MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
FROM: Steven Hollander, Lead Associate, White Collar Defense & Investigations, Calderwood & Harkness LLP (NY Bar #5681234)
TO: Conrad Ashby, Responsible Partner, White Collar Defense & Investigations, Calderwood & Harkness LLP (NY Bar #4417892)
DATE: February 27, 2026
RE: Proposed Retention of Claridge Forensic Advisory LLC — Forensic Accounting and Electronic discovery Support — Internal Investigation of Whistleblower Allegations re Ashgrove Equity Partners Specialty Underwriting, Inc.
MATTER NO.: 1025-00010
CONFIDENTIALITY NOTICE: This memorandum is a privileged and confidential attorney work-product communication prepared at the direction of counsel in anticipation of litigation and in connection with the provision of legal advice to the Audit Committee of Quorum Insurance Holdings Corp. It should not be disclosed to any person outside of Calderwood & Harkness LLP without the prior written consent of the undersigned or the Responsible Partner. Any unauthorized review, use, disclosure, or distribution of this communication is strictly prohibited. If you have received this document in error, please notify the sender immediately and destroy all copies.
I. PURPOSE AND EXECUTIVE SUMMARY
The purpose of this memorandum is to evaluate the proposed engagement of Claridge Forensic Advisory LLC ("Claridge") to provide forensic accounting analysis and electronic discovery support in connection with Calderwood & Harkness LLP's ("C&H" or the "Firm") independent internal investigation conducted at the direction of the Audit Committee of Quorum Insurance Holdings Corp. ("QIH" or "Quorum"). The investigation concerns anonymous whistleblower allegations of financial misconduct at Ashgrove Equity Partners Specialty Underwriting, Inc. ("BSU" or "Ashgrove Equity Partners"), a wholly owned subsidiary of QIH. Claridge's primary point of contact for this engagement would be Daniel J. Petrov, Managing Director, located at 101 Park Avenue, 26th Floor, New York, NY 10178.
Based on my review of Claridge's capabilities, its conflicts-check confirmation, its proposed scope of work, and its fee structure, I recommend that the Firm retain Claridge under a consulting-expert engagement structured as an extension of Calderwood & Harkness's legal engagement with the Audit Committee. This structure is designed to maximize attorney-client privilege and work-product protections applicable to Claridge's deliverables and communications. Under the recommended structure, Claridge would report to and take direction exclusively from Calderwood & Harkness — not from QIH management, BSU personnel, or any other party.
The estimated cost for Claridge's scoping-phase support is in the range of $85,000 to $120,000. This figure encompasses forensic accounting analysis of BSU's commission-income ledgers and IBNR reserve-release entries, electronic discovery collection and processing from an estimated eight to twelve custodians, and counterparty-verification work concerning the three alleged fictitious retail-broker entities. When combined with C&H's own estimated scoping-phase fees of $175,000 to $225,000, the total scoping-phase cost falls within the range of $260,000 to $345,000, which is within the expenditure parameters authorized by the Audit Committee.
Claridge's forensic capabilities are well-suited to the core investigative workstreams. The firm has substantial experience in insurance-industry fraud investigations and a demonstrated ability to trace commission-income flows across complex brokerage operations, analyze IBNR reserve-release entries in light of actuarial standards, and verify the existence and legitimacy of counterparty brokers. Its electronic discovery platform and data-analytics tools are capable of supporting the volume and complexity of data anticipated in this matter.
This memorandum sets forth the background of the investigation, Claridge's qualifications, the proposed scope of work, the fee arrangement and budget, the recommended engagement structure (with particular attention to privilege and work-product considerations), the results of Claridge's conflicts check, key risk considerations, and my recommendation for proceeding. I respectfully request your approval to finalize the Claridge engagement letter and present it to Audit Committee Chair Priya Subramaniam for Audit Committee authorization, concurrent with the initial Audit Committee briefing proposed for the week of March 9, 2026.
II. BACKGROUND
A. The Engagement
Calderwood & Harkness LLP was engaged by the Audit Committee of Quorum Insurance Holdings Corp.'s Board of Directors on February 27, 2026 to scope and, if warranted, conduct an independent internal investigation arising from an anonymous whistleblower complaint received by QIH. The engagement was authorized by a resolution of the Audit Committee dated February 24, 2026, adopted at a special telephonic meeting attended by all three independent members of the Audit Committee: Priya Subramaniam (Chair), Thomas K. Driscoll, and Angela F. Delvecchio. The resolution authorized the Audit Committee Chair to retain outside counsel of her selection to conduct the investigation and granted such counsel authority to retain forensic accountants, electronic discovery specialists, and other consultants as necessary, within approved budgetary parameters.
Our conflicts check was initiated on February 25, 2026 and cleared the following day, February 26, 2026. No conflicts were identified with respect to QIH, BSU, any of the subject individuals named in the whistleblower complaint, or any of the other relevant entities and individuals described in this memorandum.
B. The Whistleblower Allegations
The whistleblower complaint was submitted on February 14, 2026 via QIH's third-party ethics hotline, which is administered by IntegriLine Compliance Services, Inc. The complaint was assigned intake reference number IL-QIH-2026-0214-0033. The complaint was escalated by IntegriLine to QIH General Counsel Owen R. Hargrove on February 17, 2026, in accordance with QIH's whistleblower-escalation protocols. Hargrove briefed Audit Committee Chair Subramaniam on February 19, 2026, at which point the Audit Committee determined that an independent investigation by outside counsel was warranted given the nature and severity of the allegations.
The whistleblower complaint alleges that from approximately Q3 2023 through Q4 2025 — a period spanning approximately ten fiscal quarters — senior BSU personnel engaged in the following categories of financial misconduct:
Fabrication of Binder Confirmations. The complaint alleges that senior BSU personnel fabricated or materially inflated approximately 147 binder confirmations for commercial property insurance policies purportedly placed through three alleged fictitious or shell retail-broker counterparties: (i) Veltrano Risk Advisors, (ii) Halloran & Pratt Insurance Associates, and (iii) CrestPoint Brokerage LLC. The whistleblower asserts that these entities either do not exist, are shell entities without legitimate operations, or are controlled by or affiliated with one or more of the subject individuals.
Recognition of Phantom Commission Income. The complaint alleges that BSU recognized commission income on these phantom placements, estimating that approximately $74 million in fictitious placed premium was booked, generating approximately $9.6 million in phantom commission income at an approximate average commission rate of 13%. This commission income would have been reflected in BSU's commission-income ledgers and, through consolidation, in QIH's consolidated financial statements for the relevant periods.
Premature Release of IBNR Loss Reserves. The complaint further alleges that senior BSU personnel directed the premature release of approximately $38.5 million in incurred-but-not-reported ("IBNR") loss reserves in order to inflate quarterly underwriting income. The whistleblower identifies Q4 2024 and Q2 2025 as the quarters in which improper reserve releases were most heavily concentrated, though the complaint asserts that the practice extended over the full ten-quarter period.
In the aggregate, the alleged financial misstatement attributable to these two categories of misconduct is approximately $48.1 million ($9.6 million in phantom commission income plus $38.5 million in improper IBNR reserve releases).
The whistleblower complaint included two sample binder-confirmation PDFs with an aggregate placed-premium face value of approximately $12.4 million. These documents purport to confirm the binding of commercial property coverage through one of the three alleged fictitious brokers and will serve as initial test cases for Claridge's forensic analysis.
The complaint names three individuals as subjects of the allegations:
1. Garrett T. Lomax, President of BSU, who is alleged to have directed and authorized the fraudulent scheme;
2. Neil W. Stadler, Senior Vice President, Commercial Property Division, BSU, who is alleged to have created or approved the fabricated binder confirmations and coordinated with the fictitious brokers; and
3. Rhonda M. Kessler, Vice President, Finance & Operations, BSU, who is alleged to have directed the improper IBNR reserve releases and booked the phantom commission-income entries.
C. Relevant Financial Context
An understanding of the financial context is essential to assessing both the materiality of the allegations and the scope of forensic support required. The key facts are as follows:
Quorum Insurance Holdings Corp. QIH is a Delaware corporation whose common stock is publicly traded on the Nasdaq Stock Market under the ticker symbol QIHC. As of February 2026, QIH's approximate market capitalization is $4.8 billion. For fiscal year 2025, QIH reported gross written premium of approximately $3.17 billion and net earned premium of approximately $2.41 billion. QIH operates through multiple specialty insurance and underwriting subsidiaries, of which BSU is one.
Ashgrove Equity Partners Specialty Underwriting, Inc. BSU is a Connecticut corporation and a wholly owned subsidiary of QIH. BSU employs approximately 120 personnel and focuses on commercial property specialty underwriting and brokerage operations. For fiscal year 2025, BSU reported placed premium of approximately $487 million and commission and fee income of approximately $63.2 million. BSU's commission and fee income is consolidated into QIH's financial statements and represents a significant component of QIH's specialty-lines revenue.
External Audit. QIH's fiscal year 2025 Form 10-K was filed with the Securities and Exchange Commission on February 21, 2026, audited by Kellner & Strauss LLP (lead engagement partner: Howard M. Bressler). The audit opinion was unqualified. Notably, the Form 10-K was filed only seven days after the whistleblower complaint was submitted and four days after the complaint was escalated to General Counsel Hargrove. There is no disclosure of the whistleblower complaint in the Form 10-K. The timing of the filing relative to the complaint raises questions that will need to be addressed as the investigation proceeds, including whether QIH's disclosure controls and procedures functioned adequately and whether a subsequent restatement or amended filing may be warranted.
Actuarial Support. BSU's IBNR reserve schedules are maintained by Linden Actuarial Consulting Group. The contact at Linden Actuarial is Margaret Y. Cho, FCAS, located at 280 Trumbull Street, Suite 900, Hartford, CT 06103. Linden Actuarial's role in the reserve-setting and reserve-release process is directly relevant to the IBNR component of the whistleblower allegations, and Claridge will need to analyze reserve data prepared or reviewed by Linden Actuarial.
The alleged misstatement of approximately $48.1 million, if substantiated, would be material to QIH's consolidated financial statements. For reference, $48.1 million represents approximately 2.0% of FY 2025 net earned premium and would likely be material under both quantitative and qualitative materiality standards applied by Kellner & Strauss in its audit.
D. Need for Forensic Accounting and Electronic discovery Support
The whistleblower allegations involve complex financial data spanning multiple quarters and implicating several accounting line items, including commission income recognition, IBNR loss reserves, and binder confirmations supporting placed-premium calculations. Calderwood & Harkness's White Collar Defense & Investigations team has extensive experience conducting internal investigations in the insurance and financial-services sectors, but the investigation team requires specialized forensic accounting expertise to analyze BSU's commission-income ledgers, trace premium flows from policyholders through BSU to carriers, and assess the propriety of reserve-release entries in light of actuarial standards and BSU's internal approval processes.
In addition, the investigation will involve substantial electronic discovery. BSU's principal office is located at 55 Elm Street, 8th Floor, Hartford, CT 06103, and custodian data will need to be collected from the three named subject individuals as well as additional BSU personnel. Our preliminary estimate is that the initial document hold and collection will encompass approximately eight to twelve custodians. The data sources include Strathmore Data Systems/Ashbury Software email accounts, network file shares, local drives, BSU's policy-management system, BSU's commission-accounting system, and potentially personal devices. Forensic imaging of certain data sources will be necessary to preserve chain-of-custody integrity.
Calderwood & Harkness does not maintain in-house forensic accounting or electronic discovery processing capability sufficient for an engagement of this scope and complexity. Accordingly, the retention of an outside forensic advisory firm is necessary. As discussed below, Claridge Forensic Advisory LLC is well-positioned to provide the required support.
III. CLARIDGE FORENSIC ADVISORY LLC — FIRM OVERVIEW AND QUALIFICATIONS
A. Firm Profile
Claridge Forensic Advisory LLC is a Delaware limited liability company with its principal office at 101 Park Avenue, 26th Floor, New York, NY 10178. Claridge is a mid-sized forensic accounting and advisory firm with a national practice spanning major financial centers, including New York, Chicago, Los Angeles, and Washington, D.C. The firm was established to provide specialized forensic accounting, fraud investigation, electronic discovery, data analytics, regulatory compliance, and litigation support services to law firms, corporate boards, audit committees, and regulatory agencies.
Claridge's practice areas encompass precisely the categories of support required in this investigation:
• Forensic Accounting and Fraud Investigations: Claridge's core practice involves the analysis of financial records, accounting entries, and transactional data to identify and quantify financial irregularities, fraud, and misstatements. The firm has extensive experience conducting forensic analyses in the context of internal investigations directed by audit committees and outside counsel.
• Electronic discovery and Data Analytics: Claridge maintains a full-service electronic discovery capability, including forensic data collection (including forensic imaging), processing, hosting, and review support. The firm employs data-analytics tools for statistical analysis, anomaly detection, and pattern identification across large datasets.
• Regulatory Compliance and Litigation Support: Claridge has provided forensic advisory support in connection with SEC enforcement proceedings, DOJ criminal investigations, state insurance-regulatory examinations, and complex commercial litigation.
• Insurance Industry Financial Analysis: Of particular relevance to the present engagement, Claridge has extensive experience in the insurance, reinsurance, and financial-services sectors. The firm's professionals are familiar with surplus-lines brokerage operations, managing general agent ("MGA") commission structures, loss-reserve accounting under both statutory and GAAP frameworks, IBNR reserve methodologies, binder-confirmation processes, and the regulatory requirements applicable to retail and wholesale insurance intermediaries.
Claridge's insurance-industry experience is a significant factor in my recommendation. The investigation will require a forensic team that can navigate the specialized accounting conventions and regulatory frameworks that govern insurance-brokerage commission income and loss-reserve accounting. Claridge's professionals have demonstrated this capability in prior engagements.
B. Key Personnel
The proposed engagement lead is Daniel J. Petrov, Managing Director at Claridge. Mr. Petrov is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). He has extensive experience leading forensic accounting analyses in insurance-industry fraud investigations and has previously served as a forensic advisor in SEC enforcement matters and audit-committee-directed internal investigations involving premium-revenue manipulation, commission-income fraud, and reserve-adequacy issues. Mr. Petrov's background includes prior experience at a Big Four accounting firm's forensic practice, where he led engagements involving insurance holding companies and specialty underwriting operations. His familiarity with the specific financial structures at issue in this investigation — commission-income recognition on placed premium, IBNR reserve accounting, and binder-confirmation processes — makes him an appropriate engagement lead.
Claridge has proposed staffing a team of approximately three to five professionals for the scoping phase, including forensic accountants with insurance-industry specialization and electronic discovery specialists with experience in forensic data collection and processing. The specific team composition will be finalized upon execution of the engagement letter and will be subject to C&H's approval. I have reviewed the curricula vitae of the proposed team members, and each possesses relevant experience and credentials.
C. Prior Engagement History with Calderwood & Harkness
Claridge has been vetted by C&H's White Collar Defense & Investigations practice group. While Claridge has not previously served as forensic advisor on an C&H-led investigation, the firm is known within the practice group based on its reputation in the insurance-investigation space and referrals from colleagues at other Am Law firms. I have spoken with two partners at other firms who have retained Claridge in similar investigations and received uniformly positive assessments of the quality, timeliness, and reliability of Claridge's work product. Both references specifically noted Claridge's sensitivity to privilege considerations and its discipline in adhering to communication protocols established by lead counsel.
No conflicts have been identified. Claridge has confirmed in writing (see Attachment C) that it has no current or prior engagements with QIH, BSU, any of the three subject individuals (Lomax, Stadler, Kessler), any of the three alleged fictitious brokers (Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, CrestPoint Brokerage LLC), Kellner & Strauss LLP, Sentinel Mutual Assurance Group, Pemberton Hale & Creighton LLP, or Linden Actuarial Consulting Group. This absence of conflicts is discussed further in Section VII.
D. References and Credentials
Claridge's professionals hold relevant professional certifications, including CPA, CFE, and Certified Insolvency & Restructuring Advisor (CIRA) designations, among others. The firm has been retained as forensic advisor in investigations conducted by multiple Am Law 100 firms and has served audit committees of publicly traded companies in the insurance and financial-services sectors. Claridge's electronic discovery capabilities include forensic data collection using industry-standard tools, processing on major e-discovery platforms, and hosted review environments that can be configured to accommodate the privilege-review workflows and access controls required in this investigation.
IV. PROPOSED SCOPE OF WORK
The following scope of work has been developed collaboratively between the C&H investigation team and Daniel Petrov at Claridge, based on a preliminary assessment of the investigative workstreams required to address the whistleblower allegations. The scope covers the initial scoping phase of the investigation. If the scoping phase confirms the need for a full investigation, the scope of Claridge's engagement will be expanded accordingly, subject to Audit Committee authorization and budgetary approval.
A. Forensic Accounting Analysis
1. Commission-Income Ledger Analysis (FY 2023 – FY 2025). Claridge will obtain and analyze BSU's commission-income ledgers for fiscal years 2023, 2024, and 2025 — the period covered by the whistleblower allegations. The analysis will involve the following steps:
(a) Identification of Flagged Broker Entries. Claridge will identify all commission-income entries in BSU's ledgers attributable to placements through the three alleged fictitious or shell retail-broker counterparties: Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC. This will require a systematic review of broker codes, counterparty identifiers, and transaction descriptions in BSU's commission-accounting system.
(b) Quantification of Commission Income from Flagged Brokers. Claridge will calculate the total commission income recorded from each of the three alleged fictitious brokers, broken down by fiscal quarter and by individual broker. The resulting figures will be compared against the whistleblower's estimate of approximately $9.6 million in phantom commission income across the ten-quarter period. Any variance between Claridge's calculated figures and the whistleblower's estimate will be analyzed and documented.
(c) Commission-Rate Analysis. Claridge will assess whether the commission rates applied to the flagged placements are consistent with BSU's standard commission schedules and with market norms for commercial property surplus-lines placements. The whistleblower alleges an average commission rate of approximately 13%; Claridge will verify this figure and determine whether the rates on the flagged placements show anomalies relative to BSU's commission rates on placements through established, verified brokers.
(d) Commission-Payment Tracing. Claridge will trace commission payments to determine whether BSU actually paid commissions to the three alleged fictitious brokers and, if so, where the funds flowed. This analysis will involve review of BSU's accounts-payable records, bank-account statements, and wire-transfer records to identify the receiving accounts for any commission payments made to Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC. If commission payments were made, the identity and ownership of the receiving accounts will be a critical issue.
2. Premium-Flow Tracing. Claridge will trace premium cash flows on the approximately 147 binder confirmations identified by the whistleblower. The objective is to determine whether the binder confirmations represent actual insurance placements with real premium flows or are purely fictitious documents created to support phantom commission-income recognition.
(a) Premium Collection and Remittance. Claridge will trace premium cash flows from policyholders (if any) through BSU's trust and operating accounts to carriers. The analysis will determine whether actual premium was collected from policyholders, whether such premium was remitted to carriers, and whether the carriers issued policies corresponding to the binder confirmations.
(b) Carrier Cross-Referencing. During the document-collection phase, Claridge will cross-reference the binder confirmations with carrier records to determine whether the underlying policies were actually bound by the carriers listed on the binder confirmations. This will require obtaining confirmation from the relevant carriers, a process that will be coordinated with and directed by Calderwood & Harkness to preserve privilege protections.
(c) Sample Binder-Confirmation Analysis. As an initial test, Claridge will analyze the two sample binder-confirmation PDFs attached to the whistleblower complaint, which have an aggregate placed-premium face value of approximately $12.4 million. This analysis will include examination of the documents' metadata, formatting, and content for indicia of fabrication, as well as attempts to verify the underlying placements against carrier records.
3. IBNR Reserve-Release Analysis. The IBNR component of the whistleblower allegations is the larger of the two alleged categories of misstatement ($38.5 million versus $9.6 million) and will require careful forensic analysis in coordination with actuarial data maintained by Linden Actuarial Consulting Group.
(a) Obtaining Reserve Data. Claridge will obtain IBNR reserve schedules maintained by Linden Actuarial Consulting Group and BSU's internal reserve data, including reserve-development triangles, actuarial memoranda, management-override records, and supporting documentation for reserve-release entries.
(b) Quarter-by-Quarter Reserve-Release Analysis. Claridge will analyze reserve-release entries for all quarters from Q3 2023 through Q4 2025, with particular focus on Q4 2024 and Q2 2025, which the whistleblower identifies as the quarters with the most concentrated improper releases. The analysis will quantify the total reserve releases in each quarter and compare the aggregate against the whistleblower's estimate of approximately $38.5 million in improper releases.
(c) Actuarial Justification Assessment. Claridge will assess whether the reserve releases followed standard actuarial justification and internal approval processes, or whether they appear to have been directed by BSU management — specifically Lomax, Stadler, and Kessler — outside normal actuarial and governance channels. This assessment will involve review of BSU's reserve-governance policies, any documentation of management-directed reserve adjustments, and correspondence between BSU personnel and Linden Actuarial regarding reserve-release decisions.
(d) Coordination with Linden Actuarial. Any communication between Claridge (or the C&H investigation team) and Margaret Y. Cho at Linden Actuarial Consulting Group regarding reserve methodology, reserve-release justifications, or management interactions with Linden Actuarial will be coordinated with and directed by Calderwood & Harkness. The timing and manner of such communication will be determined based on the investigation's overall strategy, including considerations of witness-interview sequencing and the risk of premature disclosure to persons who may have relevant information.
B. Counterparty Verification
A critical element of the investigation is determining whether the three alleged fictitious broker counterparties — Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC — are legitimate, operating entities or are shell entities created to facilitate the alleged fraud. Claridge will assist the investigation team with the following verification activities:
(a) Surplus-Lines License Database Searches. Claridge will search surplus-lines license databases in Connecticut, New York, and other relevant jurisdictions to determine whether the three entities hold or have held surplus-lines brokerage licenses. This will include searches of the Surplus Lines Information Office (SLIO) databases and state insurance department records.
(b) Corporate-Entity Searches. Claridge will conduct corporate-entity searches in relevant jurisdictions, including Secretary of State filings in Connecticut, New York, Delaware, and any other states in which the entities may be registered. The searches will seek to identify formation dates, registered agents, officers, directors, and any amendments or dissolutions.
(c) Physical-Office Verification. The whistleblower alleges that the three brokers maintain only virtual-office addresses rather than physical offices. Claridge will verify the addresses associated with each entity through public records, commercial databases, and, if necessary, site visits coordinated with the C&H investigation team.
(d) Beneficial-Ownership Tracing. To the extent that beneficial-ownership information is available through public filings, corporate records, or the Financial Crimes Enforcement Network's Beneficial Ownership Information database, Claridge will trace the ownership of the three entities to assess whether any of them are affiliated with the subject individuals (Lomax, Stadler, or Kessler) or with persons connected to the subject individuals.
C. Electronic discovery — Collection, Processing, and Hosting
1. Data Collection. Claridge will coordinate with QIH IT and BSU IT personnel to collect electronically stored information ("ESI") from identified custodians. All interactions between Claridge and QIH/BSU IT personnel will be subject to the Privilege and Communication Protocol established by Calderwood & Harkness, and Claridge will not disclose the nature or scope of the investigation to IT personnel beyond what is necessary to effectuate the data collection, as specifically authorized by C&H.
(a) Custodian Identification. The initial custodian list for document hold and collection includes an estimated eight to twelve individuals. The priority custodians are the three named subject individuals: Garrett T. Lomax (President, BSU), Neil W. Stadler (SVP, Commercial Property Division), and Rhonda M. Kessler (VP, Finance & Operations). Additional custodians will be identified during the scoping phase based on organizational charts, reporting relationships, and preliminary document review, and may include BSU underwriters, accounting personnel, and administrative staff involved in binder-confirmation processing, commission accounting, or reserve management.
(b) Data Sources. The data sources targeted for collection include: (i) email (Strathmore Data Systems/Ashbury Software), including both active mailboxes and archived messages; (ii) network file shares accessible to the identified custodians; (iii) local drives on custodians' workstations and laptops; (iv) BSU's policy-management system (the specific system to be identified during initial IT coordination); (v) BSU's commission-accounting system; and (vi) any relevant personal devices, subject to consent or legal compulsion as appropriate.
(c) Forensic Imaging. Where necessary to preserve chain-of-custody integrity — particularly with respect to the subject individuals' devices and accounts — Claridge will perform forensic imaging using industry-standard tools and protocols. Forensic images will be verified using hash-value authentication and maintained in a secure, access-controlled environment.
2. Data Processing and Review Platform.
(a) Processing. Claridge will process collected ESI using industry-standard e-discovery platforms. Processing will include de-duplication, extraction of metadata, and application of culling criteria developed collaboratively with the C&H investigation team. The preliminary culling parameters include a date range of January 1, 2023 to the present and search terms to be developed based on the investigation's specific needs (including, at minimum, the names of the three alleged fictitious brokers, the names of the subject individuals, and terms related to binder confirmations, commission income, IBNR reserves, and reserve releases).
(b) Hosted Review Platform. Processed data will be loaded into a hosted review platform for attorney review by the Calderwood & Harkness investigation team. Claridge will configure the platform with appropriate access controls, privilege-tagging workflows, and coding panels consistent with C&H's review protocols.
3. Data Analytics.
(a) Pattern Identification. Claridge will deploy data-analytics tools to identify patterns in binder-confirmation issuance, commission-income entries, reserve-release timing and magnitude, and communications among the subject individuals and with the alleged fictitious brokers. These analytics may include network-analysis mapping of communications between custodians and external parties, timeline visualizations of key events, and clustering analysis of documents by topic and custodian.
(b) Statistical and Anomaly-Detection Analysis. Claridge will perform statistical analysis on commission-income data and reserve movements to identify anomalies relative to BSU's historical norms and industry benchmarks. This may include analysis of commission-income-to-placed-premium ratios, comparison of reserve-release patterns across BSU's lines of business, and identification of entries that fall outside expected statistical distributions.
V. PROPOSED FEE ARRANGEMENT AND BUDGET
A. Scoping-Phase Budget
The estimated total Claridge fees for scoping-phase support are $85,000 to $120,000. This estimate is based on Claridge's preliminary assessment of the scope of work described in Section IV and assumes that the scoping phase will extend over approximately four to six weeks. The breakdown of estimated components is as follows:
Claridge proposes billing on an hourly basis, with monthly invoices submitted to Calderwood & Harkness for review and consolidation. Claridge's hourly billing rates for the proposed team are as follows:
Electronic discovery processing and hosting fees will be billed at Claridge's cost plus a modest administrative markup, consistent with standard e-discovery vendor terms. Specific per-gigabyte processing rates and monthly hosting fees will be set forth in the engagement letter. Based on Claridge's preliminary estimate, processing and hosting costs for the scoping phase are expected to fall within the electronic discovery line item noted above.
B. Full-Investigation Phase (Preliminary Estimate)
If the scoping phase confirms the need for a full investigation — which is likely given the specificity and apparent internal knowledge reflected in the whistleblower complaint — Claridge's fees for the full investigation phase are estimated at $250,000 to $500,000, depending on the volume of custodian data, the number of binder confirmations requiring analysis, the complexity of premium-flow tracing and reserve-release analysis, and the extent of counterparty-verification work required. The wide range reflects uncertainty at this early stage regarding the scope and duration of a full investigation.
This estimate is consistent with Calderwood & Harkness's overall preliminary full-investigation budget estimate of $1.2 million to $2.5 million (inclusive of C&H legal fees, Claridge forensic advisory fees, and any other third-party costs). The full-investigation budget will be refined and presented to the Audit Committee for authorization upon completion of the scoping phase.
C. Cost Management
To ensure that costs are managed effectively and transparently, the following protocols will be implemented:
(a) Weekly Status Updates. Claridge will provide weekly written status updates to the C&H investigation team, summarizing work performed during the preceding week, work planned for the coming week, and any issues or developments requiring attention.
(b) Monthly Budget-to-Actual Reports. Claridge will provide monthly reports comparing actual fees and costs incurred against the approved scoping-phase budget, broken down by work category. These reports will enable the investigation team and the Responsible Partner to monitor spending and identify potential budget variances at an early stage.
(c) Advance Approval for Material Overruns. Any anticipated expenditure that would cause total Claridge fees to exceed the approved budget range must be flagged in advance and approved by Conrad Ashby before additional work is performed. Claridge has agreed to this condition.
(d) Invoice Routing. All Claridge invoices will be routed through Calderwood & Harkness for review and consolidation before submission to the Audit Committee for payment. This routing protocol serves both cost-management and privilege-protection functions, as it ensures that Claridge invoices are handled as part of C&H's legal engagement and are not disseminated directly to QIH management or other parties.
VI. ENGAGEMENT STRUCTURE — PRIVILEGE AND WORK-PRODUCT CONSIDERATIONS
A. Recommended Structure: Consulting Expert Under C&H Umbrella
I strongly recommend that Claridge be retained as a non-testifying consulting expert engaged at the direction of counsel, specifically under Calderwood & Harkness's existing legal engagement with the Audit Committee of QIH. This structure provides the strongest available protection for Claridge's work product and its communications with the C&H investigation team.
The engagement letter between Calderwood & Harkness and Claridge should specify the following terms:
(a) Direction of Counsel. Claridge is retained by and at the direction of Calderwood & Harkness LLP in connection with C&H's provision of legal services to the Audit Committee of Quorum Insurance Holdings Corp. Claridge's engagement arises from and is incident to the attorney-client relationship between C&H and the Audit Committee.
(b) Anticipation of Litigation. All work performed by Claridge under the engagement is prepared in anticipation of litigation and at the direction of counsel. The whistleblower allegations, if substantiated, may give rise to SEC enforcement proceedings, DOJ criminal proceedings, shareholder derivative or class-action litigation, and regulatory examinations by state insurance departments. The investigation is being conducted, in part, to assist C&H in providing legal advice to the Audit Committee regarding QIH's legal exposure and appropriate remedial action.
(c) Exclusive Reporting to C&H. Claridge will not communicate directly with QIH management (including Owen R. Hargrove, Marcus P. Galvin, and Denise R. Nakamura), BSU personnel, third parties, regulators, or any other person or entity without prior written authorization from Calderwood & Harkness. All Claridge communications regarding the investigation will be directed to and through the C&H investigation team.
(d) Privilege Labeling. All Claridge deliverables — including reports, analyses, memoranda, working papers, spreadsheets, and other work product — will be directed to Calderwood & Harkness and will bear the following legend: "PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — Prepared at the Direction of Counsel in Anticipation of Litigation — Calderwood & Harkness LLP / Audit Committee of Quorum Insurance Holdings Corp. — Matter No. 1025-00010."
This structure provides protection under Federal Rule of Civil Procedure 26(b)(4)(D), which shields from discovery the facts known to and opinions held by a non-testifying expert who has been retained or specially employed in anticipation of litigation or preparation for trial and who is not expected to be called as a witness. The rule provides robust protection against compelled disclosure of consulting-expert work product, subject to limited exceptions for extraordinary circumstances. Analogous protections exist under the laws of New York, Connecticut, Delaware, and other relevant jurisdictions.
It is important to contrast this structure with two alternative structures that present greater privilege risk:
Direct Retention by QIH. If Claridge were retained directly by QIH management rather than by C&H at the direction of the Audit Committee, Claridge's work product would not benefit from attorney work-product protection and would be more readily discoverable in subsequent litigation or regulatory proceedings. Moreover, direct retention by management would raise concerns about the independence of the investigation, given that QIH's CEO and CFO are potential witnesses (though not named subjects) and that the investigation concerns the conduct of a QIH subsidiary's senior management.
Direct Retention by the Audit Committee. If Claridge were retained directly by the Audit Committee without being engaged through and at the direction of C&H, the attorney work-product protection would be significantly weakened. Claridge's analyses would be characterized as business-purpose materials rather than attorney-directed work product, and the consulting-expert protections of Rule 26(b)(4)(D) would not apply. The Audit Committee's direct retention of forensic advisors is sometimes appropriate (for example, when forensic work is needed for business purposes independent of legal advice), but in this case, Claridge's work is integrally related to C&H's legal analysis and should be structured accordingly.
B. Coordination with Existing Privilege Protocol
Calderwood & Harkness has established a comprehensive Privilege and Communication Protocol for the investigation. Claridge personnel will be briefed on this protocol as part of the engagement onboarding process. The key elements of the protocol as applicable to Claridge include:
(a) Restrictions on Forwarding Privileged Materials. Claridge personnel may not forward, share, or disclose any privileged or work-product materials to any person outside of the C&H investigation team without prior written authorization from C&H. This prohibition extends to forwarding of email chains, sharing of document-review platforms or analytics results, and verbal disclosure of investigation findings.
(b) Document-Labeling Conventions. All documents generated by Claridge in connection with the engagement must carry the privilege legend set forth in Section VI.A(d) above. This includes draft and final reports, internal working papers, analytical spreadsheets, email communications regarding the investigation, and any other documents relating to Claridge's engagement.
(c) Privilege Holder. The attorney-client privilege with respect to the investigation is held by the Audit Committee of QIH, not by QIH management. Accordingly, Claridge must not take direction from, report to, or share information with any member of QIH management without C&H's express authorization.
(d) Restricted Communications. Claridge personnel should not communicate with the following individuals and entities regarding the investigation except as specifically directed by Calderwood & Harkness:
• Owen R. Hargrove, General Counsel of QIH
• Marcus P. Galvin, Chief Executive Officer of QIH
• Denise R. Nakamura, Chief Financial Officer of QIH
• Kellner & Strauss LLP (external auditor)
• Sentinel Mutual Assurance Group (D&O insurer)
• Pemberton Hale & Creighton LLP (QIH outside corporate counsel)
• Linden Actuarial Consulting Group
• Any subject individual (Lomax, Stadler, Kessler)
• Any regulatory agency (SEC, DOJ, state insurance departments)
C. Confidentiality and Non-Disclosure
In addition to the privilege protocol, Claridge will be required to execute a standalone confidentiality and non-disclosure agreement ("NDA") prior to the commencement of any substantive work. The NDA will address the following:
(a) Confidentiality Obligations. Claridge acknowledges the highly sensitive and confidential nature of the investigation and agrees that all information received from or generated in connection with the engagement constitutes confidential information that may not be disclosed to any person or entity outside of the engagement without C&H's prior written consent.
(b) Insider-Trading Restrictions. QIH is a publicly traded company listed on the Nasdaq Stock Market under the ticker symbol QIHC. Claridge personnel assigned to the engagement will come into possession of material nonpublic information ("MNPI") regarding QIH. The NDA will include a prohibition on trading in QIHC securities (including common stock, options, and other derivative instruments) by any Claridge personnel with knowledge of the investigation, and will require Claridge to implement internal information barriers to prevent the dissemination of MNPI within Claridge beyond the engagement team.
(c) Restricted Trading List. Claridge personnel assigned to the engagement will be added to the insider-trading restricted list maintained by QIH. This addition will be coordinated with Owen R. Hargrove (QIH General Counsel) or Pemberton Hale & Creighton LLP (QIH's outside corporate counsel) through C&H, in a manner that does not disclose the substance of the investigation to those parties beyond what is necessary for restricted-list administration.
VII. CONFLICTS AND INDEPENDENCE
Claridge has confirmed in writing — via a letter from Daniel J. Petrov dated February 26, 2026 (attached hereto as Attachment C) — that it has no current or prior engagement with any of the following entities or individuals:
• Quorum Insurance Holdings Corp. (EIN 83-2641057)
• Ashgrove Equity Partners Specialty Underwriting, Inc. (EIN 84-3197428)
• Garrett T. Lomax
• Neil W. Stadler
• Rhonda M. Kessler
• Veltrano Risk Advisors
• Halloran & Pratt Insurance Associates
• CrestPoint Brokerage LLC
• Kellner & Strauss LLP (QIH external auditor)
• Sentinel Mutual Assurance Group (QIH D&O insurer)
• Pemberton Hale & Creighton LLP (QIH outside corporate counsel)
• Linden Actuarial Consulting Group (BSU actuarial consultant)
• IntegriLine Compliance Services, Inc. (QIH ethics-hotline provider)
• Continental Ledger Services, Inc.
Claridge has further represented that its engagement in this matter would not create any conflict of interest or impair its independence in any respect. Claridge has confirmed that it has no financial, personal, or professional relationship with any of the listed entities or individuals that could compromise the objectivity of its forensic analysis or create an appearance of partiality.
Claridge's independence from QIH's external auditor, Kellner & Strauss LLP, is particularly important in this context. If the investigation ultimately substantiates the whistleblower's allegations, Kellner & Strauss will need to assess whether QIH's fiscal year 2025 financial statements require restatement and whether its previously issued unqualified audit opinion must be withdrawn or modified. The integrity of this process depends on the absence of any relationship between the investigation's forensic advisor and the external auditor that could compromise the independence of either. Claridge's confirmation of no current or prior relationship with Kellner & Strauss satisfies this requirement.
VIII. RISK CONSIDERATIONS AND MITIGATION
A. Risk of Claridge Being Compelled to Testify
If the investigation substantiates the whistleblower's allegations of financial fraud, the matter is likely to attract the attention of multiple enforcement agencies and private litigants. The SEC may initiate an enforcement action relating to QIH's financial reporting, and the Department of Justice may pursue criminal fraud charges against individual subjects. Shareholder class-action and derivative litigation is also reasonably foreseeable. In any of these proceedings, there is a risk that regulators, prosecutors, or private litigants may seek access to Claridge's work product or seek to compel testimony from Claridge personnel regarding their forensic findings.
The following mitigation measures are designed to minimize this risk:
(a) Consulting-Expert Structure. As discussed in Section VI.A, structuring Claridge's engagement as a non-testifying consulting expert under Rule 26(b)(4)(D) provides the strongest available protection against compelled disclosure. So long as Claridge is not designated as a testifying expert, its opinions and the facts known to it are generally protected from discovery.
(b) Privilege Legend on All Documents. All Claridge-generated documents will bear the attorney work-product privilege legend, creating a clear contemporaneous record of the privileged nature of the materials.
(c) Limited Disclosure of Claridge's Involvement. Claridge's involvement in the investigation will not be disclosed to third parties — including regulators, external auditors, or D&O insurers — without prior approval from Calderwood & Harkness and the Audit Committee. This minimizes the risk of inadvertent waiver and preserves the Audit Committee's ability to control the timing and scope of any voluntary disclosures.
(d) Detailed Privilege Logs. C&H and Claridge will maintain detailed privilege logs documenting all privileged and work-product materials generated in connection with the engagement. In the event of a privilege challenge, these logs will support the assertion of privilege and work-product protection.
It should be noted that if the Audit Committee ultimately decides to share certain investigation findings with the SEC or DOJ — for example, in the context of a cooperation strategy designed to secure favorable treatment for QIH — privilege may be selectively waived with respect to specific materials. The engagement structure should be designed to allow for controlled, partial disclosure that limits the scope of any waiver and avoids the "subject-matter waiver" problem that can arise from uncontrolled or indiscriminate disclosure.
B. D&O Insurance Considerations
QIH maintains directors and officers liability insurance through Sentinel Mutual Assurance Group. The relevant policies are:
• Primary Policy: SMA-EL-2025-07741 — $15,000,000 limit of liability — $1,000,000 self-insured retention
• Excess Policy: SMA-XS-2025-07742 — $25,000,000 excess of $15,000,000
Depending on the policy terms, Sentinel may have rights to approve or object to the retention of forensic advisors if the investigation costs implicate the D&O policy — specifically, if the Audit Committee seeks coverage for investigation costs under the entity-investigation or independent-investigation coverage grants that may exist under the primary policy. Additionally, Sentinel may have notice obligations triggered by the whistleblower complaint or the commencement of the investigation.
I recommend confirming with the Audit Committee, and through them with Pemberton Hale & Creighton LLP (which handles QIH's insurance coverage matters), whether notice to Sentinel is required at this stage and whether Claridge's retention requires Sentinel's prior approval. If coordination with Sentinel's claims contact, Patricia L. Munroe, becomes necessary, it should be conducted through C&H or through Pemberton Hale & Creighton to ensure that Claridge's retention does not jeopardize D&O coverage for investigation costs or any subsequent claims.
C. Coordination with External Auditor
As noted above, Kellner & Strauss LLP may need to review forensic findings in connection with its assessment of whether QIH's FY 2025 financial statements — filed with the SEC on February 21, 2026 with an unqualified audit opinion — require restatement. The timing and extent of any restatement analysis will depend on the investigation's findings, and it is premature to make determinations at this stage. However, it is important to anticipate the potential need to share certain Claridge work product with Kellner & Strauss and to plan for it in a manner that minimizes privilege risk.
Any sharing of Claridge's work product with Kellner & Strauss must be carefully managed to avoid waiver of attorney-client privilege and work-product protection. I recommend the following approach:
(a) Common-Interest or Joint-Defense Protocol. If sharing of Claridge's work product with Kellner & Strauss becomes necessary, a common-interest agreement or joint-defense protocol should be executed between C&H (on behalf of the Audit Committee), Kellner & Strauss, and their respective clients, establishing that the sharing of privileged materials is made in furtherance of a common legal interest and does not waive applicable privileges. The enforceability of such agreements varies by jurisdiction and should be carefully evaluated before any sharing occurs.
(b) Controlled Disclosure. Any materials shared with Kellner & Strauss should be specifically identified and documented, and the scope of sharing should be limited to the minimum necessary for Kellner & Strauss to fulfill its professional obligations. Blanket sharing of Claridge's entire work product should be avoided.
(c) Timing. The decision to share information with Kellner & Strauss should be deferred until the scoping phase is complete and C&H has formed a preliminary assessment of the investigation's findings. Premature sharing could compromise the investigation by alerting witnesses or subjects through informal channels.
IX. RECOMMENDATION
Based on the foregoing analysis, I recommend that Calderwood & Harkness retain Claridge Forensic Advisory LLC under the engagement structure described in Section VI above, to provide forensic accounting analysis and electronic discovery support for the scoping phase of the investigation into the anonymous whistleblower allegations concerning Ashgrove Equity Partners Specialty Underwriting, Inc.
Specifically, the engagement should be formalized through a written engagement letter between Calderwood & Harkness LLP and Claridge Forensic Advisory LLC, executed with the Audit Committee's authorization, specifying the following terms:
1. Reporting Structure. Claridge reports solely to Calderwood & Harkness LLP. All direction, communication, and deliverables flow through C&H. Claridge will not communicate with QIH management, BSU personnel, regulators, or third parties without C&H's prior written authorization.
2. Privilege and Work-Product Protection. All work performed by Claridge is attorney-directed work product prepared in anticipation of litigation. All Claridge deliverables will bear the applicable privilege legend and will be directed exclusively to C&H.
3. Scope of Work. The scope of Claridge's engagement for the scoping phase is as outlined in Section IV of this memorandum, encompassing forensic accounting analysis (commission-income ledger analysis, premium-flow tracing, and IBNR reserve-release preliminary review), counterparty verification, and electronic discovery (collection, processing, hosting, and initial analytics).
4. Budget. The approved budget for Claridge's scoping-phase support is $85,000 to $120,000. Material budget overruns require advance approval from the Responsible Partner.
5. Hourly Rates and Billing. Claridge will bill at the hourly rates set forth in Section V.A (Managing Director: $625/hr; Directors: $525/hr; Senior Consultants: $425/hr; Consultants: $350/hr; Analysts: $275/hr). Monthly invoices will be submitted to C&H for review and consolidation.
6. Confidentiality and Insider-Trading Obligations. Claridge will execute a standalone confidentiality and non-disclosure agreement and will comply with insider-trading restrictions applicable to QIHC securities, as described in Section VI.C.
I respectfully request Conrad Ashby's approval to finalize the Claridge engagement letter (a draft of which is attached hereto as Attachment B) and present it to Audit Committee Chair Priya Subramaniam for Audit Committee authorization. I propose that this authorization be sought concurrent with the initial Audit Committee briefing scheduled for the week of March 9, 2026, at which C&H will present its preliminary investigative plan and resource requirements to the full Audit Committee.
For reference, the total estimated scoping-phase cost is as follows:
This total falls within the expenditure parameters authorized by the Audit Committee in its resolution dated February 24, 2026. No additional authorization from the Audit Committee is required for the scoping phase, though the Audit Committee will be briefed on the specific engagement of Claridge and asked to confirm its authorization as part of the March 9 briefing.
X. ATTACHMENTS / ENCLOSURES (REFERENCED)
The following documents are referenced in and attached to this memorandum:
Attachment A: Claridge Forensic Advisory LLC — Firm Capabilities Overview (provided by Daniel J. Petrov, Managing Director, Claridge Forensic Advisory LLC)
Attachment B: Proposed Claridge Engagement Letter (draft, prepared by Calderwood & Harkness LLP, for review and comment by the Responsible Partner prior to finalization and Audit Committee authorization)
Attachment C: Claridge Conflicts-Check Confirmation (written confirmation from Daniel J. Petrov, Managing Director, Claridge Forensic Advisory LLC, dated February 26, 2026, confirming no conflicts with respect to the entities and individuals listed in Section VII)
Attachment D: Claridge Rate Schedule and Scoping-Phase Budget Estimate (detailed breakdown of proposed hourly rates, estimated hours by professional level and work category, and estimated e-discovery processing and hosting costs)
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Steven Hollander Lead Associate, White Collar Defense & Investigations 1221 Avenue of the Americas, 38th Floor New York, NY 10020 NY Bar #5681234
DISTRIBUTION: Conrad Ashby, Responsible Partner, White Collar Defense & Investigations, Calderwood & Harkness LLP — Internal C&H distribution only. This memorandum is not to be shared outside of Calderwood & Harkness LLP without the prior written approval of the Responsible Partner.