Travelers 2003 Annual Report Download - page 149

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147
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. COMMITMENTS AND CONTINGENCIES, Continued
Other Proceedings
Gulf Insurance Company (Gulf), a majority-owned subsidiary of TPC, brought an action on May 22, 2003, as
amended on July 29, 2003, in the Supreme Court of New York, County of New York (Gulf Insurance Company
v. Transatlantic Reinsurance Company, et al.), against Transatlantic Reinsurance Company (Transatlantic), and
three other reinsurance companies to recover amounts due under reinsurance contracts issued to Gulf and related
to Gulf’s February 2003 settlement of a coverage dispute under a vehicle residual value protection insurance
policy. On May 22, 2003, as amended on September 5, 2003, Transatlantic brought an action against Gulf
regarding the same dispute, which has been consolidated with Gulf’s action. Transatlantic seeks rescission of its
vehicle residual value reinsurance contracts issued to Gulf and unspecified damages for breach of contract. XL
Reinsurance America, Inc. (XL), Odyssey America Reinsurance Corporation (Odyssey) and Employers
Reinsurance Company (Employers), the other defendant reinsurers, also filed answers and counterclaims in the
Gulf action asserting positions similar to Transatlantic, including counterclaims for rescission of vehicle residual
value reinsurance contracts issued to Gulf. On October 1, 2003, Gulf entered into a final settlement agreement
with Employers, and all claims and counterclaims with respect to Employers have been dismissed. After the
settlement, the Gulf action now seeks from the remaining three defendants a total of $90.9 million currently due
under the reinsurance contracts, a declaration that $11.6 million will be payable under a second installment due
in 2004, and consequential and punitive damages. Gulf denies the reinsurers’ allegations, believes that it has a
strong legal basis to collect the amounts due under the reinsurance contracts, and intends to vigorously pursue
the action.
TPC and its board of directors have been named as defendants in three purported class action lawsuits brought
by four of TPC’s shareholders seeking injunctive relief as well as unspecified monetary damages. The actions
are captioned Henzel, et al. v. Travelers Property Casualty Corp., et al. (Jud. Dist. of Waterbury, CT Nov. 17,
2003); Vozzolo v. Travelers Property Casualty Corp., et al. (Jud. Dist. of Waterbury, CT Nov. 17, 2003); and
Farina v. Travelers Property Casualty Corp., et al. (Jud. Dist. of Hartford, CT December 15, 2003). The Henzel
and Vozzolo actions were consolidated and transferred to the complex litigation docket in Waterbury,
Connecticut; the Farina action is pending in Hartford, Connecticut.
All the complaints allege that TPC and its board of directors breached their fiduciary duties to TPC’s
shareholders in connection with the adoption of the merger and the merger agreement with SPC. According to
the plaintiffs, the merger enriches TPC management to the detriment of TPC’s shareholders. The plaintiffs
further claim that the defendants failed to adequately investigate alternatives to the merger. The Farina
complaint also names SPC and Adams Acquisition Corp, a wholly-owned subsidiary of SPC, as defendants,
alleging that they aided and abetted the alleged breach of fiduciary duty. TPC believes the suits are wholly
without merit and intends to vigorously defend against the suits.