Travelers 2004 Annual Report Download - page 197

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
17. CONTINGENCIES, COMMITMENTS AND GUARANTEES, Continued
issued by TPC. 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 $2.80
billion. ACandS asserts that, based on a prior agreement between TPC and ACandS and ACandS’ interpretation
of the July 31, 2003 arbitration panel ruling described below, TPC is liable for 45% of the $2.80 billion. On
January 26, 2004, the bankruptcy court issued a decision rejecting confirmation of ACandS’ proposed plan of
reorganization. The bankruptcy court found, consistent with TPC’s objections to ACandS’ proposed plan, that the
proposed plan was not fundamentally fair, was not proposed in good faith and did not comply with Section
524(g) of the Bankruptcy Code. ACandS has filed a notice of appeal of the bankruptcy court’s decision and has
filed objections to the bankruptcy court’s findings of fact and conclusions of law in the United States District
Court. TPC has moved to dismiss the appeal and objections and has also filed an opposition to ACandS’
objections.
An arbitration was commenced in January 2001 to determine whether and to what extent ACandS’ financial
obligations for bodily injury asbestos claims are subject to insurance policy aggregate limits. On July 31, 2003,
the arbitration panel ruled in favor of TPC that asbestos bodily injury claims against ACandS are subject to the
aggregate limits of the policies issued to ACandS, which have been exhausted. In October 2003, ACandS
commenced a lawsuit seeking to vacate the arbitration award as beyond the panel’s scope of authority (ACandS,
Inc. v. Travelers Casualty and Surety Co., U.S.D.Ct., E.D. Pa.). On September 16, 2004, the Court entered an
order denying ACandS’ motion to vacate the arbitration award. On October 6, 2004, ACandS filed a notice of
appeal. Briefing of the appeal is complete. Oral argument has not been scheduled.
In the other proceeding, a related case pending before the same court and commenced in September 2000
(ACandS v. Travelers Casualty and Surety Co., U.S.D. Ct., E.D. Pa.), ACandS sought a declaration of the extent
to which the asbestos bodily injury claims against ACandS are subject to occurrence limits under insurance
policies issued by TPC. TPC filed a motion to dismiss this action based upon the July 31, 2003 arbitration
decision described above. The Court found the dispute was moot as a result of the arbitration panel’s decision.
The Court, therefore, based on the arbitration panel’s decision, dismissed the case. On October 6, 2004, ACandS
filed a notice of appeal. This appeal has been consolidated with the appeal referenced in the paragraph above.
Briefing of the appeal is complete. Oral argument has not been scheduled.
While the Company cannot predict the outcome of the appeals of the various ACandS rulings or other legal
actions, based on these rulings, the Company would not have any significant obligations remaining under any
policies issued by TPC to ACandS.
In October 2001 and April 2002, two purported class action suits (Wise v. Travelers and Meninger v.
Travelers), were filed against TPC and other insurers (not including SPC) in state court in West Virginia. These
cases were subsequently consolidated into a single proceeding in Circuit Court of Kanawha County, West
Virginia. Plaintiffs 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 were
filed in Massachusetts and Hawaii (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 TPC as a defendant, alleging that TPC 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 in Ohio
and Texas state courts against TPC and SPC and in Louisiana state court against TPC (the claims asserted in
these suits, together with the West Virginia suit, are collectively referred to as the “Common Law Claims”).
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