Travelers 2005 Annual Report Download - page 70

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On June10, 2005, the Company and the other defendants in Rowe moved to dismiss the complaint. Oral
argument on the motion to dismiss was presented on September 19, 2005.
The Company believes that the pending lawsuits have no merit and intends to defend vigorously;
however, the Company is not able to provide any assurance that the financial impact of 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
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, exclusionsunder the agreements, as well as counterclaims
for rescission of the agreements. One of these disputes is the action described in the following paragraph.
The Company’s Gulf operation 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 and authorities. 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,” branding requirements for salvage
automobiles and the reporting of workers’ compensation premiums. The Company or its affiliates have
received subpoenas or written requests for information, in each case with respect to one or more of the
areas described above, 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 Georgia Office of the