Travelers 2003 Annual Report Download - page 147

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145
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. COMMITMENTS AND CONTINGENCIES, Continued
In its proposed plan of reorganization, ACandS sought to establish a trust to pay asbestos bodily injury claims
against it and sought to assign to the trust its rights under the insurance policies issued by Travelers. The
proposed plan and disclosure statement filed by ACandS claimed that ACandS had settled the vast majority of
asbestos-related bodily injury claims currently pending against it for approximately $2.8 billion. ACandS asserts
that based on a prior agreement between Travelers and ACandS and ACandS’ interpretation at the July 31, 2003
arbitration panel ruling, Travelers is liable for 45% of the $2.8 billion. In August 2003, ACandS filed a new
lawsuit against Travelers seeking to enforce this position (ACandS, Inc. v. Travelers Casualty and Surety Co.,
U.S.D.Ct., E.D. Pa.). Travelers has not yet responded to the complaint but intends to vigorously contest
ACandS’ assertions and believes that it has meritorious defenses.
In addition to the proceedings described above Travelers and ACandS are also involved in litigation (ACandS,
Inc. v. Travelers Casualty and Surety Co., U.S.D.Ct., E.D. Pa.) commenced in September 2000. This litigation
primarily involves the extent to which the asbestos bodily injury claims against ACandS are subject to
occurrence limits under insurance policies issued by Travelers. Travelers has filed a motion to dismiss this
action based upon the July 31, 2003 arbitration decision.
All three of the ongoing proceedings were stayed pending the bankruptcy court’s ruling on ACandS’ plan of
reorganization. In light of the issuance of that ruling, Travelers is now evaluating its next steps in the
proceedings. Travelers believes that the findings of the Bankruptcy Court support various of Travelers
assertions in the proceedings.
Travelers believes that it has meritorious defenses in all these proceedings, which it is vigorously asserting,
including, among others, that the purported settlements are not final, are unreasonable in amount and are not
binding on Travelers; that any bankruptcy plan of reorganization which ACandS files is defective to the extent it
seeks to accelerate any of Travelers obligations under policies issued to ACandS or to deprive Travelers of its
right to litigate the claims against ACandS; that the arbitration award is valid and binding on the parties and
applies the claims purportedly settled by ACandS during the pendency of the arbitration proceeding; and that the
occurrence limits in the policies substantially reduce or eliminate Travelers obligations, if any, with respect to
the purportedly settled claims.
In October 2001 and April 2002, two purported class action suits (Wise v. Travelers, and Meninger v. Travelers),
were filed against Travelers and other insurers in state court in West Virginia. The plaintiffs in these cases,
which were subsequently consolidated into a single proceeding in Circuit Court of Kanawha County, West
Virginia, allege that the insurer defendants engaged in unfair trade practices by inappropriately handling and
settling asbestos claims. The plaintiffs seek to reopen large numbers of settled asbestos claims and to impose
liability for damages, including punitive damages, directly on insurers. Lawsuits similar to Wise have been filed
in Massachusetts (2002) and Hawaii (filed in 2002, and served in May 2003) (these suits are collectively referred
to as the “Statutory and Hawaii Actions”). Also, in November 2001, plaintiffs in consolidated asbestos actions
pending before a mass tort panel of judges in West Virginia state court moved to amend their complaint to name
Travelers as a defendant, alleging that Travelers and other insurers breached alleged duties to certain users of
asbestos products. In March 2002, the court granted the motion to amend. Plaintiffs seek damages, including
punitive damages. Lawsuits seeking similar relief and raising allegations similar to those presented in the West
Virginia amended complaint are also pending against Travelers in Louisiana, Ohio and Texas state courts (these
suits, together with the West Virginia suit, are collectively referred to as the “common law claims”).