1038-00004 · Calderwood & Harkness LLP · Correspondence

insurance-coverage-notice-elkhorn.docx DOCUMENT M&A / Corporate

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP Attorneys at Law 1201 Third Avenue, Suite 4400 Seattle, Washington 98101 Telephone: (206) 555-7800 Facsimile: (206) 555-7801 www.calderwoodharkness.com

April 11, 2024

VIA OVERNIGHT COURIER AND EMAIL

Brenda Whitacre, Esq. Claims Counsel Elkhorn Mutual Insurance Company 1100 Dexter Avenue N, Suite 600 Seattle, WA 98109

Re: Notice of Claim / Reportable Circumstances Under Directors & Officers and Corporate Liability Insurance Policy No. ELK-DO-2024-08817 — Cascade Retail Holdings Inc.

Dear Ms. Whitacre:

I. Purpose and Identification of Insured

This firm serves as outside litigation and regulatory-enforcement counsel to Cascade Retail Holdings Inc. ("CRH" or the "Company"), a Delaware corporation whose common stock is publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI. CRH maintains its principal executive offices at 4500 Overlake Boulevard, Suite 800, Bellevue, Washington 98004. Calderwood & Harkness LLP ("C&H") was formally retained by CRH on April 9, 2024, pursuant to an engagement letter executed on that date and assigned C&H Matter No. 1038-00004.

The purpose of this letter is to provide formal and timely notice of a claim and reportable circumstance under CRH's Directors & Officers and Corporate Liability Insurance Policy No. ELK-DO-2024-08817 (the "Policy"), issued by Elkhorn Mutual Insurance Company ("Elkhorn"). As you are aware, the Policy is written on a claims-made basis. This notice is being tendered promptly following the event giving rise to the claim, in full compliance with the Policy's notice provisions. We trust that Elkhorn will treat this communication accordingly and process it on a priority basis given the active nature of the underlying governmental investigation described below.

II. Description of the Underlying Matter

A. The Civil Investigative Demand

On March 26, 2024, the Washington State Office of the Attorney General, Consumer Protection Division, located at 800 Fifth Avenue, Suite 2000, Seattle, Washington 98104, issued a Civil Investigative Demand ("CID") to Cascade Retail Holdings Inc. The CID was issued pursuant to the Attorney General's investigative authority under RCW 19.86.110, which authorizes the Attorney General to examine any person and to require the production of documents and answers to interrogatories whenever the Attorney General has reason to believe that a person has engaged in, or is about to engage in, any act or practice declared unlawful by the Washington Consumer Protection Act, RCW 19.86 et seq.

The CID is extensive in scope. It contains twenty-three (23) separate document requests and fourteen (14) interrogatories, each accompanied by detailed definitions, instructions, and specifications regarding the time periods, product categories, and business practices subject to investigation. The CID requires the Company to produce responsive documents and serve interrogatory responses within thirty (30) days of service, subject to any extensions that may be negotiated with the Attorney General's office.

The lead attorneys assigned to this matter within the Attorney General's Consumer Protection Division are Meredith Calloway-Voss, Lead Assistant Attorney General, and Jordan A. Kittridge, Investigating Assistant Attorney General. The assigned staff investigator is Sandra Pietsch. All three individuals are identified in the cover correspondence accompanying the CID. A complete copy of the CID, together with its exhibits, is enclosed with this letter as Enclosure 1.

B. Nature of the Allegations Under Investigation

The Attorney General's inquiry concerns CRH's use of reference pricing practices — specifically, the display of "compare-at," "original price," and "was/now" price representations — on the Company's national ecommerce platform (cascaderetail.com) and on in-store signage across CRH's network of one hundred eighty-seven (187) retail locations operating in fourteen (14) western United States. The Attorney General alleges that CRH displayed inflated "original" or "compare-at" prices that did not reflect the actual prices at which merchandise was offered for sale in the regular course of the Company's business, and that such pricing representations had the capacity to deceive consumers in violation of the Washington Consumer Protection Act.

According to information set forth in the CID and in related correspondence from the Attorney General's office, the investigation was initiated in response to one hundred forty-seven (147) consumer complaints filed with the Washington Attorney General's office between January 2023 and February 2024. Those complaints, copies of which were attached as exhibits to the CID, allege that CRH's advertised "original" or "compare-at" prices were artificially inflated and did not represent genuine prior selling prices or bona fide market comparisons.

A particular focus of the Attorney General's inquiry is CRH's "Smart Price" promotional program, which was launched nationally on October 15, 2023. The Smart Price program utilizes algorithmically generated reference prices produced by a proprietary pricing model developed and maintained by Praxton Analytics LLC, a third-party pricing consultant retained by CRH. The CID specifically requests detailed documentation regarding the design, inputs, calibration, and validation of the Praxton Analytics pricing model, as well as all communications between CRH and Praxton Analytics concerning the generation and display of reference prices. The CID further requests information regarding the internal review and approval processes CRH employed before implementing algorithmically generated reference prices on its ecommerce platform and in its retail locations.

C. Preliminary Scope and Estimated Exposure

The Attorney General's preliminary analysis, which is described in the CID and summarized in an accompanying investigative memorandum, is based on a review of a sample of 2,340 stock-keeping units ("SKUs") selected from CRH's product catalog and examined for the period from January 1, 2024 through March 15, 2024. According to the Attorney General's preliminary findings, 1,601 of those 2,340 SKUs — representing approximately 68.4% of the sample — displayed a reference price that exceeded the highest price at which the item had actually been offered for sale during the preceding ninety (90) day period. The average reference-price overstatement in the sampled SKUs was approximately 37.2% above the actual highest offering price.

The Attorney General's investigation focuses on six product categories: (1) women's apparel; (2) men's footwear; (3) home textiles; (4) small kitchen appliances; (5) outdoor furniture; and (6) consumer electronics accessories. These categories collectively represent a significant share of CRH's merchandise assortment and sales volume.

Estimated affected gross merchandise sales during the period from the Smart Price program's launch on October 15, 2023 through March 15, 2024 — the initial period of the Attorney General's inquiry — total approximately $214 million, representing approximately $42.8 million per month over the five-month period. For context, CRH reported total revenue of $3.47 billion for its fiscal year ended January 31, 2024, and the Company's market capitalization as of late March 2024 was approximately $5.1 billion.

D. Potential Exposure Categories

Although this matter is at a preliminary stage and the Company has not yet produced its response to the CID, the potential exposure categories that may arise from the Attorney General's investigation include the following:

(i) Civil penalties assessed under RCW 19.86.140, which authorizes the court to impose civil penalties of up to $100,000 per violation of the Washington Consumer Protection Act, as adjusted for inflation;

(ii) Consumer restitution for affected purchasers, which the Attorney General has statutory authority to seek under RCW 19.86.080 and related provisions;

(iii) Reimbursement of investigative costs and attorneys' fees incurred by the Attorney General's office in connection with the investigation and any ensuing enforcement action; and

(iv) Injunctive or prospective compliance obligations, including the potential imposition of independent monitoring of CRH's pricing practices and mandatory changes to the Company's reference-pricing methodology.

At this early stage, Calderwood & Harkness is not yet in a position to quantify the Company's total potential exposure. However, we note that the significant volume of affected transactions, the breadth of the product categories under investigation, and the severity of the alleged reference-price overstatements collectively suggest that the Company's exposure could be material. We will supplement this notice with additional information regarding the scope and magnitude of the Company's potential liability as the investigation progresses and as additional facts become available.

III. Prior Regulatory Counsel Involvement

For the sake of completeness, we note that prior to retaining Calderwood & Harkness LLP to handle the Attorney General's investigation and CID response, CRH consulted with its regular outside regulatory counsel, Dunlap, Mercer & Fosse LLP, located at 999 Fourth Avenue, Suite 3100, Seattle, Washington 98104. The responsible partner at that firm was Nora Chisholm. Dunlap, Mercer & Fosse had previously advised CRH on compliance with Federal Trade Commission pricing-guidance requirements in 2022, and the firm provided initial consultation to CRH regarding the CID after it was received on March 26, 2024.

Following that initial consultation and an assessment of the scope and complexity of the matter, CRH determined that it was appropriate to engage Calderwood & Harkness LLP — which has extensive experience in state attorney general consumer-protection investigations and CID response practice — to serve as lead counsel for the investigation. Calderwood & Harkness's engagement was formalized on April 9, 2024. A redacted copy of the engagement letter is enclosed as Enclosure 2 for Elkhorn's reference; certain provisions have been redacted to preserve the attorney-client privilege and work-product protections.

IV. Identification of the Policy and Coverage Request

A. Policy Identification

The insurance policy under which notice is hereby tendered is identified as follows:

A copy of the relevant Policy declarations page is enclosed as Enclosure 3 for ease of reference.

B. Coverage Requested for Defense Costs

CRH requests that Elkhorn acknowledge coverage for defense costs incurred in connection with the Attorney General's investigation and CID response, subject to the Policy's $250,000 self-insured retention. Defense costs that will be incurred in this matter include the following categories:

(a) Legal fees and expenses of Calderwood & Harkness LLP, as lead outside counsel for the investigation. C&H's hourly rates for this engagement are as follows:

• Alan Ngo, Responsible Partner: $1,150 per hour

• Sylvia Hartwell, Billing Partner (advisory role): $1,050 per hour

• Patrick Gallagher, Lead Associate: $725 per hour

• Simone Laroche, Working Associate: $575 per hour

(b) Electronic discovery processing and document review costs incurred through Stormfield Document Solutions LLC, located at 820 SW Washington Street, Suite 450, Portland, Oregon 97205, which has been engaged by C&H to assist with the collection, processing, and hosting of electronically stored information responsive to the CID.

Based on our preliminary assessment of the scope of the CID, the volume of potentially responsive documents and data, and the anticipated timeline for the investigation, we estimate that total legal fees for this matter will fall in the range of $350,000 to $475,000, exclusive of costs advanced for e-discovery processing, expert consulting, travel, and other out-of-pocket expenses. We will provide Elkhorn with updated budget estimates as the matter develops and the scope of the investigation becomes clearer.

C. Coverage for Restitution and Other Potential Exposures

In addition to defense costs, CRH requests that Elkhorn evaluate coverage for potential restitution exposure under the Policy. Should the Attorney General seek consumer restitution as part of any enforcement action or negotiated resolution, CRH intends to seek indemnification for such amounts to the extent they constitute covered "Loss" under the Policy.

CRH acknowledges that the Policy may contain exclusions applicable to governmental fines and penalties. However, CRH expressly reserves its rights to seek coverage for all other forms of loss arising out of the Attorney General's investigation, including but not limited to restitution, settlement payments, pre-judgment and post-judgment interest, and costs of compliance with any injunctive relief, to the extent such amounts constitute covered Loss under the Policy and are insurable under applicable law. CRH does not concede that any particular exclusion applies to the facts and circumstances of this matter, and CRH reserves its right to contest the applicability of any exclusion that Elkhorn may invoke.

V. Engagement Team and Point of Contact

The following individuals are the principal contacts for this matter and should be identified in Elkhorn's claim file:

Outside Counsel:

Calderwood & Harkness LLP 1201 Third Avenue, Suite 4400 Seattle, Washington 98101

Alan Ngo, Partner (Responsible Partner) Direct Telephone: (206) 555-7812

Email: a.ngo@calderwoodharkness.com

Patrick Gallagher, Associate (Lead Associate) Direct Telephone: (206) 555-7834

Email: p.gallagher@calderwoodharkness.com

CRH In-House Contacts:

Diana Prescott-Levy, General Counsel Cascade Retail Holdings Inc. 4500 Overlake Boulevard, Suite 800 Bellevue, Washington 98004 Direct Telephone: (425) 555-2200

Email: dprescottlevy@cascaderetail.com

Terence Ashford, Chief Compliance Officer Cascade Retail Holdings Inc. 4500 Overlake Boulevard, Suite 800 Bellevue, Washington 98004 Direct Telephone: (425) 555-2215

Email: tashford@cascaderetail.com

All coverage correspondence and communications regarding this claim should be directed to Alan Ngo at Calderwood & Harkness LLP, with copies to Diana Prescott-Levy at CRH. We respectfully request that Elkhorn refrain from contacting CRH personnel directly without first coordinating through this firm, in order to preserve the integrity of the attorney-client relationship and to ensure that all communications are properly documented.

VI. Reservation of Rights by CRH

CRH expressly reserves all of its rights under Policy No. ELK-DO-2024-08817, including but not limited to the following:

(a) The right to seek coverage for all categories of loss arising out of the Attorney General's investigation, including defense costs, restitution, settlement payments, and any other amounts that constitute covered Loss under the Policy;

(b) The right to challenge any coverage limitations, exclusions, conditions, or denials that Elkhorn may assert in response to this notice or at any subsequent stage of the coverage evaluation process;

(c) The right to supplement this notice with additional information as it becomes available regarding the scope, nature, and potential exposure arising from the Attorney General's inquiry, including any related or derivative claims, investigations, or proceedings that may arise out of the same or related facts and circumstances; and

(d) The right to assert any and all claims, defenses, and arguments available to CRH under the Policy, under Washington law, or under any other applicable law.

This notice is not intended to, and does not, waive any rights or defenses available to CRH under the Policy or applicable law. Nothing in this letter shall be construed as an acknowledgment by CRH that any particular claim, loss, or category of exposure falls outside the scope of coverage afforded by the Policy. CRH's provision of this notice shall not be construed as an admission regarding the merits of the Attorney General's allegations or as an acknowledgment that any violation of law has occurred.

VII. Request for Prompt Acknowledgment

CRH respectfully requests that Elkhorn provide the following at its earliest convenience:

(a) Written acknowledgment of receipt of this notice of claim;

(b) A preliminary coverage determination addressing, at minimum, the availability of coverage for defense costs incurred in responding to the CID and the Attorney General's investigation;

(c) Identification of any additional information, documentation, or materials that Elkhorn requires in order to evaluate this claim; and

(d) Identification of the claims professional and any coverage counsel that Elkhorn intends to assign to handle this matter.

We emphasize that prompt acknowledgment of defense-cost coverage is especially important in light of the active and time-sensitive nature of the Attorney General's investigation. CRH's initial rolling document production in response to the CID is anticipated on or about April 23, 2024, and the Company is already incurring significant defense costs in connection with document collection, review, and preparation of interrogatory responses. Delay in confirming coverage could prejudice CRH's ability to mount an effective defense and respond to the CID within the deadlines established by the Attorney General.

We are prepared to provide Elkhorn with any additional information or documentation reasonably necessary to facilitate its coverage review, and we welcome the opportunity to discuss this matter by telephone or in person at your convenience.

VIII. Enclosures

The following documents are enclosed with this letter:

1. Civil Investigative Demand issued by the Washington State Attorney General's Office, Consumer Protection Division, dated March 26, 2024, together with all exhibits thereto (Enclosure 1);

2. Calderwood & Harkness LLP engagement letter with Cascade Retail Holdings Inc., dated April 9, 2024, redacted as necessary to preserve applicable attorney-client privilege and work-product protections (Enclosure 2); and

3. Declarations page from Directors & Officers and Corporate Liability Insurance Policy No. ELK-DO-2024-08817, provided for ease of reference (Enclosure 3).

IX. Closing

We appreciate Elkhorn's prompt attention to this notice of claim and look forward to working cooperatively with your claims team to ensure that CRH's coverage rights are fully preserved. Please do not hesitate to contact me directly if you have any questions or require any additional information.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Alan Ngo Partner 1201 Third Avenue, Suite 4400 Seattle, Washington 98101 Direct Telephone: (206) 555-7812

Email: a.ngo@calderwoodharkness.com

Enclosures (3)

cc:

Diana Prescott-Levy, General Counsel, Cascade Retail Holdings Inc. Terence Ashford, Chief Compliance Officer, Cascade Retail Holdings Inc. Patrick Gallagher, Calderwood & Harkness LLP

CONFIDENTIAL — This letter and the enclosed materials contain information that is protected by the attorney-client privilege and/or the work-product doctrine. This communication is intended solely for the use of the addressee in connection with the evaluation of insurance coverage under Policy No. ELK-DO-2024-08817. Any unauthorized review, use, disclosure, or distribution of this communication is strictly prohibited. If you have received this communication in error, please notify the sender immediately and destroy all copies.

Item	Detail
Policy Number	ELK-DO-2024-08817
Named Insured	Cascade Retail Holdings Inc.
Insurer	Elkhorn Mutual Insurance Company
Type of Coverage	Directors & Officers and Corporate Liability Insurance (Claims-Made)
Policy Limits	$25,000,000 per occurrence / $50,000,000 aggregate
Self-Insured Retention ("SIR")	$250,000

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP Attorneys at Law 1201 Third Avenue, Suite 4400 Seattle, Washington 98101 Telephone: (206) 555-7800 Facsimile: (206) 555-7801 www.calderwoodharkness.com
April 11, 2024
VIA OVERNIGHT COURIER AND EMAIL
Brenda Whitacre, Esq. Claims Counsel Elkhorn Mutual Insurance Company 1100 Dexter Avenue N, Suite 600 Seattle, WA 98109
Re: Notice of Claim / Reportable Circumstances Under Directors & Officers and Corporate Liability Insurance Policy No. ELK-DO-2024-08817 — Cascade Retail Holdings Inc.
Dear Ms. Whitacre:
I. Purpose and Identification of Insured
This firm serves as outside litigation and regulatory-enforcement counsel to Cascade Retail Holdings Inc. ("CRH" or the "Company"), a Delaware corporation whose common stock is publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI. CRH maintains its principal executive offices at 4500 Overlake Boulevard, Suite 800, Bellevue, Washington 98004. Calderwood & Harkness LLP ("C&H") was formally retained by CRH on April 9, 2024, pursuant to an engagement letter executed on that date and assigned C&H Matter No. 1038-00004.
The purpose of this letter is to provide formal and timely notice of a claim and reportable circumstance under CRH's Directors & Officers and Corporate Liability Insurance Policy No. ELK-DO-2024-08817 (the "Policy"), issued by Elkhorn Mutual Insurance Company ("Elkhorn"). As you are aware, the Policy is written on a claims-made basis. This notice is being tendered promptly following the event giving rise to the claim, in full compliance with the Policy's notice provisions. We trust that Elkhorn will treat this communication accordingly and process it on a priority basis given the active nature of the underlying governmental investigation described below.
II. Description of the Underlying Matter
A. The Civil Investigative Demand
On March 26, 2024, the Washington State Office of the Attorney General, Consumer Protection Division, located at 800 Fifth Avenue, Suite 2000, Seattle, Washington 98104, issued a Civil Investigative Demand ("CID") to Cascade Retail Holdings Inc. The CID was issued pursuant to the Attorney General's investigative authority under RCW 19.86.110, which authorizes the Attorney General to examine any person and to require the production of documents and answers to interrogatories whenever the Attorney General has reason to believe that a person has engaged in, or is about to engage in, any act or practice declared unlawful by the Washington Consumer Protection Act, RCW 19.86 et seq.
The CID is extensive in scope. It contains twenty-three (23) separate document requests and fourteen (14) interrogatories, each accompanied by detailed definitions, instructions, and specifications regarding the time periods, product categories, and business practices subject to investigation. The CID requires the Company to produce responsive documents and serve interrogatory responses within thirty (30) days of service, subject to any extensions that may be negotiated with the Attorney General's office.
The lead attorneys assigned to this matter within the Attorney General's Consumer Protection Division are Meredith Calloway-Voss, Lead Assistant Attorney General, and Jordan A. Kittridge, Investigating Assistant Attorney General. The assigned staff investigator is Sandra Pietsch. All three individuals are identified in the cover correspondence accompanying the CID. A complete copy of the CID, together with its exhibits, is enclosed with this letter as Enclosure 1.
B. Nature of the Allegations Under Investigation
The Attorney General's inquiry concerns CRH's use of reference pricing practices — specifically, the display of "compare-at," "original price," and "was/now" price representations — on the Company's national ecommerce platform (cascaderetail.com) and on in-store signage across CRH's network of one hundred eighty-seven (187) retail locations operating in fourteen (14) western United States. The Attorney General alleges that CRH displayed inflated "original" or "compare-at" prices that did not reflect the actual prices at which merchandise was offered for sale in the regular course of the Company's business, and that such pricing representations had the capacity to deceive consumers in violation of the Washington Consumer Protection Act.
According to information set forth in the CID and in related correspondence from the Attorney General's office, the investigation was initiated in response to one hundred forty-seven (147) consumer complaints filed with the Washington Attorney General's office between January 2023 and February 2024. Those complaints, copies of which were attached as exhibits to the CID, allege that CRH's advertised "original" or "compare-at" prices were artificially inflated and did not represent genuine prior selling prices or bona fide market comparisons.
A particular focus of the Attorney General's inquiry is CRH's "Smart Price" promotional program, which was launched nationally on October 15, 2023. The Smart Price program utilizes algorithmically generated reference prices produced by a proprietary pricing model developed and maintained by Praxton Analytics LLC, a third-party pricing consultant retained by CRH. The CID specifically requests detailed documentation regarding the design, inputs, calibration, and validation of the Praxton Analytics pricing model, as well as all communications between CRH and Praxton Analytics concerning the generation and display of reference prices. The CID further requests information regarding the internal review and approval processes CRH employed before implementing algorithmically generated reference prices on its ecommerce platform and in its retail locations.
C. Preliminary Scope and Estimated Exposure
The Attorney General's preliminary analysis, which is described in the CID and summarized in an accompanying investigative memorandum, is based on a review of a sample of 2,340 stock-keeping units ("SKUs") selected from CRH's product catalog and examined for the period from January 1, 2024 through March 15, 2024. According to the Attorney General's preliminary findings, 1,601 of those 2,340 SKUs — representing approximately 68.4% of the sample — displayed a reference price that exceeded the highest price at which the item had actually been offered for sale during the preceding ninety (90) day period. The average reference-price overstatement in the sampled SKUs was approximately 37.2% above the actual highest offering price.
The Attorney General's investigation focuses on six product categories: (1) women's apparel; (2) men's footwear; (3) home textiles; (4) small kitchen appliances; (5) outdoor furniture; and (6) consumer electronics accessories. These categories collectively represent a significant share of CRH's merchandise assortment and sales volume.
Estimated affected gross merchandise sales during the period from the Smart Price program's launch on October 15, 2023 through March 15, 2024 — the initial period of the Attorney General's inquiry — total approximately $214 million, representing approximately $42.8 million per month over the five-month period. For context, CRH reported total revenue of $3.47 billion for its fiscal year ended January 31, 2024, and the Company's market capitalization as of late March 2024 was approximately $5.1 billion.
D. Potential Exposure Categories
Although this matter is at a preliminary stage and the Company has not yet produced its response to the CID, the potential exposure categories that may arise from the Attorney General's investigation include the following:
(i) Civil penalties assessed under RCW 19.86.140, which authorizes the court to impose civil penalties of up to $100,000 per violation of the Washington Consumer Protection Act, as adjusted for inflation;
(ii) Consumer restitution for affected purchasers, which the Attorney General has statutory authority to seek under RCW 19.86.080 and related provisions;
(iii) Reimbursement of investigative costs and attorneys' fees incurred by the Attorney General's office in connection with the investigation and any ensuing enforcement action; and
(iv) Injunctive or prospective compliance obligations, including the potential imposition of independent monitoring of CRH's pricing practices and mandatory changes to the Company's reference-pricing methodology.
At this early stage, Calderwood & Harkness is not yet in a position to quantify the Company's total potential exposure. However, we note that the significant volume of affected transactions, the breadth of the product categories under investigation, and the severity of the alleged reference-price overstatements collectively suggest that the Company's exposure could be material. We will supplement this notice with additional information regarding the scope and magnitude of the Company's potential liability as the investigation progresses and as additional facts become available.
III. Prior Regulatory Counsel Involvement
For the sake of completeness, we note that prior to retaining Calderwood & Harkness LLP to handle the Attorney General's investigation and CID response, CRH consulted with its regular outside regulatory counsel, Dunlap, Mercer & Fosse LLP, located at 999 Fourth Avenue, Suite 3100, Seattle, Washington 98104. The responsible partner at that firm was Nora Chisholm. Dunlap, Mercer & Fosse had previously advised CRH on compliance with Federal Trade Commission pricing-guidance requirements in 2022, and the firm provided initial consultation to CRH regarding the CID after it was received on March 26, 2024.
Following that initial consultation and an assessment of the scope and complexity of the matter, CRH determined that it was appropriate to engage Calderwood & Harkness LLP — which has extensive experience in state attorney general consumer-protection investigations and CID response practice — to serve as lead counsel for the investigation. Calderwood & Harkness's engagement was formalized on April 9, 2024. A redacted copy of the engagement letter is enclosed as Enclosure 2 for Elkhorn's reference; certain provisions have been redacted to preserve the attorney-client privilege and work-product protections.
IV. Identification of the Policy and Coverage Request
A. Policy Identification
The insurance policy under which notice is hereby tendered is identified as follows:
A copy of the relevant Policy declarations page is enclosed as Enclosure 3 for ease of reference.
B. Coverage Requested for Defense Costs
CRH requests that Elkhorn acknowledge coverage for defense costs incurred in connection with the Attorney General's investigation and CID response, subject to the Policy's $250,000 self-insured retention. Defense costs that will be incurred in this matter include the following categories:
(a) Legal fees and expenses of Calderwood & Harkness LLP, as lead outside counsel for the investigation. C&H's hourly rates for this engagement are as follows:
• Alan Ngo, Responsible Partner: $1,150 per hour
• Sylvia Hartwell, Billing Partner (advisory role): $1,050 per hour
• Patrick Gallagher, Lead Associate: $725 per hour
• Simone Laroche, Working Associate: $575 per hour
(b) Electronic discovery processing and document review costs incurred through Stormfield Document Solutions LLC, located at 820 SW Washington Street, Suite 450, Portland, Oregon 97205, which has been engaged by C&H to assist with the collection, processing, and hosting of electronically stored information responsive to the CID.
Based on our preliminary assessment of the scope of the CID, the volume of potentially responsive documents and data, and the anticipated timeline for the investigation, we estimate that total legal fees for this matter will fall in the range of $350,000 to $475,000, exclusive of costs advanced for e-discovery processing, expert consulting, travel, and other out-of-pocket expenses. We will provide Elkhorn with updated budget estimates as the matter develops and the scope of the investigation becomes clearer.
C. Coverage for Restitution and Other Potential Exposures
In addition to defense costs, CRH requests that Elkhorn evaluate coverage for potential restitution exposure under the Policy. Should the Attorney General seek consumer restitution as part of any enforcement action or negotiated resolution, CRH intends to seek indemnification for such amounts to the extent they constitute covered "Loss" under the Policy.
CRH acknowledges that the Policy may contain exclusions applicable to governmental fines and penalties. However, CRH expressly reserves its rights to seek coverage for all other forms of loss arising out of the Attorney General's investigation, including but not limited to restitution, settlement payments, pre-judgment and post-judgment interest, and costs of compliance with any injunctive relief, to the extent such amounts constitute covered Loss under the Policy and are insurable under applicable law. CRH does not concede that any particular exclusion applies to the facts and circumstances of this matter, and CRH reserves its right to contest the applicability of any exclusion that Elkhorn may invoke.
V. Engagement Team and Point of Contact
The following individuals are the principal contacts for this matter and should be identified in Elkhorn's claim file:
Outside Counsel:
Calderwood & Harkness LLP 1201 Third Avenue, Suite 4400 Seattle, Washington 98101
Alan Ngo, Partner (Responsible Partner) Direct Telephone: (206) 555-7812
Email: a.ngo@calderwoodharkness.com
Patrick Gallagher, Associate (Lead Associate) Direct Telephone: (206) 555-7834
Email: p.gallagher@calderwoodharkness.com
CRH In-House Contacts:
Diana Prescott-Levy, General Counsel Cascade Retail Holdings Inc. 4500 Overlake Boulevard, Suite 800 Bellevue, Washington 98004 Direct Telephone: (425) 555-2200
Email: dprescottlevy@cascaderetail.com
Terence Ashford, Chief Compliance Officer Cascade Retail Holdings Inc. 4500 Overlake Boulevard, Suite 800 Bellevue, Washington 98004 Direct Telephone: (425) 555-2215
Email: tashford@cascaderetail.com
All coverage correspondence and communications regarding this claim should be directed to Alan Ngo at Calderwood & Harkness LLP, with copies to Diana Prescott-Levy at CRH. We respectfully request that Elkhorn refrain from contacting CRH personnel directly without first coordinating through this firm, in order to preserve the integrity of the attorney-client relationship and to ensure that all communications are properly documented.
VI. Reservation of Rights by CRH
CRH expressly reserves all of its rights under Policy No. ELK-DO-2024-08817, including but not limited to the following:
(a) The right to seek coverage for all categories of loss arising out of the Attorney General's investigation, including defense costs, restitution, settlement payments, and any other amounts that constitute covered Loss under the Policy;
(b) The right to challenge any coverage limitations, exclusions, conditions, or denials that Elkhorn may assert in response to this notice or at any subsequent stage of the coverage evaluation process;
(c) The right to supplement this notice with additional information as it becomes available regarding the scope, nature, and potential exposure arising from the Attorney General's inquiry, including any related or derivative claims, investigations, or proceedings that may arise out of the same or related facts and circumstances; and
(d) The right to assert any and all claims, defenses, and arguments available to CRH under the Policy, under Washington law, or under any other applicable law.
This notice is not intended to, and does not, waive any rights or defenses available to CRH under the Policy or applicable law. Nothing in this letter shall be construed as an acknowledgment by CRH that any particular claim, loss, or category of exposure falls outside the scope of coverage afforded by the Policy. CRH's provision of this notice shall not be construed as an admission regarding the merits of the Attorney General's allegations or as an acknowledgment that any violation of law has occurred.
VII. Request for Prompt Acknowledgment
CRH respectfully requests that Elkhorn provide the following at its earliest convenience:
(a) Written acknowledgment of receipt of this notice of claim;
(b) A preliminary coverage determination addressing, at minimum, the availability of coverage for defense costs incurred in responding to the CID and the Attorney General's investigation;
(c) Identification of any additional information, documentation, or materials that Elkhorn requires in order to evaluate this claim; and
(d) Identification of the claims professional and any coverage counsel that Elkhorn intends to assign to handle this matter.
We emphasize that prompt acknowledgment of defense-cost coverage is especially important in light of the active and time-sensitive nature of the Attorney General's investigation. CRH's initial rolling document production in response to the CID is anticipated on or about April 23, 2024, and the Company is already incurring significant defense costs in connection with document collection, review, and preparation of interrogatory responses. Delay in confirming coverage could prejudice CRH's ability to mount an effective defense and respond to the CID within the deadlines established by the Attorney General.
We are prepared to provide Elkhorn with any additional information or documentation reasonably necessary to facilitate its coverage review, and we welcome the opportunity to discuss this matter by telephone or in person at your convenience.
VIII. Enclosures
The following documents are enclosed with this letter:
1. Civil Investigative Demand issued by the Washington State Attorney General's Office, Consumer Protection Division, dated March 26, 2024, together with all exhibits thereto (Enclosure 1);
2. Calderwood & Harkness LLP engagement letter with Cascade Retail Holdings Inc., dated April 9, 2024, redacted as necessary to preserve applicable attorney-client privilege and work-product protections (Enclosure 2); and
3. Declarations page from Directors & Officers and Corporate Liability Insurance Policy No. ELK-DO-2024-08817, provided for ease of reference (Enclosure 3).
IX. Closing
We appreciate Elkhorn's prompt attention to this notice of claim and look forward to working cooperatively with your claims team to ensure that CRH's coverage rights are fully preserved. Please do not hesitate to contact me directly if you have any questions or require any additional information.
Very truly yours,
CALDERWOOD & HARKNESS LLP
CALDERWOOD & HARKNESS LLP
By: ________
Alan Ngo Partner 1201 Third Avenue, Suite 4400 Seattle, Washington 98101 Direct Telephone: (206) 555-7812
Email: a.ngo@calderwoodharkness.com
Enclosures (3)
cc:
Diana Prescott-Levy, General Counsel, Cascade Retail Holdings Inc. Terence Ashford, Chief Compliance Officer, Cascade Retail Holdings Inc. Patrick Gallagher, Calderwood & Harkness LLP
CONFIDENTIAL — This letter and the enclosed materials contain information that is protected by the attorney-client privilege and/or the work-product doctrine. This communication is intended solely for the use of the addressee in connection with the evaluation of insurance coverage under Policy No. ELK-DO-2024-08817. Any unauthorized review, use, disclosure, or distribution of this communication is strictly prohibited. If you have received this communication in error, please notify the sender immediately and destroy all copies.
Item | Detail
Policy Number | ELK-DO-2024-08817
Named Insured | Cascade Retail Holdings Inc.
Insurer | Elkhorn Mutual Insurance Company
Type of Coverage | Directors & Officers and Corporate Liability Insurance (Claims-Made)
Policy Limits | $25,000,000 per occurrence / $50,000,000 aggregate
Self-Insured Retention ("SIR") | $250,000

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