1025-00005 · Quorum Insurance Holdings · Pre-Litigation/Motions

draft-affidavit-kessler-hoff.docx DOCUMENT Litigation

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DRAFT — PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT Prepared by Jeffrey Park and Yuki Nakamura, Calderwood & Harkness LLP, One Liberty Plaza, 55th Floor, New York, NY 10006

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK — COMMERCIAL DIVISION

AFFIDAVIT OF DIANA KESSLER-HOFF IN SUPPORT OF RESPONDENT QUORUM CASUALTY & SURETY COMPANY'S MOTION TO COMPEL ARBITRATION AND STAY LITIGATION, AND IN OPPOSITION TO PETITIONER'S CLAIMS

I. INTRODUCTORY PARAGRAPH AND OATH

STATE OF CONNECTICUT, COUNTY OF HARTFORD, ss.:

Diana Kessler-Hoff, being duly sworn, deposes and states the following:

1. I submit this affidavit in support of Respondent Quorum Casualty & Surety Company's ("QC&S") opposition to the claims asserted by Petitioner Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic") and in support of QC&S's motion to compel arbitration pursuant to Article 22 of Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty") and to stay the above-captioned litigation pending completion of such arbitration. All statements made herein are based upon my personal knowledge, my review of QC&S business records maintained under my supervision and control, and information gathered in the ordinary course of my duties. Where I refer to information provided by others within QC&S, Quorum Insurance Holdings Corp. ("QIH"), or by outside professionals retained by QC&S, I identify the source and describe the basis for my understanding. I am competent to testify to the matters set forth herein, and if called as a witness, I could and would testify to the same.

II. BACKGROUND AND QUALIFICATIONS OF THE AFFIANT

A. Current Position

2. My full name is Diana Kessler-Hoff. I am currently employed as Vice President, Claims & Reinsurance Recoveries of Quorum Casualty & Surety Company. QC&S is a New York-domiciled stock property and casualty insurance company, NAIC Company Code No. 24891, with its principal office located at 200 Constitution Plaza, Suite 3200, Hartford, Connecticut 06103. QC&S is licensed to write property and casualty insurance in all fifty states, the District of Columbia, and Puerto Rico.

3. QC&S is the principal insurance subsidiary of Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation that is publicly traded on the Nasdaq Stock Market under the ticker symbol "QIHC." QIH maintains its corporate headquarters at 200 Constitution Plaza, Suite 3400, Hartford, Connecticut 06103. QIH is the ultimate parent of QC&S and several other insurance and insurance-related subsidiaries, but QC&S is the primary operating entity that underwrites and issues insurance policies and that is the cedent under the Treaty at issue in this proceeding.

B. Professional Background and Experience

4. I have served as Vice President, Claims & Reinsurance Recoveries of QC&S since January 2017, a period of approximately nine years. In this capacity, I am responsible for the overall oversight, management, and strategic direction of QC&S's claims department, including the handling, reserving, and resolution of commercial general liability claims, excess and umbrella liability claims, and professional liability (errors and omissions) claims. My responsibilities encompass both first-party and third-party claims handling across QC&S's commercial lines book of business.

5. In addition to my claims management responsibilities, I directly supervise QC&S's reinsurance recoveries function. This function includes, among other things, the preparation and submission of reinsurance billings to QC&S's treaty and facultative reinsurers, the maintenance and reconciliation of reinsurance recoverables reported on Schedule F of QC&S's statutory financial statements filed with the Connecticut Insurance Department, and coordination with reinsurance intermediary brokers who serve as the contractual conduit for notices, reports, and payment flows between QC&S and its reinsurers. I also work closely with QIH's Reinsurance & Capital Markets group on matters relating to the structuring, placement, and administration of QC&S's reinsurance program.

6. Prior to joining QC&S, I accumulated approximately twenty-three years of experience in insurance claims management, including senior claims leadership positions at National Mutual Indemnity Company (2008–2016) and Atlantic Coast Insurance Group (2001–2008), and earlier claims examiner and adjuster roles at Continental Omnivrel Insurance Corporation (1994–2001). Throughout my career, I have been directly involved in the management of complex commercial liability claims, the administration of reinsurance treaties, and the resolution of reinsurance coverage disputes.

7. I hold the Associate in Claims (AIC) and Chartered Property Casualty Underwriter (CPCU) professional designations. I am a member of the American Institute for Chartered Property Casualty Underwriters, the Claims and Litigation Management Alliance, and the Association of Insurance and Reinsurance Run-Off Companies. I have attended and presented at multiple industry conferences on topics relating to claims management best practices and reinsurance reporting.

8. By virtue of my position, experience, and professional training, I am thoroughly familiar with, and directly responsible for, QC&S's compliance with the notice, reporting, and claims-handling obligations imposed by QC&S's reinsurance treaties, including the Treaty at issue in this proceeding.

C. Familiarity with the Treaty and Dispute

9. I am personally familiar with Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"), which is the aggregate excess-of-loss reinsurance treaty between QC&S, as cedent, and Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic"), as reinsurer. A copy of the relevant excerpts of the Treaty (Articles 3, 5, 7, 9, 11, and 22) is attached hereto as Exhibit A and incorporated herein by reference.

10. The Treaty became effective on July 1, 2019, and covers losses arising under commercial general liability, excess and umbrella liability, and professional liability (errors and omissions) insurance policies issued or renewed by QC&S during the treaty period. The Treaty provides aggregate excess-of-loss reinsurance protection to QC&S, with a per-treaty-year aggregate retention of $120,000,000. Losses incurred in excess of the retention, subject to the Treaty's terms and conditions, are ceded to Pinnacle Atlantic.

11. The initial treaty term was five years, from July 1, 2019 through June 30, 2024, with automatic annual extensions thereafter unless either party provided at least ninety (90) days' advance written notice of non-renewal. The Treaty was extended through June 30, 2026 by operation of the automatic extension provision. On October 1, 2025, Pinnacle Atlantic provided written notice of non-renewal, effective as of June 30, 2026.

12. My department — Claims & Reinsurance Recoveries — was and is responsible for identifying individual claims that triggered cession under the Treaty, preparing loss reports and notices required by the Treaty, and coordinating the submission of reinsurance billings through Broadreach Intermediaries Inc. ("Broadreach"), which serves as the designated intermediary broker under Treaty Article 9. I have personally reviewed the claims files, reserve histories, billing records, and correspondence relating to the two principal claim clusters at issue in this dispute: the Meridian Docks mass tort claims and the Veridian Financial Services errors and omissions claims, both of which are discussed in detail below.

13. I am familiar with the pre-suit demand letter dated February 14, 2026, sent by the law firm of Hargrove, Fitch & Calloway LLP on behalf of Pinnacle Atlantic, which disputes $78,400,000 in reinsurance recoverables previously paid by Pinnacle Atlantic under the Treaty and demands the return of that amount plus $12,600,000 in alleged pre-judgment interest, for a total claimed amount of $91,000,000. A copy of that letter is attached hereto as Exhibit I. I am also familiar with Pinnacle Atlantic's earlier reservation-of-rights letter dated December 12, 2025, which is attached hereto as Exhibit H.

III. QC&S'S REINSURANCE NOTICE PRACTICES AND PROCEDURES — GENERAL

A. Overview of QC&S Claims Handling Infrastructure

14. QC&S maintains a dedicated claims department staffed by experienced claims professionals, including senior claims examiners, claims managers, and claims directors, each of whom possesses specialized expertise in the lines of business they oversee. QC&S's claims department is organized by line of business, with separate units responsible for commercial general liability claims, excess and umbrella liability claims, and professional liability claims, among others. As of the date of this affidavit, QC&S's claims department employs approximately 185 claims professionals.

15. All claims received by QC&S are opened, reserved, and managed using QC&S's electronic claims management system, known internally as "ClaimsTrack." ClaimsTrack is a proprietary web-based platform that was developed and customized for QC&S and that serves as the single authoritative repository for all claims data, including claim number assignments, policyholder and claimant information, claims handler assignments, reserve entries, payment records, diary entries, notes, attachments, and correspondence. ClaimsTrack maintains a complete, time-stamped audit trail of all reserve-setting decisions, reserve adjustments, and claims handling activity from the date a claim is opened through its final closure.

16. All reserve-setting decisions made by QC&S's claims professionals are documented in ClaimsTrack, including the factual basis for initial reserves, the reasoning underlying subsequent reserve increases or decreases, and the identity of the claims professional and, where applicable, the claims committee members who authorized or approved the reserve changes. This system of documentation ensures that QC&S's reserve history for any given claim can be reconstructed in full from contemporaneous records.

B. Reinsurance Notice Protocols Under the Treaty

17. QC&S maintains written internal procedures governing reinsurance treaty reporting and notice. These procedures, which are periodically updated and distributed to the relevant claims and reinsurance recovery personnel, set forth the specific steps that must be followed to ensure compliance with QC&S's obligations under each of its active reinsurance treaties, including the Treaty at issue in this proceeding.

18. Under Treaty Article 7, which is titled "Notice of Loss," QC&S is required to provide notice to Pinnacle Atlantic of individual claims or occurrences when certain specified thresholds are met. Specifically, the Treaty sets an individual claim reporting threshold: QC&S is required to provide notice to Pinnacle Atlantic when an individual claim's incurred loss — defined as the sum of paid losses and outstanding case reserves — reaches or exceeds $1,000,000. This threshold serves as the trigger for QC&S's individual claim notice obligation under the Treaty.

19. Consistent with standard reinsurance market practice and the express terms of Treaty Article 9, all notices of loss under Article 7 are transmitted through Broadreach Intermediaries Inc. ("Broadreach"), the intermediary broker designated by the parties under the Treaty. Broadreach's principal office is located at 100 Wall Street, 18th Floor, New York, New York 10005. The designated account executive at Broadreach for the Treaty is James "Jamie" Castellano, who has served in that capacity since the inception of the Treaty in July 2019. Mr. Castellano and his team at Broadreach are responsible for receiving notices and reports from QC&S, transmitting them to Pinnacle Atlantic, and facilitating communications between the parties in connection with the Treaty.

20. In addition to individual claim notices required under Article 7, QC&S provides quarterly aggregate loss reports to Pinnacle Atlantic through Broadreach. These quarterly reports summarize QC&S's aggregate net incurred losses by treaty year and by covered line of business, and they provide Pinnacle Atlantic with ongoing visibility into the development of aggregate losses relative to the Treaty retention. The quarterly reports are prepared by the reinsurance recoveries unit within my department, reviewed by me or my designee, and submitted to Broadreach for transmission to Pinnacle Atlantic. QC&S has provided these quarterly reports consistently throughout the term of the Treaty.

C. Aggregate Excess-of-Loss Reporting Context

21. It is important to understand the Treaty's structural framework in order to evaluate Pinnacle Atlantic's late notice allegations. The Treaty is an aggregate excess-of-loss treaty — not a per-occurrence or per-risk treaty. Under an aggregate excess-of-loss treaty structure, cessions to the reinsurer attach only when the cedent's total aggregate net incurred losses for a given treaty year exceed the specified retention amount — in this case, $120,000,000. Individual claims, no matter how large, do not independently trigger a cession to the reinsurer; rather, it is the cumulative aggregate of all covered losses during a treaty year that determines whether and to what extent losses are ceded.

22. In this context, the individual claim notice obligation under Article 7 serves a fundamentally informational purpose: it is designed to keep the reinsurer informed of material individual loss exposures that may contribute to aggregate loss development, but the notice itself does not trigger a cession, nor does the timing of notice with respect to any individual claim affect the calculation of aggregate ceded losses under the Treaty. The cession mechanism is driven entirely by the aggregate, not by the status or reporting date of any single claim.

23. QC&S's practice, consistent with its obligations under Article 7, is to report individual claims promptly upon the claim crossing the $1,000,000 individual reporting threshold, and to provide ongoing aggregate loss development information through the quarterly reports described above. This two-track reporting system — individual claim notices for material exposures, plus quarterly aggregate reports — ensures that the reinsurer receives comprehensive and timely information about the development of the cedent's loss experience.

IV. THE MERIDIAN DOCKS MASS TORT CLUSTER — CLAIMS HANDLING AND NOTICE TIMELINE

A. Nature of the Meridian Docks Claims

24. The first principal claim cluster at issue in this dispute is a group of thirty-one (31) related commercial general liability bodily injury claims arising from alleged toxic contamination at the Meridian Docks industrial waterfront redevelopment project located in Newark, New Jersey (the "Meridian Docks claims"). The Meridian Docks project was a large-scale redevelopment of a formerly industrial waterfront site that had been used for decades for shipping, warehousing, and chemical processing operations.

25. The policyholder for the Meridian Docks claims is Meridian Docks Development LLC, a New Jersey limited liability company that served as the developer and general contractor for the redevelopment project. QC&S issued a commercial general liability policy to Meridian Docks Development LLC bearing policy number CGL-2020-09844.

26. The thirty-one claims allege personal injuries suffered by construction workers who were employed at the redevelopment site and by residents of nearby neighborhoods. The claimants allege that they were exposed to hazardous substances — including volatile organic compounds, heavy metals, and asbestos-containing materials — that were disturbed, released, or inadequately remediated during the course of the redevelopment work. The alleged injuries include various respiratory conditions, dermatological conditions, neurological symptoms, and, in a smaller number of cases, cancer diagnoses allegedly attributable to the environmental exposures.

B. Initial Reserving — March 15, 2021

27. QC&S first established reserves for the Meridian Docks claims on March 15, 2021, following initial receipt and investigation of the underlying claims. At that time, the thirty-one claims were at a very early stage of development. Liability had not been established, and the nature and extent of the claimed injuries were uncertain. Medical documentation was preliminary and, for many of the claims, limited to initial emergency room or urgent care records without the benefit of comprehensive diagnostic workups, specialist evaluations, or expert medical opinions.

28. Each of the thirty-one individual claims was initially reserved at an amount well below the $1,000,000 individual claim reporting threshold established by Treaty Article 7. The initial per-claim reserves were set to reflect the preliminary and uncertain nature of the bodily injury allegations, the early-stage posture of the litigation, and the wide range of possible outcomes for claims of this type. At that stage, many of the claims had only minimal medical documentation, and it was not yet possible to assess with any reasonable degree of precision the likely ultimate exposure for any individual claim. QC&S's claims professionals exercised their professional judgment in establishing initial reserves that were consistent with the information then available.

29. While the aggregate initial reserves across all thirty-one Meridian Docks claims were material to QC&S's overall commercial general liability book of business, no individual claim was reserved at or near the $1,000,000 level. Accordingly, as of March 15, 2021, no individual Meridian Docks claim had triggered an individual claim notice obligation under Treaty Article 7.

C. Development Through 2021 and Early 2022

30. Throughout the remainder of 2021 and into early 2022, QC&S's claims professionals continued to actively monitor and manage the Meridian Docks claims. The claims handlers assigned to the Meridian Docks cluster received and reviewed medical reports, environmental testing data, and litigation discovery materials on a rolling basis as they became available. Individual claim reserves were adjusted from time to time as new information warranted, consistent with QC&S's standard reserving practices.

31. During 2021, individual claim reserves for the Meridian Docks claims developed gradually upward as additional medical information and expert assessments were obtained, but the reserve development was incremental. No individual Meridian Docks claim reached the $1,000,000 individual reporting threshold at any point during calendar year 2021. QC&S's ClaimsTrack records confirm this fact, and a printout from ClaimsTrack showing the initial reserve dates and reserve development history for each of the thirty-one Meridian Docks claims through Q1 2022 is attached hereto as Exhibit B.

D. Q1 2022 Reserve Increases and Triggering of Notice Obligation

32. In the first quarter of 2022 — approximately January through March 2022 — QC&S's claims department conducted a comprehensive reserve review of the entire Meridian Docks claim cluster. This review was prompted by the receipt of significant new information that materially altered the claims team's assessment of the likely exposure for a substantial number of the individual claims.

33. Specifically, the Q1 2022 reserve review was driven by three principal developments:

(a) Newly obtained environmental testing data. In late 2021 and early 2022, additional rounds of soil, groundwater, and air quality testing were completed at and around the Meridian Docks site. The results of these tests identified significantly higher concentrations of certain hazardous substances than had been detected in earlier rounds of testing, and they expanded the geographic footprint of the contamination beyond what had previously been understood. This data strengthened the causal nexus between the site conditions and the claimants' alleged injuries.

(b) Additional medical diagnoses. During the same period, a number of the individual claimants underwent further medical evaluation and were diagnosed with more serious conditions than had been initially reported. Several claimants received diagnoses of chronic respiratory disease, two claimants were diagnosed with cancers that their treating physicians attributed to toxic exposure, and updated prognoses for other claimants indicated a greater likelihood of permanent impairment and ongoing treatment needs.

(c) Defense counsel's updated litigation exposure assessment. In February 2022, QC&S's retained defense counsel provided a comprehensive updated assessment of the litigation exposure for the Meridian Docks claims. This assessment, which took into account the new environmental data, the updated medical diagnoses, the applicable venue and jury pool characteristics for litigation in Essex County, New Jersey, and recent comparable verdicts in toxic tort cases in the New Jersey courts, indicated that the likely range of outcomes for a number of the individual claims was significantly higher than the prior assessment.

34. In light of these developments, QC&S's claims professionals conducted a thorough claim-by-claim reassessment of reserves for the Meridian Docks cluster. This reassessment resulted in material upward reserve adjustments for a significant number of the thirty-one claims. As a result of these adjustments, multiple individual Meridian Docks claims crossed the $1,000,000 individual reporting threshold under Treaty Article 7 for the first time during Q1 2022.

E. Notice to Pinnacle Atlantic — May 22, 2022

35. QC&S provided notice of the Meridian Docks claims to Pinnacle Atlantic through Broadreach Intermediaries Inc. on May 22, 2022. The notice identified each of the individual Meridian Docks claims that had reached or exceeded the $1,000,000 individual reporting threshold, together with supporting information regarding the nature of the claims, the policy at issue, and the current reserve status. A copy of the Notice of Loss letter dated May 22, 2022 is attached hereto as Exhibit C.

36. The notice was provided promptly after the individual claims crossed the Article 7 reporting threshold in Q1 2022. The interval between QC&S's initial establishment of reserves for the Meridian Docks claims (March 15, 2021) and the provision of notice (May 22, 2022) — a period of approximately fourteen months and seven days — reflects the time during which no individual Meridian Docks claim was reserved at or above the Treaty's $1,000,000 individual claim reporting threshold. This interval does not reflect any failure, deficiency, or lapse in QC&S's notice procedures. Rather, it reflects the natural development of claims that were at an early and uncertain stage when they were first opened and that developed over time as additional information became available.

37. QC&S's position is that it fully complied with Article 7 by providing notice promptly after the individual claim threshold was triggered. The Treaty does not impose a notice obligation for claims that have not reached the specified threshold, and QC&S was under no obligation under Article 7 to provide notice of claims that were reserved below $1,000,000.

38. Moreover, QC&S had been reporting aggregate loss development information to Pinnacle Atlantic, including aggregate reserve amounts for the covered lines of business, in its quarterly aggregate loss reports throughout treaty year 2021 and treaty year 2022. Copies of those quarterly aggregate loss reports are attached hereto as Exhibit F. Pinnacle Atlantic therefore had ongoing visibility into the development of QC&S's aggregate loss experience during this period, even before individual Meridian Docks claims triggered the Article 7 notice threshold.

F. Current Incurred Loss

39. QC&S's current net incurred loss across all thirty-one Meridian Docks claims is $41,200,000. These losses represent a significant component of the aggregate net incurred losses for treaty year 2022 (July 1, 2022 through June 30, 2023). The Meridian Docks claims continue to be actively managed by QC&S's claims department, and reserves are subject to ongoing evaluation and adjustment as the litigation progresses and new information becomes available.

G. Response to Pinnacle Atlantic's Late Notice Allegation

40. In its pre-suit demand letter dated February 14, 2026 (Exhibit I), Pinnacle Atlantic alleges that QC&S failed to provide timely notice of the Meridian Docks claims under Article 7, characterizing the approximately fourteen-month gap between the initial establishment of reserves in March 2021 and the provision of notice in May 2022 as a violation of the Treaty. I respectfully and categorically disagree with this characterization.

41. As set forth above, the Treaty's Article 7 notice obligation is expressly keyed to the individual claim reporting threshold of $1,000,000. QC&S's obligation to provide notice arose when individual claims reached or exceeded that threshold — not at the earlier point when the claims were first opened and reserved at amounts well below the threshold. QC&S's notice was timely measured from when the Article 7 threshold was first triggered, which occurred in Q1 2022.

42. QC&S's ClaimsTrack records confirm that no individual Meridian Docks claim was reserved at or above $1,000,000 at any time prior to Q1 2022. The claims management system's audit trail of reserve entries and adjustments provides a complete, contemporaneous, and reliable record of the reserve development for each of the thirty-one claims, and I have personally reviewed those records in connection with the preparation of this affidavit. The ClaimsTrack printout attached as Exhibit B corroborates this.

43. Additionally, to my knowledge, Pinnacle Atlantic has not identified any specific prejudice it suffered as a result of the timing of QC&S's notice. During 2021, the Meridian Docks claims were at early stages of development, with liability and damages both uncertain and evolving. Pinnacle Atlantic would not have been in a position to take any different or additional action had notice been given earlier. The Treaty does not grant Pinnacle Atlantic any claims management or settlement approval rights with respect to the underlying claims, and early-stage notice of claims that were below the reporting threshold would not have altered the trajectory of the claims or Pinnacle Atlantic's economic exposure under the Treaty. In any event, the Treaty is an aggregate excess-of-loss treaty, and notice of an individual claim — however timed — does not affect the aggregate calculation.

V. THE VERIDIAN FINANCIAL SERVICES E&O CLUSTER — CLAIMS HANDLING AND SETTLEMENT

A. Nature of the Veridian Claims

44. The second principal claim cluster at issue in this dispute consists of three related errors and omissions / professional liability claims brought by investors against Veridian Financial Services Inc. ("Veridian"), a Delaware corporation (the "Veridian claims"). Veridian is a registered investment adviser and broker-dealer that markets and sells structured financial products to institutional and high-net-worth individual investors.

45. The three claims were brought by separate groups of investors and allege that Veridian engaged in material misrepresentations and omissions in connection with the marketing, structuring, and sale of certain structured financial products. The claimants allege that they suffered substantial investment losses as a direct result of Veridian's alleged misconduct. The three claims are referred to herein as Claim A, Claim B, and Claim C.

46. QC&S issued a professional liability (errors and omissions) policy to Veridian bearing policy number PL-2021-15327. The Veridian claims were reported to QC&S and processed under that policy.

B. Claims Handling Process

47. QC&S assigned experienced professional liability claims handlers to the Veridian claims. The assigned claims professionals possessed extensive experience in handling errors and omissions claims arising from the financial services sector, including claims involving misrepresentation, suitability, and fiduciary duty allegations. The claims handlers worked under the supervision of QC&S's professional liability claims director, who in turn reports to me.

48. QC&S retained qualified and experienced defense counsel to represent Veridian in connection with the three claims. Defense counsel was selected from QC&S's approved panel of professional liability defense firms, and the retention was made in the ordinary course of QC&S's claims handling operations.

49. QC&S's claims team conducted ongoing, rigorous evaluation of the Veridian claims throughout the pendency of the litigation. This evaluation included assessment of liability exposure, damages exposure, settlement value, defense costs, and the range of potential trial outcomes. The claims team regularly communicated with defense counsel, reviewed litigation pleadings and discovery materials, and obtained updated assessments of the strengths and weaknesses of both the claimants' and the defense positions.

50. QC&S's claims committee reviewed the Veridian claims at multiple intervals during the course of the litigation. The claims committee is a senior-level internal body composed of experienced claims professionals and, for claims of this magnitude, the participation of members of QC&S's executive management. Each claims committee review was documented in written memoranda that set forth the committee's assessment of litigation risk, potential damages, available defenses, the strength and credibility of the claimants' evidence, the likely range of jury verdicts in the applicable venue, and the recommended settlement strategy, including the committee's view of the fair settlement range. Copies of the relevant claims committee memoranda are attached hereto as Exhibit D.

51. The claims committee also considered the costs of continued defense. At the time the settlement was evaluated, QC&S had already incurred substantial defense costs in connection with the Veridian claims, and the committee assessed the likely additional defense costs through trial and any post-trial proceedings. These defense cost considerations were one of several factors weighed in the committee's settlement analysis.

C. Settlement of the Veridian E&O Cluster — September 8, 2023

52. After thorough evaluation and deliberation, QC&S settled the three Veridian claims on September 8, 2023, for a combined total of $34,500,000, allocated among the three claims as follows:

(a) Claim A: $14,200,000

(b) Claim B: $12,800,000

53. Copies of the executed settlement agreements for Claims A, B, and C are attached hereto as Exhibit E.

54. The settlement was achieved after extensive, arms-length negotiations between QC&S (through its retained defense counsel) and the respective claimants' counsel for each of the three claims. The negotiations took place over a period of several months and involved the exchange of detailed settlement demand and counteroffer correspondence, as well as in-person and telephonic negotiation sessions. The settlement process was adversarial in nature, and the parties engaged in genuine, hard-fought negotiations before reaching agreement on the final settlement amounts.

55. QC&S's claims committee authorized the settlement of each of the three Veridian claims after a thorough analysis of the litigation exposure. The committee's analysis indicated that the combined trial exposure — meaning the range of probable jury verdicts if the three cases proceeded to trial — significantly exceeded the aggregate settlement amount of $34,500,000. Specifically, the committee's internal assessment placed the combined probable trial exposure in the range of $52,000,000 to $74,000,000, with the mid-point of the range at approximately $63,000,000. The settlement amount of $34,500,000 thus represented approximately 55% to 66% of the low end of the assessed trial exposure range, a ratio that was consistent with the range of discounts that QC&S typically seeks to achieve in negotiated settlements of professional liability claims of this magnitude.

56. The settlement was made in the ordinary course of QC&S's business. QC&S applied the same claims evaluation standards, settlement protocols, and authorization procedures that it applies to all professional liability claims, without any deviation or modification. The settlement was made in good faith, reflected a businesslike exercise of informed claims judgment, and was grounded in the contemporaneous claims analysis documented in QC&S's files.

D. QC&S's Net Retention and Cession

57. QC&S's net retained amount after the application of other reinsurance (not the Treaty) was $26,100,000. This net retained amount reflects the application of QC&S's separate per-occurrence excess-of-loss reinsurance arrangements, which are not at issue in this proceeding.

58. The amount ceded to the Treaty — that is, the portion of QC&S's aggregate net incurred losses for treaty year 2023 that exceeded the $120,000,000 retention — was $8,700,000. This figure is calculated as follows: QC&S's total aggregate net incurred loss for TY 2023 was $128,700,000, less the $120,000,000 retention, yielding a ceded loss of $8,700,000. The Veridian claims contributed to the aggregate net incurred loss for TY 2023 but did not independently or uniquely cause the aggregate to exceed the retention.

E. Response to Pinnacle Atlantic's Follow-the-Fortunes Allegation

59. In its pre-suit demand letter (Exhibit I), Pinnacle Atlantic alleges that QC&S settled the Veridian claims "without meaningful litigation exposure analysis, at inflated amounts, to push aggregate losses above the retention in TY 2023." I categorically deny this characterization, which is unsupported by any evidence and directly contradicted by the contemporaneous documentation in QC&S's claims files.

60. QC&S's claims files for the Veridian claims contain detailed, contemporaneous documentation of every stage of the claims evaluation process, including, without limitation:

(a) Internal claims committee memoranda analyzing liability and damages exposure for each of the three Veridian claims, prepared at multiple intervals during the course of the litigation, including immediately prior to the settlement authorization (Exhibit D);

(b) Defense counsel's written assessments of litigation exposure and trial risk, including counsel's analysis of the strength of the claimants' evidence, the credibility and probable testimony of key witnesses, the applicable legal standards, and the range of likely jury verdicts in the applicable forum;

(c) Settlement evaluation reports prepared in the ordinary course of QC&S's claims handling operations, documenting the claims team's analysis of the fair settlement value of each claim and the factors considered in reaching that analysis; and

(d) Contemporaneous correspondence documenting the arms-length negotiation process with claimants' counsel, including settlement demands, counteroffers, and the progression of negotiations toward the final settlement amounts.

61. The settlement amounts were within the reasonable range of expected outcomes for the Veridian claims and were significantly below the upper end — and indeed below the midpoint — of QC&S's assessed trial exposure range. The settlements represent sound, defensible claims management decisions, not the product of any effort to inflate claims or manipulate aggregate loss figures.

62. QC&S's settlement decisions with respect to the Veridian claims were driven by sound claims management principles, including the avoidance of unnecessary trial risk and defense costs, and were not motivated, in whole or in part, by any desire to maximize reinsurance recoveries under the Treaty or any other reinsurance agreement. QC&S's claims professionals evaluate and settle claims based on the merits of each individual claim, without reference to the reinsurance implications of the settlement. This is the standard practice at QC&S, and it was the practice followed with respect to the Veridian claims.

63. Under the follow-the-fortunes doctrine as applied in New York law, and as expressly incorporated in Treaty Article 11, a reinsurer is bound by the cedent's good-faith claims handling and settlement decisions unless the reinsurer can demonstrate that those decisions were the product of bad faith, fraud, or gross negligence. See, e.g., Vireo Life Insurance v. Certain Underwriters at Sundial Indemnity Co., 96 N.Y.2d 583, 596 (2001); British Int'l Ins. Co. v. Seguros La Republica, S.A., 342 F.3d 78, 85 (2d Cir. 2003). Pinnacle Atlantic has not alleged — and cannot demonstrate — any bad faith, fraud, or gross negligence in QC&S's handling and settlement of the Veridian claims. The follow-the-fortunes doctrine requires Pinnacle Atlantic to honor QC&S's good-faith settlement decisions, and Pinnacle Atlantic's attempt to second-guess those decisions after the fact is inconsistent with both the Treaty and settled law.

64. The Veridian settlements were handled in the same manner as comparable professional liability claims on QC&S's book, without any special treatment, deviation from standard procedures, or consideration of the potential for reinsurance recovery under the Treaty.

VI. AGGREGATE LOSS REPORTING AND BILLING PRACTICES

A. TY 2022 Losses and Cession

65. QC&S's aggregate net incurred loss for treaty year 2022 — the period from July 1, 2022 through June 30, 2023 — was $189,700,000. After application of the Treaty retention of $120,000,000, the ceded loss for TY 2022 was $69,700,000 (calculated as $189,700,000 minus $120,000,000).

66. QC&S billed Pinnacle Atlantic for the TY 2022 ceded loss through Broadreach Intermediaries Inc. in installments beginning on October 15, 2022, consistent with the billing procedures set forth in the Treaty and the standard intermediary protocols applicable to the Broadreach relationship. The billing transmittals are attached hereto as Exhibit G.

B. TY 2023 Losses and Cession

67. QC&S's aggregate net incurred loss for treaty year 2023 — the period from July 1, 2023 through June 30, 2024 — was $128,700,000. After application of the Treaty retention of $120,000,000, the ceded loss for TY 2023 was $8,700,000 (calculated as $128,700,000 minus $120,000,000).

68. The final billing installment for TY 2023 was submitted on March 29, 2024, in the amount of $3,200,000, representing the final component of the total TY 2023 ceded loss of $8,700,000.

C. Total Paid by Pinnacle Atlantic

69. Pinnacle Atlantic paid the full $78,400,000 in ceded losses under the Treaty — comprising $69,700,000 for TY 2022 and $8,700,000 for TY 2023 — across seven billing installments submitted between October 2022 and March 2024. All billings were transmitted through Broadreach Intermediaries Inc. in accordance with Treaty Article 9 and the standard intermediary procedures agreed upon by the parties. A summary of the seven billing installments, together with copies of the corresponding billing transmittals and payment confirmations, is included in Exhibit G.

70. Pinnacle Atlantic paid each of the seven billing installments without objection at the time of payment. At no time during the period from October 2022 through March 2024 did Pinnacle Atlantic raise any question, concern, or objection regarding the accuracy of QC&S's aggregate loss calculations, the propriety of the ceded loss figures, the adequacy of QC&S's notice practices, or any other aspect of the billings or the Treaty's administration. Each payment was made in accordance with the Treaty's payment terms and without reservation or qualification.

D. Pinnacle Atlantic's Post-Payment Dispute

71. Pinnacle Atlantic did not raise any objection to the billings, cessions, or any other aspect of QC&S's Treaty administration until its reservation-of-rights letter dated December 12, 2025 (Exhibit H) — approximately twenty months after the submission of the final billing installment on March 29, 2024, and approximately twenty-six months after the first billing installment was submitted on October 15, 2022.

72. The pre-suit demand letter from Hargrove, Fitch & Calloway LLP followed on February 14, 2026 (Exhibit I). It was the first written communication in which Pinnacle Atlantic sought the return of the $78,400,000 in reinsurance recoverables previously paid under the Treaty.

73. The fact that Pinnacle Atlantic accepted and paid seven billing installments totaling $78,400,000 over a period of approximately eighteen months, without objection, and then waited an additional twenty months after the final payment to raise any dispute, is significant. Pinnacle Atlantic had full access to the quarterly aggregate loss reports (Exhibit F) throughout this period, as well as the individual claim notices provided under Article 7, and it took no steps to investigate, question, or challenge the billings until well after the Treaty's effective extension period had begun to wind down and Pinnacle Atlantic had delivered its non-renewal notice.

VII. IBNR ALLOCATION — OVERVIEW OF QC&S'S PROCESS

A. Role of Velthorn Actuarial Advisors

74. In connection with the preparation of its loss development analyses and the calculation of aggregate net incurred losses for purposes of the Treaty, QC&S engages Velthorn Actuarial Advisors LLC ("Velthorn"), an independent consulting actuarial firm with offices at 75 Ashbury Asset Advisors, Suite 1400, Boston, Massachusetts 02109. Velthorn is a nationally recognized actuarial consulting firm that specializes in property and casualty insurance loss reserving, loss development analysis, and reinsurance actuarial services.

75. The principal actuary at Velthorn responsible for the QC&S engagement is Dr. Stephen Tanaka, FCAS, MAAA. Dr. Tanaka is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries, and he has more than twenty-five years of experience in property and casualty actuarial consulting.

76. Velthorn prepared the actuarial certificates and supporting analyses underlying the loss development factors and IBNR (incurred but not reported) reserve allocations that form part of the aggregate net incurred loss calculations for TY 2021 and TY 2022 under the Treaty. These actuarial analyses were prepared in accordance with the Actuarial Standards of Practice promulgated by the Actuarial Standards Board and relied upon the claims data provided by QC&S's claims department, which is maintained under my supervision.

B. Affiant's Understanding of the IBNR Dispute

77. One component of Pinnacle Atlantic's demand involves an allegation that $22,300,000 in IBNR reserve strengthening was improperly allocated to treaty year 2022 and should instead have been attributed to treaty year 2021. This allegation is significant because of its potential impact on the Treaty's cession calculations for TY 2021 and TY 2022, as follows:

(a) QC&S's aggregate net incurred loss for TY 2021 (which is undisputed) was $104,600,000. Because this amount is below the Treaty's $120,000,000 aggregate retention, no losses were ceded to Pinnacle Atlantic for TY 2021.

(b) If the $22,300,000 in IBNR were reallocated from TY 2022 to TY 2021, TY 2021's aggregate net incurred loss would increase to $126,900,000, exceeding the retention by $6,900,000. At the same time, TY 2022's aggregate net incurred loss would decrease from $189,700,000 to $167,400,000, and TY 2022's ceded loss would decrease from $69,700,000 to $47,400,000 — a reduction of $22,300,000.

(c) However, the net effect on the total amount ceded to Pinnacle Atlantic would be a reduction of $15,400,000 (from $69,700,000 to $47,400,000 for TY 2022, offset by a new $6,900,000 cession for TY 2021), because a portion of the reallocated IBNR would fall within the TY 2021 retention.

78. I am informed by Velthorn, and specifically by Dr. Tanaka, that the $22,300,000 in IBNR development at issue relates to accident-year 2022 claims whose loss development factors crystallized during the TY 2022 reporting period. According to Velthorn, the allocation of this IBNR to TY 2022 is consistent with Article 5.2 of the Treaty, which defines "losses incurred" for purposes of the aggregate calculation. Under Article 5.2, losses are allocated to the treaty year in which they are "incurred," and Velthorn has advised that the IBNR at issue was properly allocated to TY 2022 based on the accident-year origin of the underlying claims and the development patterns observed during the TY 2022 period.

79. I defer to Velthorn and to Dr. Tanaka for the detailed actuarial methodology underlying the IBNR allocation. However, I can confirm that QC&S's internal claims data — including detailed claim-by-claim reserve development histories extracted from ClaimsTrack — was provided to Velthorn as the factual and data foundation for the actuarial analysis. The claims data was prepared by my department and was subject to internal quality assurance review before being transmitted to Velthorn. I am not aware of any errors or omissions in the claims data provided to Velthorn.

VIII. CEDED EARNED PREMIUM REPORTING

A. QC&S's Reported Ceded Earned Premium for TY 2022

80. QC&S reported ceded earned premium of $38,400,000 for treaty year 2022. This figure represents the total earned premium for the lines of business covered by the Treaty for TY 2022, calculated in accordance with QC&S's interpretation of the Treaty's premium provisions.

81. Pinnacle Atlantic asserts that the correct ceded earned premium for TY 2022 is $45,200,000 — a difference of $6,800,000. Based on this asserted difference, Pinnacle Atlantic alleges that QC&S underpaid treaty premium by $2,856,000, calculated by applying the Treaty's provisional premium rate of forty-two percent (42%) to the $6,800,000 difference ($6,800,000 × 42% = $2,856,000).

B. Basis for the Difference

82. The $6,800,000 difference between QC&S's reported ceded earned premium and Pinnacle Atlantic's asserted figure arises from a single, discrete issue: Pinnacle Atlantic's inclusion of run-off portfolio transfer premiums in the calculation of ceded earned premium. QC&S excluded these premiums from the calculation.

83. QC&S's position, based on its reading of Article 3.4 of the Treaty, is that run-off portfolio transfer premiums are expressly excluded from the Treaty's definition of ceded earned premium. Article 3.4, as QC&S reads it, limits the premium base to premiums earned on policies that are currently in force during the applicable treaty year and specifically carves out premiums associated with run-off portfolio transfers, which represent the assumption of liabilities under policies that have expired or been non-renewed. QC&S's exclusion of these premiums was a deliberate, considered application of the Treaty's premium provisions, not an oversight or error.

84. In preparing the ceded earned premium calculation for TY 2022, my department coordinated with Tobias Engström, Senior Vice President, Reinsurance & Capital Markets at QIH. Mr. Engström's team is responsible for the detailed premium calculation workpapers that support the ceded earned premium figures reported under the Treaty. The exclusion of run-off portfolio transfer premiums was applied consistently with QC&S's interpretation of Article 3.4, and Mr. Engström's team confirmed that this interpretation was applied uniformly across all treaty years. The detailed premium calculation workpapers are maintained by the Reinsurance & Capital Markets group under Mr. Engström's supervision and are available for production in this proceeding.

IX. DOCUMENT PRESERVATION AND RECORD-KEEPING

85. Upon learning of the dispute raised by Pinnacle Atlantic's reservation-of-rights letter dated December 12, 2025, and upon the direction of Rachel Sondergaard, General Counsel of QIH, and outside counsel at Calderwood & Harkness LLP, QC&S implemented a comprehensive litigation hold effective March 4, 2026. The litigation hold was communicated in writing to all relevant custodians and departments within QC&S and QIH, and it applies to all categories of documents and electronically stored information potentially relevant to the dispute.

86. Pursuant to the litigation hold, all claims files, correspondence, reserve-setting documentation, claims committee memoranda, internal memoranda and communications, billing records, premium calculation workpapers, and all other records relating to the Treaty, the Meridian Docks claims, the Veridian claims, and all communications with or concerning Pinnacle Atlantic and Broadreach Intermediaries Inc. have been identified and preserved. QC&S has taken affirmative steps to suspend all routine document retention and destruction policies with respect to the categories of documents subject to the litigation hold.

87. QC&S's records described in this affidavit are maintained in the ordinary course of business and are kept in accordance with QC&S's document retention policies and applicable regulatory requirements. These records are available for production in connection with this proceeding, subject to applicable privileges and protective order provisions.

X. CONCLUSION

88. Based on my personal knowledge, my review of QC&S's business records, and the information gathered in the course of my duties as described herein, I affirm the following:

(a) QC&S complied with all notice, reporting, and claims-handling obligations under Treaty No. PA-QCS-2019-EXL-0044.

(b) QC&S provided timely notice of the Meridian Docks claims to Pinnacle Atlantic consistent with the Article 7 individual claim reporting threshold of $1,000,000. No individual Meridian Docks claim was reserved at or above that threshold prior to Q1 2022, and QC&S provided notice promptly thereafter on May 22, 2022.

(c) QC&S settled the Veridian Financial Services E&O cluster in good faith, in the ordinary course of business, and in a manner consistent with sound claims management practice. The settlement was the product of thorough, documented claims evaluation and arms-length negotiation, and it is entitled to the protection of the follow-the-fortunes doctrine under Article 11 of the Treaty and New York law.

(d) QC&S's aggregate loss reports and reinsurance billings were accurate, consistent with the Treaty's terms, and submitted through the designated intermediary, Broadreach Intermediaries Inc., in accordance with the Treaty.

(e) Pinnacle Atlantic paid $78,400,000 in ceded losses under the Treaty across seven billing installments without objection, and it did not raise any dispute until approximately twenty months after the final payment.

(f) Pinnacle Atlantic's demand for the return of $78,400,000 in reinsurance recoverables, plus $12,600,000 in interest, for a total of $91,000,000, is without factual or legal merit.

89. I respectfully request that this Court, or the arbitration panel upon referral pursuant to Treaty Article 22, deny Pinnacle Atlantic's claims in their entirety and enter such further relief as may be just and appropriate.

XI. OATH AND SIGNATURE

I declare under penalty of perjury under the laws of the State of New York that the foregoing is true and correct. I have read this affidavit in its entirety, and I affirm that each statement contained herein is true and accurate to the best of my personal knowledge, information, and belief.

________________________________________

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

Date: _____, 2026

NOTARIZATION

Sworn to and subscribed before me this _ day of ____, 2026.

________________________________________

Notary Public State of Connecticut, County of Hartford

My Commission Expires: ______

XII. EXHIBIT LIST

The following exhibits are referenced in and attached to the foregoing Affidavit of Diana Kessler-Hoff:

PINNACLE ATLANTIC REINSURANCE LTD.,

Petitioner,

– against –

QUORUM CASUALTY & SURETY COMPANY,

Respondent.

Exhibit	Description
Exhibit A	Treaty No. PA-QCS-2019-EXL-0044 (relevant excerpts: Articles 3, 5, 7, 9, 11, and 22)
Exhibit B	QC&S internal claims management system (ClaimsTrack) printout showing Meridian Docks claims initial reserve dates (March 15, 2021) and reserve development history through Q1 2022
Exhibit C	Notice of Loss letter from QC&S to Pinnacle Atlantic via Broadreach Intermediaries Inc., dated May 22, 2022, regarding Meridian Docks claims
Exhibit D	QC&S claims committee memoranda regarding Veridian Financial Services E&O cluster evaluation and settlement authorization (September 2023)
Exhibit E	Settlement agreements for Veridian Claims A, B, and C (dated September 8, 2023)
Exhibit F	QC&S quarterly aggregate loss reports to Pinnacle Atlantic for TY 2021, TY 2022, and TY 2023
Exhibit G	Billing transmittals from QC&S to Pinnacle Atlantic through Broadreach Intermediaries Inc. (seven installments, October 2022 – March 2024, totaling $78,400,000), together with payment confirmations
Exhibit H	Pinnacle Atlantic reservation-of-rights letter dated December 12, 2025
Exhibit I	Pre-suit demand letter from Hargrove, Fitch & Calloway LLP on behalf of Pinnacle Atlantic, dated February 14, 2026

DRAFT — PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT Prepared by Jeffrey Park and Yuki Nakamura, Calderwood & Harkness LLP, One Liberty Plaza, 55th Floor, New York, NY 10006 | Matter No. 1025-00005
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK — COMMERCIAL DIVISION
AFFIDAVIT OF DIANA KESSLER-HOFF IN SUPPORT OF RESPONDENT QUORUM CASUALTY & SURETY COMPANY'S MOTION TO COMPEL ARBITRATION AND STAY LITIGATION, AND IN OPPOSITION TO PETITIONER'S CLAIMS
I. INTRODUCTORY PARAGRAPH AND OATH
STATE OF CONNECTICUT, COUNTY OF HARTFORD, ss.:
Diana Kessler-Hoff, being duly sworn, deposes and states the following:
1.  I submit this affidavit in support of Respondent Quorum Casualty & Surety Company's ("QC&S") opposition to the claims asserted by Petitioner Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic") and in support of QC&S's motion to compel arbitration pursuant to Article 22 of Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty") and to stay the above-captioned litigation pending completion of such arbitration. All statements made herein are based upon my personal knowledge, my review of QC&S business records maintained under my supervision and control, and information gathered in the ordinary course of my duties. Where I refer to information provided by others within QC&S, Quorum Insurance Holdings Corp. ("QIH"), or by outside professionals retained by QC&S, I identify the source and describe the basis for my understanding. I am competent to testify to the matters set forth herein, and if called as a witness, I could and would testify to the same.
II. BACKGROUND AND QUALIFICATIONS OF THE AFFIANT
A. Current Position
2.  My full name is Diana Kessler-Hoff. I am currently employed as Vice President, Claims & Reinsurance Recoveries of Quorum Casualty & Surety Company. QC&S is a New York-domiciled stock property and casualty insurance company, NAIC Company Code No. 24891, with its principal office located at 200 Constitution Plaza, Suite 3200, Hartford, Connecticut 06103. QC&S is licensed to write property and casualty insurance in all fifty states, the District of Columbia, and Puerto Rico.
3.  QC&S is the principal insurance subsidiary of Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation that is publicly traded on the Nasdaq Stock Market under the ticker symbol "QIHC." QIH maintains its corporate headquarters at 200 Constitution Plaza, Suite 3400, Hartford, Connecticut 06103. QIH is the ultimate parent of QC&S and several other insurance and insurance-related subsidiaries, but QC&S is the primary operating entity that underwrites and issues insurance policies and that is the cedent under the Treaty at issue in this proceeding.
B. Professional Background and Experience
4.  I have served as Vice President, Claims & Reinsurance Recoveries of QC&S since January 2017, a period of approximately nine years. In this capacity, I am responsible for the overall oversight, management, and strategic direction of QC&S's claims department, including the handling, reserving, and resolution of commercial general liability claims, excess and umbrella liability claims, and professional liability (errors and omissions) claims. My responsibilities encompass both first-party and third-party claims handling across QC&S's commercial lines book of business.
5.  In addition to my claims management responsibilities, I directly supervise QC&S's reinsurance recoveries function. This function includes, among other things, the preparation and submission of reinsurance billings to QC&S's treaty and facultative reinsurers, the maintenance and reconciliation of reinsurance recoverables reported on Schedule F of QC&S's statutory financial statements filed with the Connecticut Insurance Department, and coordination with reinsurance intermediary brokers who serve as the contractual conduit for notices, reports, and payment flows between QC&S and its reinsurers. I also work closely with QIH's Reinsurance & Capital Markets group on matters relating to the structuring, placement, and administration of QC&S's reinsurance program.
6.  Prior to joining QC&S, I accumulated approximately twenty-three years of experience in insurance claims management, including senior claims leadership positions at National Mutual Indemnity Company (2008–2016) and Atlantic Coast Insurance Group (2001–2008), and earlier claims examiner and adjuster roles at Continental Omnivrel Insurance Corporation (1994–2001). Throughout my career, I have been directly involved in the management of complex commercial liability claims, the administration of reinsurance treaties, and the resolution of reinsurance coverage disputes.
7.  I hold the Associate in Claims (AIC) and Chartered Property Casualty Underwriter (CPCU) professional designations. I am a member of the American Institute for Chartered Property Casualty Underwriters, the Claims and Litigation Management Alliance, and the Association of Insurance and Reinsurance Run-Off Companies. I have attended and presented at multiple industry conferences on topics relating to claims management best practices and reinsurance reporting.
8.  By virtue of my position, experience, and professional training, I am thoroughly familiar with, and directly responsible for, QC&S's compliance with the notice, reporting, and claims-handling obligations imposed by QC&S's reinsurance treaties, including the Treaty at issue in this proceeding.
C. Familiarity with the Treaty and Dispute
9.  I am personally familiar with Treaty No. PA-QCS-2019-EXL-0044 (the "Treaty"), which is the aggregate excess-of-loss reinsurance treaty between QC&S, as cedent, and Pinnacle Atlantic Reinsurance Ltd. ("Pinnacle Atlantic"), as reinsurer. A copy of the relevant excerpts of the Treaty (Articles 3, 5, 7, 9, 11, and 22) is attached hereto as Exhibit A and incorporated herein by reference.
10.  The Treaty became effective on July 1, 2019, and covers losses arising under commercial general liability, excess and umbrella liability, and professional liability (errors and omissions) insurance policies issued or renewed by QC&S during the treaty period. The Treaty provides aggregate excess-of-loss reinsurance protection to QC&S, with a per-treaty-year aggregate retention of $120,000,000. Losses incurred in excess of the retention, subject to the Treaty's terms and conditions, are ceded to Pinnacle Atlantic.
11.  The initial treaty term was five years, from July 1, 2019 through June 30, 2024, with automatic annual extensions thereafter unless either party provided at least ninety (90) days' advance written notice of non-renewal. The Treaty was extended through June 30, 2026 by operation of the automatic extension provision. On October 1, 2025, Pinnacle Atlantic provided written notice of non-renewal, effective as of June 30, 2026.
12.  My department — Claims & Reinsurance Recoveries — was and is responsible for identifying individual claims that triggered cession under the Treaty, preparing loss reports and notices required by the Treaty, and coordinating the submission of reinsurance billings through Broadreach Intermediaries Inc. ("Broadreach"), which serves as the designated intermediary broker under Treaty Article 9. I have personally reviewed the claims files, reserve histories, billing records, and correspondence relating to the two principal claim clusters at issue in this dispute: the Meridian Docks mass tort claims and the Veridian Financial Services errors and omissions claims, both of which are discussed in detail below.
13.  I am familiar with the pre-suit demand letter dated February 14, 2026, sent by the law firm of Hargrove, Fitch & Calloway LLP on behalf of Pinnacle Atlantic, which disputes $78,400,000 in reinsurance recoverables previously paid by Pinnacle Atlantic under the Treaty and demands the return of that amount plus $12,600,000 in alleged pre-judgment interest, for a total claimed amount of $91,000,000. A copy of that letter is attached hereto as Exhibit I. I am also familiar with Pinnacle Atlantic's earlier reservation-of-rights letter dated December 12, 2025, which is attached hereto as Exhibit H.
III. QC&S'S REINSURANCE NOTICE PRACTICES AND PROCEDURES — GENERAL
A. Overview of QC&S Claims Handling Infrastructure
14.  QC&S maintains a dedicated claims department staffed by experienced claims professionals, including senior claims examiners, claims managers, and claims directors, each of whom possesses specialized expertise in the lines of business they oversee. QC&S's claims department is organized by line of business, with separate units responsible for commercial general liability claims, excess and umbrella liability claims, and professional liability claims, among others. As of the date of this affidavit, QC&S's claims department employs approximately 185 claims professionals.
15.  All claims received by QC&S are opened, reserved, and managed using QC&S's electronic claims management system, known internally as "ClaimsTrack." ClaimsTrack is a proprietary web-based platform that was developed and customized for QC&S and that serves as the single authoritative repository for all claims data, including claim number assignments, policyholder and claimant information, claims handler assignments, reserve entries, payment records, diary entries, notes, attachments, and correspondence. ClaimsTrack maintains a complete, time-stamped audit trail of all reserve-setting decisions, reserve adjustments, and claims handling activity from the date a claim is opened through its final closure.
16.  All reserve-setting decisions made by QC&S's claims professionals are documented in ClaimsTrack, including the factual basis for initial reserves, the reasoning underlying subsequent reserve increases or decreases, and the identity of the claims professional and, where applicable, the claims committee members who authorized or approved the reserve changes. This system of documentation ensures that QC&S's reserve history for any given claim can be reconstructed in full from contemporaneous records.
B. Reinsurance Notice Protocols Under the Treaty
17.  QC&S maintains written internal procedures governing reinsurance treaty reporting and notice. These procedures, which are periodically updated and distributed to the relevant claims and reinsurance recovery personnel, set forth the specific steps that must be followed to ensure compliance with QC&S's obligations under each of its active reinsurance treaties, including the Treaty at issue in this proceeding.
18.  Under Treaty Article 7, which is titled "Notice of Loss," QC&S is required to provide notice to Pinnacle Atlantic of individual claims or occurrences when certain specified thresholds are met. Specifically, the Treaty sets an individual claim reporting threshold: QC&S is required to provide notice to Pinnacle Atlantic when an individual claim's incurred loss — defined as the sum of paid losses and outstanding case reserves — reaches or exceeds $1,000,000. This threshold serves as the trigger for QC&S's individual claim notice obligation under the Treaty.
19.  Consistent with standard reinsurance market practice and the express terms of Treaty Article 9, all notices of loss under Article 7 are transmitted through Broadreach Intermediaries Inc. ("Broadreach"), the intermediary broker designated by the parties under the Treaty. Broadreach's principal office is located at 100 Wall Street, 18th Floor, New York, New York 10005. The designated account executive at Broadreach for the Treaty is James "Jamie" Castellano, who has served in that capacity since the inception of the Treaty in July 2019. Mr. Castellano and his team at Broadreach are responsible for receiving notices and reports from QC&S, transmitting them to Pinnacle Atlantic, and facilitating communications between the parties in connection with the Treaty.
20.  In addition to individual claim notices required under Article 7, QC&S provides quarterly aggregate loss reports to Pinnacle Atlantic through Broadreach. These quarterly reports summarize QC&S's aggregate net incurred losses by treaty year and by covered line of business, and they provide Pinnacle Atlantic with ongoing visibility into the development of aggregate losses relative to the Treaty retention. The quarterly reports are prepared by the reinsurance recoveries unit within my department, reviewed by me or my designee, and submitted to Broadreach for transmission to Pinnacle Atlantic. QC&S has provided these quarterly reports consistently throughout the term of the Treaty.
C. Aggregate Excess-of-Loss Reporting Context
21.  It is important to understand the Treaty's structural framework in order to evaluate Pinnacle Atlantic's late notice allegations. The Treaty is an aggregate excess-of-loss treaty — not a per-occurrence or per-risk treaty. Under an aggregate excess-of-loss treaty structure, cessions to the reinsurer attach only when the cedent's total aggregate net incurred losses for a given treaty year exceed the specified retention amount — in this case, $120,000,000. Individual claims, no matter how large, do not independently trigger a cession to the reinsurer; rather, it is the cumulative aggregate of all covered losses during a treaty year that determines whether and to what extent losses are ceded.
22.  In this context, the individual claim notice obligation under Article 7 serves a fundamentally informational purpose: it is designed to keep the reinsurer informed of material individual loss exposures that may contribute to aggregate loss development, but the notice itself does not trigger a cession, nor does the timing of notice with respect to any individual claim affect the calculation of aggregate ceded losses under the Treaty. The cession mechanism is driven entirely by the aggregate, not by the status or reporting date of any single claim.
23.  QC&S's practice, consistent with its obligations under Article 7, is to report individual claims promptly upon the claim crossing the $1,000,000 individual reporting threshold, and to provide ongoing aggregate loss development information through the quarterly reports described above. This two-track reporting system — individual claim notices for material exposures, plus quarterly aggregate reports — ensures that the reinsurer receives comprehensive and timely information about the development of the cedent's loss experience.
IV. THE MERIDIAN DOCKS MASS TORT CLUSTER — CLAIMS HANDLING AND NOTICE TIMELINE
A. Nature of the Meridian Docks Claims
24.  The first principal claim cluster at issue in this dispute is a group of thirty-one (31) related commercial general liability bodily injury claims arising from alleged toxic contamination at the Meridian Docks industrial waterfront redevelopment project located in Newark, New Jersey (the "Meridian Docks claims"). The Meridian Docks project was a large-scale redevelopment of a formerly industrial waterfront site that had been used for decades for shipping, warehousing, and chemical processing operations.
25.  The policyholder for the Meridian Docks claims is Meridian Docks Development LLC, a New Jersey limited liability company that served as the developer and general contractor for the redevelopment project. QC&S issued a commercial general liability policy to Meridian Docks Development LLC bearing policy number CGL-2020-09844.
26.  The thirty-one claims allege personal injuries suffered by construction workers who were employed at the redevelopment site and by residents of nearby neighborhoods. The claimants allege that they were exposed to hazardous substances — including volatile organic compounds, heavy metals, and asbestos-containing materials — that were disturbed, released, or inadequately remediated during the course of the redevelopment work. The alleged injuries include various respiratory conditions, dermatological conditions, neurological symptoms, and, in a smaller number of cases, cancer diagnoses allegedly attributable to the environmental exposures.
B. Initial Reserving — March 15, 2021
27.  QC&S first established reserves for the Meridian Docks claims on March 15, 2021, following initial receipt and investigation of the underlying claims. At that time, the thirty-one claims were at a very early stage of development. Liability had not been established, and the nature and extent of the claimed injuries were uncertain. Medical documentation was preliminary and, for many of the claims, limited to initial emergency room or urgent care records without the benefit of comprehensive diagnostic workups, specialist evaluations, or expert medical opinions.
28.  Each of the thirty-one individual claims was initially reserved at an amount well below the $1,000,000 individual claim reporting threshold established by Treaty Article 7. The initial per-claim reserves were set to reflect the preliminary and uncertain nature of the bodily injury allegations, the early-stage posture of the litigation, and the wide range of possible outcomes for claims of this type. At that stage, many of the claims had only minimal medical documentation, and it was not yet possible to assess with any reasonable degree of precision the likely ultimate exposure for any individual claim. QC&S's claims professionals exercised their professional judgment in establishing initial reserves that were consistent with the information then available.
29.  While the aggregate initial reserves across all thirty-one Meridian Docks claims were material to QC&S's overall commercial general liability book of business, no individual claim was reserved at or near the $1,000,000 level. Accordingly, as of March 15, 2021, no individual Meridian Docks claim had triggered an individual claim notice obligation under Treaty Article 7.
C. Development Through 2021 and Early 2022
30.  Throughout the remainder of 2021 and into early 2022, QC&S's claims professionals continued to actively monitor and manage the Meridian Docks claims. The claims handlers assigned to the Meridian Docks cluster received and reviewed medical reports, environmental testing data, and litigation discovery materials on a rolling basis as they became available. Individual claim reserves were adjusted from time to time as new information warranted, consistent with QC&S's standard reserving practices.
31.  During 2021, individual claim reserves for the Meridian Docks claims developed gradually upward as additional medical information and expert assessments were obtained, but the reserve development was incremental. No individual Meridian Docks claim reached the $1,000,000 individual reporting threshold at any point during calendar year 2021. QC&S's ClaimsTrack records confirm this fact, and a printout from ClaimsTrack showing the initial reserve dates and reserve development history for each of the thirty-one Meridian Docks claims through Q1 2022 is attached hereto as Exhibit B.
D. Q1 2022 Reserve Increases and Triggering of Notice Obligation
32.  In the first quarter of 2022 — approximately January through March 2022 — QC&S's claims department conducted a comprehensive reserve review of the entire Meridian Docks claim cluster. This review was prompted by the receipt of significant new information that materially altered the claims team's assessment of the likely exposure for a substantial number of the individual claims.
33.  Specifically, the Q1 2022 reserve review was driven by three principal developments:
(a) Newly obtained environmental testing data. In late 2021 and early 2022, additional rounds of soil, groundwater, and air quality testing were completed at and around the Meridian Docks site. The results of these tests identified significantly higher concentrations of certain hazardous substances than had been detected in earlier rounds of testing, and they expanded the geographic footprint of the contamination beyond what had previously been understood. This data strengthened the causal nexus between the site conditions and the claimants' alleged injuries.
(b) Additional medical diagnoses. During the same period, a number of the individual claimants underwent further medical evaluation and were diagnosed with more serious conditions than had been initially reported. Several claimants received diagnoses of chronic respiratory disease, two claimants were diagnosed with cancers that their treating physicians attributed to toxic exposure, and updated prognoses for other claimants indicated a greater likelihood of permanent impairment and ongoing treatment needs.
(c) Defense counsel's updated litigation exposure assessment. In February 2022, QC&S's retained defense counsel provided a comprehensive updated assessment of the litigation exposure for the Meridian Docks claims. This assessment, which took into account the new environmental data, the updated medical diagnoses, the applicable venue and jury pool characteristics for litigation in Essex County, New Jersey, and recent comparable verdicts in toxic tort cases in the New Jersey courts, indicated that the likely range of outcomes for a number of the individual claims was significantly higher than the prior assessment.
34.  In light of these developments, QC&S's claims professionals conducted a thorough claim-by-claim reassessment of reserves for the Meridian Docks cluster. This reassessment resulted in material upward reserve adjustments for a significant number of the thirty-one claims. As a result of these adjustments, multiple individual Meridian Docks claims crossed the $1,000,000 individual reporting threshold under Treaty Article 7 for the first time during Q1 2022.
E. Notice to Pinnacle Atlantic — May 22, 2022
35.  QC&S provided notice of the Meridian Docks claims to Pinnacle Atlantic through Broadreach Intermediaries Inc. on May 22, 2022. The notice identified each of the individual Meridian Docks claims that had reached or exceeded the $1,000,000 individual reporting threshold, together with supporting information regarding the nature of the claims, the policy at issue, and the current reserve status. A copy of the Notice of Loss letter dated May 22, 2022 is attached hereto as Exhibit C.
36.  The notice was provided promptly after the individual claims crossed the Article 7 reporting threshold in Q1 2022. The interval between QC&S's initial establishment of reserves for the Meridian Docks claims (March 15, 2021) and the provision of notice (May 22, 2022) — a period of approximately fourteen months and seven days — reflects the time during which no individual Meridian Docks claim was reserved at or above the Treaty's $1,000,000 individual claim reporting threshold. This interval does not reflect any failure, deficiency, or lapse in QC&S's notice procedures. Rather, it reflects the natural development of claims that were at an early and uncertain stage when they were first opened and that developed over time as additional information became available.
37.  QC&S's position is that it fully complied with Article 7 by providing notice promptly after the individual claim threshold was triggered. The Treaty does not impose a notice obligation for claims that have not reached the specified threshold, and QC&S was under no obligation under Article 7 to provide notice of claims that were reserved below $1,000,000.
38.  Moreover, QC&S had been reporting aggregate loss development information to Pinnacle Atlantic, including aggregate reserve amounts for the covered lines of business, in its quarterly aggregate loss reports throughout treaty year 2021 and treaty year 2022. Copies of those quarterly aggregate loss reports are attached hereto as Exhibit F. Pinnacle Atlantic therefore had ongoing visibility into the development of QC&S's aggregate loss experience during this period, even before individual Meridian Docks claims triggered the Article 7 notice threshold.
F. Current Incurred Loss
39.  QC&S's current net incurred loss across all thirty-one Meridian Docks claims is $41,200,000. These losses represent a significant component of the aggregate net incurred losses for treaty year 2022 (July 1, 2022 through June 30, 2023). The Meridian Docks claims continue to be actively managed by QC&S's claims department, and reserves are subject to ongoing evaluation and adjustment as the litigation progresses and new information becomes available.
G. Response to Pinnacle Atlantic's Late Notice Allegation
40.  In its pre-suit demand letter dated February 14, 2026 (Exhibit I), Pinnacle Atlantic alleges that QC&S failed to provide timely notice of the Meridian Docks claims under Article 7, characterizing the approximately fourteen-month gap between the initial establishment of reserves in March 2021 and the provision of notice in May 2022 as a violation of the Treaty. I respectfully and categorically disagree with this characterization.
41.  As set forth above, the Treaty's Article 7 notice obligation is expressly keyed to the individual claim reporting threshold of $1,000,000. QC&S's obligation to provide notice arose when individual claims reached or exceeded that threshold — not at the earlier point when the claims were first opened and reserved at amounts well below the threshold. QC&S's notice was timely measured from when the Article 7 threshold was first triggered, which occurred in Q1 2022.
42.  QC&S's ClaimsTrack records confirm that no individual Meridian Docks claim was reserved at or above $1,000,000 at any time prior to Q1 2022. The claims management system's audit trail of reserve entries and adjustments provides a complete, contemporaneous, and reliable record of the reserve development for each of the thirty-one claims, and I have personally reviewed those records in connection with the preparation of this affidavit. The ClaimsTrack printout attached as Exhibit B corroborates this.
43.  Additionally, to my knowledge, Pinnacle Atlantic has not identified any specific prejudice it suffered as a result of the timing of QC&S's notice. During 2021, the Meridian Docks claims were at early stages of development, with liability and damages both uncertain and evolving. Pinnacle Atlantic would not have been in a position to take any different or additional action had notice been given earlier. The Treaty does not grant Pinnacle Atlantic any claims management or settlement approval rights with respect to the underlying claims, and early-stage notice of claims that were below the reporting threshold would not have altered the trajectory of the claims or Pinnacle Atlantic's economic exposure under the Treaty. In any event, the Treaty is an aggregate excess-of-loss treaty, and notice of an individual claim — however timed — does not affect the aggregate calculation.
V. THE VERIDIAN FINANCIAL SERVICES E&O CLUSTER — CLAIMS HANDLING AND SETTLEMENT
A. Nature of the Veridian Claims
44.  The second principal claim cluster at issue in this dispute consists of three related errors and omissions / professional liability claims brought by investors against Veridian Financial Services Inc. ("Veridian"), a Delaware corporation (the "Veridian claims"). Veridian is a registered investment adviser and broker-dealer that markets and sells structured financial products to institutional and high-net-worth individual investors.
45.  The three claims were brought by separate groups of investors and allege that Veridian engaged in material misrepresentations and omissions in connection with the marketing, structuring, and sale of certain structured financial products. The claimants allege that they suffered substantial investment losses as a direct result of Veridian's alleged misconduct. The three claims are referred to herein as Claim A, Claim B, and Claim C.
46.  QC&S issued a professional liability (errors and omissions) policy to Veridian bearing policy number PL-2021-15327. The Veridian claims were reported to QC&S and processed under that policy.
B. Claims Handling Process
47.  QC&S assigned experienced professional liability claims handlers to the Veridian claims. The assigned claims professionals possessed extensive experience in handling errors and omissions claims arising from the financial services sector, including claims involving misrepresentation, suitability, and fiduciary duty allegations. The claims handlers worked under the supervision of QC&S's professional liability claims director, who in turn reports to me.
48.  QC&S retained qualified and experienced defense counsel to represent Veridian in connection with the three claims. Defense counsel was selected from QC&S's approved panel of professional liability defense firms, and the retention was made in the ordinary course of QC&S's claims handling operations.
49.  QC&S's claims team conducted ongoing, rigorous evaluation of the Veridian claims throughout the pendency of the litigation. This evaluation included assessment of liability exposure, damages exposure, settlement value, defense costs, and the range of potential trial outcomes. The claims team regularly communicated with defense counsel, reviewed litigation pleadings and discovery materials, and obtained updated assessments of the strengths and weaknesses of both the claimants' and the defense positions.
50.  QC&S's claims committee reviewed the Veridian claims at multiple intervals during the course of the litigation. The claims committee is a senior-level internal body composed of experienced claims professionals and, for claims of this magnitude, the participation of members of QC&S's executive management. Each claims committee review was documented in written memoranda that set forth the committee's assessment of litigation risk, potential damages, available defenses, the strength and credibility of the claimants' evidence, the likely range of jury verdicts in the applicable venue, and the recommended settlement strategy, including the committee's view of the fair settlement range. Copies of the relevant claims committee memoranda are attached hereto as Exhibit D.
51.  The claims committee also considered the costs of continued defense. At the time the settlement was evaluated, QC&S had already incurred substantial defense costs in connection with the Veridian claims, and the committee assessed the likely additional defense costs through trial and any post-trial proceedings. These defense cost considerations were one of several factors weighed in the committee's settlement analysis.
C. Settlement of the Veridian E&O Cluster — September 8, 2023
52.  After thorough evaluation and deliberation, QC&S settled the three Veridian claims on September 8, 2023, for a combined total of $34,500,000, allocated among the three claims as follows:
(a) Claim A: $14,200,000
(b) Claim B: $12,800,000
(c) Claim C: $7,500,000
53.  Copies of the executed settlement agreements for Claims A, B, and C are attached hereto as Exhibit E.
54.  The settlement was achieved after extensive, arms-length negotiations between QC&S (through its retained defense counsel) and the respective claimants' counsel for each of the three claims. The negotiations took place over a period of several months and involved the exchange of detailed settlement demand and counteroffer correspondence, as well as in-person and telephonic negotiation sessions. The settlement process was adversarial in nature, and the parties engaged in genuine, hard-fought negotiations before reaching agreement on the final settlement amounts.
55.  QC&S's claims committee authorized the settlement of each of the three Veridian claims after a thorough analysis of the litigation exposure. The committee's analysis indicated that the combined trial exposure — meaning the range of probable jury verdicts if the three cases proceeded to trial — significantly exceeded the aggregate settlement amount of $34,500,000. Specifically, the committee's internal assessment placed the combined probable trial exposure in the range of $52,000,000 to $74,000,000, with the mid-point of the range at approximately $63,000,000. The settlement amount of $34,500,000 thus represented approximately 55% to 66% of the low end of the assessed trial exposure range, a ratio that was consistent with the range of discounts that QC&S typically seeks to achieve in negotiated settlements of professional liability claims of this magnitude.
56.  The settlement was made in the ordinary course of QC&S's business. QC&S applied the same claims evaluation standards, settlement protocols, and authorization procedures that it applies to all professional liability claims, without any deviation or modification. The settlement was made in good faith, reflected a businesslike exercise of informed claims judgment, and was grounded in the contemporaneous claims analysis documented in QC&S's files.
D. QC&S's Net Retention and Cession
57.  QC&S's net retained amount after the application of other reinsurance (not the Treaty) was $26,100,000. This net retained amount reflects the application of QC&S's separate per-occurrence excess-of-loss reinsurance arrangements, which are not at issue in this proceeding.
58.  The amount ceded to the Treaty — that is, the portion of QC&S's aggregate net incurred losses for treaty year 2023 that exceeded the $120,000,000 retention — was $8,700,000. This figure is calculated as follows: QC&S's total aggregate net incurred loss for TY 2023 was $128,700,000, less the $120,000,000 retention, yielding a ceded loss of $8,700,000. The Veridian claims contributed to the aggregate net incurred loss for TY 2023 but did not independently or uniquely cause the aggregate to exceed the retention.
E. Response to Pinnacle Atlantic's Follow-the-Fortunes Allegation
59.  In its pre-suit demand letter (Exhibit I), Pinnacle Atlantic alleges that QC&S settled the Veridian claims "without meaningful litigation exposure analysis, at inflated amounts, to push aggregate losses above the retention in TY 2023." I categorically deny this characterization, which is unsupported by any evidence and directly contradicted by the contemporaneous documentation in QC&S's claims files.
60.  QC&S's claims files for the Veridian claims contain detailed, contemporaneous documentation of every stage of the claims evaluation process, including, without limitation:
(a) Internal claims committee memoranda analyzing liability and damages exposure for each of the three Veridian claims, prepared at multiple intervals during the course of the litigation, including immediately prior to the settlement authorization (Exhibit D);
(b) Defense counsel's written assessments of litigation exposure and trial risk, including counsel's analysis of the strength of the claimants' evidence, the credibility and probable testimony of key witnesses, the applicable legal standards, and the range of likely jury verdicts in the applicable forum;
(c) Settlement evaluation reports prepared in the ordinary course of QC&S's claims handling operations, documenting the claims team's analysis of the fair settlement value of each claim and the factors considered in reaching that analysis; and
(d) Contemporaneous correspondence documenting the arms-length negotiation process with claimants' counsel, including settlement demands, counteroffers, and the progression of negotiations toward the final settlement amounts.
61.  The settlement amounts were within the reasonable range of expected outcomes for the Veridian claims and were significantly below the upper end — and indeed below the midpoint — of QC&S's assessed trial exposure range. The settlements represent sound, defensible claims management decisions, not the product of any effort to inflate claims or manipulate aggregate loss figures.
62.  QC&S's settlement decisions with respect to the Veridian claims were driven by sound claims management principles, including the avoidance of unnecessary trial risk and defense costs, and were not motivated, in whole or in part, by any desire to maximize reinsurance recoveries under the Treaty or any other reinsurance agreement. QC&S's claims professionals evaluate and settle claims based on the merits of each individual claim, without reference to the reinsurance implications of the settlement. This is the standard practice at QC&S, and it was the practice followed with respect to the Veridian claims.
63.  Under the follow-the-fortunes doctrine as applied in New York law, and as expressly incorporated in Treaty Article 11, a reinsurer is bound by the cedent's good-faith claims handling and settlement decisions unless the reinsurer can demonstrate that those decisions were the product of bad faith, fraud, or gross negligence. See, e.g., Vireo Life Insurance v. Certain Underwriters at Sundial Indemnity Co., 96 N.Y.2d 583, 596 (2001); British Int'l Ins. Co. v. Seguros La Republica, S.A., 342 F.3d 78, 85 (2d Cir. 2003). Pinnacle Atlantic has not alleged — and cannot demonstrate — any bad faith, fraud, or gross negligence in QC&S's handling and settlement of the Veridian claims. The follow-the-fortunes doctrine requires Pinnacle Atlantic to honor QC&S's good-faith settlement decisions, and Pinnacle Atlantic's attempt to second-guess those decisions after the fact is inconsistent with both the Treaty and settled law.
64.  The Veridian settlements were handled in the same manner as comparable professional liability claims on QC&S's book, without any special treatment, deviation from standard procedures, or consideration of the potential for reinsurance recovery under the Treaty.
VI. AGGREGATE LOSS REPORTING AND BILLING PRACTICES
A. TY 2022 Losses and Cession
65.  QC&S's aggregate net incurred loss for treaty year 2022 — the period from July 1, 2022 through June 30, 2023 — was $189,700,000. After application of the Treaty retention of $120,000,000, the ceded loss for TY 2022 was $69,700,000 (calculated as $189,700,000 minus $120,000,000).
66.  QC&S billed Pinnacle Atlantic for the TY 2022 ceded loss through Broadreach Intermediaries Inc. in installments beginning on October 15, 2022, consistent with the billing procedures set forth in the Treaty and the standard intermediary protocols applicable to the Broadreach relationship. The billing transmittals are attached hereto as Exhibit G.
B. TY 2023 Losses and Cession
67.  QC&S's aggregate net incurred loss for treaty year 2023 — the period from July 1, 2023 through June 30, 2024 — was $128,700,000. After application of the Treaty retention of $120,000,000, the ceded loss for TY 2023 was $8,700,000 (calculated as $128,700,000 minus $120,000,000).
68.  The final billing installment for TY 2023 was submitted on March 29, 2024, in the amount of $3,200,000, representing the final component of the total TY 2023 ceded loss of $8,700,000.
C. Total Paid by Pinnacle Atlantic
69.  Pinnacle Atlantic paid the full $78,400,000 in ceded losses under the Treaty — comprising $69,700,000 for TY 2022 and $8,700,000 for TY 2023 — across seven billing installments submitted between October 2022 and March 2024. All billings were transmitted through Broadreach Intermediaries Inc. in accordance with Treaty Article 9 and the standard intermediary procedures agreed upon by the parties. A summary of the seven billing installments, together with copies of the corresponding billing transmittals and payment confirmations, is included in Exhibit G.
70.  Pinnacle Atlantic paid each of the seven billing installments without objection at the time of payment. At no time during the period from October 2022 through March 2024 did Pinnacle Atlantic raise any question, concern, or objection regarding the accuracy of QC&S's aggregate loss calculations, the propriety of the ceded loss figures, the adequacy of QC&S's notice practices, or any other aspect of the billings or the Treaty's administration. Each payment was made in accordance with the Treaty's payment terms and without reservation or qualification.
D. Pinnacle Atlantic's Post-Payment Dispute
71.  Pinnacle Atlantic did not raise any objection to the billings, cessions, or any other aspect of QC&S's Treaty administration until its reservation-of-rights letter dated December 12, 2025 (Exhibit H) — approximately twenty months after the submission of the final billing installment on March 29, 2024, and approximately twenty-six months after the first billing installment was submitted on October 15, 2022.
72.  The pre-suit demand letter from Hargrove, Fitch & Calloway LLP followed on February 14, 2026 (Exhibit I). It was the first written communication in which Pinnacle Atlantic sought the return of the $78,400,000 in reinsurance recoverables previously paid under the Treaty.
73.  The fact that Pinnacle Atlantic accepted and paid seven billing installments totaling $78,400,000 over a period of approximately eighteen months, without objection, and then waited an additional twenty months after the final payment to raise any dispute, is significant. Pinnacle Atlantic had full access to the quarterly aggregate loss reports (Exhibit F) throughout this period, as well as the individual claim notices provided under Article 7, and it took no steps to investigate, question, or challenge the billings until well after the Treaty's effective extension period had begun to wind down and Pinnacle Atlantic had delivered its non-renewal notice.
VII. IBNR ALLOCATION — OVERVIEW OF QC&S'S PROCESS
A. Role of Velthorn Actuarial Advisors
74.  In connection with the preparation of its loss development analyses and the calculation of aggregate net incurred losses for purposes of the Treaty, QC&S engages Velthorn Actuarial Advisors LLC ("Velthorn"), an independent consulting actuarial firm with offices at 75 Ashbury Asset Advisors, Suite 1400, Boston, Massachusetts 02109. Velthorn is a nationally recognized actuarial consulting firm that specializes in property and casualty insurance loss reserving, loss development analysis, and reinsurance actuarial services.
75.  The principal actuary at Velthorn responsible for the QC&S engagement is Dr. Stephen Tanaka, FCAS, MAAA. Dr. Tanaka is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries, and he has more than twenty-five years of experience in property and casualty actuarial consulting.
76.  Velthorn prepared the actuarial certificates and supporting analyses underlying the loss development factors and IBNR (incurred but not reported) reserve allocations that form part of the aggregate net incurred loss calculations for TY 2021 and TY 2022 under the Treaty. These actuarial analyses were prepared in accordance with the Actuarial Standards of Practice promulgated by the Actuarial Standards Board and relied upon the claims data provided by QC&S's claims department, which is maintained under my supervision.
B. Affiant's Understanding of the IBNR Dispute
77.  One component of Pinnacle Atlantic's demand involves an allegation that $22,300,000 in IBNR reserve strengthening was improperly allocated to treaty year 2022 and should instead have been attributed to treaty year 2021. This allegation is significant because of its potential impact on the Treaty's cession calculations for TY 2021 and TY 2022, as follows:
(a) QC&S's aggregate net incurred loss for TY 2021 (which is undisputed) was $104,600,000. Because this amount is below the Treaty's $120,000,000 aggregate retention, no losses were ceded to Pinnacle Atlantic for TY 2021.
(b) If the $22,300,000 in IBNR were reallocated from TY 2022 to TY 2021, TY 2021's aggregate net incurred loss would increase to $126,900,000, exceeding the retention by $6,900,000. At the same time, TY 2022's aggregate net incurred loss would decrease from $189,700,000 to $167,400,000, and TY 2022's ceded loss would decrease from $69,700,000 to $47,400,000 — a reduction of $22,300,000.
(c) However, the net effect on the total amount ceded to Pinnacle Atlantic would be a reduction of $15,400,000 (from $69,700,000 to $47,400,000 for TY 2022, offset by a new $6,900,000 cession for TY 2021), because a portion of the reallocated IBNR would fall within the TY 2021 retention.
78.  I am informed by Velthorn, and specifically by Dr. Tanaka, that the $22,300,000 in IBNR development at issue relates to accident-year 2022 claims whose loss development factors crystallized during the TY 2022 reporting period. According to Velthorn, the allocation of this IBNR to TY 2022 is consistent with Article 5.2 of the Treaty, which defines "losses incurred" for purposes of the aggregate calculation. Under Article 5.2, losses are allocated to the treaty year in which they are "incurred," and Velthorn has advised that the IBNR at issue was properly allocated to TY 2022 based on the accident-year origin of the underlying claims and the development patterns observed during the TY 2022 period.
79.  I defer to Velthorn and to Dr. Tanaka for the detailed actuarial methodology underlying the IBNR allocation. However, I can confirm that QC&S's internal claims data — including detailed claim-by-claim reserve development histories extracted from ClaimsTrack — was provided to Velthorn as the factual and data foundation for the actuarial analysis. The claims data was prepared by my department and was subject to internal quality assurance review before being transmitted to Velthorn. I am not aware of any errors or omissions in the claims data provided to Velthorn.
VIII. CEDED EARNED PREMIUM REPORTING
A. QC&S's Reported Ceded Earned Premium for TY 2022
80.  QC&S reported ceded earned premium of $38,400,000 for treaty year 2022. This figure represents the total earned premium for the lines of business covered by the Treaty for TY 2022, calculated in accordance with QC&S's interpretation of the Treaty's premium provisions.
81.  Pinnacle Atlantic asserts that the correct ceded earned premium for TY 2022 is $45,200,000 — a difference of $6,800,000. Based on this asserted difference, Pinnacle Atlantic alleges that QC&S underpaid treaty premium by $2,856,000, calculated by applying the Treaty's provisional premium rate of forty-two percent (42%) to the $6,800,000 difference ($6,800,000 × 42% = $2,856,000).
B. Basis for the Difference
82.  The $6,800,000 difference between QC&S's reported ceded earned premium and Pinnacle Atlantic's asserted figure arises from a single, discrete issue: Pinnacle Atlantic's inclusion of run-off portfolio transfer premiums in the calculation of ceded earned premium. QC&S excluded these premiums from the calculation.
83.  QC&S's position, based on its reading of Article 3.4 of the Treaty, is that run-off portfolio transfer premiums are expressly excluded from the Treaty's definition of ceded earned premium. Article 3.4, as QC&S reads it, limits the premium base to premiums earned on policies that are currently in force during the applicable treaty year and specifically carves out premiums associated with run-off portfolio transfers, which represent the assumption of liabilities under policies that have expired or been non-renewed. QC&S's exclusion of these premiums was a deliberate, considered application of the Treaty's premium provisions, not an oversight or error.
84.  In preparing the ceded earned premium calculation for TY 2022, my department coordinated with Tobias Engström, Senior Vice President, Reinsurance & Capital Markets at QIH. Mr. Engström's team is responsible for the detailed premium calculation workpapers that support the ceded earned premium figures reported under the Treaty. The exclusion of run-off portfolio transfer premiums was applied consistently with QC&S's interpretation of Article 3.4, and Mr. Engström's team confirmed that this interpretation was applied uniformly across all treaty years. The detailed premium calculation workpapers are maintained by the Reinsurance & Capital Markets group under Mr. Engström's supervision and are available for production in this proceeding.
IX. DOCUMENT PRESERVATION AND RECORD-KEEPING
85.  Upon learning of the dispute raised by Pinnacle Atlantic's reservation-of-rights letter dated December 12, 2025, and upon the direction of Rachel Sondergaard, General Counsel of QIH, and outside counsel at Calderwood & Harkness LLP, QC&S implemented a comprehensive litigation hold effective March 4, 2026. The litigation hold was communicated in writing to all relevant custodians and departments within QC&S and QIH, and it applies to all categories of documents and electronically stored information potentially relevant to the dispute.
86.  Pursuant to the litigation hold, all claims files, correspondence, reserve-setting documentation, claims committee memoranda, internal memoranda and communications, billing records, premium calculation workpapers, and all other records relating to the Treaty, the Meridian Docks claims, the Veridian claims, and all communications with or concerning Pinnacle Atlantic and Broadreach Intermediaries Inc. have been identified and preserved. QC&S has taken affirmative steps to suspend all routine document retention and destruction policies with respect to the categories of documents subject to the litigation hold.
87.  QC&S's records described in this affidavit are maintained in the ordinary course of business and are kept in accordance with QC&S's document retention policies and applicable regulatory requirements. These records are available for production in connection with this proceeding, subject to applicable privileges and protective order provisions.
X. CONCLUSION
88.  Based on my personal knowledge, my review of QC&S's business records, and the information gathered in the course of my duties as described herein, I affirm the following:
(a) QC&S complied with all notice, reporting, and claims-handling obligations under Treaty No. PA-QCS-2019-EXL-0044.
(b) QC&S provided timely notice of the Meridian Docks claims to Pinnacle Atlantic consistent with the Article 7 individual claim reporting threshold of $1,000,000. No individual Meridian Docks claim was reserved at or above that threshold prior to Q1 2022, and QC&S provided notice promptly thereafter on May 22, 2022.
(c) QC&S settled the Veridian Financial Services E&O cluster in good faith, in the ordinary course of business, and in a manner consistent with sound claims management practice. The settlement was the product of thorough, documented claims evaluation and arms-length negotiation, and it is entitled to the protection of the follow-the-fortunes doctrine under Article 11 of the Treaty and New York law.
(d) QC&S's aggregate loss reports and reinsurance billings were accurate, consistent with the Treaty's terms, and submitted through the designated intermediary, Broadreach Intermediaries Inc., in accordance with the Treaty.
(e) Pinnacle Atlantic paid $78,400,000 in ceded losses under the Treaty across seven billing installments without objection, and it did not raise any dispute until approximately twenty months after the final payment.
(f) Pinnacle Atlantic's demand for the return of $78,400,000 in reinsurance recoverables, plus $12,600,000 in interest, for a total of $91,000,000, is without factual or legal merit.
89.  I respectfully request that this Court, or the arbitration panel upon referral pursuant to Treaty Article 22, deny Pinnacle Atlantic's claims in their entirety and enter such further relief as may be just and appropriate.
XI. OATH AND SIGNATURE
I declare under penalty of perjury under the laws of the State of New York that the foregoing is true and correct. I have read this affidavit in its entirety, and I affirm that each statement contained herein is true and accurate to the best of my personal knowledge, information, and belief.
________________________________________
Diana Kessler-Hoff Vice President, Claims & Reinsurance Recoveries Quorum Casualty & Surety Company
Date: _____, 2026
NOTARIZATION
Sworn to and subscribed before me this _ day of ____, 2026.
________________________________________
Notary Public State of Connecticut, County of Hartford
My Commission Expires: ______
XII. EXHIBIT LIST
The following exhibits are referenced in and attached to the foregoing Affidavit of Diana Kessler-Hoff:
PINNACLE ATLANTIC REINSURANCE LTD.,
Petitioner,
– against – | Index No. (to be assigned)
QUORUM CASUALTY & SURETY COMPANY,
Respondent.
Exhibit | Description
Exhibit A | Treaty No. PA-QCS-2019-EXL-0044 (relevant excerpts: Articles 3, 5, 7, 9, 11, and 22)
Exhibit B | QC&S internal claims management system (ClaimsTrack) printout showing Meridian Docks claims initial reserve dates (March 15, 2021) and reserve development history through Q1 2022
Exhibit C | Notice of Loss letter from QC&S to Pinnacle Atlantic via Broadreach Intermediaries Inc., dated May 22, 2022, regarding Meridian Docks claims
Exhibit D | QC&S claims committee memoranda regarding Veridian Financial Services E&O cluster evaluation and settlement authorization (September 2023)
Exhibit E | Settlement agreements for Veridian Claims A, B, and C (dated September 8, 2023)
Exhibit F | QC&S quarterly aggregate loss reports to Pinnacle Atlantic for TY 2021, TY 2022, and TY 2023
Exhibit G | Billing transmittals from QC&S to Pinnacle Atlantic through Broadreach Intermediaries Inc. (seven installments, October 2022 – March 2024, totaling $78,400,000), together with payment confirmations
Exhibit H | Pinnacle Atlantic reservation-of-rights letter dated December 12, 2025
Exhibit I | Pre-suit demand letter from Hargrove, Fitch & Calloway LLP on behalf of Pinnacle Atlantic, dated February 14, 2026