The Hartford 2013 Annual Report Download - page 29

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Item 3. LEGAL PROCEEDINGS
Litigation
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 substantive legal decisions by the court defining the scope of the claims or the potentially available damages; fact discovery is
also in its early stages. 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. In February 2014, the plaintiffs expressed their intent to file a new complaint
that would, among other things, add as new plaintiffs The Hartford Floating Rate Fund and The Hartford Small Company Fund and
name as a defendant Hartford Funds Management Company, LLC (“HFMC”), which assumed the role as advisor to the funds as of
January 2013. HFMC and HIFSCO dispute the allegations and intend to defend vigorously.
Asbestos and Environmental Claims - As discussed in Part II, Item 7, MD&A - Critical Accounting Estimates - Property and Casualty
Insurance Product Reserves, Net of Reinsurance - Reserving for Asbestos and Environmental Claims within Property & Casualty Other
Operations, The Hartford continues to receive asbestos and environmental claims that involve significant uncertainty regarding policy
coverage issues. Regarding these claims, The Hartford continually reviews its overall reserve levels and reinsurance coverages, as well
as the methodologies it uses to estimate its exposures. Because of the significant uncertainties that limit the ability of insurers and
reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses, particularly those related to asbestos, the
ultimate liabilities may exceed the currently recorded reserves. Any such additional liability cannot be reasonably estimated now but
could be material to The Hartford's consolidated operating results and liquidity.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.