began exceeding the $1 million threshold for the first time. The precise timing varied by claim, but the bulk of the threshold breaches occurred during the January-to-March 2022 period.
QC&S provided notice to Pinnacle Atlantic on May 22, 2022 — approximately two to five months after the first claims crossed the $1 million threshold. While the question of whether a two-to-five-month interval constitutes "prompt" notice is inherently fact-specific and somewhat subjective, it is well within the range that courts and arbitration panels have found reasonable in the context of complex mass tort claims. The preparation and compilation of a comprehensive notice covering 31 related claims, including the assembly of supporting reserve and claims data, is not a ministerial task that can be completed overnight. A period of several weeks to a few months to prepare and transmit such a notice is both reasonable and consistent with industry practice.
The key interpretive question is whether the notice clock should run from (a) the date individual claims crossed the $1 million threshold (QC&S's position) or (b) the date QC&S first reserved the claims, even at below-threshold amounts (Pinnacle Atlantic's position). QC&S's reading is the natural and textually faithful reading of Article 7. The provision expressly conditions the individual claim notice obligation on the attainment of a $1 million incurred loss threshold. Pinnacle Atlantic's position — that notice was required at the time of first reserving, regardless of the threshold — effectively reads the $1 million threshold out of the contract. If the parties had intended that notice be required for all claims regardless of size, they could have drafted Article 7 without a threshold. The inclusion of a specific dollar threshold necessarily implies that claims below that threshold are not subject to the individual notice requirement.
This interpretation is further supported by the treaty's overall notice architecture. Article 7 establishes two complementary reporting mechanisms: individual claim notice (triggered by the $1 million threshold) and quarterly bordereau (capturing all claims, regardless of size). This two-track structure reflects a deliberate allocation of reporting responsibilities: individual claims of significance are flagged through specific notices, while the aggregate loss picture is maintained through periodic bordereau submissions. Reading the individual claim notice obligation as triggered by first reserving — at any amount — would collapse this two-track structure into a single obligation and would render the $1 million threshold superfluous.
B. The "Cluster" or "Aggregate Awareness" Argument
Pinnacle Atlantic's most potent counterargument to the threshold defense is the contention that QC&S, even if individual claims were below $1 million, should have provided notice when it became aware that the cluster of 31 related claims could, in the aggregate, materially affect the treaty year retention. This is the "aggregate awareness" or "cluster notification" theory, and it represents the primary analytical challenge to QC&S's threshold-based defense.
The argument proceeds as follows: a cedent that is aware of a developing pattern of related claims, which in the aggregate may drive its treaty-year losses above the retention level, has an implied duty to alert its reinsurer to this developing exposure, even if no individual claim has reached the specified reporting threshold. Under this theory, the notice obligation is triggered not by the individual claim threshold but by the cedent's awareness — actual or constructive — of the cluster's aggregate significance to the treaty.
QC&S has several strong counterarguments to this theory. First, as a matter of contract interpretation, Article 7 specifies an individual claim threshold, not an aggregate awareness trigger. The treaty contains no provision requiring notice of claim clusters, aggregate reserve increases, or developing patterns of related claims outside the individual claim notice and quarterly bordereau framework. If the parties had intended to impose such an obligation, they could have included an express provision — for example, a requirement to provide notice of any "occurrence," "event," or "group of related claims" that could reasonably be expected to reach a specified aggregate threshold. The absence of such language should be given effect, not disregarded.
Second, the treaty's aggregate reporting is addressed through the quarterly bordereau mechanism. The bordereau submissions are designed to give Pinnacle Atlantic an ongoing picture of aggregate loss development, including the contribution of individual claims — whether above or below the $1 million threshold — to the overall aggregate. To the extent Pinnacle Atlantic had an interest in monitoring the aggregate trajectory of the treaty year, that interest was served by the bordereau, not by the individual claim notice provision.
This leads to a factual question of significant importance: whether QC&S's quarterly bordereau submissions during the relevant period included the Meridian Docks claims in the aggregate loss data. If the Meridian Docks claims were included in the bordereau — even if they were not individually identified by name or separately flagged — then Pinnacle Atlantic may have had constructive notice of the claims and their contribution to aggregate losses. This would substantially undercut Pinnacle Atlantic's argument that it was surprised by the May 22, 2022 notice and would support an argument that the bordereau provided the reinsurer with the aggregate information it needed to monitor its exposure, consistent with the treaty's notice architecture.
We do not currently have copies of the relevant bordereau submissions in our files. This is a critical gap in the factual record that must be addressed immediately. We strongly recommend that QC&S and Broadreach produce all quarterly bordereau submissions for TY 2021 and TY 2022 for our review. The content and format of these submissions will bear directly on both the constructive notice argument and the broader assessment of QC&S's compliance with its reporting obligations.
Third, even under an "aggregate awareness" standard, the question of when QC&S should have known of the cluster's aggregate significance is not self-evident. In March 2021, when the claims were first reserved, TY 2021 aggregate losses stood at $104.6 million — below the $120 million retention. The Meridian Docks claims, at their initial reserve levels, represented a modest fraction of the aggregate. It was not until Q1 2022, when individual reserves were substantially increased and aggregate losses for TY 2022 began trending toward the retention level, that the cluster's potential treaty significance became apparent. QC&S's position — that it provided notice promptly once the significance became clear — is reasonable and defensible, even under an aggregate awareness framework.
C. The Role of Broadreach Intermediaries Inc.
The intermediary's role in this dispute warrants close examination. Under Article 9, Broadreach is the designated intermediary for all communications between QC&S and Pinnacle Atlantic, including the provision of notices required under Article 7. QC&S transmitted its May 22, 2022 notice through Broadreach, consistent with the treaty's intermediary clause, and Article 7, Section 3 provides that delivery to the intermediary constitutes delivery to the reinsurer.
Two questions arise regarding Broadreach's role. First, did Broadreach transmit any information to Pinnacle Atlantic regarding the Meridian Docks claims prior to the May 22, 2022 formal notice? This might have occurred in connection with the transmission of quarterly bordereau, in the course of routine account management communications, or through informal discussions between Broadreach's account executive (Jamie Castellano) and Pinnacle Atlantic's treaty management team. If any such earlier communications occurred and included references to the Meridian Docks claims, they could constitute earlier effective notice or, at a minimum, estop Pinnacle Atlantic from claiming that it was unaware of the claims before May 2022.
Second, was there any delay between QC&S's delivery of the notice to Broadreach and Broadreach's transmission of the notice to Pinnacle Atlantic? If QC&S delivered the notice to Broadreach on or about May 22, 2022, but Broadreach delayed in forwarding it to Pinnacle Atlantic, this would be relevant to the notice timeline. Under Article 7, Section 3, delivery to Broadreach constitutes delivery to the reinsurer, so any intermediary delay would not be attributable to QC&S. However, the facts surrounding the transmission should be confirmed.
We have included in the draft third-party subpoena to Broadreach a request for all correspondence, transmittals, emails, and communications between Broadreach and Pinnacle Atlantic (and between Broadreach and QC&S) regarding the Meridian Docks claims for the period from January 1, 2021 through December 31, 2022. This discovery is essential to a complete assessment of the notice timeline and to the development of the constructive notice and estoppel arguments.
D. Prejudice Analysis
Even assuming, arguendo, that QC&S's notice is deemed untimely — whether measured from March 15, 2021 (Pinnacle Atlantic's position) or from a date somewhat earlier than May 22, 2022 (under an "aggregate awareness" theory) — QC&S's most powerful defense is the absence of actual prejudice to Pinnacle Atlantic. Under the legal framework described in Part III, Pinnacle Atlantic bears the burden of demonstrating that the delay in notice caused it concrete, material harm. In our assessment, Pinnacle Atlantic will face formidable obstacles in meeting this burden.
Factors Weighing Against a Finding of Prejudice:
(1) No Association Right. Under an aggregate excess-of-loss treaty, the reinsurer does not typically have a right to associate in the defense of individual underlying claims. Pinnacle Atlantic's exposure under the Treaty is a function of aggregate losses across all covered casualty lines — it does not insure or reinsure any individual claim. Unlike a per-risk excess treaty, where the reinsurer's exposure is tied to the outcome of specific claims and where the right to associate in the defense is a meaningful contractual protection, the aggregate excess-of-loss structure does not give Pinnacle Atlantic a stake in the handling of any particular claim. Accordingly, Pinnacle Atlantic cannot credibly argue that earlier notice would have enabled it to participate in the defense of the Meridian Docks claims. It had no such right, and the absence of notice did not deprive it of anything it was entitled to receive.
(2) Aggregate Treaty Structure — No Current Financial Exposure at Time of First Reserving. At the time QC&S first reserved the Meridian Docks claims (March 15, 2021), TY 2021 aggregate net incurred losses stood at $104.6 million — below the $120 million retention. Pinnacle Atlantic had no current financial exposure at that time; its obligations under the Treaty had not been triggered because the retention had not been breached. Accordingly, the delay in notice did not affect any existing obligation of Pinnacle Atlantic or impair its ability to manage a current financial exposure. It is only with the benefit of hindsight — knowing that TY 2022 aggregate losses ultimately exceeded the retention — that the significance of the Meridian Docks claims to the treaty becomes apparent. A prejudice analysis must focus on the reinsurer's position at the time of the delay, not on subsequent developments.
(3) No Loss of Subrogation or Recovery Rights. There is no indication in the record that the delay in notice resulted in the loss of any subrogation, contribution, or recovery rights against third parties. The Meridian Docks claims remain in active litigation, and all potential avenues of recovery appear to remain available. Pinnacle Atlantic has not alleged the loss of any specific recovery opportunity attributable to the delay.
(4) Reserve Adequacy Not Challenged. Pinnacle Atlantic has not alleged that the Meridian Docks reserves are excessive, that they were set in bad faith, or that Pinnacle Atlantic would have reserved the claims differently had it received earlier notice. The claims developed in the ordinary course of mass tort litigation, and the reserve increases in Q1 2022 were driven by objective developments — expanded plaintiff filings, environmental testing data, and medical evidence — not by any action or inaction attributable to QC&S's notice practices. If Pinnacle Atlantic cannot demonstrate that earlier notice would have resulted in lower reserves or different claims outcomes, it cannot demonstrate prejudice.
(5) No Defense Prejudice. Pinnacle Atlantic was not the defense insurer for the Meridian Docks claims. It had no right to control, direct, or participate in the defense of the underlying tort claims. It was not responsible for the selection of defense counsel, the development of defense strategy, or the negotiation of settlements. The delay in notice did not deprive Pinnacle Atlantic of any defense-related right or opportunity.
Factors Pinnacle Atlantic May Assert as Prejudice:
(1) Monitoring Opportunity. Pinnacle Atlantic may argue that earlier notice would have allowed it to monitor the development of the Meridian Docks claims and, specifically, to review and potentially challenge the reserve increases that occurred in Q1 2022 before those increases were reflected in the aggregate loss calculations submitted under the Treaty. This is the most plausible prejudice theory available to Pinnacle Atlantic, but it faces significant analytical challenges. The reserve increases were driven by objective external developments (environmental data, medical evidence, additional plaintiff filings), not by discretionary judgments that Pinnacle Atlantic could have influenced through monitoring. Moreover, the right to "monitor" reserves is not the same as the right to control or override the cedent's reserve-setting — under the Treaty, QC&S retains exclusive authority over its reserving practices, and Pinnacle Atlantic's monitoring rights, to the extent they exist, are informational rather than decisional. A monitoring opportunity that would not have changed the outcome does not constitute actual prejudice.
(2) Bilateral Communication. Pinnacle Atlantic may contend that earlier awareness of the Meridian Docks cluster would have enabled it to provide input on claims-handling strategy — for example, by suggesting alternative defense approaches, recommending particular experts, or advocating for early mediation. However, this argument is undermined by the same structural feature noted above: in an aggregate excess-of-loss treaty, the reinsurer does not typically have a right to direct or influence the cedent's claims-handling at the individual claim level. Any input Pinnacle Atlantic might have offered would have been advisory at best, and there is no basis for concluding that QC&S would have handled the claims differently in response to such input.
(3) IBNR Implications. Pinnacle Atlantic may argue that the delay in notice compressed the timeline for reviewing actuarial projections relating to the Meridian Docks claims, affecting its ability to assess incurred-but-not-reported ("IBNR") reserves. However, this argument overlaps substantially with Pinnacle Atlantic's separate IBNR allocation dispute (Ground 2 of the four asserted grounds) and raises distinct issues that are beyond the scope of this memorandum. To the extent the IBNR argument is repackaged as a prejudice theory for the late notice ground, it suffers from the same deficiency: Pinnacle Atlantic has not identified any specific IBNR adjustment it would have made differently had notice been received earlier.
Assessment. On balance, Pinnacle Atlantic will struggle to demonstrate the concrete, material prejudice required to sustain a late notice defense under New York law. The aggregate excess-of-loss treaty structure is fundamentally incompatible with the most common forms of prejudice recognized in the case law — loss of defense participation, loss of association rights, and loss of claims-handling influence. The monitoring and communication theories are speculative and do not rise to the level of "actual prejudice" as that term has been construed by New York courts. This defense is the strongest arrow in QC&S's quiver on the late notice issue and should be positioned as the primary argument in any response or arbitration proceeding.
E. Waiver and Estoppel Considerations
In addition to the contractual and prejudice defenses, QC&S has a potentially powerful affirmative defense based on waiver and estoppel.
The timeline of Pinnacle Atlantic's payments is critical. Following QC&S's notice of the Meridian Docks claims on May 22, 2022, Pinnacle Atlantic paid the full $78.4 million in reinsurance recoverables under the Treaty across seven billing installments spanning from October 15, 2022 through March 29, 2024. The first installment — $15.0 million for TY 2022 — was paid on October 15, 2022, approximately five months after notice was provided. All seven installments were paid without any reservation of rights, without any written objection to the timeliness of the Meridian Docks notice, and without any assertion that the Meridian Docks claims should be excluded from the aggregate calculation.
Pinnacle Atlantic did not raise the late notice issue until its reservation-of-rights letter dated December 12, 2025 — more than three years after notice was provided and approximately 20 months after the final payment of $3.2 million on March 29, 2024. The pre-suit demand letter from Hargrove, Fitch & Calloway LLP followed on February 14, 2026.
Under New York law, the voluntary payment of reinsurance recoverables with knowledge of the facts giving rise to a potential defense may constitute a waiver of that defense. Waiver is the intentional relinquishment of a known right. Where a reinsurer has actual or constructive knowledge of a potential late notice defense — as Pinnacle Atlantic did here, given that it received the May 22, 2022 notice and was in a position to assess its timeliness — and nevertheless pays claims without reservation over an extended period, the reinsurer may be deemed to have waived its right to assert the defense.
Similarly, the doctrine of estoppel may preclude Pinnacle Atlantic from asserting a late notice defense where its conduct — specifically, the payment of $78.4 million in recoverables without objection — induced QC&S to rely on the expectation that the claims would be covered and that no notice-related dispute would arise. If QC&S can demonstrate detrimental reliance on Pinnacle Atlantic's course of payment — for example, by showing that QC&S relied on the reinsurance recoverables in its financial planning, statutory surplus calculations, or regulatory filings — the estoppel argument is strengthened.
We note a potential counter-argument: Pinnacle Atlantic may contend that its payments were made subject to a general reservation of rights or that the December 12, 2025 reservation-of-rights letter was timely in the context of a long-tail reinsurance relationship. However, based on the information currently available to us, we are not aware of any written reservation of rights accompanying or predating the seven payment installments. If Pinnacle Atlantic's payment confirmations or accompanying correspondence are silent on the issue of notice, the waiver argument is compelling. We recommend a thorough review of all correspondence between QC&S, Broadreach, and Pinnacle Atlantic accompanying each payment installment to confirm the absence of any reservation language.
Additionally, the mere delay in asserting a defense — here, more than three years from the date of notice and 20 months from the date of the last payment — may itself constitute waiver under New York law. While there is no bright-line rule establishing a specific time period after which a defense is waived, the length of the delay, combined with the active course of payment, significantly strengthens QC&S's position.
F. Quantitative Impact Assessment
The financial stakes associated with the late notice ground are substantial and warrant careful quantification.
If Pinnacle Atlantic prevails fully on the late notice defense — i.e., if all $41.2 million in Meridian Docks net incurred losses are excluded from the TY 2022 aggregate — the financial impact is as follows:
• TY 2022 original aggregate net incurred losses: $189.7 million
• Meridian Docks exclusion: ($41.2 million)
• TY 2022 revised aggregate net incurred losses: $148.5 million
• Less TY 2022 retention: ($120.0 million)
• Revised TY 2022 ceded loss: $28.5 million (compared to the originally calculated $69.7 million)
• Reduction in TY 2022 ceded loss: $41.2 million
On a total Treaty basis (combining TY 2022 and TY 2023 cessions):
• Total revised cessions (TY 2022 + TY 2023): $28.5 million + $8.7 million = $37.2 million
• Total claimed cessions: $78.4 million
• Reduction: $78.4 million − $37.2 million = $41.2 million at risk on this ground alone
This analysis assumes a full exclusion of all 31 Meridian Docks claims from the aggregate. However, partial exclusion scenarios are also possible. If only a subset of the 31 claims is found to have triggered a late notice violation — for example, if notice is deemed timely for claims that crossed the $1 million threshold shortly before the May 22, 2022 notice but untimely for claims that may have crossed earlier in Q1 2022 — the exclusion would be proportionally reduced. The precise amount at risk under partial exclusion scenarios depends on the reserve levels and threshold-crossing dates of individual claims, which must be confirmed through a detailed review of QC&S's claim-level reserve records.
It bears emphasis that the $41.2 million exposure on the late notice ground is a component of Pinnacle Atlantic's total demand of $91.0 million ($78.4 million in recoverables plus $12.6 million in interest). While the late notice ground is the most significant single ground in terms of dollar exposure, the four grounds are not mutually exclusive, and a partial adverse outcome on multiple grounds could produce cumulative exposure beyond the amount attributable to any single ground.
V. COUNTERARGUMENTS AND RISK ASSESSMENT
A. Strengths of QC&S's Position
QC&S enters this dispute from a position of considerable strength on the late notice ground. The principal factors supporting QC&S's defense are as follows:
1. Article 7's $1 million per-claim threshold is an express, unambiguous contractual term that directly addresses the triggering event for individual claim notice. QC&S's interpretation — that no notice obligation arose until individual claims crossed the threshold — is the natural reading of the provision and is consistent with the treaty's overall notice architecture, which distinguishes between individual claim notice (threshold-triggered) and aggregate reporting (quarterly bordereau).
2. New York law places the burden of demonstrating actual prejudice squarely on the reinsurer asserting a late notice defense. This is not a mere pleading requirement — it is a substantive burden that requires proof of concrete, material harm causally linked to the delay. Pinnacle Atlantic will bear this burden throughout any arbitration or litigation proceeding.
3. The aggregate excess-of-loss treaty structure fundamentally limits the types of prejudice available to Pinnacle Atlantic. Unlike a per-risk excess treaty, the aggregate treaty does not give the reinsurer a right to associate in defense, control claims handling, or direct settlement strategy for individual underlying claims. The most commonly recognized forms of prejudice in the reinsurance context — loss of defense participation, loss of investigation opportunity, loss of claims-handling influence — are largely inapplicable here.
4. Pinnacle Atlantic's extended course of payment — $78.4 million across seven installments over approximately 17 months, all without any reservation of rights or objection regarding notice — provides strong support for waiver and estoppel defenses. The three-year delay between notice and the first assertion of the late notice defense further reinforces these arguments.
5. If the quarterly bordereau submissions for TY 2021 and TY 2022 included the Meridian Docks claims in aggregate loss data, QC&S can argue that Pinnacle Atlantic had constructive notice of the claims and their contribution to aggregate losses, further undercutting any claim of surprise or prejudice.
B. Weaknesses and Risks
Notwithstanding the strengths of QC&S's position, several factors create litigation risk and must be carefully managed:
1. The 14-month, 7-day gap between first reserving and notice is facially significant. While the legal analysis supports QC&S's position, the raw length of the delay may create adverse optics before a court or arbitration panel. Decision-makers assessing the "prompt notice" standard may be influenced by the intuitive perception that 14 months is a long time, even if the delay is explained by the operation of the $1 million threshold.
2. Pinnacle Atlantic may argue that QC&S, as a sophisticated national casualty insurer, should have anticipated that a cluster of 31 related mass tort claims would, in the aggregate, have significant treaty implications, and should have provided notice even before individual claims reached $1 million. This "sophisticated cedent" argument, while not supported by the text of Article 7, may resonate with decision-makers who are sympathetic to the reinsurer's interest in early information.
3. The most significant factual risk is the potential for adverse documents in QC&S's internal files. If QC&S's claims committee minutes, internal memoranda, actuarial projections, or correspondence reflect an awareness, prior to Q1 2022, that the Meridian Docks cluster could materially affect the treaty-year aggregate — or, worse, if

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

MEMORANDUM OF LAW

MATTER NO.: 1025-00005

I. EXECUTIVE SUMMARY

II. FACTUAL BACKGROUND

IV. ANALYSIS OF QC&S'S LATE NOTICE DEFENSE

V. COUNTERARGUMENTS AND RISK ASSESSMENT

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