Travelers 2004 Annual Report Download - page 200

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
17. CONTINGENCIES, COMMITMENTS AND GUARANTEES, Continued
2004), the plaintiff shareholder alleges state law claims, including breach of fiduciary duty, based on the
Company’s alleged mismanagement of and failure to make disclosure relating to the practice of paying brokers
commissions on a contingent basis. The derivative actions have been consolidated for pretrial proceedings as
Rowe, et al. v. Fishman, et al. In the fifth of these actions, an alleged beneficiary of the Company’s 401(k)
savings plan has commenced a putative class action in the District of Minnesota against the Company and certain
of its current and former officers and directors captioned Spiziri v. The St. Paul Travelers Companies, Inc., et al.
(Dec. 28, 2004). The plaintiff alleges violations of the Employee Retirement Income Security Act based on
allegations similar to those alleged in In re St.Paul Travelers Securities Litigation.
The Company believes that these lawsuits have no merit and intends to defend vigorously; however, the
Company is not able to provide any assurance that one or more of these proceedings will not be material to the
Company’s results of operations in a future period. The Company is obligated to indemnify its officers and
directors to the extent provided under Minnesota law. As part of that obligation, the Company will advance
officers and directors attorneys’ fees and other expenses they incur in defending these lawsuits.
Other Proceedings
In previous filings, the Company reported on a series of purported class actions and one multi-party action
brought in various courts around the United States against certain of TPC’s subsidiaries, dozens of other insurers
and the National Council on Compensation Insurance. The allegations in the actions were substantially similar,
and generally alleged that the defendants conspired to collect excessive or improper premiums on loss-sensitive
workers’ compensation insurance policies in violation of state insurance laws, antitrust laws, and state unfair
trade practices laws. The plaintiffs in the actions do not specify damages. TPC has vigorously defended the
actions, with all but a few of the actions having been dismissed to date. In addition, the plaintiffs’ attempts to
obtain class certification have not been successful. Under the present circumstances, the Company does not
believe its remaining exposure to be significant.
From time to time the Company is involved in proceedings addressing disputes with its reinsurers regarding
the collection of amounts due under the Company’s reinsurance agreements. These proceedings may be initiated
by the Company or the reinsurers and may involve the terms of the reinsurance agreements, the coverage of
particular claims, exclusions under the agreements, as well as counterclaims for rescission of the agreements.
One of these disputes is the action described in the following paragraph.
Gulf, a wholly-owned subsidiary of TPC, brought an action on May 22, 2003, as amended on May 12, 2004,
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), XL Reinsurance
America, Inc. (XL), Odyssey America Reinsurance Corporation (Odyssey), Employers Reinsurance Company
(Employers) and Gerling Global Reinsurance Corporation of America (Gerling), 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. The reinsurers have asserted counterclaims seeking rescission
of the vehicle residual value reinsurance contracts issued to Gulf and unspecified damages for breach of contract.
Separate actions filed by Transatlantic and Gerling have been consolidated with the original Gulf action for pre-
trial purposes. 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.
On May 26, 2004, the Court denied Gulf’s motion to dismiss certain claims asserted by Transatlantic and a
joint motion by Transatlantic, XL and Odyssey for summary judgment against Gulf. Discovery is currently
proceeding in the matters. 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 actions.
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