The Hartford 2012 Annual Report Download - page 214

Table of Contents
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Management evaluates each contingent matter separately. A loss is recorded if probable and reasonably estimable. Management establishes reserves for these
contingencies at its “best estimate,” or, if no one number within the range of possible losses is more probable than any other, the Company records an
estimated reserve at the low end of the range of losses.
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The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing indemnity for third-
party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the
establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties discussed below under the caption “Asbestos and
Environmental Claims,” management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of
provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of
The Hartford.
The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, and
in addition to the matters described below, putative state and federal class actions seeking certification of a state or national class. Such putative class actions
have alleged, for example, underpayment of claims or improper underwriting practices in connection with various kinds of insurance policies, such as
personal and commercial automobile, property, life and inland marine; improper sales practices in connection with the sale of life insurance and other
investment products; and improper fee arrangements in connection with investment products. The Hartford also is involved in individual actions in which
punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims. Like many other insurers, The Hartford also has been
joined in actions by asbestos plaintiffs asserting, among other things, that insurers had a duty to protect the public from the dangers of asbestos and that
insurers committed unfair trade practices by asserting defenses on behalf of their policyholders in the underlying asbestos cases. Management expects that the
ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated
financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability
of litigation, the outcome in certain matters could, from time to time, have a material adverse effect on the Company's results of operations or cash flows in
particular quarterly or annual periods.
Apart from the inherent difficulty of predicting litigation outcomes, the Mutual Funds Litigation identified below purports to seek substantial damages for
unsubstantiated conduct spanning a multi-year period based on novel applications of complex legal theories. The alleged damages are not quantified or
factually supported in the complaint, and, in any event, the Company's experience shows that demands for damages often bear little relation to a reasonable
estimate of potential loss. The matter is in the earliest stages of litigation, with no discovery having been taken and no substantive legal decisions by the court
defining the scope of the potentially available damages. Accordingly, management cannot reasonably estimate the possible loss or range of loss, if any, or
predict the timing of the eventual resolution of this matter.
Mutual Funds Litigation - In February 2011, a derivative action was brought on behalf of six Hartford retail mutual funds in the United States District Court
for the District of New Jersey, alleging that Hartford Investment Financial Services, LLC (“HIFSCO”), an indirect subsidiary of the Company, received
excessive advisory and distribution fees in violation of its statutory fiduciary duty under Section 36(b) of the Investment Company Act of 1940. HIFSCO
moved to dismiss and, in September 2011, the motion was granted in part and denied in part, with leave to amend the complaint. In November 2011,
plaintiffs filed an amended complaint on behalf of The Hartford Global Health Fund, The Hartford Conservative Allocation Fund, The Hartford Growth
Opportunities Fund, The Hartford Inflation Plus Fund, The Hartford Advisors Fund, and The Hartford Capital Appreciation Fund. Plaintiffs seek to rescind
the investment management agreements and distribution plans between HIFSCO and these funds and to recover the total fees charged thereunder or, in the
alternative, to recover any improper compensation HIFSCO received, in addition to lost earnings. HIFSCO filed a partial motion to dismiss the amended
complaint and, in December 2012, the court dismissed without prejudice the claims regarding distribution fees and denied the motion with respect to the
advisory fees claims. HIFSCO disputes the allegations and intends to defend vigorously.
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