PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT PREPARED AT THE DIRECTION OF THE AUDIT COMMITTEE OF QUORUM INSURANCE HOLDINGS CORP.
MEMORANDUM
TO: Audit Committee of the Board of Directors of Quorum Insurance Holdings Corp.
Priya Subramaniam (Chair) Thomas K. Driscoll Angela F. Delvecchio
FROM: Calderwood & Harkness LLP
Conrad Ashby (Responsible Partner) Steven Hollander (Lead Associate) Jasmine Thornton (Working Associate)
DATE: February 27, 2026
RE: Proposed Scope of Internal Investigation — Whistleblower Allegations Concerning Ashgrove Equity Partners Specialty Underwriting, Inc.
Matter No.: 1025-00010
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I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H") has been engaged by the Audit Committee (the "Committee") of the Board of Directors of Quorum Insurance Holdings Corp. ("QIH" or the "Company") to scope and, if warranted, conduct an independent internal investigation arising from an anonymous whistleblower complaint received on February 14, 2026, through the Company's third-party compliance hotline administered by IntegriLine Compliance Services, Inc. The complaint has been assigned IntegriLine Intake Reference Number IL-QIH-2026-0214-0033.
The complaint alleges that senior executives at Ashgrove Equity Partners Specialty Underwriting, Inc. ("BSU"), a wholly owned subsidiary of QIH, engaged in a multi-year scheme involving three principal categories of misconduct: (a) the fabrication of binder confirmations through three allegedly fictitious or shell retail-broker counterparties to generate phantom placed premium; (b) the recognition of phantom commission income derived from those fabricated placements; and (c) the premature release of incurred-but-not-reported ("IBNR") loss reserves to inflate quarterly underwriting income. If accurate, the scheme would have spanned approximately ten quarters, from approximately the third quarter of 2023 through the fourth quarter of 2025.
The aggregate alleged financial misstatement is approximately $48.1 million, comprising approximately $9.6 million in phantom commission income and approximately $38.5 million in improper reserve releases. In the context of QIH's consolidated financial statements, this amount is material and, if substantiated, would raise significant questions under applicable securities laws and regulations, including the accuracy of the Company's periodic filings with the Securities and Exchange Commission ("SEC") and the certifications of senior management under the Sarbanes-Oxley Act of 2002 ("SOX").
Three BSU executives are named as subject individuals in the complaint: Garrett T. Lomax (President of BSU), Neil W. Stadler (Senior Vice President, Commercial Property Division), and Rhonda M. Kessler (Vice President, Finance & Operations).
This memorandum sets forth the proposed scope, workstreams, custodian identification, timeline, and budget for an initial four-to-six-week scoping phase. The objective of the scoping phase is to determine whether the allegations have sufficient credibility and substance to warrant a full investigation and, if so, to refine the parameters of that investigation, including its scope, resource requirements, and estimated cost.
No substantive investigative steps have yet been taken. The engagement was formally opened on February 27, 2026, following clearance of a comprehensive conflicts check on February 26, 2026. This memorandum constitutes attorney work product prepared at the direction of the Audit Committee and is subject to the protections of the attorney-client privilege and the work-product doctrine.
II. BACKGROUND
A. Quorum Insurance Holdings Corp.
Quorum Insurance Holdings Corp. is a Delaware corporation that is publicly traded on the Nasdaq Global Select Market under the ticker symbol QIHC. The Company's principal offices are located at 400 Atlantic Street, Suite 3200, Stamford, Connecticut 06901.
QIH operates as an insurance holding company with subsidiaries spanning specialty commercial lines, personal lines, insurtech platform operations, and wholesale brokerage. The Company's approximate market capitalization as of February 2026 was $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's senior management team includes the following officers relevant to this investigation:
•  Marcus P. Galvin, Chief Executive Officer
•  Denise R. Nakamura, Chief Financial Officer
•  Owen R. Hargrove, General Counsel and Secretary
The Company's external auditor is Kellner & Strauss LLP, with Howard M. Bressler serving as Lead Engagement Partner. Kellner & Strauss issued an unqualified opinion on QIH's consolidated financial statements for fiscal year 2025. The Company's appointed actuary is Linden Actuarial Consulting Group, where Margaret Y. Cho, FCAS, serves as the principal actuary responsible for the QIH engagement. The Company's transfer agent is Continental Ledger Services, Inc.
QIH maintains directors' and officers' ("D&O") liability insurance through Sentinel Mutual Assurance Group. The primary Tower A policy (Policy No. SMA-EL-2025-07741) provides $15 million in coverage with a $1 million retention. The excess Tower B policy (Policy No. SMA-XS-2025-07742) provides an additional $25 million in coverage. Both policies are currently in force and are relevant to the potential coverage of investigation costs and any resulting claims.
QIH's standing outside counsel for corporate governance and securities matters is Pemberton Hale & Creighton LLP, where Elaine R. Foxworth serves as the relationship partner.
The Company's fiscal year ends on December 31. QIH filed its annual report on Form 10-K for fiscal year 2025 with the SEC on February 21, 2026. At the time of the 10-K filing, the whistleblower complaint had been received but was still under initial review by the Company's General Counsel. No materiality determination had yet been made, and the complaint was not disclosed in the 10-K filing. The potential implications of this non-disclosure are addressed in Section VII of this memorandum and in a separate Preliminary Legal Issue Analysis memorandum.
B. Ashgrove Equity Partners Specialty Underwriting, Inc.
Ashgrove Equity Partners Specialty Underwriting, Inc. is a Connecticut corporation and a wholly owned subsidiary of QIH. BSU maintains its offices at 55 Elm Street, 8th Floor, Hartford, Connecticut 06103.
BSU operates as a wholesale insurance brokerage and managing general agent ("MGA"). Its primary business lines include commercial property, excess casualty, and professional liability insurance. For fiscal year 2025, BSU reported placed premium of approximately $487 million and commission and fee income of approximately $63.2 million. BSU employs approximately 120 individuals.
BSU's organizational leadership, insofar as relevant to this investigation, consists of the following individuals:
•  Garrett T. Lomax, President of BSU, who reports directly to QIH CEO Marcus P. Galvin. Lomax joined BSU in 2018 and has served as President since that time. His estimated fiscal year 2025 total compensation was approximately $1,095,000, comprising a base salary of $685,000 and a performance bonus of $410,000.
•  Neil W. Stadler, Senior Vice President, Commercial Property Division, who reports to Lomax. Stadler joined BSU in 2020 and is responsible for overseeing the division within which the alleged fictitious placements occurred. His estimated fiscal year 2025 total compensation was approximately $615,000, comprising a base salary of $385,000 and a performance bonus of $230,000.
•  Rhonda M. Kessler, Vice President, Finance & Operations, who reports to Lomax. Kessler joined BSU in 2019 and is responsible for BSU's financial operations, including accounting, commission processing, and financial reporting to QIH at the subsidiary level. Her estimated fiscal year 2025 total compensation was approximately $435,000, comprising a base salary of $290,000 and a performance bonus of $145,000.
All three individuals are named as subject individuals in the whistleblower complaint, as discussed in greater detail in Section III below.
C. Procedural History of the Whistleblower Complaint
The following timeline summarizes the procedural history of the whistleblower complaint from its receipt through the formal opening of this engagement:
February 14, 2026. An anonymous complaint was submitted through the online portal maintained by IntegriLine Compliance Services, Inc., QIH's third-party compliance hotline provider. The complaint was assigned Intake Reference Number IL-QIH-2026-0214-0033. The submission consisted of an online text submission accompanied by two attached PDF documents, described by the complainant as sample binder confirmations. No voice recording was made; the complaint was submitted entirely in written form through the secure online portal.
February 17, 2026. In accordance with the Company's established escalation protocol, IntegriLine escalated the complaint to QIH General Counsel Owen R. Hargrove. The escalation was triggered by the complaint's reference to potential financial fraud and its identification of senior executives, which met the threshold criteria in the Company's protocol for direct escalation to the General Counsel.
February 19, 2026. Hargrove briefed Audit Committee Chair Priya Subramaniam on the substance of the complaint in a confidential telephone call. Hargrove conveyed his preliminary assessment that the complaint contained a degree of specificity warranting further review and recommended that the Committee consider engaging independent outside counsel. Subramaniam directed Hargrove to circulate the complaint materials to the other Committee members and to convene a special meeting.
February 24, 2026. A special telephonic meeting of the Audit Committee was convened. All three members of the Committee — Chair Subramaniam, Mr. Driscoll, and Ms. Delvecchio — were present and participated. QIH General Counsel Hargrove attended as a non-voting participant to brief the Committee on the complaint. Following discussion, the Committee unanimously resolved to engage independent outside counsel to scope and, if warranted, conduct an internal investigation into the allegations. The Committee authorized Chair Subramaniam to execute the engagement letter on behalf of the Committee. The Committee further directed that the investigation would report exclusively to the Committee and that the Committee would retain sole authority over privilege decisions related to the investigation.
February 25, 2026. C&H initiated a comprehensive conflicts check across all relevant parties, including QIH, BSU, the three named subject individuals, the three alleged fictitious broker counterparties, the Company's external auditor, its appointed actuary, its D&O insurer, and other relevant entities and individuals.
February 26, 2026. The conflicts check was cleared. No disqualifying conflicts were identified. C&H confirmed its clearance to the Committee through Chair Subramaniam.
February 27, 2026. The engagement was formally opened. C&H issued a signed engagement letter, a Privilege and Communication Protocol, and this Investigation Scoping Memorandum. The scoping phase commenced as of this date.
III. SUMMARY OF THE WHISTLEBLOWER ALLEGATIONS
A. Overview of the Complaint
The whistleblower complaint comprises a four-page written narrative accompanied by two sample binder-confirmation PDFs. The PDFs have been redacted of personal metadata, which limits the ability to trace them to a particular individual or workstation based on the documents themselves. The complaint was submitted anonymously, and the identity of the complainant is not known at this time.
The anonymous complainant alleges that senior personnel at BSU engaged in a multi-year scheme spanning approximately ten quarters, from approximately the third quarter of 2023 through the fourth quarter of 2025. The scheme, as described in the complaint, involved the fabrication of commercial property policy placements through fictitious or shell retail-broker counterparties, the recognition of commission income on those fabricated placements, and the premature release of IBNR loss reserves. The complaint names three specific BSU executives as responsible for the scheme and identifies three specific broker counterparties through which the alleged fictitious placements were channeled. Each of these elements is addressed in greater detail below.
B. Fictitious Policy Placements
The complainant alleges that BSU personnel fabricated or materially inflated binder confirmations for commercial property policies. According to the complaint, these fabricated binder confirmations were generated to create the appearance that BSU had placed genuine insurance policies on behalf of retail-broker clients, when in fact no such underlying policies existed or the actual placed premium was materially less than the amounts reflected in BSU's records.
The complaint identifies at least three retail-broker counterparties through which the fabricated placements were allegedly channeled:
1.  Veltrano Risk Advisors — The complainant asserts that this entity lacks a valid surplus-lines license in any state and that its listed business address is a virtual-office facility.
2.  Halloran & Pratt Insurance Associates — The complainant similarly asserts that this entity lacks valid licensure and operates from a virtual-office address.
3.  CrestPoint Brokerage LLC — The complainant alleges that this entity is a shell company with no genuine insurance brokerage operations and no identifiable employees.
The complaint references approximately 147 binder confirmations across the ten-quarter scheme period that are allegedly associated with these three counterparties. The two sample binder-confirmation PDFs attached to the complaint reflect policies with an aggregate placed-premium face value of approximately $12.4 million. The complainant asserts that the total fictitious placed premium across the entire scheme period was approximately $74 million.
At BSU's approximate average commission rate of thirteen percent (13%), fictitious placed premium of $74 million would generate approximately $9.6 million in phantom commission income ($74,000,000 × 0.13 = $9,620,000, rounded to $9.6 million). The complainant expressly identifies this figure as the approximate magnitude of the phantom commission income.
C. Improper IBNR Reserve Releases
In addition to the fabrication of policy placements, the complainant alleges that BSU senior personnel directed the premature release of approximately $38.5 million in IBNR loss reserves. According to the complaint, these reserve releases were made without adequate actuarial support and were intended to inflate BSU's quarterly underwriting income, thereby improving the financial performance reported to QIH at the parent-company level and, ultimately, to the investing public through QIH's consolidated financial statements.
The complainant states that the improper reserve releases were concentrated in two specific quarters: the fourth quarter of 2024 and the second quarter of 2025. The complaint does not specify the precise dollar amount attributable to each of these quarters but identifies the aggregate release across both periods as approximately $38.5 million. The complaint alleges that the reserve releases were not supported by the actuarial analysis conducted by QIH's appointed actuary, Linden Actuarial Consulting Group, and that BSU senior personnel overrode or ignored actuarial recommendations regarding the appropriate level of reserves.
D. Named Subject Individuals
The complaint identifies three specific BSU executives as the individuals responsible for the alleged scheme:
The complainant describes Lomax as the architect and principal beneficiary of the scheme, with Stadler responsible for generating the fabricated binder confirmations through the Commercial Property Division and Kessler responsible for ensuring the phantom commission income was properly recorded in BSU's financial systems and for facilitating the improper reserve releases. The complaint does not identify any additional participants by name but notes the possibility that other BSU personnel may have been aware of or complicit in the scheme.
E. Estimated Financial Magnitude
The total estimated financial magnitude of the allegations, as set forth in the complaint, is as follows:
•  Alleged phantom commission income: approximately $9.6 million
•  Alleged improper IBNR reserve releases: approximately $38.5 million
•  Aggregate alleged financial misstatement: approximately $48.1 million
To place these figures in context, BSU's fiscal year 2025 commission and fee income was $63.2 million. The alleged phantom commission income of $9.6 million, if spread across the approximately ten-quarter scheme period, would represent a significant portion of BSU's commission revenue — on an annualized basis, approximately $3.84 million per year, or roughly six percent of BSU's annual commission and fee income. However, the timing distribution of the alleged phantom income across the scheme period is not specified in the complaint and could be uneven, with individual quarters potentially reflecting a higher percentage.
The combined alleged misstatement of approximately $48.1 million is material relative to QIH's consolidated financial statements. QIH reported net earned premium of approximately $2.41 billion for fiscal year 2025. While the $48.1 million figure represents a modest percentage of consolidated revenue, it is significant in relation to QIH's consolidated net income and, depending on the timing of the misstatements, could have materially affected the Company's reported earnings per share in one or more reporting periods.
F. Preliminary Assessment of Complaint Credibility
Without having conducted any substantive investigative steps, we offer the following preliminary assessment of the complaint's credibility based solely on the face of the complaint itself and the attachments.
The complaint demonstrates a level of specificity that is notable and distinguishes it from vague or conclusory allegations. The complainant: (a) identifies three specific broker counterparties by name; (b) references approximately 147 specific binder confirmations; (c) provides two sample binder-confirmation PDFs; (d) identifies specific quarters in which improper reserve releases allegedly occurred; (e) names three specific BSU executives and describes their respective roles in the alleged scheme; and (f) cites approximate dollar figures for placed premium, commission income, and reserve releases that are internally consistent and facially plausible given BSU's known financial profile.
This level of specificity suggests that the complainant has or had access to BSU's operational and financial records. The complainant appears to possess detailed knowledge of BSU's commercial property placement processes, its commission-income accounting, and its reserve governance. This is consistent with the complainant being a current or former employee of BSU or, potentially, a current or former employee of QIH with access to subsidiary-level data.
We emphasize, however, that specificity does not confirm accuracy. The allegations remain untested and unverified. It is possible that the complainant has compiled publicly available information, misunderstood legitimate business practices, or has a personal grievance that has colored his or her characterization of events. The scoping phase is designed precisely to test the credibility and substance of these allegations before committing to a full investigation.
Open questions regarding the complainant include, among others: the complainant's identity; his or her current or former role at BSU, QIH, or another entity; the complainant's motivation for filing the complaint; the extent of his or her direct, personal knowledge of the alleged scheme as opposed to secondhand information; and whether the complainant has made or intends to make any filing with the SEC or other regulatory body.
IV. PROPOSED INVESTIGATION SCOPE
A. Overarching Objectives
The proposed investigation is designed to accomplish six principal objectives, which will guide the scoping phase and, if a full investigation is warranted, the full investigation:
1.  Determine the authenticity of policy placements. Determine whether BSU personnel fabricated or materially inflated binder confirmations and recognized commission income on fictitious or inflated commercial property policy placements, including but not limited to placements attributed to Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC.
2.  Assess the propriety of reserve releases. Determine whether IBNR loss reserves were prematurely or improperly released, including whether any such releases departed from actuarial recommendations or lacked adequate governance approval.
3.  Identify responsible individuals. Identify the individuals responsible for any misconduct, determine the scope of their involvement, and assess whether any individuals beyond the three named subject individuals participated in, facilitated, or were aware of the alleged scheme.
4.  Quantify financial impact. Quantify the financial impact of any confirmed misconduct on BSU's subsidiary-level financial statements and on QIH's consolidated financial statements, including the identification of specific reporting periods affected and the magnitude of the misstatement in each period.
5.  Evaluate internal controls. Assess the adequacy of QIH's and BSU's internal controls over financial reporting ("ICFRR") in the areas relevant to the allegations, including broker onboarding, binder-confirmation generation, commission-income recognition, and IBNR reserve governance.
6.  Inform regulatory and disclosure assessments. Provide the Audit Committee with the factual foundation necessary to assess the Company's potential regulatory, disclosure, and litigation obligations, including the need for restatement of previously filed financial statements, the filing of a current report on Form 8-K, voluntary disclosure to regulators, and the adequacy of the Company's D&O insurance coverage.
B. Proposed Workstreams
To accomplish these objectives, we propose to organize the investigation into five principal workstreams. During the scoping phase, each workstream will be pursued at a level sufficient to assess the credibility and scope of the allegations and to develop a recommendation regarding the need for a full investigation. If a full investigation is warranted, each workstream will be expanded accordingly.
Workstream 1: Document Collection and Review
Objective. The objective of this workstream is to identify, collect, preserve, and review documents and electronically stored information ("ESI") relevant to the whistleblower allegations. Comprehensive document collection is the foundation of any effective internal investigation, and early identification and preservation of relevant materials is essential both to the integrity of the investigation and to compliance with the Company's document-preservation obligations.
Key Document Categories. The following categories of documents have been identified as relevant to the allegations and will be the subject of collection and review during the scoping phase. Additional categories may be identified as the investigation progresses.
•  All binder confirmations issued by BSU for commercial property placements from January 1, 2023 to the present, with particular focus on placements attributed to Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC.
•  BSU's commission-income ledger for fiscal years 2023, 2024, and 2025, including all entries reflecting commission income recognized on placements attributed to the three alleged fictitious brokers.
•  Correspondence of identified custodians, including email, instant messages (including any communications via Northgate Data Systems, Meridian Solutions, or other messaging platforms in use at BSU or QIH), text messages, and other electronic communications relating to the three alleged fictitious brokers and to IBNR reserve-setting and reserve-release activity.
•  Broker agreements, agency contracts, and onboarding documentation for Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC, including any due-diligence questionnaires, compliance certifications, or license verification records.
•  BSU's new-broker due-diligence files generally, to understand the standard onboarding process and assess whether the process was followed, circumvented, or waived with respect to the three alleged brokers.
•  Premium-flow records, including bank-account statements, wire-transfer records, ACH transaction records, and commission-payment records reflecting premium collections from, and commission payments to, the three alleged brokers.
•  IBNR reserve schedules maintained by QIH and by Linden Actuarial Consulting Group (contact: Margaret Y. Cho, FCAS) for the relevant periods, including reserve recommendations, management adjustments, and approval records.
•  Board and committee materials (board of directors and audit committee) addressing BSU performance, reserve adequacy, underwriting results, and financial results for fiscal years 2023, 2024, and 2025.
•  QIH internal audit reports and workpapers touching BSU for fiscal years 2023, 2024, and 2025, including any audit findings, recommendations, or management responses related to the areas at issue.
•  BSU organizational chart and reporting-structure documentation, including any changes to organizational structure or reporting relationships during the scheme period.
E-discovery Approach. We propose to engage Claridge Forensic Advisory LLC ("Claridge") under C&H's direction to handle the forensic collection, processing, hosting, and production of ESI. Daniel J. Petrov, Managing Director, would serve as the lead Claridge consultant on this engagement. The Claridge engagement would be structured as a consulting-expert engagement, retained under the umbrella of C&H's engagement with the Audit Committee, to maximize work-product protection over the ESI collection process, processing protocols, search terms, and review decisions. Claridge would collect ESI from identified custodians' email accounts, network drives, local drives, mobile devices, and any cloud-based storage platforms. The collected data would be processed, de-duplicated, and loaded into a document-review platform for review by C&H attorneys using search terms and technology-assisted review ("TAR") methodologies as appropriate.
Initial Volume Estimate. Subject to refinement during the scoping phase based on actual custodian identification and collection, we preliminarily estimate that the initial collection will cover eight to twelve custodians and may yield approximately 200,000 to 500,000 documents before the application of search-term filters, date restrictions, and relevance-based culling. Following filtering, we expect the reviewable population to be substantially smaller, though the precise volume will depend on the specificity and effectiveness of the search terms developed in consultation with the investigation team.
Workstream 2: Forensic Accounting Analysis of Commission Income and Reserve Releases
Objective. The objective of this workstream is to reconstruct and test BSU's commission-income recognition and IBNR reserve-release entries for accuracy, completeness, and conformity with applicable accounting standards, including generally accepted accounting principles ("GAAP") and any industry-specific statutory accounting principles ("SAP") applicable to QIH's insurance subsidiaries.
Key Analyses. The forensic accounting analysis will encompass the following principal areas of inquiry:
•  Commission-Income Tracing. Trace all commission income recognized on placements attributed to the three alleged fictitious brokers from the initial binder confirmations through the policy-issuance records, premium-collection records, commission-calculation worksheets, and revenue-recognition entries in BSU's general ledger, and ultimately through the consolidation process into QIH's consolidated financial statements. This tracing will identify whether commission income was in fact recognized, the amounts recognized, the periods in which recognition occurred, and the general-ledger accounts and journal entries through which the income was recorded.
•  Anomaly Detection. Compare placed-premium volumes attributed to the three alleged brokers against industry norms and BSU's own historical production data. Anomalies such as unusually rapid growth in placement volume from newly onboarded brokers, placement concentrations in particular policy types or coverage limits, and premium amounts that deviate from market norms may corroborate or undermine the allegations.
•  Reserve-Release Analysis. Analyze IBNR reserve-release entries for the fourth quarter of 2024 and the second quarter of 2025 — the two quarters specifically identified by the complainant — and for all other quarters from the third quarter of 2023 through the fourth quarter of 2025. Compare actual reserve-release entries against actuarial recommendations from Linden Actuarial Consulting Group to determine whether reserve releases were consistent with actuarial support or departed from such recommendations.
•  Quantification of Discrepancies. Quantify any discrepancies between recorded reserve releases and actuarial-supported release levels, both in aggregate and by quarter, to determine the magnitude of any unsupported or improperly timed releases.
•  Governance Review. Assess whether recorded reserve releases were approved through normal governance channels — including sign-off by the appointed actuary, review by QIH's Chief Financial Officer or Controller, and presentation to the Audit Committee — or were unilateral actions taken by BSU management without appropriate approval.
•  Aggregate Financial Impact. Determine the aggregate financial impact of any irregularities identified, including the effect on QIH's reported revenue, net income, earnings per share, and equity in each affected reporting period. This analysis will inform the assessment of potential restatement requirements.
Proposed Resource. Claridge Forensic Advisory LLC will perform the core forensic accounting work under C&H's direction. Claridge's team includes certified public accountants and certified fraud examiners with experience in insurance-industry accounting, reserve analysis, and financial-statement fraud investigations. Claridge's work will be documented in work papers that are prepared at the direction of counsel and are subject to work-product protection.
Workstream 3: Verification of Broker Licenses and Counterparty Existence
Objective. The objective of this workstream is to determine whether Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC are legitimate, licensed insurance brokerage entities engaged in bona fide business operations, or whether they are fictitious entities, shell companies, or entities that, while nominally existing, lack genuine business operations and may have been created or used in furtherance of the alleged scheme.
Key Steps. The verification process will involve the following investigative steps:
•  Surplus-Lines License Verification. Search surplus-lines license databases maintained by the Connecticut Insurance Department, the New York State Department of Financial Services, and other relevant state insurance departments to determine whether any of the three entities holds or has ever held a valid surplus-lines license or any other form of insurance-producer license.
•  Corporate Filings. Search the Connecticut Secretary of the State's records, and the secretary-of-state or equivalent records in New York and other potentially relevant jurisdictions, for incorporation, formation, or registration records for each of the three entities. This will establish whether the entities were formally organized, when they were organized, their registered agents, their officers and members, and their current status (active, inactive, dissolved, or otherwise).
•  Physical Address Verification. Verify the physical addresses listed for each of the three entities. The complainant alleges that the addresses are virtual-office locations. We will investigate whether the listed addresses correspond to co-working spaces, virtual-office providers, or mail-forwarding services, and whether there is any evidence of actual business operations at those locations.
•  NAIC and Regulatory Database Searches. Search the National Association of Insurance Commissioners ("NAIC") database, relevant state insurance department databases, and industry databases such as the National Insurance Producer Registry ("NIPR") for producer records associated with each entity and its principals.
•  BSU Records Review. Review any broker agreements, agency contracts, due-diligence files, onboarding questionnaires, compliance certifications, or license-verification records in BSU's possession relating to the three entities. This will allow us to assess whether BSU conducted any due diligence before entering into business relationships with these entities and, if so, the nature and adequacy of that due diligence.
•  Payment-Flow Analysis. Identify the bank accounts to which BSU made commission payments in connection with placements attributed to the three alleged brokers. Working with Claridge, we will seek to determine the beneficial ownership of those bank accounts and whether the payment flows are consistent with arm's-length transactions between BSU and independent brokerage counterparties or, alternatively, suggest that funds were directed to accounts controlled by the subject individuals or their associates.
•  Beneficial-Ownership Investigation. If the entities are confirmed to exist as formal legal entities (i.e., they are registered with a secretary of state or equivalent), we will investigate whether they have any genuine business operations, any identifiable employees, any other insurance-industry business relationships, and any relationship — direct or indirect — to the three named subject individuals or their family members, associates, or affiliates.
Workstream 4: Custodian Interviews
Objective. The objective of this workstream is to obtain testimony from relevant individuals to develop facts concerning the allegations, assess the credibility of the whistleblower complaint, and identify additional sources of documentary and testimonial evidence.
Phased Approach. Consistent with standard practice for investigations of this nature, we propose to conduct witness interviews in a phased sequence. During the scoping phase, interviews will be limited to background and contextual interviews with non-subject personnel. Substantive fact-witness interviews and interviews of the named subject individuals will be deferred to the full investigation phase, if warranted.
Phase 1 — Background and Contextual Interviews (Scoping Phase). During the scoping phase, we will conduct approximately three to five interviews with non-subject BSU personnel selected to provide a foundation of understanding regarding BSU's business operations, broker-onboarding processes, binder-confirmation generation and validation procedures, commission-income recognition workflows, and IBNR reserve governance. These interviews will be designed to establish baseline factual knowledge and to identify areas requiring further investigation, without alerting the subject individuals to the specifics of the investigation. Interviewees may include BSU operations or compliance staff responsible for broker onboarding, underwriting personnel familiar with the Commercial Property Division's placement processes, and BSU or QIH accounting personnel responsible for commission-income recording.
Phase 2 — Substantive Fact-Witness Interviews (Full Investigation Phase). If a full investigation is warranted, Phase 2 will involve a broader set of interviews with BSU operational personnel, QIH finance and accounting personnel, and, as appropriate, personnel at Linden Actuarial Consulting Group and Kellner & Strauss LLP. These interviews will be designed to develop substantive facts regarding the alleged scheme, the roles of specific individuals, the adequacy of internal controls, and the financial impact of any misconduct.
Phase 3 — Subject-Individual Interviews (Full Investigation Phase). Interviews with the three named subject individuals — Garrett T. Lomax, Neil W. Stadler, and Rhonda M. Kessler — will be conducted during the full investigation phase, typically after document review and other witness interviews are substantially complete. This sequencing allows the investigation team to maximize the effectiveness of subject-individual interviews by confronting interviewees with documentary evidence and factual information developed through prior workstreams. Each subject individual will receive Upjohn/corporate Miranda warnings in accordance with the Privilege and Communication Protocol.
Interview Protocols. All interviews will be conducted in accordance with the Privilege and Communication Protocol dated February 27, 2026. At the outset of every interview, Upjohn warnings will be administered to inform the witness that: (a) C&H represents the Audit Committee and QIH as the corporate entity, and not the individual witness; (b) the communication is protected by the attorney-client privilege, but the privilege belongs to the Company, not to the individual; (c) the Company, through the Audit Committee, may choose to waive the privilege and disclose the contents of the interview to third parties, including regulators, without the individual's consent; and (d) the individual is free to retain his or her own personal counsel at his or her own expense. Detailed interview memoranda will be prepared promptly following each interview and maintained as attorney work product.
Workstream 5: Assessment of Internal Controls and SOX Implications
Objective. The objective of this workstream is to evaluate the design and operating effectiveness of QIH's and BSU's internal controls over financial reporting ("ICFRR") in the areas relevant to the whistleblower allegations. This assessment is critical both to understanding how the alleged misconduct may have occurred undetected and to informing the Company's potential obligations under the Sarbanes-Oxley Act.
Key Areas of Focus. The ICFRR assessment will focus on the following areas:
•  Broker Onboarding Controls. Review the design and operation of controls over the onboarding of new broker counterparties at BSU, including due-diligence procedures, license-verification requirements, credit checks, background checks, and the approval process for establishing new broker relationships. Assess whether these controls, as designed, would have been sufficient to detect fictitious or shell broker entities, and whether the controls were operating effectively during the scheme period.
•  Binder-Confirmation Controls. Review the design and operation of controls over the generation, review, validation, and reconciliation of binder confirmations at BSU. Assess whether binder confirmations are independently verified against carrier records, whether confirmations are reconciled against premium-collection data, and whether any independent review or audit of binder-confirmation activity occurs.
•  Commission-Income Recognition Controls. Review the design and operation of controls over the recognition of commission income at BSU, including segregation of duties between personnel who generate binder confirmations, personnel who record commission income, and personnel who authorize commission payments. Assess whether commission-income recognition is independently verified against source documentation and whether BSU's accounting personnel perform any analytical review of commission-income trends.
•  IBNR Reserve Controls. Review the design and operation of controls over IBNR reserve-setting and reserve-release approvals at BSU and QIH. Assess the respective roles of BSU management, QIH management, the appointed actuary (Linden Actuarial Consulting Group), and the Audit Committee in the reserve governance process. Determine whether reserve releases require specific levels of approval and whether any individual has the ability to override actuarial recommendations without independent review.
•  Entity-Level Controls. Evaluate the interaction between BSU subsidiary-level controls and QIH entity-level controls, including the consolidation process, management review of subsidiary financial results, variance analysis, and the internal audit function's role in monitoring BSU's financial reporting.
•  Management's ICFRR Evaluation. Review QIH management's annual evaluation of ICFRR for fiscal years 2023, 2024, and 2025, including any testing of controls in the areas relevant to the allegations and any identified deficiencies.
•  SOX Certifications. Review the SOX Section 302 and Section 906 certifications signed by CEO Marcus P. Galvin and CFO Denise R. Nakamura for fiscal year 2025 and, as applicable, prior fiscal years. If the allegations are substantiated, these certifications may have been inaccurate, potentially giving rise to personal liability for the certifying officers.
•  Material Weakness Assessment. Assess whether any identified control deficiency constitutes a material weakness or a significant deficiency in ICFRR. A material weakness finding would have significant implications, including the potential need for disclosure in the Company's periodic filings and the potential impact on the external auditor's opinion.
•  External Audit Implications. Consider the implications for the external audit performed by Kellner & Strauss LLP, which issued an unqualified opinion on QIH's fiscal year 2025 consolidated financial statements and an unqualified opinion on the effectiveness of QIH's ICFRR. If the investigation reveals material control deficiencies or financial misstatements, coordination with Kellner & Strauss regarding the auditor's assessment of the impact on previously issued opinions will be necessary.
V. PROPOSED CUSTODIANS FOR INITIAL DOCUMENT HOLD AND COLLECTION
A. Custodian List
Based on the allegations contained in the whistleblower complaint and the organizational structure of BSU and QIH, we have identified approximately eight to twelve custodians for the initial document-preservation hold and ESI collection. The final custodian list will be refined during the first week of the scoping phase as additional information becomes available regarding BSU's organizational structure, reporting relationships, and the identities of individuals holding relevant functional roles.
The following table sets forth the proposed initial custodian list:
The custodian list is designed to capture documents and communications from individuals at multiple levels of both BSU and QIH, including the named subject individuals, individuals with functional responsibility for the processes at issue (broker onboarding, commission accounting, reserve governance), and senior QIH management personnel with oversight responsibility. We anticipate that the list may be expanded or narrowed as the investigation progresses and as additional relevant individuals are identified or existing custodians are determined to have limited relevant materials.
B. Document-Preservation Hold
A draft Document Preservation and Litigation Hold Notice (the "Hold Notice") has been prepared separately and is available for the Audit Committee's review. The Hold Notice is intended for issuance by QIH General Counsel Owen R. Hargrove to all identified custodians and to other personnel with responsibility for the Company's information-technology systems, document-management systems, and backup and archiving protocols.
The Hold Notice covers all documents and ESI relating to the following categories of materials:
•  Commercial property policy placements brokered by BSU from January 1, 2023 to the present.
•  Binder confirmations, policy documents, coverage summaries, and placement records.
•  Commission income records, calculations, ledger entries, and journal entries.
•  IBNR reserve schedules, reserve-release entries, actuarial recommendations, and reserve governance records.
•  Communications with, about, or concerning Veltrano Risk Advisors, Halloran & Pratt Insurance Associates, and CrestPoint Brokerage LLC.
•  Due-diligence files, broker-onboarding records, licensing documentation, and compliance records relating to those three entities.
•  Premium-flow records, bank-account statements, wire-transfer records, and commission-payment records relating to those three entities.
We recommend that the Hold Notice be issued immediately upon Audit Committee approval. In addition, QIH should suspend any routine document-destruction, auto-deletion, or records-retention policies that could result in the destruction of in-scope materials. This includes automatic email-deletion policies, backup-tape recycling schedules, and any pending records-disposal actions. The IT department at both BSU and QIH should be instructed to preserve all backup media and to disable any automated destruction protocols for in-scope data.
VI. THIRD-PARTY COORDINATION
A. Claridge Forensic Advisory LLC
We propose to engage Claridge Forensic Advisory LLC for forensic accounting analysis and electronic discovery support. Daniel J. Petrov, Managing Director, would serve as the lead Claridge consultant on this engagement. Claridge's offices are located at 101 Park Avenue, 26th Floor, New York, New York 10178.
Claridge has significant experience in insurance-industry fraud investigations, financial-statement fraud analysis, and large-scale ESI collection and processing. Claridge's team includes certified public accountants, certified fraud examiners, and e-discovery specialists with the technical capabilities necessary to support the forensic accounting and document-collection workstreams described in Section IV above.
The Claridge engagement will be structured under the direction and at the request of C&H, as counsel to the Audit Committee, to maximize work-product protection over Claridge's analyses, findings, and reports. Claridge will be retained as a consulting expert within the meaning of Federal Rule of Civil Procedure 26(b)(4)(D), and its work product will be treated as non-testifying expert materials prepared at the direction of counsel. A separate memorandum evaluating the proposed Claridge retention, including an assessment of Claridge's qualifications and any potential conflicts, has been prepared and is available for the Committee's review.
The estimated scoping-phase budget for Claridge is $85,000 to $120,000, which covers forensic accounting analysis, ESI collection from identified custodians, data processing, de-duplication, hosting on a document-review platform, and ongoing technical support during the scoping phase.
B. Pemberton Hale & Creighton LLP (Standing Outside Counsel)
Pemberton Hale & Creighton LLP will continue to advise QIH on corporate governance, SEC disclosure, and other securities-law matters in its capacity as the Company's standing outside counsel. Elaine R. Foxworth serves as the relationship partner. C&H's role as investigation counsel is distinct from Pemberton Hale's ongoing advisory role, and the two engagements will be maintained as separate matters with appropriate information-sharing protocols.
C&H will coordinate with Pemberton Hale on the following matters as they arise:
•  Potential Form 8-K disclosure timing, including the assessment of whether and when the Company has an obligation to disclose the existence of the investigation or the substance of the allegations.
•  Any required amendment or restatement of the fiscal year 2025 Form 10-K, which was filed on February 21, 2026.
•  Other securities-law considerations, including insider-trading blackout considerations, Regulation FD implications, and the Company's obligations under Nasdaq listing standards.
Information sharing between C&H and Pemberton Hale will be consistent with privilege protections and will be governed by the information-sharing provisions of the Privilege and Communication Protocol. To the extent that C&H and Pemberton Hale share confidential investigation-related information, such sharing will be conducted under a common-interest framework to preserve applicable privileges.
C. Kellner & Strauss LLP (External Auditor)
Kellner & Strauss LLP, with Howard M. Bressler serving as Lead Engagement Partner, is QIH's external auditor. Kellner & Strauss maintains offices at 345 Park Avenue, 18th Floor, New York, New York 10154. Kellner & Strauss issued an unqualified opinion on QIH's consolidated financial statements for fiscal year 2025 and an unqualified opinion on the effectiveness of QIH's internal controls over financial reporting for the same fiscal year.
If the investigation reveals potential misstatements in audited financial statements, coordination with Kellner & Strauss will be necessary with respect to several critical issues:
•  The auditor's assessment of the impact of any identified misstatements on previously issued audit opinions, including whether the unqualified opinion for fiscal year 2025 (and potentially prior fiscal years) remains appropriate.
•  Potential restatement requirements under GAAP, including the application of ASC 250 (Accounting Changes and Error Corrections) and the determination of whether any misstatements are material on a quantitative or qualitative basis.
•  The auditor's own professional obligations under PCAOB standards, including the auditor's obligations upon becoming aware of subsequently discovered facts that existed at the date of the audit report (AU Section 561 / AS 2905) and the auditor's obligations with respect to illegal acts (AU Section 317 / AS 2405).
The timing and manner of communication with Kellner & Strauss will be determined in consultation with the Audit Committee. There is an inherent tension between the need to promptly inform the external auditor of potential misstatements and the desire to preserve privilege and avoid premature disclosure of incomplete investigative findings. We will work with the Committee to develop an appropriate communication strategy that balances these considerations. During the scoping phase, we do not anticipate the need for direct communication with Kellner & Strauss unless initial findings indicate a high probability of material misstatement, in which case early notification may be advisable.
D. Linden Actuarial Consulting Group (Appointed Actuary)
Linden Actuarial Consulting Group, with Margaret Y. Cho, FCAS, serving as the principal actuary on the QIH engagement, maintains the IBNR reserve schedules and provides actuarial reserve recommendations that are a critical component of QIH's reserve governance process. Linden's offices are located at 280 Trumbull Street, Suite 900, Hartford, Connecticut 06103.
During the forensic accounting workstream, C&H and Claridge will need to obtain and analyze Linden's actuarial reserve recommendations for each quarter during the scheme period and compare those recommendations against actual reserve-release entries recorded by BSU and QIH. This analysis is central to the assessment of whether reserve releases were actuarially supported or whether BSU management departed from actuarial recommendations.
Direct contact with Linden may be necessary during the scoping phase to understand the reserve governance process, including the methodology used by Linden to develop reserve recommendations, the format and timing of Linden's deliverables to QIH management and the Audit Committee, and the process by which any management adjustments to Linden's recommendations were made, documented, and approved. We will coordinate the timing and scope of any contact with Linden through the Audit Committee to ensure consistency with the investigation's privilege framework.
E. Sentinel Mutual Assurance Group (D&O Insurer)
QIH maintains directors' and officers' liability insurance through Sentinel Mutual Assurance Group. Patricia L. Munroe, Vice President, Executive Liability Claims, is the designated claims contact at Sentinel. Sentinel's offices relevant to this matter are located at 200 Clarendon Street, Suite 4400, Boston, Massachusetts 02116.
Timely notice of the whistleblower complaint and the investigation should be given to Sentinel under both the primary Tower A policy (Policy No. SMA-EL-2025-07741, $15 million limit, $1 million retention) and the excess Tower B policy (Policy No. SMA-XS-2025-07742, $25 million limit). Most D&O policies require notice of claims or potential claims as soon as practicable, and failure to provide timely notice may jeopardize coverage.
A draft notice letter has been prepared separately and is available for the Audit Committee's review and approval before dispatch. The notice letter describes the whistleblower complaint, identifies the named subject individuals, summarizes the nature of the allegations, and preserves the Company's rights under the policies. The letter does not waive any rights or make any admissions.
We note that the engagement of C&H and the costs of the investigation may implicate the $1,000,000 retention under the primary Tower A policy. The Audit Committee should be aware that investigation costs incurred prior to exhaustion of the retention will be borne by the Company, and that coverage for investigation costs may be subject to certain policy terms and conditions, including any requirement for prior insurer consent to the selection of counsel and to fee rates. We recommend that the notice letter include a request for Sentinel's acknowledgment that C&H's engagement and fee structure are acceptable under the policy terms.
VII. REGULATORY, DISCLOSURE, AND LEGAL CONSIDERATIONS (SUMMARY)
The following is a summary of the principal regulatory, disclosure, and legal considerations arising from the whistleblower allegations. A separate Preliminary Legal Issue Analysis memorandum addresses these considerations in greater detail. The discussion below is intended to inform the Audit Committee's understanding of the legal landscape and to highlight issues that will require ongoing assessment as the investigation progresses.
SEC Disclosure. QIH's annual report on Form 10-K for fiscal year 2025 was filed with the SEC on February 21, 2026, without disclosure of the whistleblower complaint. At the time of filing, the complaint was still under initial review by the General Counsel, no independent counsel had been engaged, and no materiality determination had been made. If the scoping phase reveals a reasonable possibility that the allegations are substantiated, QIH may need to file a current report on Form 8-K to disclose the existence of the investigation and the potential financial impact. In addition, the Company may need to consider whether an amendment or restatement of previously filed financial statements — including the fiscal year 2025 10-K and potentially the fiscal year 2024 and fiscal year 2023 10-K filings — is required. C&H will coordinate with Pemberton Hale & Creighton LLP on all disclosure-related matters.
SOX Certifications. CEO Marcus P. Galvin and CFO Denise R. Nakamura certified the effectiveness of QIH's internal controls over financial reporting and the accuracy of QIH's financial statements for fiscal year 2025 pursuant to SOX Sections 302 and 906. Similar certifications were provided for prior fiscal years. If the investigation substantiates the allegations, those certifications may have been inaccurate. SOX Section 302 certifications are subject to civil enforcement by the SEC, while SOX Section 906 certifications carry potential criminal penalties for knowing violations (fines of up to $1,000,000 and imprisonment of up to ten years) and willful violations (fines of up to $5,000,000 and imprisonment of up to twenty years). The investigation will assess whether the certifying officers had knowledge of or were reckless with respect to any material misstatements or control deficiencies.
Connecticut Insurance Department. QIH's insurance subsidiaries are domiciled in Connecticut and subject to regulation by the Connecticut Insurance Department. Depending on the investigation's findings, notification to the Connecticut Insurance Department may be required or advisable. Connecticut's insurance regulatory framework includes provisions governing the financial reporting obligations of insurance holding companies and their subsidiaries, and material financial misconduct at a subsidiary level could trigger regulatory scrutiny of the holding company's fitness and compliance. The appropriateness and timing of any regulatory notification will be assessed upon completion of the scoping phase.
DOJ and SEC Enforcement. If the investigation substantiates the allegations of financial fraud, the conduct described in the complaint could implicate federal criminal statutes, including wire fraud (18 U.S.C. § 1343), mail fraud (18 U.S.C. § 1341), and securities fraud (18 U.S.C. § 1348 and 15 U.S.C. § 78j(b)). Criminal referral to the Department of Justice and civil referral to or inquiry by the SEC Division of Enforcement are possible outcomes. The Company will need to assess, in consultation with the Audit Committee, whether voluntary self-disclosure to the SEC or DOJ may be appropriate and whether such disclosure could yield cooperation credit under applicable enforcement policies, including the SEC's cooperation framework and the DOJ's corporate enforcement policies.
Whistleblower Protections. The anonymous complainant is protected by the anti-retaliation provisions of SOX Section 806 (18 U.S.C. § 1514A) and Dodd-Frank Act Section 922 (15 U.S.C. § 78u-6). These provisions prohibit the Company from taking any adverse employment action against an employee who provides information regarding potential securities-law violations to a supervisor, to the SEC, or through an internal compliance mechanism. The Company must take care not to take any action — including termination, demotion, suspension, reassignment, harassment, or any other form of adverse action — that could be construed as retaliatory against the anonymous complainant if his or her identity becomes known. All personnel involved in the investigation should be reminded of the Company's obligation to protect whistleblowers from retaliation. In addition, the complainant may be eligible for a financial award under the SEC's whistleblower bounty program if the complaint leads to a successful enforcement action resulting in monetary sanctions exceeding $1 million.
VIII. PROPOSED TIMELINE — SCOPING PHASE
The following week-by-week schedule sets forth the proposed timeline for the four-to-six-week scoping phase. The timeline is designed to be aggressive but realistic, reflecting the seriousness of the allegations and the need for prompt assessment while maintaining the thoroughness and rigor required for a credible investigation. The timeline may be adjusted as circumstances warrant, and the Audit Committee will be kept informed of any material changes.
Week 1 (February 27 – March 7, 2026)
•  Finalize and issue the Document Preservation and Litigation Hold Notice to all identified custodians and to IT personnel at BSU and QIH. Confirm suspension of routine document-destruction policies for in-scope materials.
•  Finalize the engagement of Claridge Forensic Advisory LLC, including execution of the consulting-exp