Travelers 2004 Annual Report Download - page 61

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.
Based on the Company’s beliefs about its legal positions in its various reinsurance recovery proceedings, the
Company does not expect any of these matters to have a material adverse effect on its results of operations in a
future period.
As part of ongoing, industry-wide investigations, the Company and its affiliates have received subpoenas
and written requests for information from government agencies. The areas of inquiry addressed to the Company
include its relationship with brokers and agents, the Company’s involvement with “non-traditional insurance and
reinsurance products,” lawyer liability insurance and branding requirements for salvage automobiles. The
Company or its affiliates have received subpoenas or written requests for information from: (i) State of California
Office of the Attorney General; (ii) State of California Department of Insurance; (iii) Licensing and Market
Conduct Compliance Division, Financial Services Commission of Ontario, Canada; (iv) State of Connecticut
Insurance Department; (v) State of Connecticut Office of the Attorney General; (vi) State of Delaware
Department of Insurance; (vii) State of Florida Department of Financial Services; (viii) State of Florida Office of
Insurance Regulation; (ix) State of Florida Department of Legal Affairs Office of the Attorney General; (x) State
of Illinois Department of Financial and Professional Regulation; (xi) State of Iowa Insurance Division; (xii) State
of Maryland Insurance Administration; (xiii) Commonwealth of Massachusetts Office of the Attorney General;
(xiv) State of Minnesota Office of the Attorney General; (xv) State of New York Office of the Attorney General;
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