1025-00005 · Quorum Insurance Holdings · Correspondence/Opposing Counsel

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CALDERWOOD & HARKNESS LLP Attorneys at Law

One Liberty Plaza, 55th Floor New York, New York 10006

Telephone: (212) 448-7200 Facsimile: (212) 448-7201

March 18, 2026

VIA HAND DELIVERY AND ELECTRONIC MAIL

Nathaniel R. Calloway III, Esq. Hargrove, Fitch & Calloway LLP 51 West 52nd Street, 40th Floor New York, New York 10019

Re: Response to Pre-Suit Demand Letter Dated February 14, 2026 — Pinnacle Atlantic Reinsurance Ltd. v. Quorum Casualty & Surety Company; Treaty No. PA-QCS-2019-EXL-0044

Dear Mr. Calloway:

I. Introduction and Representation Statement

This firm represents Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation publicly traded on the Nasdaq Global Select Market (ticker: QIHC), with its principal executive offices at 200 Constitution Plaza, Suite 3400, Hartford, Connecticut 06103, and its principal insurance subsidiary, Quorum Casualty & Surety Company ("QC&S"), a New York-domiciled stock property and casualty insurer (NAIC Company Code No. 24891), with principal offices at 200 Constitution Plaza, Suite 3200, Hartford, Connecticut 06103. We write on behalf of both QIH and QC&S in connection with the matters described herein.

This letter responds to your firm's pre-suit demand letter dated February 14, 2026 (the "Demand Letter"), sent on behalf of your client, Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic" or "PARL"), a Bermuda Class 4 insurer (Bermuda Monetary Authority Registration No. BMA-4R-2008-0331), registered at Clarendon House, 14 Church Street, Hamilton HM 11, Bermuda, and maintaining a United States office at 1285 Avenue of the Americas, 28th Floor, New York, New York 10019. We have reviewed the Demand Letter in its entirety, together with the attachments thereto and the underlying treaty documentation, and we respond as set forth below.

The Demand Letter demands the return of Seventy-Eight Million Four Hundred Thousand Dollars ($78,400,000) in reinsurance recoverables paid by Pinnacle Atlantic under Treaty No. PA-QCS-2019-EXL-0044, together with Twelve Million Six Hundred Thousand Dollars ($12,600,000) in purported accrued interest, for a total demand of Ninety-One Million Dollars ($91,000,000). The Demand Letter advances four purported grounds in support of this extraordinary demand, each of which we address in detail below. All references to the "Treaty" in this letter mean the Aggregate Excess-of-Loss Reinsurance Treaty No. PA-QCS-2019-EXL-0044, effective July 1, 2019, between QC&S as cedent and Pinnacle Atlantic as reinsurer, as extended by two automatic one-year extension periods.

At the outset, we wish to state QC&S's position clearly and unequivocally: QC&S categorically rejects each of the four grounds set forth in the Demand Letter and denies any obligation to return any portion of the $78,400,000 in properly billed and paid reinsurance recoverables, or to pay any interest thereon. The Demand Letter is without merit in its entirety. As we explain in detail below, the cessions at issue were properly calculated, properly reported, and properly billed in full compliance with the Treaty's terms, and they were voluntarily paid by Pinnacle Atlantic over a period of more than seventeen months without any contemporaneous objection, dispute, or reservation of rights. Pinnacle Atlantic's belated attempt to claw back these payments — initiated more than twenty months after the final payment — is contractually unsupported, legally unfounded, and commercially unreasonable.

II. Background and Treaty Overview

To place the parties' dispute in proper context, we briefly summarize the relevant terms and history of the Treaty.

The Treaty is a five-year aggregate excess-of-loss reinsurance treaty, effective for the period July 1, 2019, through June 30, 2024, covering commercial general liability, excess and umbrella liability, and professional liability policies issued or renewed by QC&S during each treaty year. The Treaty was placed through Broadreach Intermediaries Inc. ("Broadreach"), a New York-licensed reinsurance intermediary, acting as intermediary broker pursuant to Article 9 of the Treaty.

The Treaty provides for automatic one-year extensions absent written notice of non-renewal delivered by either party not less than nine months prior to the expiration of the then-current term. Pursuant to this mechanism, the Treaty was automatically extended through June 30, 2025, and again through June 30, 2026. Pinnacle Atlantic delivered its notice of non-renewal to QC&S, through Broadreach, on October 1, 2025, and accordingly the Treaty will lapse upon the expiration of the current extension period on June 30, 2026.

The principal financial terms of the Treaty, as relevant to the current dispute, are as follows:

• Per-Treaty-Year Retention: $120,000,000 in aggregate net incurred losses.

• Per-Treaty-Year Cession Limit: $200,000,000 (i.e., the Treaty covers aggregate net incurred losses from $120,000,000 to $320,000,000 per treaty year).

• Provisional Treaty Premium Rate: 42% of ceded earned premium, subject to a sliding-scale adjustment mechanism with a minimum rate of 35% and a maximum rate of 52%, as set forth in Article 3.

• Governing Law: The laws of the State of New York, without regard to conflict-of-laws principles (Article 16).

The disputed reinsurance recoverables at issue in the Demand Letter relate to two treaty years:

• Treaty Year 2022 (July 1, 2022 – June 30, 2023): Ceded losses of $69,700,000, representing the excess of TY 2022 aggregate net incurred losses over the $120,000,000 retention.

• Treaty Year 2023 (July 1, 2023 – June 30, 2024): Ceded losses of $8,700,000, representing the excess of TY 2023 aggregate net incurred losses over the $120,000,000 retention.

Together, these ceded losses total $78,400,000 — the precise amount that Pinnacle Atlantic now demands be returned.

These amounts were billed to Pinnacle Atlantic, through Broadreach, across seven installments between October 15, 2022, and March 29, 2024. Each billing was accompanied by supporting loss bordereaux, actuarial summaries, and such other documentation as required under the Treaty and customary industry practice. Pinnacle Atlantic voluntarily paid each of the seven billing installments in full, without any contemporaneous objection, reservation of rights, or request for additional documentation or clarification. It was not until December 12, 2025 — more than twenty months after the seventh and final payment on March 29, 2024, and more than three years after the first payment on October 15, 2022 — that Pinnacle Atlantic first raised any issue with the cessions through its reservation-of-rights letter of that date. The Demand Letter followed approximately two months later. The extraordinary delay in raising these purported objections is, as we discuss further below, itself highly relevant to the legal analysis.

III. Rejection of Ground One — Late Notice Under Article 7

The Demand Letter's first ground for recoupment is the assertion that QC&S failed to provide timely notice to Pinnacle Atlantic, as required by Article 7 of the Treaty, of certain large underlying claims that drove aggregate losses through the $120,000,000 retention. Specifically, Pinnacle Atlantic contends that QC&S failed to provide timely notice of the thirty-one (31) related commercial general liability claims constituting what the parties have referred to as the "Meridian Docks mass tort cluster," arising under QC&S Policy No. CGL-2020-09844, issued to policyholder Meridian Docks Development LLC. According to your Demand Letter, notice was provided approximately fourteen months after QC&S first established reserves for these claims, and Pinnacle Atlantic characterizes this delay as a material breach of Article 7 entitling it to deny the related cessions.

QC&S rejects this argument in its entirety. The relevant facts are as follows:

QC&S first established case reserves for the individual Meridian Docks claims on March 15, 2021, when the claims were initially reported to QC&S's claims department. At that time, each individual claim was reserved at an amount well below the Treaty's individual claim reporting threshold of $1,000,000 as set forth in Article 7.3(b). Specifically, the initial individual case reserves ranged from approximately $75,000 to $350,000 per claim, reflecting the early and uncertain stage of the underlying litigation and the limited information then available to QC&S's claims examiners. No individual claim exceeded the $1,000,000 reporting threshold, and accordingly no reporting obligation under Article 7 was triggered at that time.

It was not until the first quarter of 2022 — when material developments in the underlying Meridian Docks litigation, including new expert reports, additional plaintiff filings, and revised discovery disclosures, prompted QC&S's claims department to significantly increase the individual case reserves — that the aggregate reserve for the Meridian Docks cluster, and a number of individual claim reserves, crossed the applicable reporting thresholds. Once those thresholds were triggered, QC&S acted promptly and in full compliance with Article 7. Formal notice of the Meridian Docks claims was provided to Pinnacle Atlantic through Broadreach on May 22, 2022, accompanied by comprehensive claim summaries, reserve analyses, and supporting documentation. The notice was transmitted within the time frame contemplated by Article 7 as measured from the date the reporting obligation was triggered.

Pinnacle Atlantic's contention that the fourteen-month period between the initial establishment of reserves (March 15, 2021) and the notice to Pinnacle Atlantic (May 22, 2022) constitutes a violation of Article 7 fundamentally misapprehends the operation of the Treaty's notice provisions. Article 7 does not require notice upon the initial reservation of a claim at any amount; it requires notice when a claim meets specified reporting thresholds. QC&S's notice was timely measured from the date those thresholds were met.

Moreover, even if any arguable delay in notice could be identified — which QC&S denies — such a delay would not entitle Pinnacle Atlantic to deny the cessions or demand return of paid recoverables. Under well-established New York reinsurance law, a late-notice defense requires the reinsurer to demonstrate that it suffered actual prejudice as a result of the delay. See, e.g., Unigard Sec. Ins. Co. v. Greaves Specialty Insurance, 79 N.Y.2d 576, 581 (1992) (holding that a reinsurer must demonstrate prejudice to disclaim coverage based on late notice); see also Christiania Gen. Ins. Corp. v. Aldermere Assurance, 979 F.2d 268, 280 (2d Cir. 1992) (applying New York law and requiring showing of actual prejudice in reinsurance late-notice context). The Demand Letter conspicuously fails to identify any specific prejudice that Pinnacle Atlantic allegedly suffered as a result of the timing of QC&S's notice. No claim is made that Pinnacle Atlantic was deprived of any opportunity to participate in the defense or resolution of the underlying Meridian Docks claims, or that it would have taken any different action had notice been provided at an earlier date. Absent a concrete and particularized showing of actual prejudice, Pinnacle Atlantic's late-notice defense fails as a matter of law.

Furthermore, Pinnacle Atlantic's conduct following receipt of the Meridian Docks notice further undermines its current position. After receiving QC&S's May 22, 2022 notice and the accompanying documentation, Pinnacle Atlantic paid all cessions attributable to the Meridian Docks claims without any contemporaneous objection, dispute, or reservation of rights. This voluntary and unreserved payment is wholly inconsistent with the position Pinnacle Atlantic now takes, and it constitutes strong evidence that Pinnacle Atlantic did not, at the time, consider the notice to be untimely or the cessions to be improper.

For all of the foregoing reasons, QC&S denies that notice was untimely and, even if any arguable delay existed, denies that Pinnacle Atlantic suffered any prejudice as a result thereof. Ground One of the Demand Letter is without merit and is rejected.

IV. Rejection of Ground Two — Misallocation of IBNR Reserve Development Under Article 5

The Demand Letter's second ground for recoupment is the assertion that QC&S improperly allocated $22,300,000 in incurred but not reported ("IBNR") reserve strengthening to Treaty Year 2022 that, in Pinnacle Atlantic's view, should have been attributed to Treaty Year 2021. According to Pinnacle Atlantic, this purported misallocation had the effect of artificially inflating TY 2022 ceded losses, thereby increasing the reinsurance recoverables billed to and paid by Pinnacle Atlantic.

QC&S rejects this contention. The allocation of the $22,300,000 in IBNR reserve development to TY 2022 was prepared by QC&S's independent consulting actuaries, Velthorn Actuarial Advisors LLC, of Boston, Massachusetts (principal actuary: Dr. Stephen Tanaka, FCAS, MAAA), in accordance with applicable actuarial standards of practice and in full compliance with the Treaty. Velthorn Actuarial Advisors prepared a comprehensive loss development and reserve analysis underlying the disputed cessions and certified that the $22,300,000 in IBNR development relates to accident-year 2022 claims whose loss development factors crystallized during the TY 2022 reporting period. The allocation reflects the emergence of loss development on accident-year 2022 risks — not a retroactive recharacterization of TY 2021 losses — and is fully consistent with the Treaty's definition of "losses incurred" as set forth in Article 5.2 of the Treaty.

Article 5.2 defines "losses incurred" for each treaty year as the sum of paid losses, outstanding case reserves, and IBNR reserves attributable to losses occurring during the applicable treaty year, as reported in accordance with QC&S's reserving methodology. The IBNR at issue relates to claims that occurred during the TY 2022 accident year but whose development was not fully reflected in earlier reporting periods. The allocation of this IBNR to TY 2022 is not only consistent with the Treaty definition; it is the only allocation that is consistent with generally accepted actuarial principles as applied to the facts.

We further note that Pinnacle Atlantic's reallocation theory, even on its own terms, does not support the demand for return of $78,400,000 or any amount close thereto. The arithmetic is instructive:

• TY 2021 aggregate net incurred losses, as reported, were $104,600,000 — below the $120,000,000 retention. Accordingly, no cession was made for TY 2021.

• If the $22,300,000 in IBNR were reallocated from TY 2022 to TY 2021 as Pinnacle Atlantic proposes, TY 2021 aggregate net incurred losses would become $126,900,000 ($104,600,000 + $22,300,000), exceeding the retention by $6,900,000. This would give rise to a new TY 2021 cession of $6,900,000 — an amount that QC&S has not previously billed but could assert a right to recover.

• Conversely, TY 2022 ceded losses would be reduced from $69,700,000 to $47,400,000 (i.e., ($189,700,000 − $22,300,000) − $120,000,000 = $47,400,000). Even under Pinnacle Atlantic's own theory, TY 2022 ceded losses would remain substantial.

• The net effect of Pinnacle Atlantic's proposed reallocation, if it were correct (which QC&S denies), would be a reduction in total ceded losses of only $15,400,000 ($22,300,000 minus the offsetting $6,900,000 new TY 2021 cession) — a far cry from the $78,400,000 demanded.

Pinnacle Atlantic's reallocation theory is actuarially unsupported, contractually incorrect, and arithmetically inconsistent with the relief demanded. It is, moreover, an after-the-fact contrivance advanced more than three years after the relevant IBNR allocations were reported to and accepted by Pinnacle Atlantic without objection. QC&S rejects Ground Two of the Demand Letter in its entirety.

V. Rejection of Ground Three — Follow-the-Fortunes / Settlements Under Article 11

The Demand Letter's third ground challenges three related professional liability claim settlements constituting what the parties have referred to as the "Veridian Financial Services E&O cluster," arising under QC&S Policy No. PL-2021-15327, issued to policyholder Veridian Financial Services Inc. Specifically, Pinnacle Atlantic takes issue with QC&S's settlement of these three claims on September 8, 2023, for a combined $34,500,000, allocated as follows:

• Claim A: $14,200,000

• Claim B: $12,800,000

• Claim C: $7,500,000

Pinnacle Atlantic alleges that these settlements were not made in the ordinary course of QC&S's business and lacked good faith and businesslike conduct, and that the settlement amounts were inflated.

After accounting for recoveries from other reinsurance, QC&S's net retention on the Veridian settlements was $26,100,000, and $8,700,000 was ceded to the Treaty as part of TY 2023 aggregate losses. It is this $8,700,000 cession that forms the TY 2023 component of the Demand Letter's $78,400,000 total demand.

QC&S categorically rejects Pinnacle Atlantic's characterization of the Veridian settlements and its challenge to the related cession.

The follow-the-fortunes doctrine is a bedrock principle of reinsurance law. Under New York law, a reinsurer is obligated to follow the cedent's good-faith claims decisions, including settlement decisions, and a reinsurer may avoid this obligation only upon a showing of bad faith, fraud, or gross negligence on the part of the cedent. See, e.g., British Int'l Ins. Co. v. Seguros La Republica, S.A., 342 F.3d 78, 84-85 (2d Cir. 2003) (articulating the standard under New York law); Greaves Specialty Insurance v. ACE Am. Reinsurance Co., 361 F.3d 134, 140 (2d Cir. 2004) (noting that the follow-the-fortunes doctrine "merely requires that the cedent's claim-handling be in good faith and that the payments be 'reasonably related' to the cedent's liability"). This is an exceptionally high standard, and the burden rests squarely on the reinsurer to establish it.

Article 11 of the Treaty expressly incorporates the follow-the-fortunes principle, providing that Pinnacle Atlantic shall follow the fortunes and settlements of QC&S, provided that such settlements are made in good faith and in a businesslike manner. QC&S's settlement of the Veridian claims fully satisfies this standard.

Prior to entering into the Veridian settlements, QC&S conducted a thorough litigation exposure analysis, including evaluation of the underlying claims by senior claims professionals and outside coverage counsel, review of the applicable policy terms and conditions, analysis of the alleged damages and the strength of the claimants' theories of liability, and assessment of the costs and risks of continued litigation. The settlements were the product of arm's-length negotiations between QC&S and claimants' counsel, and the settlement amounts fell well within the range of reasonable outcomes given the magnitude of the underlying exposure, which QC&S's internal analyses estimated at between $28,000,000 and $52,000,000 on a combined basis. All aspects of the settlement evaluation and negotiation were documented in QC&S's claims handling file, which was maintained in the ordinary course of QC&S's business.

The Demand Letter provides no evidence whatsoever of bad faith, gross negligence, or fraud on the part of QC&S. It offers no independent analysis of the underlying claims, no alternative valuation of the exposure, and no specific factual basis for the conclusory assertion that the settlements were "inflated." Bare allegations of inflated settlements, unsupported by any evidentiary showing, are manifestly insufficient to overcome the follow-the-fortunes doctrine or to satisfy the demanding standard required under New York law to set aside a cedent's good-faith settlement decisions.

QC&S rejects the allegation that the Veridian settlements violated Article 11 or any other provision of the Treaty. Ground Three of the Demand Letter is without merit and is rejected.

VI. Rejection of Ground Four — Alleged Inaccurate Premium Reporting Under Article 3

The Demand Letter's fourth and final ground alleges that QC&S underreported ceded earned premium for Treaty Year 2022 by $6,800,000, asserting that QC&S reported ceded earned premium of $38,400,000 when the correct figure, according to Pinnacle Atlantic, should have been $45,200,000. Pinnacle Atlantic contends that this underreporting resulted in a treaty premium underpayment of $2,856,000 (calculated at the 42% provisional rate applied to the alleged $6,800,000 shortfall) and that this purported underreporting entitles Pinnacle Atlantic to exercise a treaty termination right or offset the claimed underpayment against the recoverables demand.

QC&S rejects these allegations. The $6,800,000 discrepancy identified by Pinnacle Atlantic arises entirely from Pinnacle Atlantic's improper inclusion, in its calculation of ceded earned premium, of premiums attributable to run-off portfolio transfers that are expressly excluded from the definition of "ceded earned premium" under Article 3.4 of the Treaty. Article 3.4 provides, in relevant part, that premiums earned on policies assumed by QC&S in connection with loss portfolio transfers, run-off transactions, and similar assumption reinsurance arrangements shall be excluded from the computation of ceded earned premium for purposes of the Treaty. QC&S's premium reporting correctly excluded these amounts in accordance with Article 3.4, and QC&S's reported ceded earned premium of $38,400,000 for TY 2022 is accurate and fully compliant with the Treaty's terms.

No underreporting occurred. There is no premium shortfall. And there is no basis for any termination right or offset claim arising from Pinnacle Atlantic's erroneous premium calculation.

Moreover, even if a bona fide premium calculation dispute existed — which it does not — such a dispute would not give rise to a unilateral termination right on the part of Pinnacle Atlantic. Premium adjustments under the Treaty are addressed through the sliding-scale adjustment mechanism and the premium settlement process set forth in Article 3. A disagreement over the amount of ceded earned premium is a matter to be resolved through the contractually specified premium reconciliation procedures, not through a demand for return of reinsurance recoverables or an assertion of termination rights that the Treaty does not confer.

QC&S rejects the premium reporting allegations and any claimed entitlement to termination or offset on this basis. Ground Four of the Demand Letter is without merit and is rejected.

VII. Voluntary Payment and Waiver

Independent of the substantive deficiencies in each of the four grounds advanced in the Demand Letter, QC&S notes that Pinnacle Atlantic's claim for return of the $78,400,000 is further undermined by the circumstances of its own payments.

As noted above, Pinnacle Atlantic paid all seven billing installments between October 15, 2022, and March 29, 2024, totaling $78,400,000, without any contemporaneous reservation of rights, objection, request for additional documentation, or indication of any kind that it considered the cessions to be improper or disputed. Each payment was made in the ordinary course, in response to billing transmittals accompanied by supporting documentation, and without any communication suggesting that Pinnacle Atlantic had identified any deficiency, irregularity, or concern.

Pinnacle Atlantic did not issue its reservation-of-rights letter until December 12, 2025 — more than twenty (20) months after the seventh and final payment on March 29, 2024, and more than three (3) years after the first payment on October 15, 2022. This extraordinary and unexplained delay in raising any objection to the cessions, after having voluntarily paid them in full, is directly relevant to the parties' respective legal positions.

QC&S expressly reserves the right to assert that Pinnacle Atlantic's unreserved voluntary payments constitute waiver of any right to object to the cessions, estoppel precluding Pinnacle Atlantic from now challenging cessions it voluntarily paid without reservation, and ratification of the cessions as properly calculated and due. QC&S further reserves the right to assert that Pinnacle Atlantic is precluded, under any and all applicable legal doctrines, from seeking the return of amounts voluntarily paid under the Treaty.

VIII. Interest Demand

The Demand Letter includes a demand for $12,600,000 in interest, purportedly calculated at a rate of 8% per annum on $78,400,000 over an approximately twenty-four (24) month average period. This interest demand is without contractual or legal basis.

No provision of the Treaty specifies or authorizes the 8% interest rate asserted by Pinnacle Atlantic. The Treaty's only provision addressing interest — Article 14.3 — relates to late payment of treaty premium by the cedent and prescribes a different rate (the then-applicable prime rate published by The Wall Street Journal plus 1.5%), and that provision is by its terms inapplicable to the circumstances posited in the Demand Letter. Pinnacle Atlantic has cited no contractual provision, statutory authority, or other legal basis for its claimed interest rate or methodology.

QC&S rejects the interest demand in its entirety. No interest is due.

IX. Applicability of Arbitration Clause — Treaty Article 22

The Demand Letter asserts, at pages 14 through 16, that the arbitration clause contained in Article 22 of the Treaty is inapplicable to the specific claims raised therein. QC&S vigorously disagrees with this assertion, and we address it at some length given its dispositive procedural importance.

Article 22 of the Treaty provides for the resolution of disputes "arising under or in connection with" the Treaty by a three-member arbitration panel sitting in New York, New York, in accordance with the ARIAS-U.S. Rules for the Resolution of U.S. Insurance and Reinsurance Disputes, as then in effect. The arbitration clause is mandatory, not permissive: it provides that the parties "shall submit" such disputes to arbitration, not that they "may" do so.

The scope of this arbitration clause is broad. It encompasses all disputes "arising under or in connection with" the Treaty. Each of the four grounds asserted in the Demand Letter — the late-notice dispute under Article 7, the IBNR allocation dispute under Article 5, the follow-the-fortunes dispute under Article 11, and the premium reporting dispute under Article 3 — arises directly and unmistakably from the interpretation, application, and performance of the Treaty. It is difficult to conceive of disputes more squarely within the scope of a clause covering disputes "arising under or in connection with" the Treaty than disputes concerning the parties' respective rights and obligations under specific enumerated articles of the Treaty itself.

Under both New York law and the Federal Arbitration Act, 9 U.S.C. §§ 1-16, there is a strong presumption of arbitrability, and any doubt as to the scope of an arbitration clause must be resolved in favor of arbitration. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) ("as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration"); see also JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 172 (2d Cir. 2004) (same). This presumption of arbitrability is particularly strong in the reinsurance context, where arbitration has long been the customary and preferred method of dispute resolution. See, e.g., Hartford Lloyd's Ins. Co. v. Teachworth, 898 F.2d 1058, 1062 (5th Cir. 1990).

Accordingly, QC&S hereby formally invokes its right to arbitrate all disputes arising under or in connection with Treaty No. PA-QCS-2019-EXL-0044 pursuant to Treaty Article 22 and the ARIAS-U.S. Rules. A separate formal Demand to Arbitrate, setting forth QC&S's designation of its party-appointed arbitrator and the specific issues to be submitted to the panel, is being delivered to your firm contemporaneously with this letter via the same methods of delivery.

We place Pinnacle Atlantic on notice that, should Pinnacle Atlantic file suit in the Supreme Court of the State of New York, New York County, Commercial Division, or in any other court of competent jurisdiction, in lieu of participating in the contractually mandated arbitration process, QC&S will promptly move to compel arbitration and to stay all judicial proceedings pending completion of the arbitration, pursuant to Section 3 of the Federal Arbitration Act, 9 U.S.C. § 3, and/or New York CPLR § 7503. QC&S is confident that any such motion will be granted, given the breadth and clarity of the arbitration clause and the well-established federal and state policies favoring enforcement of arbitration agreements.

X. Reservation of Rights

QC&S and QIH expressly reserve all rights, claims, defenses, counterclaims, and remedies available to them under the Treaty, at law, and in equity, including but not limited to:

(a) Claims for declaratory judgment confirming the validity of all cessions under the Treaty for Treaty Year 2022 and Treaty Year 2023, and confirming that QC&S is entitled to retain the full $78,400,000 in reinsurance recoverables previously paid by Pinnacle Atlantic;

(b) Claims for breach of the Treaty arising from Pinnacle Atlantic's wrongful demand for return of validly paid reinsurance recoverables and Pinnacle Atlantic's conduct in connection therewith;

(c) Claims for breach of the duty of utmost good faith (uberrima fides) owed by Pinnacle Atlantic to QC&S as reinsurer to cedent under the Treaty and applicable law;

(d) All affirmative defenses available under the Treaty, at law, and in equity, including without limitation waiver, estoppel, ratification, laches, unclean hands, failure to state a claim upon which relief can be granted, and any other applicable defenses; and

(e) Any and all other rights, claims, and remedies that may arise or become available as this matter proceeds, whether in arbitration or otherwise.

Nothing in this letter, and no action taken or omitted by QC&S or QIH in connection with this dispute, shall be construed as a waiver of any right, claim, defense, counterclaim, or remedy, whether or not expressly identified herein. QC&S and QIH reserve the right to supplement their positions as warranted by further investigation and analysis.

XI. Document Preservation Demand

QC&S hereby demands that Pinnacle Atlantic immediately institute, to the extent it has not already done so, a comprehensive litigation hold and preserve all documents, electronically stored information ("ESI"), and communications relating to Treaty No. PA-QCS-2019-EXL-0044, the disputed cessions, and the underlying claims at issue. This obligation extends to, but is not limited to, the following categories of materials:

(a) All internal analyses, memoranda, reports, correspondence, notes, and work papers relating to the disputed cessions for Treaty Year 2021, Treaty Year 2022, and Treaty Year 2023, including any analyses of the cessions prepared in connection with Pinnacle Atlantic's decision to pay, or subsequently to challenge, the cessions;

(b) All communications with Broadreach Intermediaries Inc. regarding loss reports, billing transmittals, premium calculations, and Treaty administration for any treaty year;

(c) All communications with Hargrove, Fitch & Calloway LLP regarding this dispute, including but not limited to communications relating to the preparation and issuance of the reservation-of-rights letter dated December 12, 2025, and the Demand Letter dated February 14, 2026;

(d) All underwriting, actuarial, claims, and technical files relating to the Treaty, including all actuarial analyses, loss development studies, and reserve opinions reviewed or prepared in connection with the Treaty;

(e) All documents relating to the reservation-of-rights letter dated December 12, 2025, and the Demand Letter dated February 14, 2026, including all drafts, internal approvals, and supporting materials;

(f) All electronic communications, including emails, instant messages, text messages, voicemails, and communications via any messaging platform, of Sir Edmund Haverford, Lorraine Metcalf, Conrad Hesse, and any other Pinnacle Atlantic personnel involved in the underwriting, administration, or evaluation of the Treaty and the disputed cessions; and

(g) All documents and ESI relating to any other reinsurance treaties or arrangements between Pinnacle Atlantic and QC&S, to the extent such documents bear on the interpretation or administration of the Treaty.

This preservation obligation applies to all media and formats in which such materials may exist, including paper records, electronic files, email archives, backup tapes, shared drives, cloud-based storage systems, personal devices, and any other repositories. Pinnacle Atlantic is obligated to take affirmative steps to prevent the destruction, alteration, overwriting, or concealment of any such materials, including by suspending any automatic deletion policies or document retention schedules that might result in the loss of relevant materials.

We trust that Pinnacle Atlantic and your firm are aware that the destruction, alteration, or concealment of documents or ESI that are relevant to reasonably anticipated litigation or arbitration would constitute spoliation and could give rise to adverse inference instructions, monetary sanctions, and other remedial measures in any subsequent proceeding. QC&S reserves the right to seek all available sanctions and remedies in the event that any relevant materials are not preserved.

XII. Request for Response and Next Steps

In light of the foregoing, QC&S requests that Pinnacle Atlantic, through your firm, confirm in writing within fourteen (14) calendar days of the date of this letter — i.e., no later than April 1, 2026 — the following:

(a) Whether Pinnacle Atlantic will participate in arbitration of the disputes identified herein pursuant to Treaty Article 22 and the ARIAS-U.S. Rules, and specifically whether Pinnacle Atlantic will designate its party-appointed arbitrator within the time frame prescribed by the ARIAS-U.S. Rules following receipt of QC&S's Demand to Arbitrate; and

(b) Whether Pinnacle Atlantic will comply with the document preservation obligations set forth in Section XI of this letter.

QC&S remains willing to engage in good-faith dialogue with Pinnacle Atlantic and your firm to explore whether this dispute can be resolved without the necessity of a full arbitration proceeding. To that end, QC&S is amenable to considering voluntary mediation as a preliminary step before the commencement of formal arbitration proceedings, without prejudice to any party's rights or positions. Any such mediation would be conducted under appropriate confidentiality protections and on the express understanding that participation in mediation does not constitute a waiver of any party's right to proceed to arbitration or to assert any claim, defense, or remedy.

QC&S wishes to be clear, however, that it will vigorously defend its contractual rights under the Treaty and pursue all available remedies if this dispute cannot be resolved amicably. The $78,400,000 in reinsurance recoverables at issue was properly calculated, properly billed, and properly paid, and QC&S will not agree to the return of any portion of those amounts absent a binding determination by a duly constituted arbitration panel that such a return is warranted — a determination that QC&S is confident will not be reached on the facts and law of this case.

XIII. Confidentiality Notice

This letter and its contents are subject to the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. This letter is provided in connection with potential arbitration and litigation, and its contents reflect the legal analysis, conclusions, and recommendations of counsel for QC&S and QIH. This letter and its contents should be treated as strictly confidential and should not be disclosed to any third party without the prior written consent of QC&S, except as may be required by applicable law, regulation, or order of a court or tribunal of competent jurisdiction.

We trust that the foregoing makes QC&S's position clear. We look forward to receiving your written response within fourteen days as requested above. In the meantime, please do not hesitate to contact me or my colleague Francesca Morano at (212) 448-7218 if you wish to discuss any aspect of this matter.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael Partner

One Liberty Plaza, 55th Floor New York, New York 10006 Telephone: (212) 448-7214

Email: dcarmichael@calderwoodharkness.com

cc: (via electronic mail)

Rachel Sondergaard, Esq., General Counsel, Quorum Insurance Holdings Corp.

Tobias Engström, SVP, Reinsurance & Capital Markets, Quorum Insurance Holdings Corp.

Diana Kessler-Hoff, VP, Claims & Reinsurance Recoveries, Quorum Casualty & Surety Company

Francesca Morano, Esq., Partner, Calderwood & Harkness LLP

Jeffrey Park, Esq., Associate, Calderwood & Harkness LLP

Calderwood & Harkness LLP Matter No. 1025-00005

CALDERWOOD & HARKNESS LLP Attorneys at Law
One Liberty Plaza, 55th Floor New York, New York 10006
Telephone: (212) 448-7200 Facsimile: (212) 448-7201
March 18, 2026
VIA HAND DELIVERY AND ELECTRONIC MAIL
Nathaniel R. Calloway III, Esq. Hargrove, Fitch & Calloway LLP 51 West 52nd Street, 40th Floor New York, New York 10019
Re: Response to Pre-Suit Demand Letter Dated February 14, 2026 — Pinnacle Atlantic Reinsurance Ltd. v. Quorum Casualty & Surety Company; Treaty No. PA-QCS-2019-EXL-0044
Dear Mr. Calloway:
I. Introduction and Representation Statement
This firm represents Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation publicly traded on the Nasdaq Global Select Market (ticker: QIHC), with its principal executive offices at 200 Constitution Plaza, Suite 3400, Hartford, Connecticut 06103, and its principal insurance subsidiary, Quorum Casualty & Surety Company ("QC&S"), a New York-domiciled stock property and casualty insurer (NAIC Company Code No. 24891), with principal offices at 200 Constitution Plaza, Suite 3200, Hartford, Connecticut 06103. We write on behalf of both QIH and QC&S in connection with the matters described herein.
This letter responds to your firm's pre-suit demand letter dated February 14, 2026 (the "Demand Letter"), sent on behalf of your client, Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic" or "PARL"), a Bermuda Class 4 insurer (Bermuda Monetary Authority Registration No. BMA-4R-2008-0331), registered at Clarendon House, 14 Church Street, Hamilton HM 11, Bermuda, and maintaining a United States office at 1285 Avenue of the Americas, 28th Floor, New York, New York 10019. We have reviewed the Demand Letter in its entirety, together with the attachments thereto and the underlying treaty documentation, and we respond as set forth below.
The Demand Letter demands the return of Seventy-Eight Million Four Hundred Thousand Dollars ($78,400,000) in reinsurance recoverables paid by Pinnacle Atlantic under Treaty No. PA-QCS-2019-EXL-0044, together with Twelve Million Six Hundred Thousand Dollars ($12,600,000) in purported accrued interest, for a total demand of Ninety-One Million Dollars ($91,000,000). The Demand Letter advances four purported grounds in support of this extraordinary demand, each of which we address in detail below. All references to the "Treaty" in this letter mean the Aggregate Excess-of-Loss Reinsurance Treaty No. PA-QCS-2019-EXL-0044, effective July 1, 2019, between QC&S as cedent and Pinnacle Atlantic as reinsurer, as extended by two automatic one-year extension periods.
At the outset, we wish to state QC&S's position clearly and unequivocally: QC&S categorically rejects each of the four grounds set forth in the Demand Letter and denies any obligation to return any portion of the $78,400,000 in properly billed and paid reinsurance recoverables, or to pay any interest thereon. The Demand Letter is without merit in its entirety. As we explain in detail below, the cessions at issue were properly calculated, properly reported, and properly billed in full compliance with the Treaty's terms, and they were voluntarily paid by Pinnacle Atlantic over a period of more than seventeen months without any contemporaneous objection, dispute, or reservation of rights. Pinnacle Atlantic's belated attempt to claw back these payments — initiated more than twenty months after the final payment — is contractually unsupported, legally unfounded, and commercially unreasonable.
II. Background and Treaty Overview
To place the parties' dispute in proper context, we briefly summarize the relevant terms and history of the Treaty.
The Treaty is a five-year aggregate excess-of-loss reinsurance treaty, effective for the period July 1, 2019, through June 30, 2024, covering commercial general liability, excess and umbrella liability, and professional liability policies issued or renewed by QC&S during each treaty year. The Treaty was placed through Broadreach Intermediaries Inc. ("Broadreach"), a New York-licensed reinsurance intermediary, acting as intermediary broker pursuant to Article 9 of the Treaty.
The Treaty provides for automatic one-year extensions absent written notice of non-renewal delivered by either party not less than nine months prior to the expiration of the then-current term. Pursuant to this mechanism, the Treaty was automatically extended through June 30, 2025, and again through June 30, 2026. Pinnacle Atlantic delivered its notice of non-renewal to QC&S, through Broadreach, on October 1, 2025, and accordingly the Treaty will lapse upon the expiration of the current extension period on June 30, 2026.
The principal financial terms of the Treaty, as relevant to the current dispute, are as follows:
• Per-Treaty-Year Retention: $120,000,000 in aggregate net incurred losses.
• Per-Treaty-Year Cession Limit: $200,000,000 (i.e., the Treaty covers aggregate net incurred losses from $120,000,000 to $320,000,000 per treaty year).
• Provisional Treaty Premium Rate: 42% of ceded earned premium, subject to a sliding-scale adjustment mechanism with a minimum rate of 35% and a maximum rate of 52%, as set forth in Article 3.
• Governing Law: The laws of the State of New York, without regard to conflict-of-laws principles (Article 16).
The disputed reinsurance recoverables at issue in the Demand Letter relate to two treaty years:
• Treaty Year 2022 (July 1, 2022 – June 30, 2023): Ceded losses of $69,700,000, representing the excess of TY 2022 aggregate net incurred losses over the $120,000,000 retention.
• Treaty Year 2023 (July 1, 2023 – June 30, 2024): Ceded losses of $8,700,000, representing the excess of TY 2023 aggregate net incurred losses over the $120,000,000 retention.
Together, these ceded losses total $78,400,000 — the precise amount that Pinnacle Atlantic now demands be returned.
These amounts were billed to Pinnacle Atlantic, through Broadreach, across seven installments between October 15, 2022, and March 29, 2024. Each billing was accompanied by supporting loss bordereaux, actuarial summaries, and such other documentation as required under the Treaty and customary industry practice. Pinnacle Atlantic voluntarily paid each of the seven billing installments in full, without any contemporaneous objection, reservation of rights, or request for additional documentation or clarification. It was not until December 12, 2025 — more than twenty months after the seventh and final payment on March 29, 2024, and more than three years after the first payment on October 15, 2022 — that Pinnacle Atlantic first raised any issue with the cessions through its reservation-of-rights letter of that date. The Demand Letter followed approximately two months later. The extraordinary delay in raising these purported objections is, as we discuss further below, itself highly relevant to the legal analysis.
III. Rejection of Ground One — Late Notice Under Article 7
The Demand Letter's first ground for recoupment is the assertion that QC&S failed to provide timely notice to Pinnacle Atlantic, as required by Article 7 of the Treaty, of certain large underlying claims that drove aggregate losses through the $120,000,000 retention. Specifically, Pinnacle Atlantic contends that QC&S failed to provide timely notice of the thirty-one (31) related commercial general liability claims constituting what the parties have referred to as the "Meridian Docks mass tort cluster," arising under QC&S Policy No. CGL-2020-09844, issued to policyholder Meridian Docks Development LLC. According to your Demand Letter, notice was provided approximately fourteen months after QC&S first established reserves for these claims, and Pinnacle Atlantic characterizes this delay as a material breach of Article 7 entitling it to deny the related cessions.
QC&S rejects this argument in its entirety. The relevant facts are as follows:
QC&S first established case reserves for the individual Meridian Docks claims on March 15, 2021, when the claims were initially reported to QC&S's claims department. At that time, each individual claim was reserved at an amount well below the Treaty's individual claim reporting threshold of $1,000,000 as set forth in Article 7.3(b). Specifically, the initial individual case reserves ranged from approximately $75,000 to $350,000 per claim, reflecting the early and uncertain stage of the underlying litigation and the limited information then available to QC&S's claims examiners. No individual claim exceeded the $1,000,000 reporting threshold, and accordingly no reporting obligation under Article 7 was triggered at that time.
It was not until the first quarter of 2022 — when material developments in the underlying Meridian Docks litigation, including new expert reports, additional plaintiff filings, and revised discovery disclosures, prompted QC&S's claims department to significantly increase the individual case reserves — that the aggregate reserve for the Meridian Docks cluster, and a number of individual claim reserves, crossed the applicable reporting thresholds. Once those thresholds were triggered, QC&S acted promptly and in full compliance with Article 7. Formal notice of the Meridian Docks claims was provided to Pinnacle Atlantic through Broadreach on May 22, 2022, accompanied by comprehensive claim summaries, reserve analyses, and supporting documentation. The notice was transmitted within the time frame contemplated by Article 7 as measured from the date the reporting obligation was triggered.
Pinnacle Atlantic's contention that the fourteen-month period between the initial establishment of reserves (March 15, 2021) and the notice to Pinnacle Atlantic (May 22, 2022) constitutes a violation of Article 7 fundamentally misapprehends the operation of the Treaty's notice provisions. Article 7 does not require notice upon the initial reservation of a claim at any amount; it requires notice when a claim meets specified reporting thresholds. QC&S's notice was timely measured from the date those thresholds were met.
Moreover, even if any arguable delay in notice could be identified — which QC&S denies — such a delay would not entitle Pinnacle Atlantic to deny the cessions or demand return of paid recoverables. Under well-established New York reinsurance law, a late-notice defense requires the reinsurer to demonstrate that it suffered actual prejudice as a result of the delay. See, e.g., Unigard Sec. Ins. Co. v. Greaves Specialty Insurance, 79 N.Y.2d 576, 581 (1992) (holding that a reinsurer must demonstrate prejudice to disclaim coverage based on late notice); see also Christiania Gen. Ins. Corp. v. Aldermere Assurance, 979 F.2d 268, 280 (2d Cir. 1992) (applying New York law and requiring showing of actual prejudice in reinsurance late-notice context). The Demand Letter conspicuously fails to identify any specific prejudice that Pinnacle Atlantic allegedly suffered as a result of the timing of QC&S's notice. No claim is made that Pinnacle Atlantic was deprived of any opportunity to participate in the defense or resolution of the underlying Meridian Docks claims, or that it would have taken any different action had notice been provided at an earlier date. Absent a concrete and particularized showing of actual prejudice, Pinnacle Atlantic's late-notice defense fails as a matter of law.
Furthermore, Pinnacle Atlantic's conduct following receipt of the Meridian Docks notice further undermines its current position. After receiving QC&S's May 22, 2022 notice and the accompanying documentation, Pinnacle Atlantic paid all cessions attributable to the Meridian Docks claims without any contemporaneous objection, dispute, or reservation of rights. This voluntary and unreserved payment is wholly inconsistent with the position Pinnacle Atlantic now takes, and it constitutes strong evidence that Pinnacle Atlantic did not, at the time, consider the notice to be untimely or the cessions to be improper.
For all of the foregoing reasons, QC&S denies that notice was untimely and, even if any arguable delay existed, denies that Pinnacle Atlantic suffered any prejudice as a result thereof. Ground One of the Demand Letter is without merit and is rejected.
IV. Rejection of Ground Two — Misallocation of IBNR Reserve Development Under Article 5
The Demand Letter's second ground for recoupment is the assertion that QC&S improperly allocated $22,300,000 in incurred but not reported ("IBNR") reserve strengthening to Treaty Year 2022 that, in Pinnacle Atlantic's view, should have been attributed to Treaty Year 2021. According to Pinnacle Atlantic, this purported misallocation had the effect of artificially inflating TY 2022 ceded losses, thereby increasing the reinsurance recoverables billed to and paid by Pinnacle Atlantic.
QC&S rejects this contention. The allocation of the $22,300,000 in IBNR reserve development to TY 2022 was prepared by QC&S's independent consulting actuaries, Velthorn Actuarial Advisors LLC, of Boston, Massachusetts (principal actuary: Dr. Stephen Tanaka, FCAS, MAAA), in accordance with applicable actuarial standards of practice and in full compliance with the Treaty. Velthorn Actuarial Advisors prepared a comprehensive loss development and reserve analysis underlying the disputed cessions and certified that the $22,300,000 in IBNR development relates to accident-year 2022 claims whose loss development factors crystallized during the TY 2022 reporting period. The allocation reflects the emergence of loss development on accident-year 2022 risks — not a retroactive recharacterization of TY 2021 losses — and is fully consistent with the Treaty's definition of "losses incurred" as set forth in Article 5.2 of the Treaty.
Article 5.2 defines "losses incurred" for each treaty year as the sum of paid losses, outstanding case reserves, and IBNR reserves attributable to losses occurring during the applicable treaty year, as reported in accordance with QC&S's reserving methodology. The IBNR at issue relates to claims that occurred during the TY 2022 accident year but whose development was not fully reflected in earlier reporting periods. The allocation of this IBNR to TY 2022 is not only consistent with the Treaty definition; it is the only allocation that is consistent with generally accepted actuarial principles as applied to the facts.
We further note that Pinnacle Atlantic's reallocation theory, even on its own terms, does not support the demand for return of $78,400,000 or any amount close thereto. The arithmetic is instructive:
• TY 2021 aggregate net incurred losses, as reported, were $104,600,000 — below the $120,000,000 retention. Accordingly, no cession was made for TY 2021.
• If the $22,300,000 in IBNR were reallocated from TY 2022 to TY 2021 as Pinnacle Atlantic proposes, TY 2021 aggregate net incurred losses would become $126,900,000 ($104,600,000 + $22,300,000), exceeding the retention by $6,900,000. This would give rise to a new TY 2021 cession of $6,900,000 — an amount that QC&S has not previously billed but could assert a right to recover.
• Conversely, TY 2022 ceded losses would be reduced from $69,700,000 to $47,400,000 (i.e., ($189,700,000 − $22,300,000) − $120,000,000 = $47,400,000). Even under Pinnacle Atlantic's own theory, TY 2022 ceded losses would remain substantial.
• The net effect of Pinnacle Atlantic's proposed reallocation, if it were correct (which QC&S denies), would be a reduction in total ceded losses of only $15,400,000 ($22,300,000 minus the offsetting $6,900,000 new TY 2021 cession) — a far cry from the $78,400,000 demanded.
Pinnacle Atlantic's reallocation theory is actuarially unsupported, contractually incorrect, and arithmetically inconsistent with the relief demanded. It is, moreover, an after-the-fact contrivance advanced more than three years after the relevant IBNR allocations were reported to and accepted by Pinnacle Atlantic without objection. QC&S rejects Ground Two of the Demand Letter in its entirety.
V. Rejection of Ground Three — Follow-the-Fortunes / Settlements Under Article 11
The Demand Letter's third ground challenges three related professional liability claim settlements constituting what the parties have referred to as the "Veridian Financial Services E&O cluster," arising under QC&S Policy No. PL-2021-15327, issued to policyholder Veridian Financial Services Inc. Specifically, Pinnacle Atlantic takes issue with QC&S's settlement of these three claims on September 8, 2023, for a combined $34,500,000, allocated as follows:
• Claim A: $14,200,000
• Claim B: $12,800,000
• Claim C: $7,500,000
Pinnacle Atlantic alleges that these settlements were not made in the ordinary course of QC&S's business and lacked good faith and businesslike conduct, and that the settlement amounts were inflated.
After accounting for recoveries from other reinsurance, QC&S's net retention on the Veridian settlements was $26,100,000, and $8,700,000 was ceded to the Treaty as part of TY 2023 aggregate losses. It is this $8,700,000 cession that forms the TY 2023 component of the Demand Letter's $78,400,000 total demand.
QC&S categorically rejects Pinnacle Atlantic's characterization of the Veridian settlements and its challenge to the related cession.
The follow-the-fortunes doctrine is a bedrock principle of reinsurance law. Under New York law, a reinsurer is obligated to follow the cedent's good-faith claims decisions, including settlement decisions, and a reinsurer may avoid this obligation only upon a showing of bad faith, fraud, or gross negligence on the part of the cedent. See, e.g., British Int'l Ins. Co. v. Seguros La Republica, S.A., 342 F.3d 78, 84-85 (2d Cir. 2003) (articulating the standard under New York law); Greaves Specialty Insurance v. ACE Am. Reinsurance Co., 361 F.3d 134, 140 (2d Cir. 2004) (noting that the follow-the-fortunes doctrine "merely requires that the cedent's claim-handling be in good faith and that the payments be 'reasonably related' to the cedent's liability"). This is an exceptionally high standard, and the burden rests squarely on the reinsurer to establish it.
Article 11 of the Treaty expressly incorporates the follow-the-fortunes principle, providing that Pinnacle Atlantic shall follow the fortunes and settlements of QC&S, provided that such settlements are made in good faith and in a businesslike manner. QC&S's settlement of the Veridian claims fully satisfies this standard.
Prior to entering into the Veridian settlements, QC&S conducted a thorough litigation exposure analysis, including evaluation of the underlying claims by senior claims professionals and outside coverage counsel, review of the applicable policy terms and conditions, analysis of the alleged damages and the strength of the claimants' theories of liability, and assessment of the costs and risks of continued litigation. The settlements were the product of arm's-length negotiations between QC&S and claimants' counsel, and the settlement amounts fell well within the range of reasonable outcomes given the magnitude of the underlying exposure, which QC&S's internal analyses estimated at between $28,000,000 and $52,000,000 on a combined basis. All aspects of the settlement evaluation and negotiation were documented in QC&S's claims handling file, which was maintained in the ordinary course of QC&S's business.
The Demand Letter provides no evidence whatsoever of bad faith, gross negligence, or fraud on the part of QC&S. It offers no independent analysis of the underlying claims, no alternative valuation of the exposure, and no specific factual basis for the conclusory assertion that the settlements were "inflated." Bare allegations of inflated settlements, unsupported by any evidentiary showing, are manifestly insufficient to overcome the follow-the-fortunes doctrine or to satisfy the demanding standard required under New York law to set aside a cedent's good-faith settlement decisions.
QC&S rejects the allegation that the Veridian settlements violated Article 11 or any other provision of the Treaty. Ground Three of the Demand Letter is without merit and is rejected.
VI. Rejection of Ground Four — Alleged Inaccurate Premium Reporting Under Article 3
The Demand Letter's fourth and final ground alleges that QC&S underreported ceded earned premium for Treaty Year 2022 by $6,800,000, asserting that QC&S reported ceded earned premium of $38,400,000 when the correct figure, according to Pinnacle Atlantic, should have been $45,200,000. Pinnacle Atlantic contends that this underreporting resulted in a treaty premium underpayment of $2,856,000 (calculated at the 42% provisional rate applied to the alleged $6,800,000 shortfall) and that this purported underreporting entitles Pinnacle Atlantic to exercise a treaty termination right or offset the claimed underpayment against the recoverables demand.
QC&S rejects these allegations. The $6,800,000 discrepancy identified by Pinnacle Atlantic arises entirely from Pinnacle Atlantic's improper inclusion, in its calculation of ceded earned premium, of premiums attributable to run-off portfolio transfers that are expressly excluded from the definition of "ceded earned premium" under Article 3.4 of the Treaty. Article 3.4 provides, in relevant part, that premiums earned on policies assumed by QC&S in connection with loss portfolio transfers, run-off transactions, and similar assumption reinsurance arrangements shall be excluded from the computation of ceded earned premium for purposes of the Treaty. QC&S's premium reporting correctly excluded these amounts in accordance with Article 3.4, and QC&S's reported ceded earned premium of $38,400,000 for TY 2022 is accurate and fully compliant with the Treaty's terms.
No underreporting occurred. There is no premium shortfall. And there is no basis for any termination right or offset claim arising from Pinnacle Atlantic's erroneous premium calculation.
Moreover, even if a bona fide premium calculation dispute existed — which it does not — such a dispute would not give rise to a unilateral termination right on the part of Pinnacle Atlantic. Premium adjustments under the Treaty are addressed through the sliding-scale adjustment mechanism and the premium settlement process set forth in Article 3. A disagreement over the amount of ceded earned premium is a matter to be resolved through the contractually specified premium reconciliation procedures, not through a demand for return of reinsurance recoverables or an assertion of termination rights that the Treaty does not confer.
QC&S rejects the premium reporting allegations and any claimed entitlement to termination or offset on this basis. Ground Four of the Demand Letter is without merit and is rejected.
VII. Voluntary Payment and Waiver
Independent of the substantive deficiencies in each of the four grounds advanced in the Demand Letter, QC&S notes that Pinnacle Atlantic's claim for return of the $78,400,000 is further undermined by the circumstances of its own payments.
As noted above, Pinnacle Atlantic paid all seven billing installments between October 15, 2022, and March 29, 2024, totaling $78,400,000, without any contemporaneous reservation of rights, objection, request for additional documentation, or indication of any kind that it considered the cessions to be improper or disputed. Each payment was made in the ordinary course, in response to billing transmittals accompanied by supporting documentation, and without any communication suggesting that Pinnacle Atlantic had identified any deficiency, irregularity, or concern.
Pinnacle Atlantic did not issue its reservation-of-rights letter until December 12, 2025 — more than twenty (20) months after the seventh and final payment on March 29, 2024, and more than three (3) years after the first payment on October 15, 2022. This extraordinary and unexplained delay in raising any objection to the cessions, after having voluntarily paid them in full, is directly relevant to the parties' respective legal positions.
QC&S expressly reserves the right to assert that Pinnacle Atlantic's unreserved voluntary payments constitute waiver of any right to object to the cessions, estoppel precluding Pinnacle Atlantic from now challenging cessions it voluntarily paid without reservation, and ratification of the cessions as properly calculated and due. QC&S further reserves the right to assert that Pinnacle Atlantic is precluded, under any and all applicable legal doctrines, from seeking the return of amounts voluntarily paid under the Treaty.
VIII. Interest Demand
The Demand Letter includes a demand for $12,600,000 in interest, purportedly calculated at a rate of 8% per annum on $78,400,000 over an approximately twenty-four (24) month average period. This interest demand is without contractual or legal basis.
No provision of the Treaty specifies or authorizes the 8% interest rate asserted by Pinnacle Atlantic. The Treaty's only provision addressing interest — Article 14.3 — relates to late payment of treaty premium by the cedent and prescribes a different rate (the then-applicable prime rate published by The Wall Street Journal plus 1.5%), and that provision is by its terms inapplicable to the circumstances posited in the Demand Letter. Pinnacle Atlantic has cited no contractual provision, statutory authority, or other legal basis for its claimed interest rate or methodology.
QC&S rejects the interest demand in its entirety. No interest is due.
IX. Applicability of Arbitration Clause — Treaty Article 22
The Demand Letter asserts, at pages 14 through 16, that the arbitration clause contained in Article 22 of the Treaty is inapplicable to the specific claims raised therein. QC&S vigorously disagrees with this assertion, and we address it at some length given its dispositive procedural importance.
Article 22 of the Treaty provides for the resolution of disputes "arising under or in connection with" the Treaty by a three-member arbitration panel sitting in New York, New York, in accordance with the ARIAS-U.S. Rules for the Resolution of U.S. Insurance and Reinsurance Disputes, as then in effect. The arbitration clause is mandatory, not permissive: it provides that the parties "shall submit" such disputes to arbitration, not that they "may" do so.
The scope of this arbitration clause is broad. It encompasses all disputes "arising under or in connection with" the Treaty. Each of the four grounds asserted in the Demand Letter — the late-notice dispute under Article 7, the IBNR allocation dispute under Article 5, the follow-the-fortunes dispute under Article 11, and the premium reporting dispute under Article 3 — arises directly and unmistakably from the interpretation, application, and performance of the Treaty. It is difficult to conceive of disputes more squarely within the scope of a clause covering disputes "arising under or in connection with" the Treaty than disputes concerning the parties' respective rights and obligations under specific enumerated articles of the Treaty itself.
Under both New York law and the Federal Arbitration Act, 9 U.S.C. §§ 1-16, there is a strong presumption of arbitrability, and any doubt as to the scope of an arbitration clause must be resolved in favor of arbitration. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) ("as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration"); see also JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 172 (2d Cir. 2004) (same). This presumption of arbitrability is particularly strong in the reinsurance context, where arbitration has long been the customary and preferred method of dispute resolution. See, e.g., Hartford Lloyd's Ins. Co. v. Teachworth, 898 F.2d 1058, 1062 (5th Cir. 1990).
Accordingly, QC&S hereby formally invokes its right to arbitrate all disputes arising under or in connection with Treaty No. PA-QCS-2019-EXL-0044 pursuant to Treaty Article 22 and the ARIAS-U.S. Rules. A separate formal Demand to Arbitrate, setting forth QC&S's designation of its party-appointed arbitrator and the specific issues to be submitted to the panel, is being delivered to your firm contemporaneously with this letter via the same methods of delivery.
We place Pinnacle Atlantic on notice that, should Pinnacle Atlantic file suit in the Supreme Court of the State of New York, New York County, Commercial Division, or in any other court of competent jurisdiction, in lieu of participating in the contractually mandated arbitration process, QC&S will promptly move to compel arbitration and to stay all judicial proceedings pending completion of the arbitration, pursuant to Section 3 of the Federal Arbitration Act, 9 U.S.C. § 3, and/or New York CPLR § 7503. QC&S is confident that any such motion will be granted, given the breadth and clarity of the arbitration clause and the well-established federal and state policies favoring enforcement of arbitration agreements.
X. Reservation of Rights
QC&S and QIH expressly reserve all rights, claims, defenses, counterclaims, and remedies available to them under the Treaty, at law, and in equity, including but not limited to:
(a) Claims for declaratory judgment confirming the validity of all cessions under the Treaty for Treaty Year 2022 and Treaty Year 2023, and confirming that QC&S is entitled to retain the full $78,400,000 in reinsurance recoverables previously paid by Pinnacle Atlantic;
(b) Claims for breach of the Treaty arising from Pinnacle Atlantic's wrongful demand for return of validly paid reinsurance recoverables and Pinnacle Atlantic's conduct in connection therewith;
(c) Claims for breach of the duty of utmost good faith (uberrima fides) owed by Pinnacle Atlantic to QC&S as reinsurer to cedent under the Treaty and applicable law;
(d) All affirmative defenses available under the Treaty, at law, and in equity, including without limitation waiver, estoppel, ratification, laches, unclean hands, failure to state a claim upon which relief can be granted, and any other applicable defenses; and
(e) Any and all other rights, claims, and remedies that may arise or become available as this matter proceeds, whether in arbitration or otherwise.
Nothing in this letter, and no action taken or omitted by QC&S or QIH in connection with this dispute, shall be construed as a waiver of any right, claim, defense, counterclaim, or remedy, whether or not expressly identified herein. QC&S and QIH reserve the right to supplement their positions as warranted by further investigation and analysis.
XI. Document Preservation Demand
QC&S hereby demands that Pinnacle Atlantic immediately institute, to the extent it has not already done so, a comprehensive litigation hold and preserve all documents, electronically stored information ("ESI"), and communications relating to Treaty No. PA-QCS-2019-EXL-0044, the disputed cessions, and the underlying claims at issue. This obligation extends to, but is not limited to, the following categories of materials:
(a) All internal analyses, memoranda, reports, correspondence, notes, and work papers relating to the disputed cessions for Treaty Year 2021, Treaty Year 2022, and Treaty Year 2023, including any analyses of the cessions prepared in connection with Pinnacle Atlantic's decision to pay, or subsequently to challenge, the cessions;
(b) All communications with Broadreach Intermediaries Inc. regarding loss reports, billing transmittals, premium calculations, and Treaty administration for any treaty year;
(c) All communications with Hargrove, Fitch & Calloway LLP regarding this dispute, including but not limited to communications relating to the preparation and issuance of the reservation-of-rights letter dated December 12, 2025, and the Demand Letter dated February 14, 2026;
(d) All underwriting, actuarial, claims, and technical files relating to the Treaty, including all actuarial analyses, loss development studies, and reserve opinions reviewed or prepared in connection with the Treaty;
(e) All documents relating to the reservation-of-rights letter dated December 12, 2025, and the Demand Letter dated February 14, 2026, including all drafts, internal approvals, and supporting materials;
(f) All electronic communications, including emails, instant messages, text messages, voicemails, and communications via any messaging platform, of Sir Edmund Haverford, Lorraine Metcalf, Conrad Hesse, and any other Pinnacle Atlantic personnel involved in the underwriting, administration, or evaluation of the Treaty and the disputed cessions; and
(g) All documents and ESI relating to any other reinsurance treaties or arrangements between Pinnacle Atlantic and QC&S, to the extent such documents bear on the interpretation or administration of the Treaty.
This preservation obligation applies to all media and formats in which such materials may exist, including paper records, electronic files, email archives, backup tapes, shared drives, cloud-based storage systems, personal devices, and any other repositories. Pinnacle Atlantic is obligated to take affirmative steps to prevent the destruction, alteration, overwriting, or concealment of any such materials, including by suspending any automatic deletion policies or document retention schedules that might result in the loss of relevant materials.
We trust that Pinnacle Atlantic and your firm are aware that the destruction, alteration, or concealment of documents or ESI that are relevant to reasonably anticipated litigation or arbitration would constitute spoliation and could give rise to adverse inference instructions, monetary sanctions, and other remedial measures in any subsequent proceeding. QC&S reserves the right to seek all available sanctions and remedies in the event that any relevant materials are not preserved.
XII. Request for Response and Next Steps
In light of the foregoing, QC&S requests that Pinnacle Atlantic, through your firm, confirm in writing within fourteen (14) calendar days of the date of this letter — i.e., no later than April 1, 2026 — the following:
(a) Whether Pinnacle Atlantic will participate in arbitration of the disputes identified herein pursuant to Treaty Article 22 and the ARIAS-U.S. Rules, and specifically whether Pinnacle Atlantic will designate its party-appointed arbitrator within the time frame prescribed by the ARIAS-U.S. Rules following receipt of QC&S's Demand to Arbitrate; and
(b) Whether Pinnacle Atlantic will comply with the document preservation obligations set forth in Section XI of this letter.
QC&S remains willing to engage in good-faith dialogue with Pinnacle Atlantic and your firm to explore whether this dispute can be resolved without the necessity of a full arbitration proceeding. To that end, QC&S is amenable to considering voluntary mediation as a preliminary step before the commencement of formal arbitration proceedings, without prejudice to any party's rights or positions. Any such mediation would be conducted under appropriate confidentiality protections and on the express understanding that participation in mediation does not constitute a waiver of any party's right to proceed to arbitration or to assert any claim, defense, or remedy.
QC&S wishes to be clear, however, that it will vigorously defend its contractual rights under the Treaty and pursue all available remedies if this dispute cannot be resolved amicably. The $78,400,000 in reinsurance recoverables at issue was properly calculated, properly billed, and properly paid, and QC&S will not agree to the return of any portion of those amounts absent a binding determination by a duly constituted arbitration panel that such a return is warranted — a determination that QC&S is confident will not be reached on the facts and law of this case.
XIII. Confidentiality Notice
This letter and its contents are subject to the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. This letter is provided in connection with potential arbitration and litigation, and its contents reflect the legal analysis, conclusions, and recommendations of counsel for QC&S and QIH. This letter and its contents should be treated as strictly confidential and should not be disclosed to any third party without the prior written consent of QC&S, except as may be required by applicable law, regulation, or order of a court or tribunal of competent jurisdiction.
We trust that the foregoing makes QC&S's position clear. We look forward to receiving your written response within fourteen days as requested above. In the meantime, please do not hesitate to contact me or my colleague Francesca Morano at (212) 448-7218 if you wish to discuss any aspect of this matter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Partner
One Liberty Plaza, 55th Floor New York, New York 10006 Telephone: (212) 448-7214
Email: dcarmichael@calderwoodharkness.com
cc: (via electronic mail)
Rachel Sondergaard, Esq., General Counsel, Quorum Insurance Holdings Corp.
Tobias Engström, SVP, Reinsurance & Capital Markets, Quorum Insurance Holdings Corp.
Diana Kessler-Hoff, VP, Claims & Reinsurance Recoveries, Quorum Casualty & Surety Company
Francesca Morano, Esq., Partner, Calderwood & Harkness LLP
Jeffrey Park, Esq., Associate, Calderwood & Harkness LLP
Calderwood & Harkness LLP Matter No. 1025-00005

CALDERWOOD & HARKNESS LLP Attorneys at Law

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