Travelers 2005 Annual Report Download - page 67

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filed a motion to stay the issuance of the Third Circuit’s mandate in anticipation of TPC’s petition for a
writ of certiorari to the United States Supreme Court.
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 district court found the dispute was moot
as a result of the arbitration panel’s decision. The district court, therefore, based on the arbitration panel’s
decision, dismissed the case. If the January 19, 2006 ruling of the Third Circuit described in the paragraph
above survives further appeal, this case will be reinstated.
The Company continues to believe it has meritorious positions in these ACandS-related proceedings
and intends to litigate vigorously.
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) instate court in West Virginia.
These cases were subsequently consolidated into a single proceeding in the 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, allegingthat 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 state court against TPC
and SPC, in Texas state court 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”).
All of the actions against TPC described in the preceding paragraph, other than the Hawaii Actions,
had been subject to a temporary restraining order entered by the federal bankruptcy court in New York
that had previously presided over and approved the reorganization inbankruptcy of TPC’s former
policyholder Johns-Manville Corporation and affiliated entities. In August 2002, the bankruptcy court held
a hearing on TPC’s motion for a preliminary injunction prohibiting further prosecution of the lawsuits
pursuant to the reorganization plan and related orders. At the conclusion of this hearing, the court ordered
the parties to mediation, appointed a mediator and continued the temporary restraining order. During
2003, the same bankruptcy court extended the existinginjunction to apply to an additional set of cases filed
in various state courts inTexas and Ohio as well as to the attorneys who are prosecuting these cases. The
order also enjoined these attorneys and their respective law firms from commencing any further lawsuits
against TPC based upon these allegations without the prior approval of the court. Notwithstanding the
injunction, additional Common Law Claims were filed and served on TPC.
On November 19, 2003, the parties advised the bankruptcy court that a settlement of the Statutory
and Hawaii Actions had been reached. This settlement includes a lump sum payment of up to $412 million
by TPC, subject to a number of significant contingencies. After continued meetings with the mediator, the
parties advised the bankruptcy court on May 25, 2004 that a settlement resolving substantially all pending
and similar future Common Law Claims against TPC had also been reached. This settlement requires a
payment of up to $90 million by TPC, subject to a number of significant contingencies. Each of these
settlements is contingent upon, among other things, an order of the bankruptcy court clarifying that all of