PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT PREPARED IN ANTICIPATION OF LITIGATION AND/OR ARBITRATION
REGULATORY DISCLOSURE ANALYSIS MEMORANDUM
SEC, NYDFS, and Credit Agreement Obligations
March 22, 2026
PRIVILEGE LEGEND: This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared in anticipation of litigation and/or arbitration. It is intended solely for the use of the addressee and those persons specifically identified in the distribution list below. This memorandum contains legal analysis, mental impressions, conclusions, and opinions of counsel and is protected from disclosure by the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. This memorandum should not be disclosed to, shared with, or made available to any third party without the prior written consent of Calderwood & Harkness LLP and Quorum Insurance Holdings Corp. Inadvertent disclosure of this memorandum does not constitute a waiver of any applicable privilege or protection. If you have received this memorandum in error, please notify Francesca Morano at (212) 555-4100 immediately and destroy all copies.
I. EXECUTIVE SUMMARY
You have asked us to analyze Quorum Insurance Holdings Corp.'s ("QIH" or the "Company") disclosure and reporting obligations that have been triggered by the pre-suit demand letter from Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic"), dated February 14, 2026, and delivered by Pinnacle Atlantic's outside counsel, Hargrove, Fitch & Calloway LLP ("HFC"), through its lead partner Nathaniel R. Calloway III. In that demand, Pinnacle Atlantic seeks the return of $91,000,000, comprising $78,400,000 in reinsurance recoverables previously paid under the 2019 aggregate excess-of-loss reinsurance treaty (Treaty No. PA-QCS-2019-EXL-0044) (the "Treaty") plus $12,600,000 in accrued interest calculated at 8% per annum over an approximately twenty-four-month average period.
This memorandum addresses three discrete categories of disclosure and reporting obligations that arise from the Pinnacle Atlantic demand:
1.  SEC Financial Reporting Obligations Under ASC 450 (Loss Contingencies). As a Nasdaq-listed public company, QIH must evaluate whether the Pinnacle Atlantic dispute requires accrual and/or footnote disclosure in its periodic filings with the Securities and Exchange Commission ("SEC"), including its Forms 10-K and 10-Q, under Accounting Standards Codification Topic 450-20 ("ASC 450"), formerly Statement of Financial Accounting Standards No. 5. We also address related Item 1A (Risk Factors), Item 7 (MD&A), Form 8-K, and insider trading considerations.
2.  NYDFS Regulatory Notification Requirements. QIH's principal subsidiary, Quorum Casualty & Surety Company ("QC&S," NAIC No. 24891), is a New York-domiciled stock property and casualty insurer subject to the regulatory authority of the New York Department of Financial Services ("NYDFS"). We analyze the extent to which the Pinnacle Atlantic dispute triggers notification and reporting obligations under New York Insurance Law and applicable NYDFS regulations and guidance, including implications for statutory financial reporting (Schedule F) and the Company's A.M. Ridgeway rating.
3.  Credit Agreement Reporting Obligations. QIH maintains a $750,000,000 senior secured revolving credit facility (the "Credit Facility") with Cartwright National Bank, N.A. ("Cartwright" or the "Administrative Agent"). We analyze whether the Pinnacle Atlantic demand constitutes material litigation requiring notice under the Credit Facility's covenants and assess the impact of potential adverse outcomes on QIH's compliance with the minimum statutory surplus financial covenant.
In preparing this analysis, we have coordinated with Harmon & Whitfield LLP ("H&W"), specifically Elaine Whitfield-Ross, Partner, of 185 Asylum Street, Suite 2600, Hartford, CT 06103, who serves as QIH's insurance regulatory counsel and who has been consulted on NYDFS-related matters discussed herein. The factual and disclosure-related portions of this memorandum (but not our privileged legal analysis) may be shared, at the General Counsel's discretion and with appropriate redaction, with Meridian Whitcomb & Co. LLP ("MW"), specifically Patricia Hernandez, CPA, audit partner on the QIH engagement, of 300 Park Avenue, 22nd Floor, New York, NY 10022, for purposes of alignment on audit treatment and ASC 450 classification.
Key Conclusions. Based on our analysis, we reach the following principal conclusions:
•  ASC 450 Classification: The Pinnacle Atlantic dispute should be classified as a "reasonably possible" loss contingency. No accrual is required at this time, but footnote disclosure describing the nature of the contingency, the amount of the demand, QIH's assessment that it has meritorious defenses, and the range of possible loss is required and should appear in QIH's next quarterly filing (Q1 2026 Form 10-Q, due approximately May 2026).
•  NYDFS Notification: Notification to the NYDFS regarding the Pinnacle Atlantic dispute is likely required given the materiality of the demand relative to QC&S's statutory surplus. We recommend filing such notification within thirty days, in coordination with H&W.
•  Credit Agreement Notice: Delivery of notice to Cartwright National Bank under the material litigation reporting covenant of the Credit Facility is required and should be delivered immediately. Depending on the specific timeframe set forth in the notice provision of the credit agreement, such notice may already be overdue.
•  Financial Covenant Compliance: Even in the worst-case scenario ($91,000,000 full demand honored), QC&S's statutory surplus would remain at $1,329,000,000, well above the $1,100,000,000 covenant minimum. No covenant default would be triggered, although the narrowing of headroom from $320,000,000 to $229,000,000 is significant and may prompt increased lender monitoring.
The balance of this memorandum sets forth our detailed analysis supporting these conclusions and provides recommended action items and a proposed timeline for implementation.
II. BACKGROUND AND FACTUAL CONTEXT
A. The Dispute
The following summary of the underlying dispute is drawn from our review of the Treaty, QC&S's billing files, Pinnacle Atlantic's demand letter, and the Initial Case Assessment Memorandum prepared by our team and delivered to your office on March 15, 2026. We include this summary here to provide the necessary context for the disclosure analysis that follows.
The Treaty. On July 1, 2019, QC&S and Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic"), a Bermuda-domiciled Class 4 insurer registered with the Bermuda Monetary Authority (BMA Registration No. BMA-4R-2008-0331), entered into an aggregate excess-of-loss reinsurance treaty (Treaty No. PA-QCS-2019-EXL-0044) (the "Treaty"). Under the Treaty, Pinnacle Atlantic agreed to assume ceded losses in excess of an annual aggregate retention of $120,000,000, subject to the terms and conditions of the Treaty, including provisions governing notice of loss (Article 7), loss allocation and IBNR reporting (Article 5), the follow-the-fortunes doctrine (Article 11), premium reporting (Article 3), and dispute resolution (Article 22).
Treaty Years at Issue. The dispute centers on two Treaty Years:
•  Treaty Year 2022 ("TY 2022"): QC&S reported aggregate net incurred losses of $189,700,000 for TY 2022. After application of the $120,000,000 aggregate retention, the ceded loss billed to Pinnacle Atlantic was $69,700,000.
•  Treaty Year 2023 ("TY 2023"): QC&S reported aggregate net incurred losses of $128,700,000 for TY 2023. After application of the $120,000,000 aggregate retention, the ceded loss billed to Pinnacle Atlantic was $8,700,000.
The total ceded losses billed across both Treaty Years were thus $78,400,000 ($69,700,000 + $8,700,000).
Payment History. Pinnacle Atlantic paid the full $78,400,000 in reinsurance recoverables across seven billing installments between October 15, 2022, and March 29, 2024. At no point during the billing or payment process did Pinnacle Atlantic raise any objection to the amounts billed, the loss allocations underlying those billings, or the premium reports on which the Treaty's financial terms were based. All seven payments were made without reservation of rights.
The Demand. On February 14, 2026, Pinnacle Atlantic's outside counsel, Nathaniel R. Calloway III of HFC, delivered a pre-suit demand letter to QC&S demanding the return of $78,400,000 in previously paid reinsurance recoverables, plus $12,600,000 in accrued interest calculated at a rate of 8% per annum over an approximately twenty-four-month average period, for a total demand of $91,000,000.
The demand letter asserts four grounds for recovery:
1.  Late Notice (Article 7): Pinnacle Atlantic contends that QC&S failed to provide timely notice of the Meridian Docks mass tort claim cluster, which Pinnacle Atlantic alleges constituted a material development affecting ceded losses under the Treaty. Pinnacle Atlantic asserts that the late notice prejudiced its ability to investigate and mitigate its exposure.
2.  Misallocation of IBNR (Article 5): Pinnacle Atlantic alleges that QC&S improperly allocated $22,300,000 in incurred but not reported ("IBNR") reserves to Treaty-covered losses, inflating the ceded loss figures reported to Pinnacle Atlantic beyond what the Treaty terms permitted.
3.  Follow-the-Fortunes Challenge (Article 11): Pinnacle Atlantic challenges QC&S's settlement of the Veridian Financial Services errors and omissions liability cluster for $34,500,000, contending that the settlement was unreasonable and that the follow-the-fortunes doctrine does not obligate Pinnacle Atlantic to follow QC&S's settlement decisions in this instance.
4.  Ceded Earned Premium Underreporting (Article 3): Pinnacle Atlantic alleges that QC&S underreported ceded earned premiums by $6,800,000, resulting in an overpayment of ceded losses relative to the correct premium base.
As detailed in the Initial Case Assessment Memorandum, we have assessed QC&S's defenses to each of these four grounds and have concluded that QC&S has strong, meritorious defenses. In particular, we believe that the late notice defense is undermined by Pinnacle Atlantic's failure to reserve rights at the time of payment, the IBNR allocation followed industry-standard actuarial practices, the follow-the-fortunes challenge faces significant legal barriers under well-established reinsurance law, and the premium underreporting allegation is factually unsupported based on the premium bordereaux we have reviewed to date. Nevertheless, as discussed below, the existence of a credible demand of this magnitude from a sophisticated counterparty represented by competent counsel requires careful attention to disclosure obligations.
B. QIH Corporate Profile Relevant to Disclosure Analysis
A summary of QIH's corporate structure and financial profile is relevant to the materiality assessments that follow throughout this memorandum.
Quorum Insurance Holdings Corp. is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol "QIHC," with its headquarters at 200 Constitution Plaza, Suite 3400, Hartford, CT 06103. As of February 28, 2026, QIH had a market capitalization of approximately $6.7 billion. For fiscal year 2025, QIH reported gross written premium of $4.18 billion and net earned premium of $2.93 billion. QIH's Chief Executive Officer is Martin Galbraith, and its General Counsel is Rachel Sondergaard.
Quorum Casualty & Surety Company ("QC&S") is QIH's principal operating subsidiary and a New York-domiciled stock property and casualty insurance company (NAIC No. 24891). QC&S holds a current A.M. Ridgeway financial strength rating of A (Excellent) with a Stable outlook, as affirmed in its most recent rating review in 2025. As of December 31, 2025, QC&S reported statutory surplus of $1,420,000,000.
Board Authorization. On February 24, 2026, the QIH Board of Directors' Audit Committee authorized the retention of litigation counsel in connection with the Pinnacle Atlantic dispute. Calderwood & Harkness LLP's engagement in this matter was formally opened on March 2, 2026 (Matter No. 1025-00005).
C. Current Posture
The dispute is currently at the pre-suit / prospective litigation stage. No lawsuit has been filed in any court, and no arbitration demand has been served. The two potential forums for resolution of the dispute are:
•  Supreme Court of the State of New York, New York County, Commercial Division, if either party elects to bring a court action; or
•  Arbitration under Treaty Article 22, which provides for dispute resolution through a three-member arbitration panel under the ARIAS-U.S. Rules, with the seat of arbitration in New York, New York.
Calderwood & Harkness has responded to HFC's demand letter on behalf of QC&S, rejected all four grounds asserted by Pinnacle Atlantic, and invoked the arbitration clause set forth in Treaty Article 22. We anticipate that the dispute will proceed to arbitration, although the precise timing and procedural posture will depend on Pinnacle Atlantic's response to our invocation of the arbitration clause.
Additionally, we note that the Treaty is set to lapse on June 30, 2026. Pinnacle Atlantic gave non-renewal notice on October 1, 2025, in accordance with the Treaty's non-renewal provisions. The lapse of the Treaty will not, by its terms, affect the parties' respective rights and obligations with respect to ceded losses incurred during the Treaty period, including the losses at issue in this dispute.
III. SEC REPORTING OBLIGATIONS — ASC 450 LOSS CONTINGENCY DISCLOSURE
A. Applicable Framework
As a Nasdaq-listed public company, QIH files periodic reports with the SEC, including annual reports on Form 10-K and quarterly reports on Form 10-Q. These filings include consolidated financial statements prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP") and are subject to audit (in the case of the Form 10-K) or review (in the case of the Form 10-Q) by QIH's independent registered public accounting firm, Meridian Whitcomb & Co. LLP.
The accounting and disclosure treatment of the Pinnacle Atlantic dispute is governed by ASC 450-20 (Contingencies — Loss Contingencies), formerly Statement of Financial Accounting Standards No. 5 ("SFAS No. 5"), promulgated by the Financial Accounting Standards Board ("FASB"). ASC 450-20 establishes a three-tier framework for classifying loss contingencies based on the likelihood of the loss being incurred:
(i) Probable. A loss contingency is classified as "probable" when the future event or events confirming the loss are "likely to occur." Under this classification, if the amount of the loss can be reasonably estimated, the registrant must accrue the loss (i.e., record a charge against income and establish a liability on the balance sheet). If the loss is probable but cannot be reasonably estimated, footnote disclosure — but not accrual — is required.
(ii) Reasonably Possible. A loss contingency is classified as "reasonably possible" when the chance of the future event or events occurring is "more than remote but less than likely." Under this classification, no accrual is required, but footnote disclosure is required describing (a) the nature of the contingency, and (b) an estimate of the possible loss or range of loss, or a statement that such an estimate cannot be made.
(iii) Remote. A loss contingency is classified as "remote" when the chance of the future event or events occurring is "slight." Under this classification, no disclosure is generally required, except in certain limited circumstances (e.g., guarantees subject to ASC 460).
In addition to the FASB standards, the SEC Staff has provided guidance on the disclosure of litigation contingencies in Staff Accounting Bulletin ("SAB") Topic 5.Y (formerly SAB No. 92, as codified). SAB Topic 5.Y emphasizes that registrants should periodically reassess their loss contingency classifications and update their disclosures accordingly as circumstances change. The SEC Staff has expressed the view that registrants should not adopt overly narrow interpretations of their disclosure obligations and should err on the side of transparency when the potential impact of a contingency is material to the registrant's financial condition or results of operations.
The SEC Staff has also made clear, through various enforcement actions and comment letters, that registrants are expected to disclose specific information about material legal proceedings, including the amount or range of reasonably possible losses in excess of amounts accrued, where such estimates can be made. The reluctance of some registrants to provide such estimates has been a recurring focus of SEC Division of Corporation Finance comment letters, and QIH should be mindful of this regulatory posture in crafting its disclosure.
B. Classification of the Pinnacle Atlantic Demand
We have applied the three-tier ASC 450-20 framework to the Pinnacle Atlantic demand and reached the following conclusions:
Analysis Under the "Probable" Standard. To classify the Pinnacle Atlantic demand as "probable," we would need to conclude that it is "likely" that QIH will incur a loss — that is, that Pinnacle Atlantic is likely to prevail on some or all of its demand and that QC&S will be required to return some or all of the $78,400,000 in recoverables (plus interest). Based on our analysis as set forth in the Initial Case Assessment Memorandum, we do not believe this standard is met. The demand involves a legitimate dispute over the interpretation and application of four distinct provisions of a complex reinsurance treaty, but QC&S possesses strong, meritorious defenses on each of the four grounds. The likelihood of Pinnacle Atlantic prevailing on the full $91,000,000 demand is, in our assessment, low. Moreover, even if Pinnacle Atlantic were to prevail on one or more of its arguments, the amount of any adverse judgment or award is not reasonably estimable with precision at this early stage of the dispute. Accordingly, we do not recommend classification of the contingency as "probable."
We note, however, that this assessment is necessarily preliminary and based on the information available to us as of the date of this memorandum. Should subsequent developments — such as the production of documents in arbitration, adverse preliminary rulings, or the discovery of facts undermining QC&S's defenses — materially alter the balance of the merits, reclassification to "probable" may become appropriate.
Analysis Under the "Reasonably Possible" Standard. The "reasonably possible" standard is met when the chance of an adverse outcome is "more than remote but less than likely." We believe this standard is clearly satisfied here. While QC&S's defenses are strong, the dispute involves genuinely contested issues of treaty interpretation and reinsurance practice, and Pinnacle Atlantic is a sophisticated counterparty that has engaged experienced reinsurance litigation counsel. In particular, as we noted in the Initial Case Assessment Memorandum, Pinnacle Atlantic may have colorable arguments with respect to the IBNR allocation issue ($22,300,000 under Article 5), where the actuarial methodologies employed by QC&S, while consistent with industry practice, involve judgment-laden assumptions that an arbitration panel could view differently. The complexity and multi-issue nature of the dispute, the credibility and financial resources of the adverse party, and the inherent uncertainty of arbitration outcomes all support the conclusion that the chance of some adverse outcome is more than remote.
Analysis Under the "Remote" Standard. Classification of the Pinnacle Atlantic demand as "remote" is not appropriate. A demand of $91,000,000 from a sophisticated Bermuda-domiciled Class 4 reinsurer, represented by a reputable law firm, asserting four articulated grounds for recovery, cannot credibly be characterized as presenting only a "slight" chance of an adverse outcome. Regardless of the strength of QC&S's defenses, the inherent uncertainty of legal proceedings, the fact that Pinnacle Atlantic has obviously conducted sufficient diligence to identify and articulate specific treaty-based arguments, and the magnitude of the demand all militate against a "remote" classification.
Recommended Classification: "Reasonably Possible." Based on the foregoing analysis, we recommend that QIH classify the Pinnacle Atlantic dispute as a "reasonably possible" loss contingency under ASC 450-20. Under this classification, no accrual (i.e., no charge against income or liability on the balance sheet) is required at this time, but footnote disclosure is required in QIH's next periodic filing with the SEC.
C. Recommended Footnote Disclosure Content
The footnote disclosure required under ASC 450-20 for a "reasonably possible" loss contingency must describe (a) the nature of the contingency, and (b) an estimate of the possible loss or range of loss, or a statement that such an estimate cannot be made. In crafting this disclosure, QIH must balance the need for transparency with the equally important need to avoid any waiver of attorney-client privilege or work product protection and to avoid making statements that could be used against QIH in the arbitration.
We recommend that the footnote disclosure include the following elements:
(a) Nature of the Contingency. The disclosure should describe the dispute as a pre-suit demand from a reinsurer disputing reinsurance recoverables under an aggregate excess-of-loss reinsurance treaty. The disclosure should identify the counterparty (Pinnacle Atlantic Reinsurance Ltd.) and the general nature of the dispute (a claim that certain ceded losses were improperly billed and paid under the treaty), without providing an unnecessarily detailed description of the specific legal theories asserted or QC&S's defenses. The disclosure should note that the dispute is at the pre-arbitration stage and that QIH expects the matter to proceed to arbitration.
(b) Amount of the Demand. The disclosure should state the total amount of the demand: $91,000,000, comprising $78,400,000 in reinsurance recoverables plus $12,600,000 in accrued interest.
(c) QIH's Position. The disclosure should state that QIH believes it has meritorious defenses to the demand and intends to vigorously defend against the claim. This language is standard in loss contingency disclosures and does not, by itself, constitute a waiver of privilege or an admission of any fact.
(d) Range of Possible Loss. The disclosure should state that the range of possible loss is $0 to $91,000,000 and that, at this early stage of the dispute, a point estimate within that range cannot reasonably be determined. While the SEC Staff has encouraged registrants to provide more specific range estimates where possible, the early pre-arbitration posture of this dispute and the complexity of the four contested grounds make a narrower estimate impracticable at this time.
(e) Reinsurance Recoverable. The disclosure should note that the reinsurance recoverable of $78,400,000 remains reflected on QIH's consolidated GAAP balance sheet as of December 31, 2025, and that QIH continues to believe that the recoverable is properly recorded. Simultaneously, the recoverable remains on QC&S's statutory balance sheet (Schedule F, Part 3) for regulatory purposes.
We strongly recommend that the disclosure language not include any characterization of the likelihood of an adverse outcome beyond the standard "reasonably possible" classification, any description of QC&S's specific legal arguments or defense strategy, any reference to attorney-client privileged communications or attorney work product, or any statement that could be construed as an admission or concession regarding any of the four grounds asserted by Pinnacle Atlantic. We will prepare proposed draft disclosure language in a separate communication for your review and for coordination with MW.
Timing of Disclosure. QIH's fiscal year ends on December 31. Assuming the FY 2025 Form 10-K has been filed (or is being filed contemporaneously with this memorandum), the next quarterly filing will be the Q1 2026 Form 10-Q, which is due to be filed with the SEC in approximately May 2026. The Pinnacle Atlantic dispute should be disclosed as a loss contingency in that filing. If the FY 2025 Form 10-K has not yet been filed as of the date of this memorandum, the disclosure should also be included in the FY 2025 Form 10-K, as discussed further in Section III.E below.
Future Reclassification. If circumstances change materially — for example, if an arbitration panel issues an unfavorable ruling on a preliminary issue, if QC&S's defenses are weakened by newly discovered facts, or if settlement discussions result in a probable range of loss — reclassification of the contingency from "reasonably possible" to "probable" may become warranted. Reclassification to "probable" would trigger an obligation to accrue the estimated loss (if reasonably estimable) and to record a corresponding charge against income and liability on the balance sheet. We will monitor developments in the arbitration and advise you if reclassification becomes appropriate.
D. Financial Impact Quantification for Disclosure Purposes
Although no accrual is required at this time, it is important for the Audit Committee, management, and QIH's external auditors to understand the potential financial impact of the dispute in various scenarios. We set forth the following quantification for internal planning and disclosure purposes:
Scenario 1: Full Write-Off of Reinsurance Recoverable ($78,400,000). If QC&S were required to return the full $78,400,000 in reinsurance recoverables (without interest), the financial impact would be as follows:
•  Pre-tax charge: $78,400,000
•  After-tax impact (at the 21% federal corporate income tax rate): $78,400,000 × (1 − 0.21) = $61,936,000 reduction in net income
•  QC&S statutory surplus impact: $1,420,000,000 − $78,400,000 = $1,341,600,000 (a reduction of approximately 5.5%)
Scenario 2: Full Demand Honored ($91,000,000). If QC&S were required to pay the full $91,000,000 demand (recoverables plus interest), the financial impact would be as follows:
•  Pre-tax charge: $91,000,000
•  After-tax impact (at the 21% federal corporate income tax rate): $91,000,000 × (1 − 0.21) = $71,890,000 reduction in net income
•  QC&S statutory surplus impact: $1,420,000,000 − $91,000,000 = $1,329,000,000 (a reduction of approximately 6.4%)
Materiality Assessment. By any standard quantitative threshold applied in practice, the amounts at issue are material to QIH's consolidated financial statements and to QC&S's statutory financial condition:
•  The $78,400,000 recoverable represents approximately 5.5% of QC&S's statutory surplus of $1,420,000,000.
•  The $91,000,000 total demand represents approximately 6.4% of QC&S's statutory surplus.
•  Against QIH's FY 2025 net earned premium of $2.93 billion, the demand represents approximately 3.1% — a meaningful percentage in the context of quarterly earnings.
•  Against QIH's market capitalization of approximately $6.7 billion, the after-tax impact of a full write-off ($61.9 million) represents approximately 0.9%, which may be viewed as material by analysts and investors given the nature of the charge as an unusual, non-recurring item.
These figures should be made available to the Audit Committee and, with appropriate privilege protections, shared with Patricia Hernandez of MW for purposes of her assessment of the reinsurance recoverable asset on QIH's consolidated GAAP balance sheet and the adequacy of any reserve or disclosure in connection with the FY 2025 or Q1 2026 financial statements.
E. Coordination with Meridian Whitcomb & Co. LLP
Patricia Hernandez, CPA, the lead audit partner on the QIH engagement at MW, should be promptly informed of the Pinnacle Atlantic dispute and Calderwood & Harkness's recommended ASC 450 classification of "reasonably possible." This coordination is important for several reasons:
First, MW issued an unqualified opinion on QIH's consolidated GAAP financial statements for fiscal year 2025, which include the $78,400,000 reinsurance recoverable as an asset on the consolidated balance sheet. The Pinnacle Atlantic demand, received on February 14, 2026, constitutes an event occurring after the balance sheet date (December 31, 2025) but prior to the issuance of the financial statements. MW will need to evaluate whether the demand constitutes a recognized subsequent event (Type 1, requiring adjustment of the financial statements) or a non-recognized subsequent event (Type 2, requiring footnote disclosure only) under ASC 855 (Subsequent Events). In our view, the demand is a Type 2 subsequent event — the dispute did not exist as of December 31, 2025, and the conditions giving rise to the demand (Pinnacle Atlantic's decision to challenge the recoverables) arose after the balance sheet date. Accordingly, adjustment of the FY 2025 financial statements is not required, but footnote disclosure of the demand as a subsequent event may be warranted if the FY 2025 Form 10-K has not yet been filed.
Second, MW's own professional standards (AU-C Section 560, Subsequent Events and Subsequently discovered Facts) may require MW to evaluate whether the Pinnacle Atlantic demand affects its audit opinion or requires a modification thereof. While we do not believe such modification is warranted based on the facts as we understand them, early coordination with MW will ensure that any audit-related implications are identified and addressed before the FY 2025 10-K or the Q1 2026 10-Q is filed.
Third, coordination with MW is essential to ensure alignment between Calderwood & Harkness's recommended ASC 450 classification and MW's own independent assessment. Disagreement between management and the external auditor on the classification of a material loss contingency could result in qualified audit opinions, SEC comment letters, or restatement risk — outcomes that can be avoided through proactive coordination.
If the FY 2025 Form 10-K has already been filed as of the date of this memorandum, QIH should evaluate whether an amendment to the 10-K or a current report on Form 8-K is necessary to disclose the Pinnacle Atlantic demand. If the FY 2025 10-K has not yet been filed, the contingency should be addressed in the FY 2025 10-K footnotes as a subsequent event.
Recommended Action: We recommend scheduling a joint call among Francesca Morano (C&H), Patricia Hernandez (MW), and Rachel Sondergaard (QIH) at the earliest practicable date to discuss the ASC 450 classification, the subsequent-event analysis, and the proposed footnote disclosure language.
F. Item 1A (Risk Factors) and Item 7 (MD&A) Considerations
Beyond the specific ASC 450 footnote disclosure, QIH should evaluate whether its existing periodic filing disclosures require updating in light of the Pinnacle Atlantic dispute:
Item 1A — Risk Factors. QIH's existing risk factor disclosures presumably include general risk factors relating to reinsurance recoverable concentration, counterparty credit risk, and the potential for disputes with reinsurers. In light of the Pinnacle Atlantic demand, QIH should consider whether these risk factors should be updated to reflect the specific risk that a material reinsurance recoverable ($78,400,000) is subject to a pending dispute and potential impairment. While overly specific risk factor language is not necessary, the disclosure should be sufficient to alert investors to the fact that QIH faces a specific, identified risk related to a reinsurance counterparty's challenge to previously paid recoverables. QIH should also consider whether the risk of similar disputes with other reinsurers should be addressed, particularly if the factual or legal theories advanced by Pinnacle Atlantic could apply to other treaties in QC&S's reinsurance program.
Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"). SEC Regulation S-K, Item 303, requires registrants to discuss in MD&A any known trends, events, or uncertainties that are reasonably likely to have a material effect on the registrant's financial condition, liquidity, or results of operations. The Pinnacle Atlantic dispute, if resolved adversely, could result in a material charge against income, a reduction in QC&S's statutory surplus, and a narrowing of headroom under the Credit Facility's minimum statutory surplus covenant. QIH's MD&A should address the potential impact of the dispute on net income, statutory surplus, and Credit Facility compliance, with appropriate qualifiers regarding the uncertainty of the outcome and QIH's belief in the merits of its defenses.
Forward-Looking Statements. Any forward-looking statements contained in QIH's periodic filings or other public communications should be accompanied by appropriate safe-harbor language under the Private Securities Litigation Reform Act of 1995 (15 U.S.C. § 78u-5) and should identify the Pinnacle Atlantic dispute as a factor that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.
IV. NYDFS NOTIFICATION REQUIREMENTS
A. Applicable Regulatory Framework
QC&S is a New York-domiciled stock property and casualty insurance company (NAIC No. 24891) and, as such, is subject to the regulatory authority and supervisory jurisdiction of the New York Department of Financial Services ("NYDFS"). The NYDFS exercises comprehensive oversight over domestic insurers, including the authority to examine the insurer's affairs, require periodic financial reporting, and receive notification of material events affecting the insurer's financial condition, operations, or regulatory compliance.
The principal statutory and regulatory provisions relevant to QC&S's notification obligations in connection with the Pinnacle Atlantic dispute include:
•  New York Insurance Law § 1501 *et seq.*: These provisions establish the framework for reporting requirements applicable to domestic insurers, including the obligation to file annual and quarterly statutory financial statements, supplemental reports, and notifications of material events as required by the Superintendent of Financial Services.
•  New York Insurance Law § 307: This provision requires domestic insurers to obtain prior approval for, or provide notification of, certain material transactions and events, including transactions that may have a material impact on the insurer's financial condition. While Section 307 is most commonly associated with affiliate transactions and extraordinary dividends, its broad scope may encompass material litigation or arbitration that could affect the insurer's surplus.
•  NYDFS Circular Letters and Supervisory Guidance: The NYDFS has issued various circular letters and supervisory guidance documents addressing insurers' obligations to report material developments, including material litigation and disputes, to the Department. These circular letters, while not carrying the force of formal regulation, represent the Department's expectations and are treated by prudent insurers as effectively binding.
Our analysis of QC&S's NYDFS notification obligations has been coordinated with Elaine Whitfield-Ross of Harmon & Whitfield LLP, who has confirmed that, in her experience, the NYDFS expects notification of disputes of the magnitude presented here. The specific analysis and recommendations below reflect our collaborative assessment.
B. Material Litigation / Arbitration Notification
Based on our review of the applicable statutory provisions and NYDFS guidance, and in consultation with H&W, we believe that QC&S is likely required to notify the NYDFS of the Pinnacle Atlantic dispute as material pending or threatened litigation or arbitration.
The materiality of the dispute is clear. The $91,000,000 demand represents approximately 6.4% of QC&S's statutory surplus of $1,420,000,000, a figure that is well above any de minimis threshold that the NYDFS would apply in determining whether a dispute warrants regulatory notification. For context, NYDFS examiners and supervisory staff have historically treated claims exceeding 2-3% of an insurer's statutory surplus as potentially material for notification purposes, and the magnitude of the Pinnacle Atlantic demand is more than double that threshold.
The notification should describe the following:
•  The nature of the dispute, including the identity of the counterparty (Pinnacle Atlantic Reinsurance Ltd.), the reinsurance treaty at issue (Treaty No. PA-QCS-2019-EXL-0044), and the general grounds for the demand;
•  The amount at issue ($91,000,000, comprising $78,400,000 in recoverables and $12,600,000 in interest);
•  QC&S's assessment that it has meritorious defenses to the demand and intends to defend vigorously;
•  The anticipated forum for resolution (arbitration under ARIAS-U.S. Rules); and
•  The potential impact on QC&S's statutory financial condition, including the effect on surplus if the demand were fully honored.
Timing. The notification should be made promptly. While the New York Insurance Law does not prescribe a specific number of days within which such notification must be filed, the NYDFS's general expectation is that domestic insurers will notify the Department of material developments within a reasonable time after becoming aware of them. Given that the demand was received on February 14, 2026, and litigation counsel was retained on March 2, 2026, we recommend that the notification be filed no later than early April 2026 — within approximately thirty days of the engagement of litigation counsel and approximately six weeks after receipt of the demand.
The notification should be prepared by H&W in coordination with our office and delivered to the appropriate bureau within the NYDFS, typically the Property Bureau (for P&C insurers) or the Financial Condition Unit, depending on the Department's current organizational structure. Elaine Whitfield-Ross has confirmed her willingness to prepare a draft notification for our review.
C. Schedule F and Reinsurance Reporting
QC&S currently reports the $78,400,000 reinsurance recoverable from Pinnacle Atlantic on Schedule F, Part 3 of its statutory annual statement filed with the NYDFS (and, through the NAIC electronic filing system, with all states in which QC&S is licensed). Schedule F, Part 3 details ceded reinsurance recoverables by counterparty, including amounts billed and collected, amounts outstanding, and any provision for uncollectible reinsurance.
The Pinnacle Atlantic dispute raises several issues regarding QC&S's Schedule F reporting:
•  Current Reporting. As of the December 31, 2025 statutory annual statement, the $78,400,000 recoverable is properly reported on Schedule F as a paid recoverable. No provision for uncollectible reinsurance has been established, as the amount was paid in full by Pinnacle Atlantic and no dispute had been formally raised as of year-end 2025.
•  Future Adjustments. If the Pinnacle Atlantic dispute results in a determination that some or all of the recoverable must be returned, QC&S will need to adjust Schedule F accordingly. Such an adjustment would reduce reported reinsurance recoverables, increase net retained losses, and reduce statutory surplus.
•  Quarterly Statutory Filings. Any material change in the status of the recoverable — including the establishment of a provision for uncollectible reinsurance or a write-down of the recoverable asset — should be reflected in QC&S's next quarterly statutory filing. If no adjustment is warranted at this time (which is consistent with our ASC 450 "reasonably possible" classification), a note or supplemental filing may nonetheless be appropriate to disclose the existence of the dispute.
Additionally, the NYDFS may inquire about the recoverable as part of its ongoing financial examination process. The NYDFS conducts periodic financial examinations of domestic insurers, typically on a five-year cycle, although targeted examinations may be initiated at any time in response to identified concerns. QC&S should be prepared to respond to NYDFS inquiries regarding the Pinnacle Atlantic recoverable, including providing copies of the demand letter, the treaty, billing records, and QC&S's response. We recommend that QIH maintain a well-organized examination-ready file on the dispute, in coordination with our office and H&W.
D. Impact on A.M. Ridgeway Rating
QC&S's current A.M. Ridgeway financial strength rating of A (Excellent), Stable outlook (2025) is an important competitive asset and is referenced in QC&S's policyholder communications, surplus lines filings, and reinsurance arrangements. The potential impact of the Pinnacle Atlantic dispute on this rating warrants consideration.
A.M. Ridgeway monitors rated entities for material developments that could affect financial strength, and it routinely reviews statutory filings, SEC disclosures, and publicly available information for evidence of such developments. If the Pinnacle Atlantic dispute becomes public — whether through SEC disclosure in QIH's periodic filings, the filing of litigation or an arbitration demand, or media coverage — A.M. Ridgeway may request information about the dispute from QC&S's management as part of its ongoing surveillance process.
In the worst-case scenario (full $78,400,000 write-off), QC&S's statutory surplus would decline from $1,420,000,000 to $1,341,600,000 — a reduction of approximately 5.5%. While a surplus reduction of this magnitude would be noted by A.M. Ridgeway, it is, standing alone, unlikely to trigger a rating downgrade. A.M. Ridgeway's rating methodology for P&C insurers considers a wide range of quantitative and qualitative factors, including surplus adequacy, reserve strength, operating performance, business profile, and enterprise risk management. A single-event surplus reduction of 5.5%, unaccompanied by other adverse developments, would typically be viewed as manageable within the context of an A-rated insurer with $1.4 billion in surplus.
Nevertheless, we recommend proactive engagement with A.M. Ridgeway if and when the dispute becomes publicly disclosed. A.M. Ridgeway is more likely to view the dispute favorably if QC&S provides a candid and well-organized briefing rather than waiting for A.M. Ridgeway discover the dispute through public filings. Such engagement should be coordinated with the General Counsel's office and with Tobias Engström, SVP, Reinsurance & Capital Markets, who typically manages the A.M. Ridgeway relationship.
E. Coordination with Harmon & Whitfield LLP
Elaine Whitfield-Ross, Partner, Harmon & Whitfield LLP, 185 Asylum Street, Suite 2600, Hartford, CT 06103, serves as QIH's insurance regulatory counsel and has extensive experience with NYDFS reporting and compliance matters. H&W previously advised QC&S on the 2019 Treaty's compliance with the credit-for-reinsurance requirements of New York Insurance Law, including the confirmation that Pinnacle Atlantic's Bermuda domicile and BMA Class 4 registration status qualified it as an eligible reinsurer under the applicable New York credit-for-reinsurance provisions.
We recommend that H&W be engaged to perform the following tasks in connection with the Pinnacle Atlantic dispute:
(i) Prepare or review the NYDFS notification regarding the Pinnacle Atlantic dispute, ensuring that the notification is complete, accurate, and compliant with applicable statutory and regulatory requirements.
(ii) Assess the credit-for-reinsurance implications if the Treaty is terminated (which will occur upon lapse on June 30, 2026) or the recoverable is impaired. Under New York Insurance Law § 6606 and the related NYDFS regulations, QC&S may take credit for reinsurance ceded to an eligible reinsurer, but the availability of such credit may be affected if the recoverable is disputed, written down, or subject to a set-off or counterclaim. H&W should advise on whether the Pinnacle Atlantic dispute affects QC&S's ability to take Schedule F credit for the recoverable in its statutory filings.
(iii) Advise on any Schedule F adjustments that may be required in QC&S's quarterly or annual statutory filings as the dispute progresses.
Recommended Action: We recommend scheduling a conference call with Elaine Whitfield-Ross, Rachel Sondergaard, and Tobias Engström (SVP, Reinsurance & Capital Markets) to coordinate the regulatory notification strategy, discuss credit-for-reinsurance implications, and align on the approach to Schedule F reporting. This call should take place within the next one to two weeks.
V. CREDIT AGREEMENT REPORTING OBLIGATIONS — CARTWRIGHT NATIONAL BANK, N.A.
A. Revolving Credit Facility Overview
QIH maintains a $750,000,000 senior secured revolving credit facility (the "Credit Facility") with Cartwright National Bank, N.A. ("Cartwright"), 383 Madison Avenue, New York, NY 10179, serving as administrative agent. The Credit Facility, which matures in June 2028, provides QIH with working capital, letter of credit capacity, and general corporate liquidity. Andrew Bao serves as the relationship manager at Cartwright for the QIH account.
The Credit Facility is secured by the stock of QC&S and certain other QIH subsidiaries and is subject to affirmative and negative covenants customary for credit facilities of this type and size. Among the covenants relevant to this analysis is the minimum statutory surplus covenant, which requires QC&S to maintain statutory surplus of not less than $1,100,000,000 at all times. In addition, the Credit Facility contains standard affirmative covenants requiring QIH to provide periodic financial reports, compliance certificates, and — critically — notice of material litigation, arbitration, or governmental proceedings.
B. Material Litigation Reporting Covenant
Credit agreements of the type governing QIH's Credit Facility customarily include a covenant requiring the borrower to promptly notify the administrative agent of any litigation, arbitration, investigation, or governmental proceeding that is commenced or threatened against the borrower or any of its material subsidiaries, to the extent that such proceeding could reasonably be expected to result in a Material Adverse Effect (as defined in the credit agreement). These covenants are broadly drafted and are intended to ensure that the lender syndicate is kept informed of developments that could affect the borrower's financial condition, operations, or ability to perform its obligations under the credit agreement.
The Pinnacle Atlantic demand for $91,000,000 is highly likely to qualify as material litigation (or threatened arbitration) requiring notice under this covenant. The analysis is straightforward:
•  The amount at issue ($91,000,000) is significant both in absolute terms and relative to QC&S's statutory surplus (approximately 6.4%).
•  If the demand were fully honored, QC&S's statutory surplus would be reduced from $1,420,000,000 to $1,329,000,000, narrowing the headroom under the minimum statutory surplus covenant from $320,000,000 to $229,000,000 — a reduction of approximately 28.4%.
•  The potential income statement impact (after-tax charge of up to $71,890,000) is material to QIH's consolidated results of operations.
•  Even under a more conservative scenario (partial recovery by Pinnacle Atlantic, e.g., on the IBNR allocation issue alone at $22,300,000), the potential impact would likely exceed any reasonable de minimis threshold under the credit agreement's definition of Material Adverse Effect.
We have not yet reviewed the specific language of the Credit Facility's definitions of "Material Adverse Effect" and "Material Litigation" or the precise notice provision, as we do not currently have a copy of the executed credit agreement in our files. We strongly recommend that Rachel Sondergaard and Tobias Engström promptly provide us with a copy of the Credit Facility (including all amendments) so that we can confirm our analysis against the specific contractual language. However, based on our extensive experience with credit agreements of this type, we are confident that the Pinnacle Atlantic demand will trigger the notice obligation, and we recommend that QIH proceed on that assumption.
Notice Requirements. Typical credit agreement covenants of this nature require notice within a specified number of business days — commonly five to ten business days — after the borrower becomes aware of the triggering event. The "triggering event" in this case is arguably the receipt of the Pinnacle Atlantic demand on February 14, 2026, or at the latest, the Audit Committee's authorization of counsel retention on February 24, 2026. Depending on the specific timeframe in the credit agreement, the notice obligation may have already arisen. The failure to timely deliver a required notice can, in certain credit agreements, constitute an event of default (often subject to notice and cure provisions), and QIH should take this obligation seriously.
Recommended Content of Notice. The notice to Andrew Bao at Cartwright should include:
•  A description of the dispute, including the identity of the counterparty, the treaty at issue, and the nature of the claims;
•  The amount of the demand ($91,000,000);
•  QIH's assessment that the claims are without merit and that QIH intends to vigorously defend;
•  Confirmation that QC&S remains in compliance with all financial covenants under the Credit Facility, including the minimum statutory surplus covenant; and
•  A statement that QIH will provide updates as the dispute develops.
We can prepare a draft notice for your review, and we recommend that it be delivered to Andrew Bao as promptly as possible.
C. Minimum Statutory Surplus Covenant Analysis
The Credit Facility requires QC&S to maintain statutory surplus of not less than $1,100,000,000 at all times. The following analysis summarizes the impact of the Pinnacle Atlantic dispute on QC&S's compliance with this covenant under various scenarios:
As the table illustrates, QC&S would remain in compliance with the minimum statutory surplus covenant even in the worst-case scenario. The remaining headroom of $229,000,000 represents a substantial margin above the covenant minimum. Accordingly, no covenant default would be triggered by the Pinnacle Atlantic dispute, even if the full $91,000,000 demand were honored.
However, the narrowing of headroom is not inconsequential. A reduction of approximately 28.4% in covenant headroom — from $320,000,000 to $229,000,000 — may prompt Cartwright and other lenders in the syndicate to increase their monitoring of QC&S's statutory financial condition and to request additional information regarding the dispute and its potential impact on surplus.
We also recommend that QIH evaluate whether any other financial covenants under the Credit Facility could be affected by the income statement impact of a write-off or disgorgement. For example, if the Credit Facility includes debt service coverage ratios, leverage ratios, or minimum net income thresholds, a pre-tax charge of $78,400,000 to $91,000,000 could affect compliance with those covenants. A thorough review of the credit agreement is needed to complete this analysis.
D. Potential Lender Response
Even though covenant compliance is maintained in all scenarios, QIH should be prepared for the following potential lender responses to the disclosure of the Pinnacle Atlantic dispute:
•  Borrower Certificate. Cartwright may request a borrower certificate confirming continued compliance with all financial covenants following the disclosure of the dispute. Such certificates are routinely delivered in connection with quarterly compliance reporting, but Cartwright may request an interim certificate upon receipt of the material litigation notice.
•  Syndicate Briefings. If the Credit Facility is syndicated (as is typical for a facility of this size), other lenders in the syndicate may request briefings or additional information regarding the dispute and its potential financial impact. QIH should be prepared to provide a clear and consistent narrative to all syndicate members, coordinated through Cartwright as administrative agent.
•  Information Requests. Cartwright or syndicate lenders may request copies of the demand letter, QIH's response, and periodic updates on the status of the arbitration. QIH should evaluate the extent to which such information can be provided without waiving privilege and should consider entering into a common-interest or joint-defense agreement with Cartwright if necessary to preserve privilege over shared materials.
The risk of acceleration of the Credit Facility or restriction on drawdown availability is low given the substantial remaining headroom under the statutory surplus covenant and the absence of any actual covenant default. Nevertheless, the credit agreement provisions regarding remedies, events of default, and the consequences of failure to deliver required notices should be reviewed carefully to ensure that no technical default arises from the timing of the notice.
Narrative Control. We recommend that QIH proactively notify Cartwright of the dispute concurrently with, or shortly after, the first public disclosure of the dispute through SEC filings. Lenders generally respond more favorably to borrowers who provide early, transparent disclosure rather than allowing the lender discover the issue through public filings or market reports. Proactive notification also provides QIH with the opportunity to frame the narrative — emphasizing the strength of QC&S's defenses, the substantial remaining covenant headroom, and QIH's commitment to vigorously defending the claim.
E. Timing of Notice
The timeline of relevant events is as follows:
•  February 14, 2026: Pinnacle Atlantic's pre-suit demand received by QC&S
•  February 24, 2026: QIH Audit Committee authorized retention of litigation counsel
•  March 2, 2026: Calderwood & Harkness LLP engagement formally opened
•  March 22, 2026: Date of this memorandum
If the credit agreement requires notice upon receipt of a claim or demand that could constitute material litigation — as many such agreements do — the notice obligation may have arisen as early as February 14, 2026, and notice may already be overdue by more than five weeks. Even under the most generous reading of the notice provision (e.g., notice required within ten business days of the borrower's determination that the claim constitutes material litigation), the passage of time since the Audit Committee's February 24, 2026 authorization of counsel retention argues strongly for immediate delivery of the notice.
Recommended Action: We recommend that Rachel Sondergaard and Tobias Engström immediately review the exact notice provision in the credit agreement and, absent a determination that no notice is required (which we consider unlikely), promptly deliver notice to Andrew Bao at Cartwright National Bank, N.A. If the exact credit agreement language cannot be reviewed within the next two business days, we recommend delivering the notice on a protective basis, even before the review is complete, to minimize any further delay.
VI. ADDITIONAL DISCLOSURE CONSIDERATIONS
A. Form 8-K Analysis
In addition to the periodic reporting obligations discussed in Section III above, QIH should evaluate whether the Pinnacle Atlantic demand triggers a current reporting obligation on Form 8-K.
Several items on Form 8-K are potentially relevant:
Item 8.01 (Other Events). Item 8.01 permits (but does not require) a registrant to file a Form 8-K to report any events the registrant considers to be of importance to security holders. QIH may elect to file a voluntary 8-K to disclose the Pinnacle Atlantic dispute proactively, particularly if there is a risk of selective disclosure (e.g., if the dispute becomes known to analysts, rating agencies, or counterparties before it is disclosed in a periodic filing) or market rumors that could create an obligation to confirm or deny the information. A voluntary 8-K can also serve as a mechanism for making a public disclosure that terminates insider trading restrictions and reopens the trading window for insiders.
Item 2.06 (Material Impairments). Item 2.06 requires a registrant to file a Form 8-K if it concludes that a material charge for impairment of one or more of its assets is required under GAAP. If QIH were to determine — at this stage or at any future point — that the $78,400,000 reinsurance recoverable is impaired and that a material charge must be recorded, an 8-K filing under Item 2.06 would be required. At the present time, however, our recommended ASC 450 classification of "reasonably possible" does not support a conclusion that impairment has occurred, and no 8-K under Item 2.06 is required.
Item 1.01 (Entry into a Material Definitive Agreement) and Item 1.02 (Termination of a Material Definitive Agreement). The Treaty's scheduled lapse on June 30, 2026, should be evaluated to determine whether it constitutes the termination of a "material definitive agreement" requiring disclosure under Item 1.02. While reinsurance treaties are not typically classified as material definitive agreements for Form 8-K purposes, the size of the Treaty and the associated dispute may warrant a different analysis in this case.
Current Recommendation. At this stage, no Form 8-K is required. However, an 8-K filing may become advisable depending on future developments, including the commencement of formal arbitration proceedings, a significant ruling by the arbitration panel, a settlement, or a determination that impairment of the recoverable is required. We will monitor developments and advise you if a Form 8-K filing becomes necessary or strategically advisable.
B. Insider Trading Considerations
The existence of the Pinnacle Atlantic dispute and its potential financial impact on QIH constitutes material non-public information ("MNPI"). Under the federal securities laws, including Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, persons in possession of MNPI are prohibited from trading in the securities of the issuer to which the information relates, or from tipping such information to others who may trade on it.
The following persons are, to our knowledge, currently aware of the dispute and should be considered in possession of MNPI:
•  Martin Galbraith, Chief Executive Officer
•  Rachel Sondergaard, General Counsel
•  Tobias Engström, SVP, Reinsurance & Capital Markets
•  Members of the QIH Board of Directors' Audit Committee (who authorized the retention of litigation counsel on February 24, 2026)
•  Any other QIH officers, directors, employees, or advisors who have been informed of the dispute
All such persons should refrain from trading in QIH securities (including common stock, options, and any other equity or debt securities) until the dispute has been publicly disclosed in an SEC filing or other public disclosure that satisfies the requirements for dissemination of material information.
Recommended Actions:
(i) The General Counsel should implement a restricted trading window or blackout period for all persons with knowledge of the dispute, effective immediately and continuing until the information is publicly disclosed and a reasonable period has elapsed for the market to absorb the information.
(ii) QIH's compliance department should be notified (to the extent not already aware) of the need to implement and enforce the trading restrictions, including through the Company's pre-clearance procedures for officer and director trades