The Hartford 2008 Annual Report Download - page 438

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Commitments and Contingencies (continued)
The Company is also a defendant in two consolidated securities actions and two consolidated derivative actions filed in the
United States District Court for the District of Connecticut. The consolidated securities actions assert claims on behalf of a
putative class of shareholders alleging that the Company and certain of its executive officers violated Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 by failing to disclose to the investing public that The Hartford’s business
and growth was predicated on the unlawful activity alleged in the New York Attorney General’s complaint against Marsh.
The consolidated derivative actions, brought by shareholders on behalf of the Company against its directors and an
additional executive officer, allege that the defendants knew adverse non-public information about the activities alleged in
the Marsh complaint and concealed and misappropriated that information to make profitable stock trades in violation of their
duties to the Company. Defendants filed a motion to dismiss the consolidated derivative actions in May 2005. Those
proceedings are stayed by agreement of the parties. In July 2006, the district court granted defendants’ motion to dismiss the
consolidated securities actions, and the plaintiffs appealed. In November 2008, the United States Court of Appeals for the
Second Circuit vacated the decision and remanded the case to the district court. The Company will renew its motion to
dismiss with respect to issues that the district court did not address in the prior ruling.
In September 2007, the Ohio Attorney General filed a civil action in Ohio state court alleging that certain insurance
companies, including The Hartford, conspired with Marsh in violation of Ohio’s antitrust statute. The trial court denied
defendants’ motion to dismiss the complaint in July 2008. The Company disputes the allegations and intends to defend this
action vigorously.
Investment And Savings Plan ERISA Class Action Litigation – In November and December 2008, following a decline in the
share price of the Company’s common stock, seven putative class action lawsuits were filed in the United States District
Court for the District of Connecticut on behalf of certain participants in the Company’s Investment and Savings Plan (“the
Plan”), which offers the Company’s common stock as one of many investment options. These lawsuits allege that the
Company and certain of its officers and employees violated ERISA by allowing the Plan’s participants to invest in the
Company’s common stock and by failing to disclose to the Plan’s participants information about the Company’s financial
condition. These lawsuits seek restitution or damages for losses arising from the investment of the Plan’s assets in the
Company’s common stock during the alleged class periods. The cases have been consolidated. The Company disputes the
allegations and intends to defend the actions vigorously.
Fair Credit Reporting Act Class Action – In February 2007, the United States District Court for the District of Oregon gave
final approval of the Company’s settlement of a lawsuit brought on behalf of a class of homeowners and automobile policy
holders alleging that the Company willfully violated the Fair Credit Reporting Act by failing to send appropriate notices to
new customers whose initial rates were higher than they would have been had the customer had a more favorable credit
report. The settlement was made on a claim-in, nationwide-class basis and required eligible class members to return valid
claim forms postmarked no later than June 28, 2007. The Company has paid $84.3 to eligible claimants in connection with
the settlement. The Company has sought reimbursement from the Company’s Excess Professional Liability Insurance
Program for the portion of the settlement in excess of the Company’s $10 self-insured retention. Certain insurance carriers
participating in that program have disputed coverage for the settlement, and one of the excess insurers has commenced an
arbitration to resolve the dispute. Management believes it is probable that the Company’s coverage position ultimately will
be sustained.
Call-Center Patent Litigation – In June 2007, the holder of twenty-one patents related to automated call flow processes,
Ronald A. Katz Technology Licensing, LP (“Katz”), brought an action against the Company and various of its subsidiaries
in the United States District Court for the Southern District of New York. The action alleges that the Company’s call centers
use automated processes that willfully infringe the Katz patents. Katz previously has brought similar patent-infringement
actions against a wide range of other companies, none of which has reached a final adjudication of the merits of the
plaintiff’s claims, but many of which have resulted in settlements under which the defendants agreed to pay licensing fees.
The case was transferred to a multidistrict litigation in the United States District Court for the Central District of California,
which is currently presiding over other Katz patent cases. In August 2008, the Company reached a settlement under which
the Company purchased a license under the patent portfolio held by Katz in exchange for a payment of an immaterial
amount.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009