Travelers 2006 Annual Report Download - page 234

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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15. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)
October 2003, ACandS commenced a lawsuit seekingto 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 district court entered an order denying ACandS’ motion to vacate the arbitration
award. On January 19, 2006, the United States Court of Appeals for the Third Circuit reversed the district
court’s decision and declared the arbitration award void on procedural grounds. On May 22, 2006, the
United States Supreme Court denied TPC’s petition for a writ of certiorari seekingreview of the Third
Circuit’s decision. As a result, the matter has been remanded to district court and TPC has asked the
district court to remand the arbitration to the panel that initially ruled in favor of TPC for further
proceedings consistent with the Third Circuit’s decision. ACandS has opposed that request.
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 and dismissed the case. As a result of the January 19, 2006
ruling bythe Third Circuit and the Supreme Court’s denial of certiorari, described in the paragraph above,
this case has been 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) in state 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, alleging thatTPC 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 raisingallegations similar to
those presented in the West Virginia amended complaint are also pending 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 toas the “Common Law Claims”). Lawsuits seeking similar
relief in Ohio have been dismissed.
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 in bankruptcy 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 partiesto mediation, appointed a mediator and continued the temporary restraining order. During