PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 155 North Wacker Drive, Suite 4200 Chicago, Illinois 60606
Matter No.: 1005-00003
CLAIMS REPORTING COMPLIANCE CHECKLIST
D&O and Product-Liability Insurance Tower — 2022-2023 Renewal Transition
June 1, 2022
Prepared for:
Trevor Haines Vice President, Risk Management Nexford Industrial Holdings Inc. 2200 Corporate Center Drive, Suite 800 Schaumburg, Illinois 60173
Donna Kowalski Director of Insurance and Claims Nexford Industrial Holdings Inc. 2200 Corporate Center Drive, Suite 800 Schaumburg, Illinois 60173
Prepared by:
Douglas Fairchild, Partner Naomi Petersen, Associate Yuki Nakamura, Associate
Calderwood & Harkness LLP 155 North Wacker Drive, Suite 4200 Chicago, Illinois 60606
This document constitutes a privileged and confidential attorney-client communication and attorney work product. It has been prepared by Calderwood & Harkness LLP at the request of Nexford Industrial Holdings Inc. for the purpose of providing legal advice regarding insurance coverage matters. This document is not intended for distribution to any third party without the prior written consent of Nexford Industrial Holdings Inc. and Calderwood & Harkness LLP. Distribution to Nexford's broker of record, Ashford Breckinridge LLP, and to outside litigation counsel, Hollander Byrne & Strauss LLP, has been authorized by Nexford General Counsel and is made without waiver of any applicable privilege.
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I. PURPOSE AND SCOPE
This Claims Reporting Compliance Checklist (this "Checklist") has been prepared by Calderwood & Harkness LLP ("C&H") in connection with the upcoming renewal of the Directors & Officers ("D&O") liability insurance tower and the product-liability/general liability ("PL/GL") insurance tower maintained by Nexford Industrial Holdings Inc. ("Nexford" or "NIH"). The renewal effective date for both towers is July 1, 2022, transitioning from the outgoing policy period of July 1, 2021 through July 1, 2022 to the incoming renewal policy period of July 1, 2022 through July 1, 2023.
The purpose of this Checklist is to provide Nexford's Risk Management and Insurance departments with a comprehensive guide to ensure strict compliance with all notice obligations arising under both the outgoing and renewal insurance programs. Failure to comply with timely and accurate claims-reporting obligations can result in a forfeiture of coverage rights, the assertion of late-notice defenses by carriers, or the creation of gaps in coverage continuity across the renewal boundary. This Checklist is designed to minimize those risks through a systematic review of all applicable reporting requirements and a set of actionable compliance procedures.
This Checklist addresses two principal categories of claims-reporting obligations:
(A) Transitional Reporting of Pending/Known Claims. There are currently two active product-liability lawsuits and one resolved D&O matter that must be properly transitioned across the renewal boundary. This Checklist identifies each such claim, confirms the reporting history to date, and specifies the transitional notices that must be delivered to renewal carriers on or before July 1, 2022, to preserve coverage continuity.
(B) Future Claims Reporting Procedures. This Checklist establishes the internal protocols and external notice procedures that Nexford personnel should follow when new claims, occurrences, or reportable circumstances arise during the renewal policy period (July 1, 2022 through July 1, 2023). These procedures cover both the D&O tower and the PL/GL tower, including the standalone Side-A DIC policy.
The Named Insureds covered by this Checklist and the applicable insurance towers are as follows:
In preparing this Checklist, C&H has coordinated with the following outside advisors and counsel, each of whom has been authorized by Priya Sundaram, General Counsel and Corporate Secretary of Nexford, to receive and review this document:
Broker of Record: Ashford Breckinridge LLP — Phillip Garza (D&O placement) and Tamara Fisk (PL/GL placement), 321 South Plymouth Court, Suite 1500, Chicago, Illinois 60604.
Outside Litigation Counsel: Hollander Byrne & Strauss LLP — Catherine Byrne (Lead Trial Counsel) and Rafael Mendez (Senior Associate), 70 West Madison Street, Suite 3600, Chicago, Illinois 60602. Hollander Byrne & Strauss currently serves as defense counsel on the two pending product-liability matters described in Section II below.
This Checklist should be treated as a living document and updated upon receipt of final issued policies, confirmed carrier notice addresses, and any corrective endorsements that remain pending as of the date hereof. All outstanding items requiring follow-up are identified in Section X.
II. SUMMARY OF PENDING CLAIMS REQUIRING TRANSITIONAL NOTICE
As of the date of this Checklist, there are three claims or matters in Nexford's claims history that require transitional notice or confirmation in connection with the July 1, 2022 renewal. Two are active product-liability lawsuits; one is a resolved D&O matter. Each is summarized below with the transitional steps necessary to ensure coverage continuity.
A. Higgins v. Nexford Conveyor Systems, LLC et al.
Case Information:
Factual Summary: The plaintiff, Jeremy Higgins, alleges that he sustained a catastrophic crush injury to his left arm and shoulder while working at a grain processing facility owned and operated by AgriSource Midwest, Inc. in Joliet, Illinois. The complaint alleges that the emergency stop mechanism on a Model NCS-7200 conveyor system manufactured and installed by Nexford Conveyor Systems, LLC was defective in both design and manufacture, and that the defect caused the conveyor system to fail to halt when the plaintiff activated the emergency stop control. The complaint sets forth causes of action for strict products liability, negligent design, negligent manufacture, and failure to warn.
Damages Sought: $14,500,000 (including claimed past and future medical expenses, lost wages, permanent disability, and pain and suffering).
Current Status (as of June 1, 2022): The case is active and in the discovery phase. Plaintiff's written discovery was served on March 8, 2022, and responses were due (and timely served) on April 7, 2022. Depositions of NCS engineering personnel are currently being scheduled for July and August 2022. No dispositive motions are pending. A trial date has not yet been set by the court, but the case is expected to proceed to a Case Management Conference in September 2022.
Coverage Tower: Product-liability tower. This claim was timely reported to Midland Casualty & Surety Company under the primary GL/PL policy for the 2021-2022 policy period, Policy No. MCS-GL-2021-55671, on September 20, 2021 (six days after the complaint was filed). Midland Casualty acknowledged receipt of the notice on September 28, 2021, and assigned Claim No. MCS-CL-2021-14892 to the matter.
Open Reserves: This claim is part of the $8.3 million in total open PL reserves across both pending product-liability claims, as reported in Nexford's five-year loss history. The specific reserve allocation for Higgins has been set by Midland Casualty at $5.2 million (inclusive of defense costs and indemnity).
Litigation Counsel: Hollander Byrne & Strauss LLP — Catherine Byrne, Lead Trial Counsel, and Rafael Mendez, Senior Associate, 70 West Madison Street, Suite 3600, Chicago, Illinois 60602. Hollander Byrne & Strauss was retained with the approval of Midland Casualty and has been serving as defense counsel since October 2021.
Transitional Notice Required:
(a) Confirm that the Higgins claim was properly reported as a "known prior claim" on all PL renewal applications submitted by Ashford Breckinridge to the renewal tower carriers on May 3, 2022.
(b) Confirm continuing coverage under the occurrence-based PL policy. Because the Midland Casualty primary GL/PL policy is written on an occurrence basis, coverage for the Higgins claim should attach to the policy in effect at the time of the underlying occurrence (alleged date of injury: September 8, 2021), regardless of the renewal transition. However, transitional notice to the renewal carriers is necessary to ensure that the renewal carriers are aware of the pending claim and do not assert any known-claim or pending-litigation exclusion.
(c) On or before July 1, 2022, provide an updated claim status to all PL tower carriers (Midland Casualty, Great Basin Insurance Company, Cornerstone Reinsurance Corp., and Allegheny Pacific Underwriters, Inc.) confirming the current status of the litigation, updated reserve figures, and the identity and contact information for defense counsel.
B. Consolidated Builders Supply Co. v. Triton Fastener Corp.
Case Information:
Factual Summary: The plaintiff, Consolidated Builders Supply Co. ("Ridgeway Enterprises"), a commercial building materials distributor, alleges that Grade 8 hex bolts manufactured by Triton Fastener Corp. suffered structural failure when installed in a commercial building project in DuPage County, Illinois, causing a partial wall collapse during construction. Ridgeway Enterprises alleges that the bolt failures resulted from a metallurgical defect in the bolts' heat treatment process. The complaint asserts claims for strict products liability, breach of express and implied warranties, and negligence, seeking recovery for approximately $6.8 million in property damage and business interruption losses sustained by Ridgeway Enterprises and its downstream customers.
Current Status (as of June 1, 2022): The case is active and proceeding to the merits phase. Triton's motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) was denied by the Honorable Judge Margaret Delacroix on February 11, 2022. Triton filed its Answer on March 14, 2022. The parties are currently engaged in document discovery, and the court has entered a scheduling order with a fact discovery cutoff of November 30, 2022.
Coverage Tower: Product-liability tower. This claim was timely reported to Midland Casualty & Surety Company under the primary GL/PL policy for the 2021-2022 policy period, Policy No. MCS-GL-2021-55671, on November 9, 2021 (seven days after the complaint was filed). Midland Casualty acknowledged receipt on November 16, 2021, and assigned Claim No. MCS-CL-2021-15408 to the matter.
Open Reserves: This claim is part of the $8.3 million in total open PL reserves across both pending claims. The specific reserve allocation for Consolidated Builders has been set by Midland Casualty at $3.1 million (inclusive of defense costs and indemnity).
Litigation Counsel: Hollander Byrne & Strauss LLP — same team as Higgins (Catherine Byrne and Rafael Mendez). Hollander Byrne & Strauss was retained with Midland Casualty's approval and has been serving as defense counsel since November 2021.
Transitional Notice Required:
(a) Same as Higgins — confirm that the Consolidated Builders claim was properly reported as a known prior claim on all PL renewal applications submitted by Ashford Breckinridge on May 3, 2022.
(b) Confirm continuing occurrence-based coverage. The alleged occurrence (bolt failures and wall collapse) predates the renewal, and coverage should attach under the policy in effect at the time of the occurrence. However, transitional notice to renewal carriers is necessary.
(c) On or before July 1, 2022, provide an updated claim status to all PL tower carriers confirming the current litigation status, updated reserve figures, and defense counsel information.
C. D&O Claims History — Shareholder Demand Letter (2020)
Claim Summary: In 2020, Nexford received a shareholder demand letter from a minority shareholder (Harborview Partners) alleging that certain directors had failed to exercise adequate oversight over Nexford's product quality control processes in light of the Triton voluntary recall of March 2020. The demand was investigated by a Special Committee of the Board of Directors and ultimately resolved without any payment or concession. The matter was reported to Vandermeer National Insurance Company under the then-current D&O primary policy for the 2019-2020 policy period. Vandermeer acknowledged receipt but no coverage determination was necessary because the matter was resolved without any loss.
Claims History: Zero paid D&O losses in the five-year claims history (2017-2022). The 2020 shareholder demand letter is the only D&O claim or circumstance reported during the five-year period.
Transitional Notice Required:
(a) Confirm that the 2020 shareholder demand letter is disclosed on the D&O renewal applications as a closed claim, resolved without payment.
(b) No further action is required unless the matter is reopened by additional shareholder demands or related proceedings. If any such reopening occurs, immediate notice to Vandermeer National and the D&O excess carriers will be necessary.
III. D&O TOWER — CARRIER NOTICE REQUIREMENTS (2022-2023 RENEWAL POLICIES)
The following section sets forth the notice requirements for each carrier in the D&O liability insurance tower for the 2022-2023 renewal policy period. Total D&O renewal premium across all layers (excluding Side-A DIC) is $1,498,200. The tower is structured as follows:
Total D&O Tower Limits: $40,000,000 (plus $20,000,000 Side-A DIC dedicated)
A. Primary Layer — Vandermeer National Insurance Company
Policy Details:
Notice Address:
Claims Department Vandermeer National Insurance Company [Address to be confirmed with Ashford Breckinridge LLP upon issuance of renewal policy — see Section X, Outstanding Items]
Required Notice Format: Written notice of any Claim (as defined in the policy) must be provided to Vandermeer as soon as practicable after any Insured Person or the Company becomes aware of the Claim. The notice must include, at a minimum, the following information:
(a) A description of the Claim, including the nature of the allegations or demands;
(b) The identity of the claimant or party making the demand;
(c) The identity of any named Insured Person(s) against whom the Claim is directed;
(d) The date the Claim was first made or the date the Insured Person or Company first became aware of the Claim;
(e) A description of the nature of the alleged Wrongful Act (as defined in the policy); and
(f) Copies of any complaints, petitions, demand letters, subpoenas, regulatory orders, or other written communications constituting or relating to the Claim.
Deadline Calculation: The Vandermeer primary policy requires notice "as soon as practicable." While this standard does not impose a fixed number of days, C&H recommends that Nexford adopt a best-practice standard of providing notice within fifteen (15) business days of becoming aware of a Claim or of any circumstance that could reasonably be expected to give rise to a Claim. This recommendation is consistent with the notice standards that Illinois courts have found sufficient to satisfy "as soon as practicable" requirements, and it provides a reasonable buffer against late-notice defenses.
Important Note Regarding Definition of "Claim": During the post-bind review of the Vandermeer renewal policy, C&H identified that the definition of "Claim" in the current policy form may be narrower than the definition that was negotiated during the placement process. Specifically, the current form may not clearly encompass informal regulatory inquiries, pre-formal investigation correspondence, or target letters. A corrective endorsement has been requested through Ashford Breckinridge and is pending as of the date of this Checklist. Until the corrective endorsement is confirmed in writing and attached to the policy, C&H recommends that Nexford adopt a conservative reporting approach and provide notice to Vandermeer of both formal proceedings (lawsuits, arbitrations, regulatory investigations) AND informal regulatory inquiries (subpoenas, informal requests for information, target letters, examination correspondence) to preserve coverage rights.
Copy to Broker: All notices sent to Vandermeer should be simultaneously copied to Ashford Breckinridge LLP, Attn: Phillip Garza, 321 South Plymouth Court, Suite 1500, Chicago, Illinois 60604.
B. 1st Excess Layer — Commonwealth Indemnity Group
Policy Details:
Notice Address:
Claims Department Commonwealth Indemnity Group [Pennsylvania — claims department address to be confirmed with Ashford Breckinridge LLP upon issuance of renewal policy — see Section X, Outstanding Items]
Required Notice Format: Written notice must be provided concurrently with, or promptly after, notice to the Vandermeer primary carrier. The notice should include the same information as the primary notice set forth in Section III.A above, and should additionally reference the Vandermeer primary policy number and the date on which notice was provided to Vandermeer.
Deadline Calculation: Concurrent with Vandermeer notice, or within five (5) business days thereafter. C&H recommends that notice to Commonwealth be sent on the same date as the Vandermeer notice whenever possible.
Important Note on Excess Notice: Even where the value of a Claim does not appear to approach the $10 million excess attachment point, C&H strongly recommends that notice be provided to Commonwealth Indemnity to preserve Nexford's coverage rights. Claim values can escalate unexpectedly, and a failure to provide timely notice to the excess carrier — even on a claim that initially appears to be a primary-layer exposure — can result in a loss of excess coverage if the claim later exceeds the primary limits.
C. 2nd Excess Layer — Northfield Excess Insurance Company (NEW — Replacing Graystone Mutual Assurance Co.)
Policy Details:
Notice Address:
Claims Department Northfield Excess Insurance Company [New York — claims department address to be obtained from Ashford Breckinridge LLP and confirmed in binder — see Section X, Outstanding Items]
Required Notice Format: Written notice per policy terms. As a follow-form excess, the notice format should mirror the requirements of the Vandermeer primary policy. Notice should reference the Vandermeer primary policy number and the Commonwealth 1st Excess policy number, and should include the same claim information as described in Section III.A.
Deadline Calculation: Concurrent with, or promptly after, primary and 1st excess notice. C&H recommends notice within five (5) business days of the primary notice.
Special Attention — New Carrier: This is the first renewal with Northfield Excess Insurance Company, which replaces Graystone Mutual Assurance Co. as the 2nd excess carrier. As this is a new relationship, the following steps should be taken:
(a) Upon receipt of the issued Northfield policy, C&H should confirm that the notice provisions in the issued policy match the terms reflected in the binder.
(b) Review the Northfield policy for any unique reporting requirements, notice conditions, or cooperation obligations that differ from the prior Graystone form.
(c) Confirm the designated claims department address, claims contact person, and preferred method of delivery (email, overnight mail, or both).
(d) Retain copies of the binder and all pre-bind correspondence with Northfield for reference in the event of any coverage dispute.
D. 3rd Excess Layer — Pinnacle Re Insurance Ltd. (Bermuda)
Policy Details:
Notice Address:
Claims Department Pinnacle Re Insurance Ltd. [Bermuda — claims department address to be confirmed with Ashford Breckinridge LLP — see Section X, Outstanding Items]
Required Notice Format: Written notice per policy terms. As a Bermuda-domiciled carrier, Pinnacle Re may require notice to be delivered via London or Bermuda market protocols. C&H recommends confirming the specific notice mechanism (including whether notice may be given through a London market bureau or managing agent) with Ashford Breckinridge at the time of policy issuance.
Deadline Calculation: Concurrent with underlying layer notices. C&H recommends notice within five (5) business days of the primary notice, consistent with the approach for all excess layers.
Special Considerations — International Carrier:
(a) As a Bermuda-domiciled carrier, the Pinnacle Re policy may be governed by Bermuda law or may contain a choice-of-law provision designating another jurisdiction. C&H recommends confirming the applicable law provisions upon receipt of the issued policy.
(b) The policy may contain mandatory arbitration provisions or specify exclusive jurisdiction for claims disputes in Bermuda or another offshore forum. These provisions should be reviewed and flagged for Nexford's General Counsel.
(c) Currency provisions should be confirmed — Pinnacle Re may denominate limits and retentions in U.S. dollars or may require conversion protocols.
E. Side-A DIC — Harrington Specialty Insurance Co.
Policy Details:
Notice Address:
Claims Department Harrington Specialty Insurance Co. [Delaware — claims department address to be confirmed with Ashford Breckinridge LLP — see Section X, Outstanding Items]
Required Notice Format: Written notice must be provided directly to Harrington Specialty — not through the underlying D&O tower carriers. The Side-A DIC operates independently of the Vandermeer/Commonwealth/Northfield/Pinnacle Re ABC tower and has its own separate notice requirements. Notice should include:
(a) A description of the claim against the individual director or officer;
(b) The identity of the claimant and the Insured Person(s) against whom the claim is directed;
(c) The date the claim was first made;
(d) A description of the circumstances that have given rise to the Side-A DIC coverage trigger (i.e., the failure of the underlying D&O insurance to respond, whether due to insolvency, coverage denial, exhaustion of underlying limits, or other coverage gap); and
(e) Copies of all relevant documentation, including any coverage denial letters from underlying carriers, proof of underlying limits exhaustion, or evidence of carrier insolvency.
Deadline Calculation: As soon as practicable. C&H recommends the same fifteen (15) business day standard as for the Vandermeer primary, measured from the date the Insured Person or the Company becomes aware of the circumstances triggering the Side-A DIC coverage.
Key Points:
(a) Coverage Trigger. The Side-A DIC policy triggers when the underlying D&O insurance fails to respond to a covered loss. This may occur in the following scenarios: (i) insolvency or financial impairment of an underlying carrier; (ii) coverage denial by an underlying carrier; (iii) exhaustion of underlying aggregate limits; or (iv) the existence of a coverage gap or exclusion in the underlying tower that does not apply under the Side-A DIC form.
(b) Board Awareness. All nine (9) members of the Board of Directors of Nexford Industrial Holdings Inc. — including Chairman Gerald "Gerry" Whitcomb and the four independent directors — should be individually informed of the existence of the Side-A DIC policy and the separate notice obligation. The five Veltrano Capital Partners-appointed directors should also be made aware. C&H recommends that Priya Sundaram (General Counsel and Corporate Secretary) provide a brief written summary of the Side-A DIC coverage and notice requirements to each director, either at the next regularly scheduled Board meeting or via separate correspondence.
(c) Independent Notice Channel. Priya Sundaram should maintain a direct notice channel to Harrington Specialty that is independent of the Vandermeer primary claims process. This is critical because the Side-A DIC may be triggered precisely in circumstances where the underlying carrier relationship has broken down (e.g., a coverage dispute with Vandermeer), and it is essential that the notice pathway to Harrington not be dependent on the underlying carriers.
IV. PRODUCT-LIABILITY TOWER — CARRIER NOTICE REQUIREMENTS (2022-2023 RENEWAL POLICIES)
The following section sets forth the notice requirements for each carrier in the product-liability/general liability insurance tower for the 2022-2023 renewal policy period. Total PL renewal premium across all layers is $2,985,500. The tower is structured as follows:
Total PL Tower Limits: $75,000,000
A. Primary GL/PL Layer — Midland Casualty & Surety Company
Policy Details:
Notice Address:
Claims Department Midland Casualty & Surety Company [Illinois — claims department address to be confirmed with Ashford Breckinridge LLP upon issuance of renewal policy — see Section X, Outstanding Items]
Required Notice Format: Written notice of any occurrence or claim must be provided to Midland Casualty as soon as practicable. Because the Midland primary policy is written on an occurrence basis, the notice obligations differ somewhat from the claims-made D&O tower. The notice must include:
(a) The date and description of the occurrence, including the location and circumstances;
(b) The identity of the injured party or claimant;
(c) A description of the nature and extent of the bodily injury or property damage arising from the occurrence;
(d) The identity of the Named Insured or subsidiary involved in the occurrence (i.e., whether the claim involves NCS, Triton, or Marlowe Asset Management);
(e) Identification of any products involved, including model numbers, SKU numbers, lot numbers, and manufacturing dates;
(f) The identity of any counsel retained or expected to be retained;
(g) Copies of any complaints, demand letters, or other written claims; and
(h) An estimated value of the claim or exposure, if ascertainable at the time of notice.
Product Recall Notice: In addition to standard claims reporting, Midland Casualty requires separate notice for any product recall, advisory notice, or corrective action involving products manufactured or sold by any Named Insured. Recall notices must include:
(a) A description of the affected product(s), including model numbers, SKU numbers, lot numbers, serial numbers, and manufacturing date ranges;
(b) The scope of the recall or advisory (number of units affected, geographic distribution, customer categories);
(c) Estimated recall costs, including logistics, replacement, credit/refund, and customer notification costs;
(d) Identification of any regulatory agency involvement, including the Consumer Product Safety Commission ("CPSC"), the Occupational Safety and Health Administration ("OSHA"), state attorneys general, or other governmental bodies; and
(e) Copies of any regulatory correspondence, voluntary recall notifications, or corrective action reports.
Deadline Calculation: The Midland Casualty policy requires notice "as soon as practicable." C&H recommends that Nexford adopt the following best-practice deadlines:
• For occurrences giving rise to bodily injury or property damage claims: notice within ten (10) business days of the occurrence or of Nexford's becoming aware of the occurrence.
• For lawsuits: immediately upon service of process — target same-day or next-business-day notice to Midland Casualty.
• For product recalls or advisories: immediately upon the decision to initiate a recall or issue an advisory — target same-day notice to Midland Casualty.
Consent Requirements: The Midland Casualty primary policy contains a consent-to-settle provision. No settlement of any covered claim may be made without the prior written consent of Midland Casualty. This requirement must be communicated to defense counsel (Hollander Byrne & Strauss LLP) and incorporated into all settlement authority protocols. Any settlement discussions should be reported to Midland Casualty in advance, and formal settlement proposals should be submitted to Midland Casualty for approval before any binding commitment is made.
Defense Cost Reporting: The Midland Casualty primary policy treats defense costs as eroding the aggregate limit. Accordingly, Midland Casualty requires quarterly defense cost reports to track erosion of the $10,000,000 aggregate limit. These reports should include cumulative paid defense costs, cumulative paid indemnity, and outstanding reserves for each pending claim. C&H Associate Yuki Nakamura has provided detailed guidance on the tracking methodology (see reference in Section VIII below), and Donna Kowalski should coordinate with Yuki Nakamura to ensure that the quarterly reporting format meets Midland Casualty's requirements.
Copy to Broker: All notices sent to Midland Casualty should be simultaneously copied to Ashford Breckinridge LLP, Attn: Tamara Fisk, 321 South Plymouth Court, Suite 1500, Chicago, Illinois 60604.
B. 1st Excess / Umbrella Layer — Great Basin Insurance Company
Policy Details:
Notice Address:
Claims Department Great Basin Insurance Company [Nevada — claims department address to be confirmed with Ashford Breckinridge LLP upon issuance of renewal policy — see Section X, Outstanding Items]
Required Notice Format: Written notice concurrently with, or promptly after, notice to the Midland Casualty primary carrier. As a follow-form policy, the Great Basin notice should include the same information as the Midland Casualty notice and should additionally reference the Midland Casualty primary policy number (MCS-GL-2022-58904) and the date on which notice was provided to Midland Casualty.
Deadline Calculation: Concurrent with Midland Casualty notice, or within five (5) business days thereafter. C&H recommends sending notice to Great Basin on the same date as the Midland Casualty notice whenever feasible.
Important — Notice on All Claims: C&H strongly recommends that notice be provided to Great Basin on all claims, even those expected to remain well within primary limits. Given that defense costs erode the Midland primary aggregate ($10,000,000), and given that combined open reserves on pending claims already total $8.3 million, the Great Basin attachment point could be reached during the renewal policy period. Failure to provide timely notice on a claim that later exceeds the primary aggregate could result in a loss of excess coverage at a critical juncture. Additionally, Nexford should closely monitor defense cost erosion against the $10M primary aggregate to determine proximity to the Great Basin excess attachment point (see Section VIII below for the defense cost erosion monitoring protocol).
C. 2nd Excess Layer — Cornerstone Reinsurance Corp.
Policy Details:
Notice Address:
Claims Department Cornerstone Reinsurance Corp. [New York — claims department address to be confirmed with Ashford Breckinridge LLP upon issuance of renewal policy — see Section X, Outstanding Items]
Required Notice Format: Written notice on a follow-form basis, including all information required by the Midland Casualty primary policy. Notice should reference the Midland Casualty and Great Basin policy numbers and the dates on which notice was provided to those carriers.
Deadline Calculation: Concurrent with underlying layer notices. C&H recommends notice within five (5) business days of the Midland Casualty primary notice.
D. 3rd Excess Layer — Allegheny Pacific Underwriters, Inc.
Policy Details:
Notice Address:
Claims Department Allegheny Pacific Underwriters, Inc. [California — claims department address to be confirmed with Ashford Breckinridge LLP upon issuance of renewal policy — see Section X, Outstanding Items]
Required Notice Format: Written notice per policy terms, including all information required by the Midland Casualty primary policy. Notice should reference the Midland Casualty, Great Basin, and Cornerstone policy numbers and the dates on which notice was provided to those carriers.
Deadline Calculation: Concurrent with underlying layer notices. C&H recommends notice within five (5) business days of the Midland Casualty primary notice.
Note on Attachment Point: While the $60 million attachment point for the Allegheny Pacific 3rd excess layer may appear remote, C&H notes that catastrophic loss scenarios modeled by Kessler Quinn Advisory Group — including a mass conveyor system failure or a widespread fastener defect affecting multiple commercial construction projects — could generate aggregate losses reaching this layer. Nexford's product portfolio includes approximately 42,000 SKUs shipped annually across the NCS, Triton, and Marlowe Asset Management subsidiaries, and a systematic product defect could give rise to multi-site, multi-claimant litigation that rapidly exhausts the lower layers of the tower. Timely notice to Allegheny Pacific on all claims is therefore critical, regardless of the initial perceived exposure.
V. TRANSITIONAL NOTICE CHECKLIST — PENDING CLAIMS AT RENEWAL
The following checklist items must be completed on or before July 1, 2022, to ensure proper transitional notice for the pending claims identified in Section II. Donna Kowalski, as Director of Insurance and Claims, is responsible for completing each item, with oversight from Trevor Haines (VP Risk Management) and coordination with Ashford Breckinridge LLP (broker of record).
Checklist Item 1: Confirm Known-Claim Reporting on Renewal Applications
• [ ] Verify that Higgins v. Nexford Conveyor Systems, LLC (Case No. 2021-L-04382, Circuit Court of Will County, Illinois) was fully and accurately disclosed on all PL renewal applications submitted by Ashford Breckinridge to the PL tower carriers on May 3, 2022. Confirm that the disclosure included the case number, court, date filed, named parties, nature of allegations, and damages sought.
• [ ] Verify that Consolidated Builders Supply Co. v. Triton Fastener Corp. (Case No. 1:21-cv-08914, U.S. District Court for the Northern District of Illinois) was fully and accurately disclosed on all PL renewal applications submitted by Ashford Breckinridge on May 3, 2022. Confirm that the disclosure included the same level of detail as described above.
• [ ] Verify that the 2020 shareholder demand letter (the only D&O claim in the five-year history) was disclosed on the D&O renewal applications and noted as resolved without payment. Confirm that the D&O applications accurately reflected a zero-payment D&O claims history for the five-year period.
• [ ] Confirm that the marketing submission prepared by Ashford Breckinridge accurately reflected the five-year loss history for the PL tower as follows:
• [ ] Obtain copies of all signed renewal applications from Ashford Breckinridge and retain in the insurance claims file. Copies should be provided to C&H for Matter No. 1005-00003.
Checklist Item 2: Transition Notice to Renewal Carriers
• [ ] On or before July 1, 2022 (renewal inception date), send written notice to each PL renewal carrier confirming the status of the pending claims as known at renewal inception. Notices should be sent to the following carriers:
(a) Midland Casualty & Surety Company (PL Primary) (b) Great Basin Insurance Company (PL 1st Excess/Umbrella) (c) Cornerstone Reinsurance Corp. (PL 2nd Excess) (d) Allegheny Pacific Underwriters, Inc. (PL 3rd Excess)
• [ ] Each transitional notice should include the following information:
(a) Case name, case number, court, and filing date for each pending claim;
(b) Current litigation status (e.g., discovery phase, pending motions, upcoming depositions);
(c) Updated reserve figures ($8.3 million combined for Higgins and Consolidated Builders, allocated as follows: Higgins — $5.2M; Consolidated Builders — $3.1M);
(d) Confirmation that each pending claim was timely reported to Midland Casualty under the prior policy period (MCS-GL-2021-55671) and that claim numbers have been assigned (Higgins: MCS-CL-2021-14892; Consolidated Builders: MCS-CL-2021-15408); and
(e) Contact information for defense counsel: Catherine Byrne (Lead Trial Counsel) and Rafael Mendez (Senior Associate), Hollander Byrne & Strauss LLP, 70 West Madison Street, Suite 3600, Chicago, Illinois 60602; telephone: (312) 555-4800.
• [ ] Retain copies of all transitional notices sent and any acknowledgment letters or emails received from the renewal carriers.
Checklist Item 3: Confirm Coverage Continuity
• [ ] Confirm with Ashford Breckinridge that both pending PL claims (Higgins and Consolidated Builders) are treated as covered occurrences under the occurrence-based PL tower and are not subject to any known-claim exclusion, pending-litigation exclusion, or prior-acts limitation in the renewal policies. Obtain written confirmation from Ashford Breckinridge on this point.
• [ ] Review the renewal policy language for each PL tower carrier for any new prior-acts provisions, retroactive-date provisions, or changes to the definition of "occurrence" that could affect coverage for pre-renewal occurrences. Flag any such provisions for immediate review by C&H.
• [ ] Reference the C&H Memorandum dated May 20, 2022 (Re: Interaction of Pending Claims with PL Tower Renewal — Occurrence-Based Coverage Analysis) for a detailed legal analysis of coverage continuity for the Higgins and Consolidated Builders claims across the renewal boundary. That memorandum addresses the interplay between occurrence-based coverage triggers, known-loss doctrines, and prior-acts provisions under Illinois law and the relevant policy forms.
VI. FUTURE CLAIMS — REPORTING PROCEDURES AND INTERNAL PROTOCOLS
This Section establishes the procedures that Nexford personnel should follow when new claims, occurrences, or reportable circumstances arise during the 2022-2023 renewal policy period. These procedures apply to both the D&O tower and the PL/GL tower, including the standalone Side-A DIC policy.
A. Identification of Reportable Events
The following categories of events must be reported under the insurance program and are subject to the notice procedures set forth in this Section:
Product-Liability / General Liability Tower:
(a) Any bodily injury or property damage claim, whether formal or informal, arising from products manufactured, sold, distributed, or serviced by NCS, Triton, or Marlowe Asset Management. Nexford's combined product portfolio encompasses approximately 42,000 active SKUs shipped annually to customers across the United States and international markets.
(b) Any product recall, advisory notice, safety bulletin, or corrective action affecting any product manufactured or sold by NCS, Triton, or Marlowe Asset Management, whether initiated voluntarily or at the direction of a regulatory agency. For reference, Nexford's recent recall history includes: (i) the Triton Fastener Corp. voluntary recall of March 12, 2020, involving Grade 5 carriage bolts with suspected metallurgical defects, at a total cost of approximately $1.1 million; and (ii) the NCS advisory notice of August 7, 2020, involving certain Model NCS-6100 conveyor belt tensioning assemblies, at a total cost of approximately $340,000. Combined historical recall costs total approximately $1.44 million.
(c) Any regulatory investigation or inquiry by OSHA, CPSC, state attorneys general, or other federal, state, or local regulatory bodies relating to the safety, quality, or compliance of any Nexford product.
(d) Any circumstance involving a Nexford product that could reasonably be expected to give rise to a claim for bodily injury or property damage, even if no formal claim has yet been made.
D&O Tower:
(e) Any lawsuit, arbitration demand, regulatory proceeding, or formal investigation naming or targeting any director or officer of Nexford Industrial Holdings Inc. or any of its subsidiaries.
(f) Any demand letter, shareholder demand, books-and-records request (under 8 Del. C. § 220 or equivalent), or written claim directed at any director or officer.
(g) Any regulatory investigation, inquiry, subpoena, civil investigative demand, or target letter directed at any director or officer, or at Nexford in a manner that could expose individual directors or officers to personal liability.